Sweet Victory: Ninth Circuit Affirms Dismissal of Trader Joe’s Honey False Ad Suit

The Ninth Circuit affirmed the dismissal of a class-action lawsuit that alleged Trader Joe’s Manuka Honey product labeling was misleading. Trader Joe’s marketed its store brand Manuka honey as “100% New Zealand Manuka Honey” or “New Zealand Manuka Honey.” Plaintiffs claimed that these labels were misleading because the honey only consisted of between 57.3% and 62.6% honey derived from Manuka flower nectar. Plaintiffs alleged that the label and ingredient list created a “false impression” that the Trader Joe’s honey contained a higher percentage of honey derived from Manuka.

The FDA provides guidelines about honey that allow for the labeling of honey by its “chief floral source” which means the principal source of honey is a single floral source. Trader Joe’s Manuka honey met the standard of the FDA definition. Therefore, the Trader Joe’s label was accurate because there was no dispute as to whether all of the honey was technically Manuka honey.

Despite the fact that the front label was accurate under the FDA guidelines, Plaintiffs argued that consumers could still be misled into thinking the honey was “100%” derived from the Manuka flower nectar. The court understood that there was an ambiguity surrounding the meaning of the “100%” claim. The district court concluded, and the Ninth Circuit agreed, that other available information about the honey would “quickly dissuade a reasonable consumer” from believing the honey was 100% derived from Manuka.

A reasonable consumer may look at information beyond the physical label to learn about the product itself and its packaging. The court found that a reasonable consumer of Manuka honey would be dissuaded from Plaintiffs’ interpretation of “100%” based on three key “contextual inferences” from the product: (1) it is impossible to create honey 100% from Manuka (or other floral source); (2) the low price of the product; and (3) the presence of the “10+” on the label. On the first point, bees forage and therefore it is impossible to ever have honey derived from one source. On the second, Manuka honey is a fancy product, and the fact that it only cost $13.99 should indicate it was not made solely from Manuka flower nectar. And, third, Manuka honey producers have created a scale that grades the honey based on the purity of the Manuka honey. Trader Joe’s only has a “10+” out of 26+.

Therefore, a reasonable consumer would not reach the conclusion that “100% New Zealand Manuka Honey” is making the claim that the product consists exclusively of honey derived from Manuka. Rather, a reasonable consumer would conclude that the “100%” claim means that it is “100% honey whose chief floral source is the Manuka plan” (an accurate statement).

Takeaway: Context clues matter. A reasonable consumer can be expected to look beyond just the wording on the label in front of them. Be conscious of ambiguous language; just because an advertisement is ambiguous, does not automatically mean that it is misleading or deceptive.

So Fresh and So Clean: Wet Ones Wipes Suit Dismissed

On June 7, 2021, the Southern District of California dismissed a case against Edgewell Personal Care, Co., alleging that defendants’ label on its “Wet Ones” antibacterial hand wipes was false and deceptive. Plaintiff brought a putative class action against defendants for making misleading representations about the efficacy and skin safety of its hand wipes. The suit was filed under the California Unfair Competition Law (“UCL”), False Advertising Law (“FAL”), and Consumer Legal Remedies Act (“CLRA”).

Plaintiff alleged that Wet Ones wipes do not kill 99.99% of germs as advertised. The active ingredient in the hand wipes was allegedly ineffective against certain viruses and bacteria. Plaintiff also alleged that the hand wipes contained ingredients that were allergens or skin irritants, contradicting the label’s claim that the hand wipes were hypoallergenic and gentle.

The court determined that plaintiff had standing. Under the UCL and FAL, plaintiff needs to show that she suffered an economic injury that was caused by the unfair business practice or false advertising at the root of the claim, and that she actually relied on the misrepresentations. Here, plaintiff lost money on hand wipes she would not have bought, or bought on different terms, if she knew the truth about their efficacy and she relied on these representations when purchasing.

The court found that plaintiff’s claims failed the reasonable consumer test, which requires a probability that a “significant portion of the general consuming public or of targeted consumers, acting reasonably in the circumstances, could be misled” by the representations.

First, the court stated that a reasonable consumer would not expect the hand wipes to kill the types of bacteria, viruses and germs plaintiff named, like the ones that cause polio or food-borne illnesses. A reasonable consumer would only expect the wipes to kill bacteria more likely to be found on hands. Second, the court found that no reasonable consumer would understand hypoallergenic and gentle to mean the product is completely free of ingredients that could cause an allergic reaction. Further, it is unlikely a reasonable consumer would think hypoallergenic and gentle meant that the hand wipes had no risk of irritation, rather than just a lower risk of skin irritation. A reasonable consumer may also understand the label claims to refer to the product’s effect, not the ingredients.

Takeaway: The way in which an average consumer would actually read and understand a label’s promises is key. In a time where consumers rely heavily on cleaning products, this case shows it won’t be enough for a plaintiff to allege any possible misreading of a label; a consumer’s reading of the label needs to be reasonable.

Score One for the Student Athletes: NCAA Adopts Interim Name, Image, Likeness Policy

The National Collegiate Athletic Association (NCAA) has officially adopted interim policy changes that will allow college athletes the opportunity to benefit from their name, image, and likeness (NIL). This change comes on the heels of NCAA v. Alston, discussed here, where the Supreme Court ruled 9-0 that the NCAA violated anti-trust laws when it limited education-related benefits a college or university could offer student athletes. We previously wrote about the NCAA’s adoption of a new rule allowing elite Olympic and Paralympic athletes to have “additional training expenses” paid without jeopardizing their NCAA eligibility. This new policy goes well beyond the NCAA’s previous rule.

This policy change also comes right as select states’ laws go into effect that allow students to profit from their NIL rights. Without this policy change, a college athlete going to school in one state would have been able to earn money from their NIL without worrying about their college eligibility, while a student in another state would risk violating NCAA rules.

Some of the policy changes also include allowing college athletes to enter into sponsorship and endorsement deals, to get compensated for making personal appearances and signing autographs, and to work with agents. College athletes will have opportunities unlike ever before, which in turn means brands will have new audiences to reach if they choose to enter into deals with student athletes.

However, this journey is far from over. The NCAA views this policy change as temporary as it waits either for (a) Congress to pass federal legislation addressing the problem or (b) new NCAA permanent rules to be approved.

Takeaway: Uniformity is key. The temporary policy the NCAA implemented was important to avoid a scenario where students in one state could profit off their NIL rights, while others could not. This change opens up possibilities for brands and student athletes alike.

Maryland Legalizes Sports Betting and College Athletes’ Image Ownership

In May 2020, Maryland made two major moves in the sports world: it legalized sports betting and passed a law allowing college athletes to profit from their names, images, and likeness.

HB 940 legalizes sports betting and provides a framework for the industry to operate. It allows for in-person betting, including at major Maryland sports stadiums belonging to the Baltimore Orioles and the Baltimore Ravens. It also provides licenses for mobile and online sports wagering.

SB 439 allows college athletes to profit from their names, images, and likeness (NIL). This has been a point of contention with the National Collegiate Athletic Association (NCAA), whose rules prohibit athletes from earning money off their names, images, and likeness. The NCAA plans to vote on athletes’ NIL rights in the very near future. Maryland is the latest state to pass such legislation ahead of any action by the NCAA.

The newly enacted laws will likely have a major impact in Maryland, both in the sports world and beyond. HB 940 anticipates over $15 million a year in revenue, which will support education and be used to help small, minority owned and women-owned businesses. SB 439 may encourage the NCAA to revisit their policy on college athletes’ abilities to profit from their names, images, and likeness.

Now that the Supreme Court has ruled in favor of the student-athletes over the NCAA in their antitrust suit regarding compensation restrictions, NCAA v. Alston, the NCAA may feel even more pressure to revise their rules regarding student-athletes’ NIL rights.

Takeaway: We will have to wait and see if more states follow Maryland by legalizing sports betting and allowing their athletes to profit off themselves. Or, perhaps the federal government will step in and pass legislation to legalize sports betting and protect college athletes’ individual rights. Congress has introduced legislation for college athletes’ name, image, and likeness rights. Either way, states are not waiting for the federal government or the NCAA to make their own moves.

 

Register today! Join us for a CLE webinar “Evolving Roles for Self-Regulation of Medical Devices and Health Services”

This CLE webinar offers a unique, inside look at how BBB National Programs’ National Advertising Division (NAD) evaluates medical devices and other health-related products and services. Our panelists will engage in a lively discussion of recent enforcement trends and challenges for manufacturers, and how companies can effectively use the NAD framework to their advantage. In addition, this event will discuss NAD guidance on self-regulation and how to use it as a tool to ensure competitors also meet the standards set by the Federal Trade Commission (FTC).

Join us at 2:00 p.m. ET today, June 23rd.

Today’s webinar will provide the medical device industry and others in the life sciences sector with the chance to interact with BBB National Programs and NAD leadership and answer questions, such as:

  • How broad is the NAD’s mandate when it comes to regulated products and services?
  • How do the unique and complicated marketing channels in the device and health services industry affect NAD’s analysis of the truth and accuracy of advertising?
  • What are the potential applications of self-regulation to emerging outcomes- and value-based commercial models for medical devices?
  • Why is the role of self-regulation in the medical device industry becoming more attractive?
  • How do companies appropriately use health care data within the framework of an NAD case?
  • What is the current attitude toward self-regulation held by the FTC?

Event Speakers

  • Laura Brett, Vice President, National Advertising Division, BBB National Programs
  • Mary Engle, Executive Vice President, Policy, BBB National Programs
  • Joe Metro, Partner, Reed Smith
  • John Feldman, Partner, Reed Smith

Are Virtual Branded Worlds the Future?

The COVID-19 pandemic has had immeasurable effects on consumers and how they engage with brands, with the elimination of in-person consumer interactions for nearly a year. As a result, some brands are taking consumers’ entrance into the metaverse one step further by developing virtual worlds that allow the consumer to engage with the brand in a whole new way. These worlds and experiences have helped brands stay connected to consumers throughout the pandemic. One such brand taking advantage of consumers’ search for new online experiences is the global skincare brand SK-II, which launched a virtual city based around iconic Japanese sights. Consumers can watch movies and get a tour of SK-II studios. Other brands have joined the virtual branded experience train. Luxury fashion house Burberry launched an interactive virtual replica of its flagship Tokyo store that allows customers to navigate around the store and buy items from its collection.

Virtual worlds and experiences have benefits beyond connecting with consumers during the pandemic. They are easily changeable and can adapt more quickly to consumer preferences and trends than a brick and mortar store can. The reach of a virtual world and experience is well beyond that of a physical one. While after more than a year of lockdowns and quarantines, consumers may be ready to interact with brands, it is also clear that the virtual brand worlds and interactions are here to stay.

Takeaway: Virtual worlds provide brands opportunities for consumer engagement and are capable of reaching a far wider audience than brick and mortar. But, in post-pandemic life, consumers’ desire to get back into the real world might cause them to shun online experiences. Time will tell.

FTC Seeks Monetary Penalties for Deceptive Marketing of COVID-19 Treatments in First Action under the COVID-19 Consumer Protection Act

Last week, the Department of Justice (“DOJ”) together with the Federal Trade Commission (“FTC”) announced a new civil lawsuit filed against St. Louis-based chiropractor Eric Anthony Nepute and his company, Quickwork LLC, alleging that they deceptively marketed products containing vitamin D and zinc as scientifically proven to treat or prevent COVID-19. This is the first enforcement action alleging violations of the COVID-19 Consumer Protection Act.

The COVID-19 Consumer Protection Act, passed by Congress in December 2020, prohibits deceptive acts or practices associated with the treatment, cure, prevention, mitigation or diagnosis of COVID-19. Those in violation of the new law may be subject to civil penalties, injunctive relief, and other remedies available under the FTC Act.

According to the complaint, the defendants marketed their “Wellness Warrior” vitamin D and zinc products as being just as effective as, or more effective than, the COVID-19 vaccines currently available. For example, the defendants falsely touted that their products “will prevent [COVID-19] from infecting your body”, “a ‘high dose’ of Vitamin D would help to turn COVID-19 into a ‘mild illness’”, and vitamin D and zinc “actually works better than . . . any vaccine” and, therefore, customers did not “really need a vaccine.”

In May 2020, the FTC sent a warning letter to the Nepute, warning him about unsubstantiated COVID-19 efficacy claims that he was making for other products. Despite the FTC’s warning, Nepute continued marketing his products, including the Wellness Warrior vitamin D and zinc products, as proven immunity boosters that effectively treat or prevent COVID-19, while regularly dismissing public health guidance and promoting the products as equal or better protection against COVID-19 than currently available vaccines.

The complaint asks the court to exercise a provision of the new law to impose monetary penalties and to grant a preliminary injunction to stop the defendants from continuing to make the allegedly deceptive advertising claims.

Takeaway: With the FTC’s new authority under the COVID-19 Consumer Protection Act, this lawsuit signals that the Commission will take a much more aggressive stance in policing the proliferation of consumer scams and frauds by companies touting fake drugs and treatments for COVID-19. For marketers that fail to comply with FTC warning letters, they may find themselves subject to similar suits and could face potentially significant civil penalties.

ANA Law & Public Policy Conference, Hosted by Reed Smith – The Future is Now

The ANA’s Law & Public Policy 1-Day Conference returns virtually to examine the ways in-house counsel can help their marketing teams “future proof” their advertising and marketing programs. From a deep dive into the new administration’s policies to cutting edge discussions on privacy, measurement, transparency, brand safety, and more, this is a must-attend conference for senior and operations level marketing and advertising lawyers who wish to stay ahead of the curve, proactively help their client, and be an insurance policy that protects their brands and fosters growth. Continuing Legal Education (CLE) credit will be offered.

The full agenda and registration can be found here.

12:45 – 1:30 pm ET: Join New York, partner Keri Bruce for I DON’T KNOW MUCH, BUT I KNOW I NEED A CONTRACT: IN-HOUSING MEDIA. In-housing is everywhere in marketing land. Marketers are “in-housing” creative and media and everything else in between. It’s happening at different speeds and in various flavors, all in the name of better, faster, cheaper, and with (hopefully) more transparency. The more digital transformation accelerates toward maturity, the more in-housing marketers will likely face. For legal counsel, that means dealing with new terms and contract puzzles that they have not had to understand and solve before. It also means dealing with marketers and procurement who are often in the same boat. When the rubber meets the road, legal will no doubt ask the business, “What are you actually buying? What does this term really mean? Have you thought about that condition? What if this consequence happens? What if that other thing doesn’t happen?” And in most cases, the business will simply respond, “I don’t know, I just need a contract.” In this session, Keri and Tom Triscari will provide practical tips for legal teams to make sure the right questions get asked before the contract gets negotiated. It all starts with a simple question: What is the trade? And how does this provider fit into the advertising ecosystem?

3:25pm – 4:25 pm ET: Join Global Diversity & Inclusion Advisor, Iveliz R. Crespo for BUILDING DIVERSE TEAMS. Studies show that diverse teams are more innovative, have higher collective intelligence, and are better at making decisions and solving problems. In this session, attendees will learn research-based strategies for successfully developing diverse and inclusive legal teams.

 

“Ignite”-ing another Photo Copyright Case

On April 12, 2021, Florida-based creative agency, Creative Klick Agency LLC, filed a lawsuit in the Southern District of Florida against Dan Bilzerian and his spirits company, Ignite Spirits Inc. and related companies. Creative Klick alleged that the spirits brand used its photos on various social media accounts, including those belonging to Bilzerian, and on Ignite’s websites, without the agency’s permission.

The complaint alleges that Ignite was first introduced to Creative Klick when the brand sought to hire the agency (through another agency) to produce social media marketing materials and related content, including high-end photography. The complaint further alleges that Ignite informed the agency that to help sway the brand to hire the agency, the agency should produce some sample images of one of Ignite’s vodka bottles. Creative Klick produced such a photoshoot and sent the photographs, which are registered with the U.S. Copyright Office, to the prospective client. Creative Klick argues that Ignite then re-appropriated, reproduced, and distributed copies of the photographs, and created derivative works thereof for use on both Bilzerian’s and Ignite Spirits’s social media pages without any license, permission, or approval by Creative Klick.

The complaint accuses Ignite of willful and intentional copyright infringement, contributory copyright infringement, and vicarious copyright infringement. Creative Klick seeks an order from the court requiring Ignite and its affiliates (i) to stop using copies of the photos, and (ii) to pay the agency actual and statutory damages and any profit attributable to the alleged infringement, including interest, attorney fees, and costs.

Takeaway: Photographs and other creative materials submitted as part of a pitch are subject to copyright protection. The sending of materials for presentation to a prospective client does not, in and of itself, transfer an ownership interest or license to the prospective client. Set forth how pitch materials will be treated at the outset of a relationship. This can be accomplished in a non-disclosure agreement.

FCC issues reminder to broadcasters on sponsorship IDs

Earlier this month, the Federal Communications Commission (FCC) issued an enforcement advisory to remind broadcasters of their sponsorship obligations.

What is the Sponsorship Identification Rule?
Under section 317 of the Communications Act of 1934 (the Sponsorship Identification Rule), when a broadcast station transmits any matter for which money, a service, or other valuable consideration is either directly or indirectly paid or promised to, or charged or accepted by, such station, the station, at the time of the broadcast, must make a disclosure that states: (1) that such matter is sponsored, paid for, or furnished, either in whole or in part, and (2) by whom or on whose behalf such consideration was supplied. The notice provides that broadcasters who are paid for programming without disclosing the program’s sponsor can “mislead the public and promote unfair competition.” Further, the disclosures help audiences distinguish third-party content from station editorial content.

The advisory also reminds broadcast licensees to exercise reasonable diligence to obtain from their employees, or from third-party suppliers, sponsorship identification information in order to enable the licensee to air the required sponsorship identification announcement disclosing that the material was broadcast in exchange for consideration.

Per the public notice, violation of the Sponsorship Identification Rule can lead to sanctions, including imprisonment or monetary forfeitures.

Takeaway: The enforcement advisory serves as an important reminder to commercial broadcasters to ensure they understand and comply with the Sponsorship Identification Rule. Advertisers should be aware of the rule as well, especially those that might be running public service announcement-like ads in paid media. The Sponsorship Identification Rule is generally met if: (i) the advertisement mentions the name of the source of the ad (i.e., the name of the brand, company, non-profit or governmental entity paying for the advertising space), and (ii) there is a commercial product or service mentioned in the advertisement. However, in the context of a public service announcement, there is not normally a commercial product or service mentioned in the ad. Thus, advertisers who want to run public service announcement-like advertisements will likely receive pushback from commercial broadcasters if their ads do not also disclose the source and the fact that the ads were paid for.

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