AD-ttorneys@law – October 9, 2020

Alerts / October 9, 2020

In This Issue:

Just the Carefully Worded, Interminable Facts, Ma’am

FDA widens dragnet on COVID-19 drug claims

DC ‘COVID-dential’

Let’s repeat it again in case anyone out there doesn’t know already: “Currently there are no FDA-approved medicines specifically for COVID-19.” That’s straight from the Food and Drug Administration’s mouth. Pretty black and white, no?

It’s likely that no one who’s producing supposed COVID-19 treatments or cures have any illusions about what they’re doing, but maybe someone out there actually needs a heads-up.

In any case, the number of companies receiving warning letters from the FDA is growing—as are new categories of pen pals. The latest: pharmacies.

Consider Pharmacy Plus, Inc., a “compounding pharmacy” that makes targeted drugs for specific types of patients. In a warning letter dated Sept. 9, the FDA alleges that the pharmacy was advertising drugs on its website branded “COVID PACK” and “COVID ‘POSITIVE’ PACK” products.

The Takeaway

The product names alone got the FDA’s attention; further claims that these products were “physician recommended supplements for prophylaxis, treatment and recovery from the Covid-19 virus,” “routinely prescribed for covid positive patients,” and “ideal to keep in the home for emergency use when a family member tests positive for the virus” just raised the stakes.

Every player in the drug production, distribution and marketing chain needs to be careful about COVID-19 claims. Make one and you may get the attention of the FDA’s COVID-19 joint task force with the Federal Trade Commission.

NAD Pulls KIND Back From the Clif

Watchdog’s ruling on challenged claims presents trifecta of essential lessons

The Mysteries

The National Advertising Division’s (NAD’s) rulings should be studied by marketers in the same way scholars study the Torah or the Nag Hammadi scrolls. What appears disguised as a split decision – or even as splitting hairs – is a Solomonic judgment that contains wisdom within.

Recently, Clif Bar & Co. brought before NAD a commercial filmed by rival healthy snack bar macher KIND, LLC, the producer of the eponymous line of snacks. The commercial contained three disputed claims, each of which served as an occasion for object lessons on ad-making.

In the first claim – that KIND features “75% less sugar than the leading Clif bar” – NAD came down on KIND’s side, with significant but important adjustments. The essence of the claim was not in dispute, because the commercial showed a comparison between Clif’s Chocolate Chip bar (20 grams of sugar) and KIND’s Dark Chocolate Nuts & Sea Salt Bar (5 grams). But NAD found that the commercial implied that the comparison held for all Clif and KIND products, instead of only the two depicted. It asked KIND to specify the flavors involved in the comparison.

On the second claim, NAD drew an interesting distinction between serving size and serving weight. The commercial did not err when it based the “less sugar” claim on a comparison between one serving size of both products. But since the serving sizes were different weights – KIND’s serving weighing in at 40 grams to Clif’s 68 – NAD advised that the difference be disclosed in the ad.

The Takeaway

The third claim involved a conflict with a more subjective basis: the depiction of the ingredients in Clif’s product that was featured in the ad. While NAD didn’t go into detail in its summary, it maintained that “nothing in the commercial conveys that the depicted ingredients (brown rice syrup for the Clif bar and almonds for the KIND bar) are the only ingredients in the products, merely the first ingredients when listed in order of predominance by weight.” The depiction of the brown rice syrup “accurately reflected the quantity and composition of the ingredient found in the depicted Clif bar ... [and] the advertisement does not use negatively charged terms or obscure chemical names to imply that brown rice syrup is harmful or unsafe.”

And there you have it, NAD doing what it does best – modeling the distinctions that every marketer should have at their disposal while developing new art and copy. So dust off your browser and hit the stacks – you’ll be a better advertiser for it.

KIND agreed to adopt the organization’s recommendations, calling itself “grateful that NAD has upheld the heart of KIND’s commercial.”

Berkeley’s City Government Banishes Sugar From the Checkout Line

Big supermarkets will be forced to push healthy food for impulse buyers

In Plain Sight

The array of candy and other sugary products in the traditional checkout aisle – alongside sensational periodicals and other bric-a-brac that are perfect objects for compulsive purchasing – is such a fact of life that you may not ever notice it. But if you’re shopping in Berkeley, California, you may be brought up short by a change of scene.

The Berkeley City Council unanimously passed a city ordinance that’s reinventing the supermarket checkout experience. The ordinance “limits food and beverage products sold at the checkout area” and covers the 25 or so 2,500-square-feet-plus shops in Berkeley that “have more than 25 linear feet of food for sale.” Smaller markets and corner shops are unaffected by the ban.

Checkout food and beverages are limited to “beverages with no added sugars and no artificial sweeteners and food items with limited calories, added sugars, and sodium ... .”

The ordinance summary contains a sample healthy checkout stock so you can get a feel for what it will be like to check out in Berkeley (in the non-Grateful Dead sense).

First the World Weekly News goes under, and now candy is being banned? What’s the world coming to?

The Takeaway

The regulation is the first of its kind in the nation, according to Center for Science in the Public Interest (CSPI), although it follows in the wake of larger-scale but ultimately unsuccessful initiatives (think Mayor Mike Bloomberg’s 2012 New York City soda ban).

An interesting wrinkle: The council, which was batting around the ordinance back in February, is now pitching the rule as a smart response to COVID-19 – conditions like diabetes and obesity tend to worsen the outcomes of coronavirus infections.

“The healthy checkout ordinance is essential for community health, especially in the time of COVID-19,” Councilmember Kate Harrison, one of the movers behind the bill, told CSPI.

Cosmetics Company Invites Face-Off With FTC

NAD review finds no support for name, claim – but company wants to continue the fight

Seriously, Folks

Even if it causes a little pain, following the National Advertising Division’s recommendations on your ad copy is almost always worth it.

NAD review offers marketers a valuable trial run before regulators step in and things get hairy. Wouldn’t you typically rather make recommended adjustments to your ads or packaging than lawyer up over a Federal Trade Commission lawsuit?

Despite our repetition of this what-should-be-by-now-rhetorical question, there are still companies out there that would rather go toe-to-toe with the feds. Perhaps they don’t read our newsletter.

It’s not for us to pass judgment on companies, but a recent case left us shaking our heads.

Mask LLC (great company name for the COVID-19 era, no?) is the manufacturer of the Spotless Blemishes & Oily Skin Soothing CBD Sheet Mask, yet another CBD product that promises bliss – “uncover a peaceful state of being,” reads the product webpage.

NAD ran across the product during routine monitoring and decided to ask the company to justify both the name of the product and the claim that one of its ingredients – helichrysum essential oil – “may work to help heal blemishes, encouraging signs of skin renewal and cell turnover to lessen the look of redness and scarring.”

“Spotless Blemishes & Oily Skin Soothing CBD Sheet Mask” failed under NAD’s scrutiny as a product name. The watchdog claimed that Mask LLC allegedly failed to “conduct or provide” any testing to prove that the mask “soothes oily skin” or produces “spotless blemishes.” NAD also recommended that the helichrysum essential oil claim be discontinued because the company “failed to provide a reliable ingredient study demonstrating that the amount of helichrysum essential oil found in the product (which the advertiser never specified) has a positive effect on blemishes.”

The Takeaway

Mask LLC decided to roll the dice with the FTC, replying to NAD that it would not follow its recommendations and that “there is no basis to conclude that the product claims to remove blemishes simply because the word ‘spotless’ is in the product name” and that “MASK Skincare [does not] claim that Helichrysum Essential Oil absolutely and without qualification has a beneficial or positive effect on the skin.” NAD referred the matter to the Commission.

The company might have been in a better position if it had offered any sort of testing at all, the results of which could have been discussed and reassessed, producing more appropriate nomenclature or ad claims. As it is, NAD alleges the company didn’t conduct testing at all, which leaves it with no cards to play.

Alleged Repeat Offender Triples Original FTC Penalty

Supplement marketer double-dips with negative option schemes

Fool Me Once…

And while we’re on the subject of pushing the envelope with the Federal Trade Commission, let’s look at a company that allegedly pushed the envelope and then jumped inside it and sealed it for delivery.

Back in 2016, NutraClick, a nutritional supplement marketer and self-proclaimed “technology-driven health and wellness products company,” got into a spat with the Commission over a common internet bait-and-switch: the promise of free product samples that, when ordered, turned into regular monthly membership charges.

“The recurring membership fee ranges from $29.99 to $79.99 depending on the product,” the original FTC complaint reads. “Consumers must cancel their membership within a 18-day trial period to avoid future charges. Although Defendant’s websites contain statements about the recurring charge, those statements are not clear and conspicuous.” The Commission claims that 70,000 complaints were lodged against the company’s practices.

NutraClick settled, giving up $350,000 and its future indulgence in negative-option practices.

Violation Convocation

Four years later and that $350,000 is looking like chump change.

In its latest complaint against NutraClick, the FTC alleges that the company launched a “VIP Membership” program. Consumers were enticed “with ‘free samples’ of their dietary supplements or beauty products. After a ‘Free Trial’ … acceptance of these free samples converts to paid memberships, unless consumers affirmatively cancel their memberships.”

According to the Commission, the new program violated the Federal Trade Commission Act, the Telemarketing Sales Rule, the Restore Online Shoppers’ Confidence Act, and the Telemarketing and Consumer Fraud and Abuse Prevention Act.

But that’s not all …

The Takeaway

The Central District of California, where both cases were filed, received a contempt sanction from the Commission that accompanied the new complaint, and NutraClick and two of its officers were served with a $1.04 million monetary judgment.

The company agreed to pay the fee and, according to the FTC, is “permanently banned from using negative options in the future.”

We’ll see if they live up to this settlement. In any case, we’ll leave you with some advice that’s at the heart of so many other takeaways: Don’t do what they did.

Podcasts: Have You Heard the One About…

Blockchain. What Is It and Why Should I Care?

Blockchain technology is widely anticipated to disrupt major industries and business operations over the next several years. But with all of the “hype” in the blockchain market, at times it can be difficult to separate fact from fiction and identify the real value in this new technology. To help bring things into focus, we’ve crafted a five-part series to introduce blockchain from a technological, market, and legal perspective. Hear it here.

Check Out Our Latest Blog Posts

FTC Enforcement: What Is Equitable Relief?

All eyes remain on the Supreme Court and what, if any, changes the Court may make to the Federal Trade Commission’s (FTC’s) authority to seek consumer redress. Will the Court strip the FTC of that authority entirely? The Third Circuit’s recent decision in an antitrust matter suggests so. Read more here.

Was OFAC’s Advisory an October Surprise or More of the Same?

Ransomware has hit pandemic proportions and there does not seem to be a clear end in sight. On October 1, 2020, the U.S. Department of Treasury’s Office of Foreign Assets Control (OFAC) issued an advisory regarding ransom payments and the risk of sanctions associated with such payments. Learn more here.

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