Scientific Studies Are “SuperStarch” Kryptonite, Class Action Suit Says

Plaintiff Kevin McCann launched a putative class action against The UCAN Company (“UCAN”), which markets and distributes a line of sports performance products including “Generation UCAN SuperStarch Drink Mix,” “Generation UCAN Protein Drink Mix,” and “UCAN Snack Bars powered by SuperStarch.” The products all contain “SuperStarch,” which UCAN claims to be an easily digestible carbohydrate that promotes “‘sustained energy,’ ‘optimized performance’ ‘enhanced fat burn’ and ‘speedier recovery,’ all without the harmful and performance-impairing side effects associated with gastrointestinal distress.” SuperStarch is allegedy hydrothermally modified waxy maize starch, the carbohydrates in which have a lower glycemic index than those that are not hydrothermically modified.

But, according to McCann’s complaint, the science behind SuperStarch is anything but settled. Although one 2011 study showed that the starch did lead to lower insulin spikes and a higher level of fat breakdown than a sweetener called maltodextrin, but that there was no difference in performance between people who took the starch versus people taking maltodextrin. The white papers on the efficacy of SuperStarch were authored by a member of UCAN’s advisory board and “contain many unsubstantiated claims tricked up to look like science.” The complaint further alleges that a study by the Florida State University Institute of Sports Sciences and Medicine showed no improvement in athlete performance from taking SuperStarch before or during exercise, and that it actually hurt performance by causing digestive issues.

The suit seeks to join a national class of all persons in the United States who purchased UCAN’s the SuperStarch products and two subclasses for purchasers in states with similar consumer fraud laws under the facts of the case, and demands restitution, compensatory and punitive damages, and attorneys’ fees under various state consumer protection statutes. UCAN has yet to answer suit.

Takeaway: Advertisers should ensure any scientific claims linked to advertised products are substantiated by peer-reviewed scientific studies—not simply internal data— to avoid costly consumer protection suits.

Shedding Unwanted Pounds and Class Actions: Jenny Craig Settles TCPA Suit for $3 Million

Last month, a Florida district court granted preliminary approval of a $3 million class action settlement brought on behalf of recipients of unwanted Jenny Craig marketing text messages. The lead plaintiff, Zoey Bloom, alleges in her complaint that Jenny Craig used an automatic telephone dialing system to transmit two text messages that advertised Jenny Craig’s weight loss services without her prior express written consent. One such message Bloom received was: “”Hi Zoey, It’s Liz @ Jenny Craig again. Don’t want you to miss our best offer ever! Free 1 yr prog. + $17 off wkly menu for 12 wks. Interested?” She sought to join all persons within the United States who received similar text message advertisements from Jenny Craig without prior written consent since May 2014—about 628,610 individuals.

The settlement agreement includes an unopposed request for class counsel’s attorneys’ fees of up to 30% of the settlement fund and the legal costs to bring the suit. The speedy settlement came after “extensive arm’s-length negotiations, including a full-day mediation session, and subsequent negotiations lasting over one week,” and “provides relief for settlement class members where their recovery, if any, would otherwise be uncertain, especially given Jenny Craig’s ability and willingness to continue its vigorous defense of the case,” according to Bloom’s unopposed motion for preliminary approval of the settlement. The final approval hearing to determine the fairness and adequacy of the settlement is set for February 25, 2019.

Takeaway: The TCPA prohibits making calls or sending messages using any automatic telephone dialing system or “robodialing” to a number assigned to a cellular phone service, other than those made with prior express consent or for emergency purposes. Violations carry a minimum penalty of $500 per call or message. Advertisers should ensure any campaign involving robodialed calls, voice messages, or text messages are within TCPA standards.

 

Vegan Cookie Company Settles Deceptive Nutrition Label Suit For $5 Million

Vegan cookie company, Lenny & Larry’s Inc., has reached a $5 million settlement with a proposed class of consumers who accused the company of misstating the nutritional value of its “Complete Cookie.” The proposed class action plaintiffs alleged that the Complete Cookie’s label violated the federal Food, Drug and Cosmetic Act and a variety of state consumer protection laws by (i) understating the calorie, carbohydrate, fat and sugar content; (ii) overstating the protein content; and (iii) miscalculating the percent daily protein share.

Under the terms of the settlement, Lenny & Larry’s will put $5 million in a common fund, with $1.85 million towards cash payments – with portions of this cash payment going toward administrative costs, the plaintiff’s fees and costs, and named plaintiff’s incentive awards – and $3.15 million towards free product. Any unclaimed cash will go toward free cookie distribution instead, and if the initial free cookie distribution doesn’t exhaust the entirety of the $3.15 million product inventory, the remainder will be sent to retail outlets to be given to consumers for free. Additionally, Lenny & Larry’s retain the right to terminate the settlement if more than 300 settlement class members opt-out of the settlement.

Takeaway: As we have previously written, advertisers of food products should continue to pay special attention to the labelling of ingredients in light of the continued scrutiny by the class-action bar.

ANA Releases Latest White Paper on Transparency in Wake of FBI Investigation

The Association of National Advertisers (ANA) and Reed Smith released a white paper – Media Buying 2018: Transparency at a Crossroads – reporting on the state of transparency in the advertising industry and the recently announced FBI criminal investigation into agency media buying practices. Pursuant to the FBI’s request, the ANA notified its advertiser members that the FBI was requesting cooperation in the investigation if an advertiser believes it is a victim of any fraud or other criminal activities in media buying. The white paper can be found here.

The white paper provides insight on how the advertising industry reached this point and where it may go moving forward. Among other things, the white paper includes insight on how advertisers can cooperate with the FBI, the potential scale of the FBI investigation, the nature of the potential crimes, and how advertisers can protect their interests during the investigation.

It should be noted, however, that at this point in time, no one has been charged with any crimes and criminal activity should not be inferred simply because an investigation is underway.

For additional information regarding the white paper or the FBI investigation, contact the Reed Smith team of Douglas Wood (dwood@reedsmith.com), Keri Bruce (kbruce@reedsmith.com), or Steven A. Miller (samiller@reedsmith.com).

ANA Legal and Regulatory Webinar: Data Transparency

At the ANA’s March ANA Advertising Law & Public Policy Conference, a panel discussed how advertisers need to be on top of who has, or is, collecting advertiser data, what are they doing with it, how to access to it, and whether (or how) to use those data assets in data-driven transactions.

As a follow up to that session on November 13 at 1 pm, Keri Bruce and Kimberly Chow of Reed Smith LLP will share new insights and tips for marketers on how to collect and use data to further their business while minimizing data risk and liability.

Visit the ANA website to register today!

Six Years Behind Bars: DOJ Gives Dire Warning to Online False Advertisers

The First Circuit recently affirmed the six-year sentence of Mustafa Hassan Arif, who sold bogus drugs and health products under a panoply of brands he had concocted out of Pakistan. Arif created and operated over 1,500 websites to market and sell the products, and induced unwitting purchasers in the United States and elsewhere to buy his products online through altered clinical studies, fabricated testimonials, and false indicia of origin. Specifically, his web of subnetworks and referral networks included claims that the drugs had been clinically tested and been shown to cure a variety of diseases and that the drugs were manufactured and distributed from addresses in Europe and New Zealand. However, in fact, all of the studies, testimonials, and statistics were completely fabricated and the drugs were made in Pakistan. Arif’s scheme garnered over $11 million in revenues.

In affirming Arif’s sentence, the First Circuit rejected each of Arif’s arguments on appeal. Specifically, although Arif conditionally pled guilty to wire fraud in 2016, he argued that prosecutions such as his must be pursued exclusively by the Federal Trade Commission as false advertising cases, and not by the Department of Justice as wire fraud cases. The First Circuit rejected this argument squarely. Arif also argued that he could not have committed fraud as a matter of law because he “held an honest and sincere belief in the efficacy of his products [and] correctly identified their ingredients,” and that a purchaser of “reasonable prudence” would have known not to rely on the statements made on his websites due to a disclaimer on the third-party payment processor’s website. These arguments similarly failed, and the First Circuit held that “Arif’s belief in the efficacy of his products does not negate his fraudulent intent when he knowingly made false statements that went to the heart of his customer’s purchases” and “[customer] reliance is not an element of wire fraud.”

Takeaway: False advertising online may carry stiff penalties and even jail time; extreme cases may draw the ire of the Department of Justice as well as the Federal Trade Commission. Moreover, mere belief in the efficacy of the falsely-advertised products and a disclaimer will not protect online false advertisers from liability.

Just Fruit? Kind Faces Yet Another Class Action Lawsuit

Last month, a class-action lawsuit was filed in federal court alleging that Kind, LLC (“Kind”) deceptively advertises certain Kind bars and fruit packets. Specifically, the plaintiffs allege that Kind uses images of fruit on its products, and employs fruit sounding names, when the products do not contain whole fruit (e.g., the product containing mango, apple and chia is branded as the “mango apple bar” and its packaging includes images of mango slices and a whole apple). According to the complaint, the naming conventions and imagery communicates that the products are manufactured from start to finish directly from whole fruit ingredients; that the ingredients are not processed; and that the ingredients are fresher and healthier because they contain whole fruit. Plaintiffs seek preliminary and permanent injunctive relief to correct the alleged deceptive practices, and over Five Million Dollars ($5,000,000) in monetary damages.

TAKEAWAY: Class action attorneys are increasingly reviewing product packaging for consumer packaged food products. In addition to complying with Food and Drug Administration (“FDA”) requirements, advertisers should be aware that naming conventions and imagery may give rise to a complaint pursuant to federal and state laws prohibiting unfair and deceptive acts and practices.

Stung by the FTC: Aromaflage Owner Settles Mosquito Repellant Advertising Claims

Last month, the Federal Trade Commission (“FTC”) approved a final consent order settling deceptive advertising charges against Mikey & Momo, Inc. and its owners regarding claims that its Aromaflage sprays and candles effectively repel mosquitoes, including mosquitoes that may be carrying the Zika virus and other diseases.

According to the FTC’s complaint, Mikey & Momo and its owners made false and unsubstantiated claims, such as “fragrance with function,” “repels mosquitoes for 2.5 hours,” “scientifically tested” and “rigorously tested at one of the world’s leading Universities”. Specifically, the FTC alleges that such claims were not supported by rigorous and reliable scientific evidence.   Shifting gears, the FTC also alleges that Mikey & Momo promoted its products using what appeared to be independent and objective product reviews, without disclosing that such reviews were written by the owners of the company as well as family and relatives.

The consent order bars Mikey & Momo and its owners from engaging in deceptive conduct in the future and requires that they clearly and conspicuously disclose any material connection between a reviewer or endorser and the product being reviewed.

TAKEAWAY: Don’t get stung by the FTC. This case serves as a reminder that the FTC continues to be active in areas involving health claims and endorsements and testimonials.

Sport Supplement Company and Consumers Settle Deceptive Label Suit

Dietary supplement manufacturer PhD Fitness LLC (“PhD Fitness”) and a putative class of consumers have reached a settlement over claims that PhD Fitness deceptively labelled its sports supplements. The plaintiffs filed the proposed class action alleging that the marketing materials and labels on PhD Fitness’ “JYM” and “Post-JYM” supplements made false and misleading claims about the products ingredients, including that the ingredient dosage, and that the products contain sodium.

Takeaway: As we have previously written, advertisers of dietary supplements should continue to pay special attention to the labelling of supplement ingredients as well as the supplements’ claims made – and the substantiation required – in light of the continued scrutiny by the class-action bar.

The Cousteau Society Sues Jacques Cousteau’s Granddaughter for Trademark Infringement

The Cousteau Society (“TCS”) filed a lawsuit in New York federal court against Jacques Cousteau’s granddaughter, Celine Cousteau, alleging trademark infringement and unfair competition under federal and New York state law.

In its complaint, TCS argues that it owns all of the intellectual property associated with Jacques Cousteau – trademarks; rights of privacy, publicity, and personality (including Jacques Cousteau’s signature red stocking cap); and copyrights in films, images and photographs – and that Celine Cousteau improperly used such intellectual property without TCS’ permission for her upcoming documentary film, “Celine Cousteau, the Adventure Continues.” TCS alleges that after it learned about the production of the documentary, it sent notice to Celine Cousteau of TCS’ intellectual property ownership and requested Celine Cousteau not use such intellectual property; Celine Cousteau replied to TCS and assured the organization that its intellectual property would not be utilized in her documentary. Later, TCS viewed a press kit for the documentary which included what TCS claims is a copyrighted image of Jacques Cousteau in his signature red stocking cap as a background image for one of the pages. Shortly thereafter, TCS brought suit alleging a “flagrant usurpation” of its intellectual property seeking a permanent injunction, any profits derived from the use of its trademarks, and statutory and punitive damages.

Takeaway: Importantly, the depiction of famous apparel, including stocking caps, could give rise to a claim for publicity, trademark, or copyright infringement. Advertisers who wish to pay homage to celebrities, who like Jacques Cousteau, have a signature item of apparel, should be aware of the TCS enforcement action.

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