Alerts

AD-ttorneys@law – September 21, 2018

Alerts / September 21, 2018

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Cali Cans Kiddie Colas!

New law demands that children’s meals drop soda in favor of water or unflavored milk

Unhappy Meal?

California is known for its aggressive regulatory posture when it comes to consumer health, and a recent bill that has been presented for Gov. Brown’s signature is no exception. The opening paragraphs of the bill are festooned with a litany of sobering facts: Skyrocketing obesity rates. The transference of childhood obesity to adult victims. Children getting 25 percent of their calories from fast food. And a list of illnesses associated with obesity, from type 2 diabetes to depression. The governor has until Sept. 30 to sign the law.

SB-1192, first introduced in February 2018, requires that any restaurant that offers children’s meals include only water with no added natural or artificial sweeteners or unflavored milk (including milk alternatives) as the default beverage in the meal. Additionally, in-store display boards and menus advertising children’s meals with beverages will need to list or display the new defaults. Consumers can request the usual soft drink if they wish, but if they don’t remember to do so, they’ll get the default.

Many restaurant chains had already made similar changes prior to the bill, and the penalties – a warning on the first incident, $250 on the second and $500 for each violation thereafter, with no more than one violation per inspection visit – may be too low to have as significant an impact as the bill’s drafters intended. Of course, this is California, so a violation of this law could be the basis for a class action under California Business and Professions Code 17200, which allows the violation of any other law to be the basis for an unfair practices claim under 17200.

The Takeaway

Regardless of enforcement or potential class action litigation, as with many matters related to weight loss, it may be habit that will affect the most change. Assuming the governor signs the bill, California kids will automatically receive healthier beverages with their beloved special meals.

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CA May Delay Privacy Law Enforcement

Congress lobbied to pre-empt the law

Unprecedented

California has enacted, effective Jan. 1, 2020, the California Consumer Privacy Act (CCPA), a privacy law unprecedented in the U.S. that grants California residents a broad range of European-like privacy rights. Amendments passed on Aug. 31, and awaiting a signature decision by the governor, will (if the bill is signed) extend the time for the California attorney general (CaAG) to promulgate regulations to July 1, 2020, push back enforcement until the earlier of that date or six months from issuance of the regulations, and remove the CaAG’s ability to intervene in private lawsuits – all changes made at the request of the CaAG. Fortunately for advertisers and retailers, the CaAG’s recommendation that the CCPA’s limited private right of action be expanded was rejected, and language was even added to clarify the limits of consumer lawsuits. The U.S. Chamber of Commerce is lobbying Congress to pass a federal omnibus privacy and data protection law that would pre-empt the CCPA and other existing and future state data protection laws. See its proposal and statement here. The Internet Association, a trade group that represents leading internet companies, has also released a proposed framework for federal legislation. More on these efforts is available here.

The Takeaway

Assuming no federal pre-emption, companies need to begin to prepare for the CCPA. To comply with the 12-month look back for consumer requests as of the law’s effective date, businesses will need to start data-mapping and record-keeping of personal information (PI) as of Jan. 1, 2019. Since, depending on how long it takes to promulgate the regulations, businesses could get up to a six-month delay in enforcement if the amendment becomes law, a case for waiting to start compliance efforts until Q1 2019 can be made, which may help with budgeting the expense. See our prior post here for how to begin to get ready for the CCPA. In the coming months we will hold a series of seminars on the CCPA and how to build a CCPA compliance program. We will also continue to track efforts to further amend the act, federal legislation that may supplement or pre-empt it, attempts at similar legislation in other states, and the CCPA rule-making process about to be kicked off by the CaAG.

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Goop Doles Out Settlement for Rotten Egg Claims

Full refund for jade eggs and flower oils in the offing

You Put It Where?!

The Goop saga has been hard to miss, but in case you’ve been hidden away under a rock (“earthing,” Goop would call it), here it is in a nutshell.

Goop is the brainchild of Hollywood A-lister Gwyneth Paltrow, who launched the company in 2008 to promote a series of health and wellness products. It grew into a big enterprise, worth about $250 million in 2018. But …

A cloud of negativity has troubled the sunshine-and-light-suffused company from the beginning. Skeptics have continuously taken on Goop’s product offerings and the claims that promote them: everything from aromatic stress treatments, healing stickers and medicine bags to jade eggs marketed as promoting vaginal health.

We’ve reported on these troubles before. Concurrently, Paltrow’s public profile took a series of hits, earning her the reputation (fairly or not) of being an out-of-touch celebrity.

Bulldogs

Truth in Advertising, Inc. (TINA) took aim at Goop in the summer of 2017, building up a database of 50 of the company’s products and their related health claims. On top of that, the organization sent a missive to two California county district attorneys’ offices outlining the health claims and urging an investigation. TINA has taken it upon itself to monitor Goop’s activities, even going so far as to attend the June 2017 “In Goop Health” conference held in Los Angeles, where it gained additional information about some of Goop’s products.

A year later, in June 2018, TINA alleged that Goop had mostly ignored its recommendations – the company had allegedly removed only 19 of the 50-plus claims made on the Goop website – in a second letter to the district attorneys. This time, a response was forthcoming.

The Takeaway

Ten California counties recently filed suit against Goop alleging unsupported medical claims in its product marketing, specifically as they related to the company’s Jade and Rose Quartz vaginal egg products. The parties reached a settlement in very short order in early September 2018. Among other things, Goop agreed to refrain, for five years, from marketing nutritional supplements and medical devices that have an effect on certain conditions, disorders or diseases, or that are otherwise marketed in a manner that is deceptive or inconsistent with federal Food and Drug Administration monographs, conditions of use and/or approvals. Goop also agreed to restrict nutritional supplement and medical device claims to those supported by competent and reliable scientific evidence in its possession that substantiates the claim prior to making the claim.

The egg products are still available for purchase on the Goop website; however, Goop is required to pay full refunds to those who purchased its Jade and Rose Quartz Eggs between Jan. 12 and Aug. 31, 2017, which the California counties claim it marketed to “balance hormones, regulate menstrual cycles, prevent uterine prolapse, and increase bladder control.” Purchasers of Goop’s Inner Judge Flower Essence Blend – flower oil extracts that were billed as preventing depression – will receive a full refund as well.

Additionally, Goop is required to pay $145,000 in civil penalties and agrees to cease advertising products with medical benefits that are not supported by “competent and reliable scientific evidence.”

This is a good example of local authorities enforcing consumer protection laws, and California counties have been particularly active in this regard. Marketers should also take note of regulatory scrutiny of health and wellness claims and the heightened standard for substantiation that applies when such claims are made.

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Energy Drink Smackdown Begins in Cali Central

Monster Energy takes aim at rival Vital’s allegedly outlandish health claims

Miracle Juice

Energy drink manufacturer Monster has accused VPX of marketing its BANG drinks like a “modern-day snake oil.” VPX, which produces a range of health and performance supplements, is accused of claiming that BANG can reverse mental disability and cure Alzheimer’s disease, dementia, Parkinson’s disease and Huntington’s disease. Compared with these allegations, the fact that VPX calls BANG the “healthiest energy drink” in the market seems like a relatively minor misstep.

Typographical errors and emojis appear in the original, we swear.

Contents

The suit, filed in the Central District of California in early September 2018, goes on to allege that BANG’s ingredient list is deceptive as well.

Creatine, if you haven’t heard of it yet, is an organic acid that helps maintain energy levels in muscle and brain tissue. Like many naturally occurring substances, it has been lionized as a health and exercise supplement, although results are inconclusive.

Nonetheless, creatine exists; Monster accuses VPX of inventing a new ingredient – “Super Creatine” – that supposedly reaches the brain 20 times more effectively than regular creatine. By “invented,” Monster doesn’t mean “hammered the compound out in the laboratory” – it means “completely fabricated the idea of it.” According to Monster’s complaint, Super Creatine is “nothing more than water-soluble creatine,” which is readily available on the market.

Further, Monster claims that VPX’s current actions are nothing new – the company has allegedly been the subject of National Advertising Division (NAD) and Food and Drug Administration (FDA) actions that take issue with the company’s use of ingredient studies in support of product performance claims. In its complaint, Monster recaps three previous NAD actions and one FDA action brought against VPX that found VPX made unsubstantiated claims about a number of its health supplement products.

The Takeaway

Like any close rivalry, the current dispute gets pretty nasty: In the complaint, Monster takes swings at VPX founder John Owoc’s allegedly weak scientific credentials (“his qualifications seem to be based exclusively on his previous stint as a high school science teacher”), the product claims’ lack of credible scientific backing, the company logo and even Owoc’s “guilty conscience.”

Monster is leveling a bevy of charges against VPX, including false and misleading descriptions and representations of fact under the Lanham Act, violation of California’s Unfair Competition and False Advertising Laws, and trade libel. Monster requests that the court enjoin VPX from making allegedly false claims about its BANG products and award Monster damages and profits in excess of $75,000 incurred as a result of VPX’s actions.

As with the Goop case, marketers considering making health and wellness claims should keep in mind the heightened standard for substantiation that applies when such claims are made. This case also illustrates that marketers not only face regulatory and consumer claims when they make unsubstantiated and deceptive claims, but also are at risk of claims by their competitors that are injured in the market by their false and deceptive advertising practices.

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Shocking Pics of Partying Rodents Keep Class Action Alive

Consumers claim critter repellants fail to drive off vermin as advertised

Hallelujah

“This case is simple and the disputed issues of material fact are stark.”

Music to a plaintiff’s ears.

In this case, the plaintiffs are Joanne Hart and Sandra Bueno, California consumers who brought a lawsuit against Bell + Howell and Van Hauser LLC (BHH), manufacturers of plug-in ultrasonic pest repellers. The plaintiffs accused BHH of violations of California’s Consumer Legal Remedies Act (CLRA), Unfair Competition Law, False Advertising Law, and breach of express warranty and fraud for advertising their vermin repellers as effective, when, the plaintiffs claim, they spectacularly fail to do the job.

The Mouse That Snored

In their motion for summary judgment, the defendants had claimed that despite the repellers’ packaging, which promised to “rid your home of all kinds of creepy crawlies” and other such assertions, disclaimers had made clear that the product would not work in every circumstance, including in rooms with a lot of carpets and furniture that would dull the effect of the ultrasonic waves. This was enough, they argued, to explain why the repellers failed in certain circumstances, and to hold otherwise would imply an undefined “real world effectiveness standard;” the reasonable consumer, according to BHH, would understand the limitations of ultrasonic technology and that its effectiveness would be impacted by hard objects or carpeting.

And here’s the second wonderful line from the Southern District of New York’s order to deny BHH’s motion for summary judgment: “As the [plaintiffs’] photographs show, mice can apparently relax comfortably under a Repeller and even appear to be so drawn in by its siren song that one would scale a wall just to snooze on it.”

Oh, those photographs. They show mice congregating under a repeller and even lounging across the top of one in a state of somnolence. The effect was to leave “the Court wondering how BHH can argue that there is no disputed issue of material fact as to efficacy.”

The Takeaway

The court argued that the repellers were being accused not of failing in certain circumstances, or of falling short of a nonexistent standard, but of never working at all, thus leaving the subject matter of the case open to decision by jury. Similarly, the plaintiffs called into question the credibility of BHH’s premarket testing on its repellers, and the court found that a trier of fact could find that the tests were too limited. The order also references numerous Federal Trade Commission notices to manufacturers and retailers of similar products, as well as studies that demonstrated the ineffectiveness of ultrasonic repellant techniques, all of which might give rise to the notion that the defendants’ marketing was knowingly false.

This case, like the Goop and Vital cases discussed above, should reinforce the need for reliable and competent evidence to substantiate claims, particularly as it relates to claims of product attributes and performance.

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