Alerts

AD-ttorneys@law - March 27, 2019

Alerts / March 27, 2019

In This Issue

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NARB Sheds Light on Two-for-One Ad Rules

Famed TV marketing company must adjust claims to provide full fee disclosure

Blocks Harmful Rays!

“As Seen on TV” seems like one of those ready-made slogans that are just floating around in the collective cultural subconscious – used by many, invented by no one, perfectly suited to the advertising environment. It’s such a common ad tag that it must have been invented by many marketers spontaneously and independently when television marketing came into its own and began to dominate print.

But no – it has a specific inventor. Or at the very least, one company claims to have invented it: Telebrands Corporation, a direct response marketing company. Don’t remember them? Well, if you’re of a certain age, the following hint will bring it all flooding back: Ambervision sunglasses, their biggest success. If you’re a millennial or younger, here’s the ad for further historical study. Enjoy.

Illuminated

In July 2018, Telebrands fell victim to criticism for a different advertising claim it used, the ubiquitous “buy one, get one” formulation. (As far as we know, Telebrands does not claim to have invented this one.)

The advertising claim was used to promote Telebrands’ Atomic Beam flashlights. In particular, the television advertisement and website advertisement promoting the flashlight offered a second flashlight for a separate “fee,” but did not modify the offer to clearly disclose the discount or price offered for the second flashlight. The critic was Energizer Brands LLC, which called out Telebrands Corporation before the National Advertising Division (NAD) for further scrutiny. NAD held that the “buy one, get one” claim is generally understood by consumers to mean that they would receive the second flashlight at a deep discount or for free with the payment of a nominal fee and recommended that Telebrands modify its offer to clearly disclose the discount or price for the second flashlight (e.g., “Buy one, get second one for $9.99” or “Buy one, get one 50% off”).

Telebrands appealed NAD’s recommendations to the National Advertising Review Board (NARB), arguing that “fee” and “price” are substantively the same term and that the offer terms were fully disclosed on the company’s website where consumers purchased the flashlights.

NARB agreed with NAD, finding that the separate “fee” offer terms were much less prominent than the rest of the offer terms, to the point that consumers would not notice or understand the disclosure and – even if they did – the ad would give the impression that the “fee” in question was for the nominal shipping and handling charge rather than payment for a second device.

Moreover, the disclosure was only presented to consumers at checkout and not with the initial “buy one, get one” offer. This is another instance of the “four corners of the ad” concept, which recommends that disclosures be included within the context of the original ad.

In March 2019, NARB recommended that Telebrands modify its “buy one, get one” claims to clearly reveal the price or discount for a second flashlight and any other fees. Although the ads are no longer running, Telebrands agreed to take this advice into account in the future.

The Takeaway

Companies making “buy one, get one” offers should be mindful of clearly and conspicuously disclosing the discount or price that is associated with the second product along with any other charges or fees. The offer terms should be disclosed within the four corners of the advertisement and not just at check out.

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New Balance Made-in-USA Suit Halts for Mysterious Settlement Negotiations

When it comes to made-in-USA claims, defense says plaintiffs were like, “Whatevs”

Which 30 Percent?

When a handful of California consumers sued New Balance Athletics Inc. in 2017, their accusations were fairly straightforward. Unlike many high-profile athletic footwear manufacturers, New Balance maintains a manufacturing presence in the United States. According to the class action complaint, New Balance has sold hundreds of thousands of pairs of shoes to California consumers based on the misrepresentation that they are made in the USA, when rather they are made up of a substantial percentage of foreign-made components.

The plaintiffs maintained that these advertisements were misleading, since a substantial percentage – 30 percent – of the value of each shoe is “attributable to foreign-made components and/or labor.” This much, the complaint states, New Balance admitted openly.

School on a Saturday

Out in the open or not, the consumers, who originally brought suit in California State Superior Court, held that the 30 percent discrepancy was enough to trigger violations of California’s False Advertising Law, Consumer Legal Remedies Act, and Unfair Competition law and constituted breach of warranty, negligent misrepresentation and unjust enrichment. (The case was later removed to federal court, in particular the Southern District of California.)

Then things got weird.

New Balance, in a filing opposing class certification, launched an odd attack on the plaintiffs. The company alleged that the class certification was flawed for a variety of reasons, justified most notably by a study conducted by one of New Balance’s expert witnesses. The study looked at “300 California residents who, since 2015, actually purchased New Balance shoes that were labeled ‘Made in the USA.’” The study claimed that more than 70 percent of the respondents said they were indifferent to New Balance’s domestic production claims.

The study also claimed that of the remaining respondents – those who were not indifferent to the origin claim – “very few felt that the shoe is not genuinely ‘made’ in this country if 70% of the value of the shoe comes from domestic sources.”

One last indignity – the filing also maintained that the named plaintiffs in the class action were, themselves, indifferent to the made-in-the-USA claims. “Named Plaintiffs in this case ... are individuals who were solicited for this litigation through targeted social media advertisements that led them to a class action website trolling for potential plaintiffs.” The filing cited the original complaint testimony about the qualifying purchases – two of the plaintiffs had purchased the shoes for medical reasons and the third because the shoe was comfortable for running.

Whether or not this interesting attack on the plaintiffs’ claims was the cause of settlement negotiations, talks began in early 2018 and have only recently resolved, with a final plan expected by late April 2019. At one point a settlement plan was floated that would have awarded consumers $750,000 – $10 refunded per purchase, with a $50 refund cap per person and a $100 refund cap per household – but details of the latest plan are not yet available.

The Takeaway

Companies should be mindful of what is required to make a made-in-the-USA claim and stay within the parameters for such claims set by both state and federal laws.

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Swisher Sweets Settles Box-Price Switcheroo

Cigarillo maker accused of selling equivalent loose product for more than packaged special offer

Legendary

In a previous issue we discussed a lawsuit involving John Deere, a brand that has become a cultural icon. This week we address a similarly iconic product – albeit from a very different culture: Swisher Sweets.

If you’ve ever spent time in a convenience store, you’ve seen Swisher Sweets or a brand like it: small cigars that can be purchased individually in plastic wrapping or several at a time in a box. This type of small cigar – sometimes called a cigarillo – has become a staple of hip-hop culture; when stuffed with marijuana (by the consumer, of course), the cigarillos become the blunts of rap lore. A recent internet search uncovered several hundred songs that call out the Swisher Sweets brand by name.

Rolled?

Swisher International Inc., which sells its cigarillos for profit in Oregon retail stores, became the subject of a class action suit filed by plaintiff J. Podawiltz in the Circuit Court of Oregon for Multnomah County on behalf of himself and other similarly situated Oregon consumers.

The accusation? The plaintiff claimed that Swisher violated Oregon’s Unlawful Trade Practices Act, causing the plaintiff and many other Oregon consumers to suffer ascertainable economic losses as a result of its false and misleading promotion. In particular, the complaint alleged that the defendant advertised a five-cigarillo box of sweets as “5 for the price of 3” and the plaintiff purchased a five-box for $4.79, when single Swishers were available for only 99 cents at Plaid Pantry, the store in which the plaintiff purchased the defendant’s cigarillos.

The parties settled in March, with the defendant forking over $2.5 million in vouchers for its product to class members, those who purchased Swisher cigar products between Aug. 25, 2015, and Feb. 7, 2019. Class members who bought the Swishers under the five-for-the-price-of-three arrangement, as well as a number of variants on the “X for the price of X” formula, can claim up to five $1 vouchers.

Let’s hope they use the five dollars to buy five loose swishers instead of five in a box.

The Takeaway

Companies should be mindful of not making representations to consumers about the alleged existence of price reduction in hopes of increasing sales when consumers would be better off buying the product in smaller quantities. Making false representations of fact to consumers could make a company the target of a class action lawsuit for unlawful trade practices.

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Jenny Craig Sheds $3 Million in TCPA Settlement

Long code auto dialer doesn’t provide cover, plaintiff says

Tricky Dials

Weight-loss megabrand Jenny Craig settled a Telephone Consumer Privacy Act (TCPA) class action back in January. The complaint, brought as a putative class action by Florida consumer Zoey Bloom, alleged that defendant Jenny Craig sent her text messages in March and April 2018 in violation of the TCPA, resulting in the invasion of privacy, harassment, aggravation and disruption of the daily life of thousands of individuals and sought monetary damages.

According to the complaint, the defendant sent the plaintiff unsolicited text messages using an automatic telephone dialing system, and the text messages constituted telemarketing because they encouraged the future purchase of defendant’s weight loss services. The plaintiff alleged that the messages were sent from a long code system that enabled the defendant “to send SMS text messages en masse, while deceiving recipients into believing that the message was personalized and sent from a telephone number operated by an individual.”

Bloom, of course, alleged that she had never given consent to receive these messages and sued Jenny Craig for willful and knowing violations of the TCPA.

The case, filed in May 2018 in the Southern District of Florida, settled in Jan. 2019.

Consumers who received similar texts between May 2014 and Sept. 2018 can apply for benefits from a $3 million fund that is made available by Jenny Craig. Although there are approximately 620,000 possible class members, individual awards are to be determined

The Takeaway

Companies sending promotional text messages to consumers should be aware of the obligations set forth under the TCPA, including obtaining proper consumer consent before sending promotional text messages using auto dialers. The requirements for compliance with the TCPA are complex and the statutory damages for noncompliance add up quickly.

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Tootsie’s Charms Trade Dress Takes a Licking

Court issues preliminary injunction in favor of rival

Business Sucks

The lollipop wars have raged for nearly a century.

Spangler Candy Company’s Dum Dums brand was purchased by Spangler, the company that manufactures Circus Peanuts candy, in the 1950s and has been around since the 1920s.

Rival Tootsie Roll Industries produces the Charms Lollipop line, including the tiny Charms Mini Pops. Tootsie purchased the Charms line in the late 1980s, but the brand has been kicking around since 1912.

You can bet they keep an eye on each other.

Trading Dress?

In 2018, when a consumer notified Spangler that Tootsie’s packaging for its Mini Pops line bore a striking resemblance to the Dum Dums packaging, the company sprang into action with a Lanham Act (the Act) lawsuit. Spangler’s complaint alleges that Tootsie engaged in trade dress infringement and unfair competition under the Act when it chose to match Spangler’s distinctive package color and layout, which it had been using continuously since 2011. Spangler claims that Tootsie copies its distinctive trade dress without Spangler’s permission and that Tootsie is unfairly benefiting from Spangler’s investment in the Dum Dums trade dress and the reputation, success and goodwill that Spangler has cultivated through its marketing and promotion of its Dum Dums product.

“The trade dress is comprised of the bag’s principal color, red, with the brand name in white letters,” according to the plaintiff’s complaint, with “a display window showing the product, located in the lower half of the bag below the brand name and above a red bottom border of the bag; and a yellow oval located on the lower right hand side of the bag that covers a portion of the display window and has large blue numerals inside the yellow oval.”

Pretty specific. Spangler claims that Tootsie even copied the yellow palette boxes it uses to display the pops in box and warehouse stores.

The suit, which was filed a little less than a year ago in Ohio’s Northern District, took a positive turn for Spangler this month when the court granted it a preliminary injunction barring Tootsie from selling its Mini Pops in the offending packaging.

While the court noted that there was no evidence of actual confusion, the fact that Tootsie’s similarly designed bags were intended to be sold side by side with Dum Dums on store shelves indicated an intent to confuse customers. “Tootsie admits its consumers spend merely seconds picking out the package, basing the decision on recognition, possibly without even reading the package,” the court wrote. Given this lack of attention, the packages did not need to be identical, or even overtly deceitful, to violate Spangler’s trade dress. They just needed to be confusing.

The court agreed with Spangler that the confusion would result in a “loss of control of its reputation by allowing Tootsie to sell the same product in the confusingly similar bag” and that this would cause “irreparable harm since ‘loss of control over one’s reputation is neither calculable nor precisely compensable.’”

Although Tootsie objected over the expense the repackaging would incur, the court found that the loss of the Dum Dums brand’s “goodwill and reputation” outweighed Tootsie’s financial burden.

The Takeaway

In marketing their products, companies should be mindful not to infringe on the trade dress of another company’s product. Packaging that bears a resemblance to another product’s branding may cause confusion among consumers who spend very little time choosing a product based on its packaging.

Judge Sours on Natural Class Action Lawsuit Against Starbucks Gummies

Class action lawsuits alleging misleading advertising of food and beverage products show no sign of abating anytime soon. So we have to give a shout out once in a while when the good guys score a win and common sense appears to prevail. This happened recently in a class action alleging that Starbucks had misleadingly claimed that its sour gummy candies were only naturally flavored. To Starbucks’ credit, the gummies are actually naturally flavored. Plaintiff, however, purported to be outraged by the fact that the gummies contained fumaric acid, an artificial ingredient that helps make the gummies sour. This, in turn, led to the question debated by philosophers reaching as far back as Aristotle – “is sour a flavor?” Read more and subscribe to the AD-ttorneys Law Blog here.

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Increased Scrutiny on Notice and Choice for Use of Ad Profiling, Especially Using Mobile Location Data

Regulators and consumer protection authorities are taking action against companies with regard to the notice and choice, or lack thereof, they are providing to consumers for the collection of their precise location data on mobile devices. The Digital Advertising Alliance (DAA) recently held a presentation that highlighted what transparency and choice consumers should be provided in connection with the collection of such location data. For one, the DAA requires that consumers be provided enhanced notice of location awareness for advertising purposes during the process of downloading the mobile application (pre-install), at the time the application is opened, or at the time such data is collected and, also, in the application’s settings or any privacy policy. For more information, see our blog post here.

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Baker & Hostetler LLP publications are intended to inform our clients and other friends of the firm about current legal developments of general interest. They should not be construed as legal advice, and readers should not act upon the information contained in these publications without professional counsel. The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask us to send you written information about our qualifications and experience.

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