ALJ Affirms Antitrust Violations for Ad Tech Agreements in FTC v. 1-800 Contacts

Please see our recent write-up of the ALJ’s decision to affirm the finding in FTC v. 1-800 Contacts of antitrust violations in their ad tech agreements. You can find that write-up here.

Today’s Hot Topic: Food Advertising

From time to time I like to remind clients of specific network guidelines to keep in mind when developing advertising. One such guideline involves the advertising of food.

Standard

According to the network guidelines, advertising may not overstate the nutritional value of foods. Use of words such as “nutritious” or “healthy” must be substantiated and may not be used to exaggerate or distort the value of the food.  Health and energy claims for foods and food ingredients will be considered on a case-by-case basis.  Such claims must be fully substantiated and put in the context of a total diet.  All food advertising must comply with the provisions of the Nutrition Labeling and Education Act of 1990 (NLEA).

Guidelines

Nutrition Information Claims

A.  Nutrient content descriptors (e.g., “low fat,” “calorie-free,” “good source,” “reduced,” and “light”) must comply with the applicable NLEA definitions for those terms.

B.  Foods advertised as meal substitutes are considered on a case-by-case basis and evaluated from the perspective of the completeness of the nutrition provided.  Unless the food provides the nutritional equivalent of a balanced meal, food advertised as a meal substitute:

  1. May only be presented as an occasional replacement for meals when a person is unable to eat properly; and
  2. May not be positioned as a permanent part of the daily diet.

C.  Food possessing reduced or low levels of an ingredient should not be advertised to suggest that the food can be consumed in large amounts without consequences.   Any implication of immoderate consumption is not acceptable.

Health Claims

A.  Overly broad health or nutritional benefit claims are not permitted.

  1. Claims that distort the importance of a food or a food ingredient or suggest an advantage beyond what exists are unacceptable.
  2. Unless substantiated, implying that one individual food is more important than other dietary components is not permitted.

B.  Health claims will not be acceptable in those instances where a product possesses both healthy and unhealthy components which bear on the claim being made (e.g., a product containing no cholesterol cannot advertise itself as healthy or helping to prevent heart disease when the product is also high in sodium).

C.  Claims suggesting that the consumption of food or food ingredients will result in mental and/or physical enhancement are unacceptable unless substantiated.

The networks have specific policies regarding the advertising of food. So, if you have plans to create advertising which features food, make sure the advertising complies with the network guidelines.  And remember, when it doubt, ask questions.

Marilyn Colaninno is Director of Rights and Clearances for Reed Smith and is responsible for clearing commercials for the firm’s many clients in the advertising industry. If you have specific questions, please contact Marilyn directly at 212-549-0347 or at mcolaninno@reedsmith.com.

 

 

Just Like Grandma Used to Infringe: Trademark Battle Sparks Over “Nana”

Granny can’t catch a break. In the food and beverage industry, “NANA”-formative trademarks are plentiful.  However, the owner of several such marks has overstepped its bounds, asserts Nana Joe’s LLC in its complaint filed earlier this month in the Eastern District of Texas.  Nana Joe’s makes vegan and gluten free granola products, and has branded its products with “NANA JOE’S”-formative trademarks since 2012.  However, another company, Microbiotic Health Foods Inc. doing business as “Nana’s Cookie Company,” recently accused Nana Joe’s of infringing its own “NANA” registrations and demanded they stop using the word.

Nana Joe’s is having none of it, and asserts that Microbiotic exceeded its “limited alleged trademark rights” in its complaint seeking declaratory relief. The complaint claims that Microbiotic does not have “a monopoly on the word ‘nana,’ a fact evidenced, for example, by the over dozens of different federal trademark registrations or pending registrations that include that word,” and notes that Microbiotic has allowed Nana Joe’s and others’ use of “NANA” without complaint for years.  It seeks a declaration that Nana Joe’s use of “NANA” is uninfringing and that Microbiotic’s registrations are invalid and unenforceable.  Microbiotic has yet to respond to the suit.

Takeaway: Companies that use common terms such as “Nana” should take care to police their trademark registrations, or else they may lose their rights to other users.

 

Soy Vey! FDA May Revoke Soy’s Heart Health-Claim

The FDA has called into question its health claim finding a link between consumption of soy protein and reduced risk of heart disease. Since 1999, the FDA has allowed manufacturers and advertisers to label soy products with an “authorized” claim of soy’s heart-health benefits.  However, proposed rulemaking may reduce it to a “qualified” claim of such benefits, which has a lower scientific standard, or rescind the claim altogether.  The potential revocation follows numerous studies published since 1999 that present inconsistent findings on the relationship between soy protein and heart disease.

This proposal has been a long time coming. The American Heart Association (AHA) has challenged the FDA’s authorization of the health claim as far back as 2008.  The AHA reiterated this position when the FDA announced its decision to review soy’s heart-health benefits last month.  The FDA has opened a 75-day public comment period before it will decide whether to proceed with a final rulemaking stripping soy of its authorized health claim or allowing it to remain.  It would be the first time the FDA has proposed a rule to revoke a health claim.

Takeaway: Manufacturers and advertisers should be aware they may have to remove or qualify authorized claims of soy’s heart-health benefits from their products pending the FDA’s decision in the coming months.

 

Montel Williams Aims Pot Shot at Cannabis Trademark Infringers

Talk show host and cannabis mogul Montel Williams recently filed suit against multiple medical marijuana retailers under the Lanham Act and Florida state law for trademark infringement, false advertising, violations of the right to publicity and right to privacy, and unfair business practices. Williams markets a line of medical-grade cannabidiol, or CBD, oils for use by patients suffering from a variety of chronic diseases.  Forbes magazine recently interviewed Williams about his CBD products, in which he promoted his brand of potent oils and denounced subpar cannabis products as ineffective.

Williams’ lawsuit claims that since the Forbes article’s publication, many medical marijuana retailers have been using his likeness to propagate fake advertisements and news stories that endorse other cannabis products. These false advertisements are “capitalizing on [Williams’] valuable reputation and intellectual property to lure consumers into ordering their Infringing Products on the false premise that they have been tested, created, or recommended by Williams, when they have not,” the complaint alleges.  The named defendants have not yet responded to the suit.

Takeaway: Simply because a celebrity mentions an advertiser’s product or service in news articles or talk shows does not give the advertiser the right to align their product with the celebrity – talent agreements and releases with celebrities are still required.

 

California Toughens Automatic-Renewal Law

California’s proposed Automatic-Renewal Law (ARL) passed the state Legislature earlier this month, tightening the requirements on companies that sell subscription services with automatically renewing payments to consumers. The new law comes on the heels of a flurry of class actions suits filed under California’s previous ARL enacted in 2010.  The 2010 ARL required auto-renewing consumer contracts to disclose terms clearly and conspicuously, obtain affirmative consumer consent before imposing a charge, provide an acknowledgment that contains the terms, the cancellation policy, and provide a simple cancellation method.

The new ARL incorporates the requirements of the 2010 version, and has the additional requirements of clear and conspicuous explanations of any updates to the price or purchase agreement to be charged after a free gift or trial concludes, affirmative consumer consent to non-discounted pricing prior to billing, disclosure of how to cancel automatic renewal prior to payment for the continuing service after a free gift or trial, and an “exclusively online” cancellation mechanism for consumers who originally accepted the service agreement online.

Takeaway: Companies that sell subscription services with automatically renewing payments to consumers in California should update their practices to conform to this new ARL.

CARU Refers Dave & Busters Inquiry to FTC

Last month, the Children’s Advertising Review Unit (“CARU”) referred claims by Dave & Busters Entertainment, Inc. to the Federal Trade Commission (FTC). CARU’s initial inquiry involved Dave & Busters advertising that aired during children’s programming.  The ad started with large text that stated “Free Video Game Play”, and a voiceover said “Dave & Busters has free video game play weekdays this summer.  You can buy a power card for $50 and play video games for free all summer.”  A superscript appeared at the bottom of the screen informing viewers, in part, that the offer required purchase of a $50 power card and excluded certain games.

Despite the “free games” advertised, CARU took issue with the $50 power card purchase requirement and the exclusion of certain games from the otherwise unqualified offer. According to CARU, these conditions were not adequately disclosed to the child audience.

CARU subsequently referred the inquiry to the FTC after Dave & Busters declined to participate in the self-regulatory process.

Takeaway: When it comes to advertisements targeting children, advertisers should avoid relying on “fine print” to disclose material terms of an offer.

 

Ride Sharing App Lyft Hit With TCPA Claim Based on Marketing Partner

Lyft, Inc. was hit with a putative class action under the Telephone Consumer Protection Act (“TCPA”) this month. The plaintiffs allege that Lyft is liable for text messages sent by Jobcase, Inc., Lyft’s marketing agency. Notably, the plaintiffs believe that Jobcase sent text messages to prospective drivers on behalf of Lyft, including “Maria, START NOW: Drive with Lyft, up to $1500/wk. Click to Apply!” Lyft compensates Jobcase based on the number of potential drivers that access Lyft’s website through a unique URL, according to the complaint.

Takeaway: Advertisers that hire agencies to perform text message campaigns on their behalf should investigate how the messages are sent and ensure that provisions within the agreement adequately shift liability to the agency.

 

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