Proskauer on Advertising Law
Proskauer on Advertising Law

The Legal “Pecking Order”: Ninth Circuit Finds Poultry Labeling Claims Preempted

In a unanimous precedential decision, a Ninth Circuit panel recently affirmed the dismissal of a putative class action against Trader Joe’s, which alleged that the statement “Up to 5% Retained Water” on Trader Joe’s poultry product labels was misleading. According to Plaintiff, her independent testing showed Trader Joe’s poultry products contained a higher percentage of retained water.  However, the Ninth Circuit affirmed the district court’s finding that federal law preempted Plaintiff’s challenge to those advertising claims. Webb v. Trader Joe’s, No. 19-56389, 2021 WL 2275265 (9th Cir. June 4, 2021).

As the Ninth Circuit’s decision explained, poultry testing and labeling are federally regulated under the Poultry Products Inspection Act (“PPIA”) and overseen by the Food Safety and Inspection Service (“FSIS”). Importantly, FSIS had already inspected and approved Trader Joe’s “Up to 5% Retained Water” claim. FSIS had also reviewed and declined to object to the testing protocol Trader Joe’s used to obtain the data supporting that claim. And because Trader Joe’s had never publicly published its testing protocol, the Court found Plaintiff had not (and could not) allege that her testing protocol was the same as that used by Trader Joe’s.

On this basis, the Ninth Circuit found Plaintiff’s claims were preempted by the PPIA. Since the FSIS had already reviewed and accepted Trader Joe’s testing protocol and labeling, requiring Trader Joe’s to conform to Plaintiff’s test protocol, or to accept  Plaintiff’s test data, would impose requirements “in addition to, or different than those” required under federal law—namely, the PPIA.

Plaintiff tried to avoid that finding by arguing Trader Joe’s protocol was not “preapproved” by FSIS.  In other words, Plaintiff argued FSIS did not object to the testing protocol, but did not explicitly approve it either.  The Court was not persuaded.  It noted that under the PPIA, Trader Joe’s was only required to make its protocol available to FSIS, which “may object to or require changes” within 30 days.  And under the federal regulatory scheme, FSIS’s decision not to object or otherwise require changes to the protocol constituted federal approval.

Many advertising class actions take issue with labels that are allegedly misleading.  When those labels are subject to a federal regulatory scheme (more commonly the FDCA than the PPIA) in which the federal agency approves or signs off on a subsequently challenged statement, preemption can be a strong basis for a dismissal motion.

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Judge Wipes Out “Wet Ones” False Advertising Suit

Judge Todd W. Robinson of the Southern District of California recently dismissed a putative class action against Edgewell Personal Care, the makers of Wet Ones antibacterial hand wipes, alleging it misled consumers by representing Wet Ones kill 99.99 percent of germs and are “hypoallergenic” and “gentle.” In dismissing plaintiff’s claims, the court found no reasonable consumer would take these representations to mean that Wet Ones kill 99.99 percent of all kinds of germs (including those not commonly found on hands), or that the hand wipes are entirely free of allergens or skin irritants. Souter v. Edgewell Personal Care Co., No. 20-cv-1486 (S.D. Cal. June 7, 2021).

The Wet Ones product label states that the wipes “Kill[] 99.99% of Germs.” Plaintiff alleged this statement is misleading because the wipes’ active ingredient is “ineffective against certain viruses, bacteria, and spores, which comprise more than 0.01 percent of germs and can cause serious diseases.” Specifically, Plaintiff alleged the wipes could not protect consumers from – among other conditions – food-borne illnesses, sexually transmitted diseases, polio, and COVID-19.

The court, however, found “no reasonable consumer would be misled by [these representations] in the way that Plaintiff alleges.”  Plaintiff did not explain “how or why a reasonable consumer would believe that a hand wipe would protect against these viruses and diseases.” Indeed, the court found it implausible that a reasonable consumer would believe a hand wipe could protect them against conditions like polio or HPV. Instead, if anything, the court found a reasonable consumer would suspect that a hand wipe would be effective only against bacteria commonly found on hands. Plaintiff’s complaint failed to allege how common it is for the strains of bacteria she identified to appear on hands.

The court was likewise unconvinced that defendant’s use of the words “hypoallergenic” and “gentle” was misleading. It found “[n]o reasonable consumer would read ‘hypoallergenic’ and ‘gentle’ to mean that [the product] is completely free of ingredients that can cause an allergic reaction.” Rather, a reasonable consumer is more likely to interpret the label to mean the product poses a lower risk (as opposed to no possible risk) of skin irritation. Furthermore, the court found a reasonable consumer may understand these terms to convey a message about the effect of Wet Ones on the skin, rather than a message about its ingredients.

This decision serves as a reminder of the importance of context in determining reasonable consumer takeaway. When plaintiffs ignore context and claim to have taken away an objectively unreasonable message, their complaint is ripe for dismissal.

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Want to talk advertising? We welcome your questions, ideas, and thoughts on our posts. Email or call us at lweinstein@proskauer.com /212-969-3240.

Don’t Sweat It: 8th Circuit Affirms Dismissal of Deodorant Class Action

The Eighth Circuit recently affirmed the dismissal of a class action alleging that Unilever’s differential pricing of men’s and women’s antiperspirants violated the Missouri Merchandising Practices Act (MMPA). In doing so, the Court found plaintiff’s claims wrongly equated marketing targeted to women with point-of-sale price discrimination by gender (i.e. charging a different price for the same product based on the gender of the purchaser, at the time and place where the retail transaction is completed).  Schulte v. Conopco, Case No. 20-2696 (8th Cir. May 18, 2021).

Dove “Men + Care” is an antiperspirant line primarily marketed to men, with five different scents. A differently branded product, Dove “Advanced Care,” is marketed primarily to women. Dove Advanced Care  is offered in a range of fifteen different scents – all of which are different from the scents available with the Men + Care product. The two lines have distinct packaging and labels, and are often priced differently.  Plaintiff alleged she purchased an Advanced Care antiperspirant stick from each of the six defendant retailers, and paid a premium of up to $1.00 per stick. According to plaintiff, this price differential constituted a “pink tax,” which she claimed violated the MMPA’s prohibition on “unfair practices.”

The district court dismissed the complaint, noting “[w]omen are able to purchase any of the Dove antiperspirants for the same price as men regardless of the scent or variety.” 2020 U.S. Dist. LEXIS 126194 (E.D. Mo. 2020).  On appeal, the Eighth Circuit affirmed. Without reaching the question of whether the MMPA does, in fact, prohibit gender discrimination in pricing, the Eighth Circuit found plaintiff incorrectly equated gender-based marketing with gender discrimination. According to the Court, to plausibly allege gender discrimination, plaintiff needed to plausibly allege that the only difference between “Men + Care” and “Advanced Care” was the gender of the consumer. Noting the various other differences between the two lines (including differences in scents, packaging, and labels), the Court found plaintiff failed to do so. Instead, the Court determined these various differences make the different products potentially attractive to different customers with different preferences.

The Eighth Circuit also emphasized the difference between marketing a product to appeal to a specific gender, and actually charging different point-of-sale pricing according to the consumer’s gender. The Court found plaintiff’s position incorrectly assumes that women must purchase products marketed to their gender, due to (in plaintiff’s words) “social conditioning and societal expectations regarding what is ‘feminine’ and ‘masculine.’” The Court noted that if plaintiff’s primary concern was price, she was free to purchase the cheaper “Men + Care” antiperspirant line. Plaintiff chose not to because, as stated in her brief, she did not want to “smell like a man.” Thus, the court concluded, plaintiff’s grievance was that she did not want to pay extra for her preference. But preference-based pricing, the Court said, was not in and of itself “unfair.”

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Want to talk advertising? We welcome your questions, ideas, and thoughts on our posts. Email or call us at lweinstein@proskauer.com /212-969-3240.

Judge Looks “Kind”ly Upon Certifying Class in Snack Bar Advertising Suit

In a recent opinion out of the Southern District of New York, Judge William H. Pauley III certified three classes of plaintiffs in New York, California, and Florida who allege that KIND LLC, the manufacturer of KIND Bars, deceptively marketed several products as “all natural” and “non-GMO,” even though they purportedly contain synthetic and genetically modified ingredients.  In re KIND LLC “Healthy and All Natural” Litig., No. 15-md-02645 (S.D.N.Y. Mar. 24, 2021).

The court began its analysis by examining each of the four Rule 23(a) requirements—numerosity, commonality, typicality, and adequacy—and determining that each weighed in favor of class certification.  Most notably, the court found that common questions predominated despite the absence of any uniform definition of the term “natural” because, in its view, all the definitions plaintiffs advanced were consistent with one another.  Plaintiffs offered definitions of “natural” from the dictionary, FDA policy, the USDA, and Congress. In considering these various definitions, Judge Pauley recognized that “these formulations of the definition ‘natural’ differ,” but dismissed these concerns because he believed none “exclude[d] another.”

This decision is somewhat surprising, given the deep reservoir of class certification decisions finding that, where plaintiffs fail to establish a controlling definition for a key term or phrase in the challenged advertisement, individual issues predominate and class certification should be denied.  A number of courts have reached this conclusion in the “natural” labeling sphere:

  • In Astiana v. Kashi Co., the court refused to certify a class bringing “all natural” claims, in part because the plaintiffs were unable to show that “all natural” had a shared meaning amongst the proposed class. 2013 U.S. Dist. LEXIS 108445, *40 (S.D. Cal. 2013)
  • In Thurston v. Bear Naked, Inc., a federal judge in the Southern District of California found commonality and predominance lacking because the plaintiffs “fail[ed] to sufficiently show that ‘natural’ has any kind of uniform definition among class members.” 2013 U.S. Dist. LEXIS 151490, *25 (S.D. Cal. 2013).
  • In Randolph v. J.M. Smucker Co., the court denied class certification where plaintiff had “not demonstrated that an objectively reasonable consumer would agree with her interpretation of ‘all natural,’” while also noting that this failure “unequivocally exposes the fact that there is a lack of consensus” surrounding what constitutes a “natural” product. 2014 U.S. Dist. LEXIS 176731, *14 (S.D. Fla. 2014).

Courts regularly adopt this reasoning in other contexts also. See Pierce-Nunes v. Toshiba Am. Info. Sys., 2016 U.S. Dist. LEXIS 149847 (C.D. Cal. 2016) (holding that the predominance requirement was not satisfied where plaintiffs could not establish a common meaning for the term “LED TV”); In re 5-Hour Energy Mktg. & Sales Practices Litig., 2017 U.S. Dist. LEXIS 220969 (C.D. Cal. 2017) (same based on “energy”); In re Tropicana Orange Juice Mktg. & Sales Practices Litig., 2019 U.S. Dist. LEXIS 102566 (D.N.J. 2019) (same based on “pasteurized”).

The FDA also has not adopted, and has actually declined to adopt, a formal definition of the term “natural,” citing the “many facets of this issue” the agency would have to carefully consider if it were to undertake the task of defining the term.  See 58 Fed. Reg. 2302, 2407 (Jan. 6, 1993).  In doing so, the FDA noted “the ambiguity surrounding use of this term.”  It is difficult to square this ambiguity with the KIND court’s certification decision.

Watch this space as we monitor whether this decision is part of a shifting tide in “natural” certification decisions, or merely an outlier amidst continuing struggles to reach consensus on what “natural” even means.

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Want to talk advertising? We welcome your questions, ideas, and thoughts on our posts. Email or call us at lweinstein@proskauer.com /212-969-3240.

Judge Recommends Lanham Act Litigant “Shake it Off”

Judge Joshua D. Wolson of the U.S. District Court for the Eastern District of Pennsylvania recently dismissed a Lanham Act suit that challenged critical comments on a blog (not this one!).  The case was brought by plaintiff Crash Proof Retirement, a retirement investment adviser who was the subject of the criticism.  The defendant author of the blog post was a former stockbroker.

In dismissing the suit, the court determined that “arms’-length criticism made without any economic motivation does not constitute commercial speech just because it might impact someone’s business or livelihood,” and cannot be the basis for a Lanham Act claim. Quoting “the immortal words of [pop singer] Taylor Swift,” Judge Wolson wrote: “although ‘haters gonna hate, hate, hate…’, sometimes you just have to ‘shake it off.’” Crash Proof Retirement, LLC v. Paul M. Price, Case No. 2:20-cv-05906-JDW (E.D. Pa. Apr. 13, 2021).

The blog post at issue criticized plaintiff’s investment services. As the court found, the author went so far as to insinuate the plaintiff’s business is a scam. After discussing misgivings about Crash Proof Retirement’s strategy, the post described a low-risk alternative strategy.  Plaintiff brought suit under the Lanham Act, claiming the author of the blog post made false or misleading statements about Crash Proof while advertising and promoting an alternative investment strategy.

The court however, held that plaintiff’s legal theory was not crash proof, since the blog post did not constitute “commercial speech” under the Lanham Act.  In deciding whether speech is commercial, courts consider three factors: (1) whether the speech is an advertisement; (2) whether it refers to a specific product or service; and (3) whether the speaker has an economic motivation.

Here, the court found only the second of the three factors was satisfied. Even though the post referred to plaintiff’s specific product or service, it did not advertise or promote any product. Nor was there any indication the author had an economic motivation. The post critiqued plaintiff’s services and described an alternate investment strategy, not associated with any particular product or competitor. The court held that the mere mention of a specific product or service could not overcome the absence of any advertising content or economic motivation, and did not make the writing commercial speech.

The court was likewise unmoved by the argument that the blog post presented an idea that would compete with plaintiff’s, noting “[t]he mere fact that the parties may compete in the marketplace of ideas is not sufficient to invoke the Lanham Act.” The court observed that the Lanham Act is not intended to stifle criticism of goods or services by one who is not engaged in marketing or promoting a competing product.

Judge Wolson’s opinion serves as a reminder that Taylor Swift gives good legal advice, and that while negative press may cause a business some harm, this does not, by itself, entitle one to relief under the Lanham Act.

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Want to talk advertising? We welcome your questions, ideas, and thoughts on our posts. Email or call us at lweinstein@proskauer.com /212-969-3240.

FTC Workshop: “Bringing Dark Patterns to Light”

The FTC recently held a workshop titled “Bringing Dark Patterns to Light,” a recording of which can be found at the following link. The workshop centered around exploring the effects of digital “dark patterns” on consumers and the marketplace.

The term “dark patterns” refers to a range of potentially deceptive website design tactics that can manipulate consumers’ behavior or limit their autonomy. Dark patterns can deceive consumers into purchasing, sharing, or agreeing to items consumers did not intend to purchase, share, or agree to. Dark patterns are also employed to make it confusing or difficult to terminate agreements or subscriptions. Increasingly, companies are also using dark patterns to manipulate consumers into giving up their personal data, which is sold and then used to target advertising and manipulate future behavior.

Some examples of “dark patterns” include:

  • a website that automatically adds items to a user’s online shopping cart;
  • the “bait and switch,” where a user looking to take one course of action is redirected to a completely unforeseen result. For example, if pressing an “X” at the top right corner of a pop-up – which normally results in closing the window – actually initiates a download;
  • “disguised ads” designed to blend in with other content or navigation on the page, to manipulate consumers into clicking on them.

Panel 1: “What are Dark Patterns, and Why Are They Employed?”

One FTC workshop panel focused on defining dark patterns and identifying the drivers of dark patterns.

According to the panelists, dark patterns have one of six attributes – they 1) are deceptive, 2) constitute “information hype”, 3) are asymmetric, 4) are covert, 5) result in differential treating, or 6) are restrictive.

  • “Deceptive” dark patterns induce false beliefs — for example, a countdown timer that does not relate to what is being advertised, meant to mislead consumers into believing the availability of items or discounts are time-limited.
  • “Information hype” dark patterns delay or hide important information from users – for example, hidden fees shown only after the user has spent time selecting items.
  • “Asymmetric” dark patterns make it hard to access certain choices that disadvantage the advertiser. A common example is where websites hide the option to decline consent to cookies (while making the “accept” option readily accessible).
  • “Covert” dark patterns manipulate users without their knowledge. For example, where a pop-up asks for a consumer’s email address and phone number in exchange for a discount, even though (unbeknownst to most consumers) only one piece of information is required for the discount.
  • “Differential treating” dark patterns disadvantage and treat one group of users differently from another – for example, where the only way to get ahead in a video game is to purchase features and not by your own skill (thereby treating users who have the means and willingness to pay differently from those who do not).
  • “Restrictive” dark patterns eliminate certain options from user interfaces altogether – for example, to sign up for a service, a consumer must agree to both the terms and conditions and marketing emails to proceed.

While unique in their own ways, the panelists noted that dark patterns ultimately function in two ways: (1) by manipulating information flow to users or (2) by modifying the decision space for users and ultimately influencing how users make choices.

A study by one of the panelists demonstrated how and how often a consumer experiences dark patterns depends on the consumer’s preferred interface. According to this study, use of dark patterns and the variety of dark patterns employed is higher on apps than on mobile or desktop websites. While this may be due to many factors, the panelist believed it demonstrates how important it is to understand that a review of a website on one interface or platform might not provide a complete and accurate picture of an advertiser’s use of dark patterns.

Panel 5: “How Can We Best Continue to Address Dark Patterns?: Potential Strategies for Dealing with Dark Patterns”

In another workshop, panelists discussed the current legal regime and enforcement challenges related to dark patterns, how to prioritize efforts to combat dark patterns, and various solutions for mitigating the harmful effects of dark patterns on consumers.   Notable members of this panel include Laura Brett, director of the NAD, and Jennifer Rimm, an Assistant Attorney General of the Office of Consumer Protection at the Office of the Attorney General for the District of Columbia.

The panel noted there has recently been an increased interest in regulating dark patterns.  The FTC is actively working to combat these unfair practices by bringing enforcement actions under the FTCA and statutes such as the Restore Online Shoppers Confidence Act, which requires sellers of subscription plans to disclose all material terms and provide a simple way to cancel.  Policymakers have also expressed willingness to prohibit dark patterns in impending and recently-enacted privacy legislation.  The California Consumer Privacy Act, which went into effect in 2020, was the first privacy law to specifically prohibit dark patterns in opt-out processes.  The Act gives consumers the right to stop, access, and delete the sale of their online information, and prevents advertisers from using processes intended to impair a consumer’s choice to opt out.

Federal courts of appeals have also backed the FTC in cases alleging that dark patterns were used to deceive consumers.  For example, the Second Circuit in FTC v. LeadClick Media found the defendant’s website, which sold colon cleanses and weight loss products, violated the FTC Act where it included fake customer testimonials drafted by the company and advertising content that was designed to look like independent journalism.

State Attorneys General have also recently brought consumer protection cases involving dark patterns.  One such case was brought against Instacart in the District of Columbia for adding a 10% default charge allegedly designed to look like a tip for the driver, when in fact it was collected by Instacart.  A similar suit, currently ongoing in the District of Columbia, was brought against Marriot Hotels for not including a mandatory amenity and resort fee in the advertised price of its hotel rooms, and for using a number of other allegedly deceptive design strategies that obscured the fee.

The panel also noted the potential for independent self-regulation, including NAD, to help deter dark patterns.  One panelist noted that – as with other marketing practices – robust FTC enforcement promotes better self-regulation; strong FTC enforcement motivates advertisers to comply with NAD recommendations, and to bring NAD challenges against competitors who use unfair practices to tilt the competitive landscape in their favor.

Advertisers should be cognizant that the use of dark patterns exposes them to the risk of FTC enforcement actions, NAD challenges, and other legal liabilities.  In addition to these legal risks, once exposed, dark patterns can quickly erode consumer trust and company goodwill, leading to long-term losses.  Steps advertisers should take to avoid engaging in practices that could be viewed as dark patterns advertisers include:

  • Making sure options to cancel subscriptions are not hidden.
  • Avoiding practices that would surprise a consumer. Such practices to avoid include:
    • automatically adding items to a user’s purchase basket without a customer’s consent;
    • concealing unexpected charges;
    • disguising advertisements as part of regular content.

To the extent online platforms use AI systems as part of the design process or to generate marketing materials, advertisers should also proactively review the material to ensure the absence of dark patterns.

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Want to talk advertising? We welcome your questions, ideas, and thoughts on our posts. Email or call us at lweinstein@proskauer.com /212-969-3240.

Supreme Court Curtails FTC Power to Seek Restitution in Court

A unanimous Supreme Court yesterday significantly curtailed the FTC’s ability to obtain the equitable monetary remedies of restitution and disgorgement of profits from entities accused of engaging in deceptive practices in violation of the FTC Act.  In so holding, the Court drew heavily on its interpretation of the language and history of that statute in concluding that allowing the FTC to dispense with administrative proceedings to obtain the equitable monetary remedies of relief would be to “allow a small statutory tail to wag a very large dog.”  AMG Capital Mgmt., LLC v. FTC¸ No. 19-508, slip op. at 8–9 (Apr. 22, 2021).

Under the FTC Act, the FTC may enforce the Act’s prohibitions on unfair or deceptive acts or practices either by commencing administrative proceedings under §5 of the Act or by suing a party in court under §13(b) of the Act.  The Act expressly authorizes the FTC, when going the administrative proceeding route, to seek civil penalties for violations of a final cease and desist order issued at the completion of this process.  While §13(b) does not reference the availability of monetary remedies—it merely authorizes the FTC to seek a “permanent injunction”—the FTC routinely uses §13(b) suits to seek equitable monetary awards of restitution and disgorgement.  Indeed, §13(b) has become the FTC’s primary tool for enforcing the Act.

The Supreme Court’s decision in this matter arose out of a §13(b) suit the FTC brought against the petitioner for deceptive pay-day loan practices.  The district court granted the FTC’s motion for summary judgment, awarding an injunction and ordering the petitioner to pay $1.27 billion in restitution and disgorgement.  The Ninth Circuit affirmed, holding that circuit precedent “empower[ed] district courts to grant any ancillary relief necessary to accomplish complete justice, including restitution.”

The Supreme Court disagreed.  The Court noted that Congress amended the FTC Act in the 1970s to add §13(b), allowing the FTC to seek a court-ordered “permanent injunction.”  In context, the Court found the words “permanent injunction” in §13(b) have a limited purpose as applying only to injunctions, and could not be read as allowing the FTC to directly obtain court-ordered monetary relief.  The provision only discusses relief that is prospective, not retrospective.  Based on this, the Court determined Congress enacted §13(b) to address the problem of stopping seemingly unfair practices from taking place while the FTC determines their lawfulness.

Moreover, other provisions in the FTC Act, which were enacted after §13(b), give district courts the authority to impose conditioned and limited monetary relief. The Court found it unlikely that Congress would have enacted these provisions if §13(b) had already implicitly allowed the Commission to obtain those same forms of monetary relief and more.

This ruling may significantly curtail those efforts, and may result in greater use of §5 proceedings to fulfill the FTC’s mission. Watch this space for further developments.

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Want to talk advertising? We welcome your questions, ideas, and thoughts on our posts. Email or call us at lweinstein@proskauer.com /212-969-3240.

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