Consumer Advertising Law Blog

EU Bureaucrats Have Been Drinking Something, Not Water

The EU earlier this month banned companies that sell water from making claims that water “hydrates.”  Penalties for making such an outrageous claim can range up to two years in prison. What’s going on here you might wonder?  Is it not only the Euro that has become destabilized but also EU bureaucrats?  Apparently the thinking behind this decision is that there are certain medical conditions that can lead to dehydration. So although water can help hydrate someone who’s just engaged in vigorous physical activity or has been out in the hot sun all day, it’s not a “cure” for any disease that causes dehydration and shouldn’t be marketed as such. The EU was asked to consider this issue following an application by two German Professors, who were concerned to ensure that hydration claims wouldn’t be interpreted as meaning that water intake can reduce the risk of developing a human disease.

From the US perspective, it seems that the EU has lost sight of the basic principles that claims must be interpreted through the eyes of a reasonable consumer and in the context of an advertisement as a whole. If a company creates an advertisement showing a beach volleyball player drinking water during a break, surely no reasonable consumer will believe that the product is being marketed as a “cure” for diabetes or diarrhea or any other medical condition that causes excessive thirst or dehydration.  The claim that water helps you “hydrate” to a reasonable consumer is more likely a good reminder that they need to drink an adequate amount of fluids each day and that water can be an important and healthy choice.  Nor is there anything misleading, as some have suggested, about claiming your product helps with something if there are other products that help as well. If the EU truly intends to go down this path it has its work cut out for it. Is the slogan that Snickers is "the snack that satisfies" next -- it won’t satisfy if you’re suffering from a medical condition that causes hunger or malnutrition.  Let water be water and let’s move on to more important things.

- Randy Shaheen

Trust But Substantiate - Were Sugary Drink Companies Really Targeting Minorities?

We like to enjoy an occasional nonadult sugary beverage. And some of our good friends are sugary drink manufacturers. So it was with some interest that we read news stories earlier this month about a new report that found that blacks and hispanics were major targets of soda and other sugary drink advertisements. However, also being advertising lawyers we couldn’t help but wonder about the substantiation for that claim. (Our kids really hate it when we ask them to put together a substantiation file to support claims like “it’s been at least a month since you let me have a sleepover.”) So we read the underlying report issued by the Yale Rudd Center For Food Policy & Obesity, and it raises a few questions. 

The report (at page 65) notes that black children and teens viewed 81% and 90% more TV ads for sugary drinks than their white counterparts in 2010. For the more narrow category of regular soda, the differences were 93% and 77% respectively. However, the report notes that black children watched 50% more TV than white children and black teens viewed 64% more TV than white teens. Thus, a significant portion of the difference in ad exposure was likely due to increased TV viewing, and not alleged targeting. Indeed, with respect to soda, almost all the difference between black and white teens might be explained that way. If other parts of the Center's methodology are similarly flawed, the differences between the populations might even lose any statistical difference. 

Oddly enough, the significance of making this type of adjustment is not completely lost on the Center.  In their fact sheets discussing targeting of various groups by sugary drink marketers, the Center notes that teens in general viewed more TV ads than adults. The Center notes that this difference is even more significant because teens in general watch less TV than adults. Despite that observation, the fact sheet on black youth uses the 81% and 90% figures without any mention of the fact that these numbers are less significant because black youth watch significantly more TV than white youth. In terms of adjusting for viewing habits, the Center seems happy to incorporate that item into its analysis when it comes to explaining that kids watch more ads than adults, but, when that same approach diminishes the impact of striking statistics, the Center neglects to incorporate the adjustment for viewing habits into the text of its report. I'm doubtful that the FTC would endorse such a strategy for any commercial advertiser. 

So caveat emptor and caveat lector (reader) as well.

- Randy Shaheen

 

 

It’s as Natural as…

What is natural?  That is a question that has generated much buzz in the courts and in the press.  We previously blogged about the Snapple suit here  and noted that after the suit was brought against Snapple, the company swapped out the contentious corn syrup ingredient for sugar.  The Corn Refiners Association is also under heat from a lawsuit brought by major sugar companies alleging that the Corn Refiners’ commercials and other attempts to rebrand corn syrup as “corn sugar”, “co-opt the goodwill of ‘sugar’ and… sidestep growing consumer sentiment” and are false and misleading. 

A new slew of cases have begun to address the issue of which ingredients would render the “All Natural” label false. It seems that for companies wanting to be accepted by the public as a natural brand, it’s not as easy as removing most or all of the artificial ingredients.  A lawsuit against SkinnyGirl Margarita alleges that its “All Natural” and “Contains No Preservatives” label was false and misleading due to the use of the preservative sodium benzoate.  Shortly before the complaint was filed, Whole Foods pulled the Margarita off its shelf claiming that it wasn’t “all natural.” The company claims on its website that “[t]he litigation filed in relation to the labeling of Skinnygirl Margarita is frivolous.”As Bethenny Frankel stated more provocatively, “I’m not making wheatgrass here. If I could put an agave plant and some limes on a shelf I would.  [The Skinnygirl Margarita] is as close to nature as possible, while still being a shelf stable product.” 

In addition, a class action was recently brought against Kashi, owned by Kellogg, in the Southern District court of California claiming that Kashi’s “All-Natural” GoLean bars, instant hot cereal, chewy cookies, crackers, pita crisps, waffles, and pizza are anything but that.  Plaintiffs name sodium molybdate, phytnadione, sodium selenite, magnesium phosphate, niacinamide, calcium carbonate, calcium phosphate, calcium pantothenate as ingredients that they claim have already been declared synthetic by federal regulations.  They cite the definition of synthetic under the National Organic Program as “[a]substance that is formulated or manufactured by a chemical process or by a process that chemically changes a substance extracted from naturally occurring plant, animal, or mineral sources, except that such term shall not apply to substances created by naturally occurring biological processes.”  

Finally, ConAgra, a large Canola Oil Producer, has been sued for its use of the “100% Natural” labeling because the oil is made from genetically modified plants. 

*    *    *

The cases seem to keep on coming.  Part of the problem is that the term ”natural” is not governed by a comprehensive set of requirements.  The FTC abandoned an attempt to define “natural” in the 1980s.  The FDA’s website asks the question “What is the difference between natural and artificial ingredients? Is a naturally produced ingredient safer than an artificially manufactured ingredient? It responds with the answer of “[n]atural ingredients are derived from natural sources (e.g., soybeans and corn provide lecithin to maintain product consistency; beets provide beet powder used as food coloring). Other ingredients are not found in nature and therefore must be synthetically produced as artificial ingredients. Also, some ingredients found in nature can be manufactured artificially and produced more economically, with greater purity and more consistent quality, than their natural counterparts.”  The USDA’s website states that Natural, as applied to meat and poultry, is “[a] product containing no artificial ingredient or added color and is only minimally processed. Minimal processing means that the product was processed in a manner that does not fundamentally alter the product. The label must include a statement explaining the meaning of the term natural (such as "no artificial ingredients; minimally processed").” At least one state and some retail chains have similar policies relating to the presence of natural ingredients and minimal processing.

Given the flood of recent litigation perhaps it is the courts, and not the regulators, who will end up providing sorely needed definition.  Though one wonders whether the regulators aren’t better fit for the job. 

- Randy Shaheen and Deborah Birnbaum

UK ASA: Are You Really “Free Range”?

The UK’s advertising watchdog, the Advertising Standards Authority (ASA), banned a TV advert by Tesco Stores Ltd promoting its own-brand “Butcher’s Choice” sausages.  The ad featured pigs roaming in a field, in a hay barn and walking with a farmer down a lane.  Members of the public complained that the pastoral-like depiction of the pigs was misleading because the sausages were sourced from pigs that were bred and reared indoors.  Tesco, the UK’s largest retailer, defended the ad saying that, although the meat used for the sausages came from pigs that were “finished” indoors, some of them were born outdoors; the farm shown in the ad was a supplier for the sausages, and both indoor and outdoor bred pigs were reared to proper standards of husbandry and animal welfare. The ASA was not persuaded. It noted that in all scenes in the ad the pigs were shown to be in a spacious and free environment, wandering around freely. This, it found, would mislead consumers into thinking Butcher’s Choice sausages were made from pigs allowed unrestricted movement and access to outdoor pastures, which was not the case.  

The ASA is clearly attuned to the fact that the rearing conditions of the animals from which meat, dairy and egg products come from is a factor in the purchasing decisions of many UK consumers. Though the sausages were not marketed as ‘free range’ products, the ad portrayed pigs in a traditional farming setting that belied the more confined conditions the pigs were actually reared in. Advertisers should take care not to suggest (even if only through background imagery) that animals are reared in better conditions than is the case, as this may be deemed to mislead consumers. 

- Richard Dickinson

UK ASA: Do Drinking and Humor Mix? Yes, but…

Last week the UK’s advertising watchdog, the Advertising Standards Authority (ASA), cleared a TV ad by supermarket chain Aldi Stores Ltd despite numerous complaints about its light-hearted portrayal of alcohol consumption. The ad featured an elderly woman sitting at a table and speaking of how her husband likes both a popular brand of tea bags and Aldi’s own brand tea bags. At the end of the ad, the woman states “I don’t like tea; I like gin”, and picks up a glass and drinks from it.

Complainants writing in to the ASA felt that the ad encouraged irresponsible drinking and implied that gin was a suitable substitute for non-alcoholic drinks; some, including doctors, complained that the ad offensively made light of alcoholism, and was inappropriate for day-time broadcasts.  Aldi defended its advert saying that the ad was intended to be humorous and not to suggest gin as a substitute for tea. It also pointed out that underage viewers could be put off by the ad’s unglamorous portrayal of alcohol consumption by an older person. Clearcast, the UK’s industry body that pre-clears most TV ads, had approved the ad without any scheduling restrictions and said it considered that it was acceptable to show adults drinking responsibly;  it said there was no indication that the woman in the ad was intoxicated or a heavy drinker.

The ASA agreed with Aldi and Clearcast; it found that there was no suggestion the woman was an alcoholic, and that the ad simply stated, humorously, one adult’s preference for gin over tea. The ad was not in breach of rules concerning harm and offence, alcohol advertising or scheduling.

This Aldi adjudication follows a recent ban on adverts for Cell Drinks featuring under-25s holding, but not consuming, alcoholic beverages; that Cell Drinks ban was based partly on the humorous, but mischievous nature of the Cell Drinks ad, which was deemed to appeal to underage viewers.  It is clear that the focus of the ASA’s concern is not whether ads for or featuring alcoholic beverages are funny or light-hearted, but rather on whether the humour might encourage unhealthy, unsafe or illegal behaviours, such as excessive or underage drinking.

- Richard Dickinson

FTC To Review Rules on Warranties, Retail Food Advertising

As part of its periodic review of agency rules, the FTC recently announced plans to review its rules governing consumer product warranties and retail food advertising.

With respect to warranties, up for review are the three warranty rules, the FTC’s interpretations of those rules, and its guidance on the advertising of warranties and guarantees. The warranty rules govern warranty disclosures, require that warranties be made available to consumers prior to sale, and lay out the standards for any informal dispute process that consumers must utilize prior to filing a suit for breach of warranty. The rule review has potential implications for a wide variety of retailers and manufacturers as the warranty rules have broad application – covering warranties on automobiles, personal computers, mobile devices, appliances, and a host of other consumer products. One topic that may get some attention in the rule review is whether a manufacturer’s warranty must cover damage caused by the use of non-original manufacturer parts. Manufacturers’ warranties often refuse to cover damage resulting from the use of these “aftermarket” parts and questions arise as to whether this practice is permissible under the warranty rules, or, conversely, whether it operates as an illegal “tying arrangement.” Although the FTC has addressed such questions through advisory opinions, the current interpretations might benefit from some updating to provide additional guidance on this and other “tying” scenarios. The FTC’s request for comment has questions specifically tailored to this issue.

In addition, as with other FTC regulations, the increased use of e-commerce and electronic devices is likely to play a role in this review as well. One of the warranty rules up for review requires that retailers make warranties available to consumers before they purchase a product. The current rule does not contemplate whether making warranty documents available electronically is permitted. The rule was promulgated in 1975 and contemplates only brick and mortar, catalog, and door-to-door sales. It does not have rules specifically geared to online sales nor does it otherwise contemplate electronic compliance. Again, although the FTC staff has issued opinions on similar topics and has issued guidance about online disclosures in general, retailers and manufacturers would surely benefit from more direction within the confines of the rule itself. The agency’s request for comment specifically solicits input on this issue as well. Finally, it will be interesting to see whether the FTC will use the review as an opportunity to expand the rule to cover so-called “extended warranties,” or whether it will continue to use Section 5 as its primary enforcement tool. Comments on the warranty rules are due October 24, 2011.

Another rule up for review is the “Unavailability Rule,” which prohibits grocery stores and other food retailers from advertising products at a given price unless the products are in stock and available during the stated period of the advertisement. Otherwise, the ad must disclose that “supplies are limited” or similar language to that effect. Among other things, the FTC seeks comment on whether the rule, which was last updated in 1989, continues to be effective, whether it should be expanded to cover other types of retail stores, or whether it should be amended to account for changes in technology. Comments on this rule are due October 19, 2011.

After the close of the comment period, the agency will review the comments, and, based on the feedback, determine whether to modify or repeal the rule to address the concerns raised, to reflect changes in the marketplace, or to reduce undue regulatory burden. It may also hold public workshops or roundtables if it determines that further input is needed.

- Amy Mudge and Allyson Himelfarb

Food Fights Back - Industry Group May Challenge Food Advertising to Children Guidelines

We previously blogged about a draft interagency group proposal to establish principles for foods that are advertised to children. The interagency group includes representatives from the FTC and FDA. The draft proposal sets forth two principles for ten categories of food most heavily marketed to children (such as cereal, candy, dairy, and carbonated and noncarbonated beverages) and suggests that these principles be met by 2016:

• Principle A: Foods marketed to children should make a meaningful contribution to a healthful diet through inclusion of food groups such as juice, whole grains, low fat or fat free dairy, lean meat or fish, beans, nuts and eggs. There are two different suggested approaches to measure whether the contribution is meaningful. The first option looks to whether 50% by weight of the food or dish is comprised of the relevant groups, while the second sets specific goals for one or more of the relevant food groups.
• Principle B: Foods marketed to children should minimize consumption of foods with significant amounts of nutrients that could have a negative impact on health or weight -- specifically, sodium, saturated fat, trans fat, and added sugars. Specific targets are proposed for each of these.

Unlike other efforts to create voluntary food advertising guidelines, the current proposals appear to have generated significantly more opposition. An industry coalition has formed to fight against the guidelines, with the hope that Congress will act to kill the interagency effort. Dan Jaffe, spokesman for the Sensible Food Policy Coalition and executive vice president for the Association of National Advertisers has been quoted as saying that legislative activity is “likely.”

The coalition is putting forth two arguments. First, the coalition argues that the guidelines are overly strict and would potentially impact not only marketing to children but to adults as well. The coalition issued a report last week arguing that 88 of 100 most popular foods with the general public would not meet the standards for salt, sugar and fat set under the voluntary guidelines for advertising foods to children ages 2 to 17. Second, given the current economic climate, the coalition is arguing that the proposed guidelines will significantly impact spending on marketing and will be a job killer. Of course, the proposed guidelines are only voluntary and given the First Amendment are unlikely to ever have the force of law, but the industry is no doubt worried that these guidelines will in practice become industry standards much as other industries have fallen in line behind other FTC voluntary guidelines.

A provision in the report that accompanied the fiscal 2012 House Financial Services spending bill (HR 2434) warned the FTC not to “issue principles or guidelines governing food marketed to children unless a peer-reviewed scientific study conclusively demonstrates that regulating food marketing directed to children is the most effective way of changing long-term eating behavior and reducing obesity.” The provision also warns the FTC not to base any enforcement actions against companies on the guidelines. The House has not yet taken up the bill.

The fiscal 2012 Agriculture spending bill (HR 2112), which did pass, has report language directing the Agriculture Department to seek appropriators’ approval for any future involvement in the interagency working group.

The coalition claims the support of 25 senators and more than 100 House members who have written letters questioning the scope of the interagency group’s work. The majority of signers have been Republicans, but some Democrats also have joined in. So it looks like we may be headed for a full blown food fight.

- Randy Shaheen

NAD: Title Sports Drink, Just Because It’s True Doesn’t Mean You Can Say It

Earlier this month the National Advertising Division of the Council of Better Business Bureaus (NAD ) recommended that the Electric Beverage Company discontinue its ad campaign comparing its Title sports drink to other competing sports drinks, including Gatorade.

Stokely-Van Camp, Inc., the maker of Gatorade, recently brought claims before NAD alleging that the Electric Beverage Company was making unsupported comparative claims. The maker of Gatorade challenged several advertising claims, including claims that Title had more electrolytes and less calories and sugars than Gatorade. They also challenged advertisements that implied that Title allowed players to heal more quickly and that the colorants in Gatorade are harmful.

In response to Gatorade’s challenge, the Electric Beverage Company voluntarily removed or modified some of its claims, including discontinuing the advertisements suggesting that the colorants in Gatorade are harmful and the Terrell Owens commercial implying that Title is why “I play hurt when others sit.”

However, the NAD also found that Title’s claims that its product had five times more magnesium and potassium” than Gatorade and that it has “twice the electrolytes” of Gatorade, while perhaps literally true, implied a superior performance benefit. NAD recommended that Title make only “monadic” claims (e.g. “___ amount of potassium and magnesium”). The NAD’s decision in this case serves as a good reminder that when it comes to advertising claims “truth” is not always a defense.

- Randy Shaheen and Jocelyn Wiesner

Fiji’s Green Is Clean, Says California Court

In the last decade, green claims in advertising have exploded as marketers continually seek to appeal to eco-conscious consumers interested in protecting the environment. In making these claims, companies must be careful to avoid “greenwashing,” which is the deceptive use of marketing to promote a misleading environmentally friendly image for the company’s products.

Recently, a plaintiff in California brought a putative class action against Fiji Water Co. LLC (Fiji), alleging that the company engaged in greenwashing through the labeling and advertising of its bottled water. The front label of the product in question contains a green water drop symbol and the bottled water is advertised with the slogan, “Every Drop is Green.” The named plaintiff, Ayana Hill, alleged that Fiji misrepresented its bottled water as environmentally superior to that of its competitors, and, in doing so, violated California’s consumer protection statutes. In particular, Ms. Hill took issue with the green water drop symbol, which she alleged gave consumers the false impression that the product received an environmental seal of approval from an independent, third-party organization.

A California Court of Appeals did not agree and last week dismissed Ms. Hill’s claims with prejudice. The court held that the claims failed because they did not satisfy the reasonable consumer standard as expressed in the FTC’s Green Guides or as used in California’s consumer protection laws. In other words, “no reasonable consumer would be misled to think that the green drop on Fiji water represents a third party organization's endorsement or that Fiji water is environmentally superior to that of the competition.” In reaching this decision, the court noted that the green water drop symbol bears no name or recognized logo of any group, and no indication that it is anything but a symbol of Fiji water. Moreover, the symbol appears on the back of every bottle next to the website name, “fijigreen.com,” which would lead a reasonable consumer to believe that the symbol is by Fiji water, rather than a third-party organization.

The FTC’s Green Guides and the recent Proposed Revisions are an excellent resource for companies looking to reduce legal risk and steer clear of greenwashing. The Guides are designed to inform marketers how to avoid making environmental claims that are unfair or deceptive under Section 5 of the FTC Act and they contain numerous examples addressing different types of deception. As a matter of federal law, the guides themselves are only administrative interpretations and not enforceable regulations. However, a number of states, like California, have incorporated FTC’s green guides into state laws governing unlawful environmental marketing claims.

- James Speyer & Sean Hennessy

Is Advertising to Children Like Taking Candy From A Baby? FTC Issues Report and Recommendations on Food Marketing to Kids

Late last month, a coalition of federal agencies published a preliminary proposal to guide the food industry’s self-regulatory efforts with respect to the marketing of food to children aged 2-17.  Congress created the Interagency Working Group on Food Marketed to Children (“Working Group”) as part of the 2009 Omnibus Appropriations Act (H.R. 1105). The Working Group is comprised of members from the Food and Drug Administration, the Centers for Disease Control and Prevention, the United States Department of Agriculture, and the Federal Trade Commission. 

The draft proposal sets forth two principles for ten categories of food most heavily marketed to children (such as cereal, candy, dairy, and carbonated and noncarbonated beverages) and suggests that these principles be met by 2016:

• Principle A: Foods marketed to children should make a meaningful contribution to a healthful diet through inclusion of food groups such as juice, whole grains, low fat or fat free dairy, lean meat or fish, beans, nuts and eggs. There are two different suggested approaches to measure whether the contribution is meaningful. The first option looks to whether 50% by weight of the food or dish is comprised of the relevant groups while the second sets specific goals for one or more of the relevant food groups.
• Principle B: Foods marketed to children should minimize consumption of foods with significant amounts of nutrients that could have a negative impact on health or weight -- specifically, sodium, saturated fat, trans fat, and added sugars. Specific targets are proposed for each of these.

Because the First Amendment constraints on the government’s ability to curb commercial speech, all of the Working Group’s proposals are voluntary and, according to the FTC, are not intended to be a precursor to a rulemaking effort. Nevertheless, in its statement on the proposal, the FTC acknowledged that the proposal sets “ambitious goals” that will be “challenging for the industry to meet.” This is particularly true because the proposed definitions for what activities by food companies constitute “marketing,” which are adopted from a 2006 FTC study of youth-directed food marketing, are “substantially broader” than the definitions that currently govern the industry’s self-regulatory programs and encompass over 20 forms of activity.

Due to these concerns about the breadth of the definition of “marketing,” the Working Group is seeking comments about whether the final recommendations of the proposal should be narrower for adolescents aged 12-17 than for children aged 2-11. The FTC, which will review comments related to definitions in the proposal, seems to be receptive to different rules for different ages. In its statement about the proposal, it notes that adolescents are more capable of understanding the intent of marketing, the evidence of the influence of food marketing on adolescent behavior is inconclusive, and restrictions on marketing to adolescents are more likely to impact marketing that reaches a substantial adult audience.

The FTC is holding an information session on the proposal on May 24, 2011 at the Department of Health and Human Services in Washington, D.C. The deadline for written comments on the proposed principles has been extended to July 14, 2011.

- Randy Shaheen and Daniel Stuart

FDA's Proposed Menu Labeling Regulations May Cause Indigestion

As previously reported in this blog, Section 4205 of the Patient Protection and Affordable Care Act of 2010 requires chain restaurants to list calories on menus for “standard menu items” and to provide other nutritional information in writing upon request. On April 6, 2011, the FDA issued proposed regulations implementing Section 4205. These regulations address issues such as what businesses are subject to the law, what constitutes a menu, how nutritional information must be presented, and other issues.

In some respects, the proposed regulations are more restrictive than expected. For example, the FDA proposes to regulate accuracy using the standard currently applicable to disclosures made in the Nutrition Fact Box on packaged foods. Under this standard, food must contain at least 80% of the declared amount of certain “good” nutrients such as dietary fiber and proteins, and must not exceed the declared amount of certain “bad” nutrients, such as calories and fat, by more than 20%. The FDA’s adoption of this standard appears to conflict with Section 4205’s mandate that restaurants be required only to have a “reasonable basis” for disclosures.

Other aspects of the proposed regulation are less aggressive than some observers had anticipated. For example, the proposed regulation does not requires nutritional disclosures for alcoholic beverages. The FDA reasoned that it is not clear from the face of Section 4205 whether Congress intended to require labeling for alcoholic beverages, and that labels for alcoholic beverages themselves are also regulated by the Alcohol and Tobacco Tax and Trade Bureau.

In still other areas the regulation strikes more of a middle ground. For example, Section 4205 applies to restaurants and “similar retail food establishments.” Under the proposed regulation, a business is a “similar retail establishment” if it sells restaurant-type food and its “primary business activity” is the sale of food. In turn, “primary business activity” means either that that business holds itself out as a restaurant, or that over 50% of its floor space is devoted to selling food. Practically speaking, this approach renders businesses such as convenience stores and grocery stores subject to menu labeling, but excludes entities such as movie theaters, hotels, trains and planes.

Comments on the proposed regulation are due by June 6, 2011, and given the ramifications of menu labeling on industry participants, we expect that the FDA will receive many comments on the proposed regulation. In terms of timing, the FDA has said that it hopes to issue a final rule near the end of 2011, and that it expects to begin enforcement 6 months after the issuance of the final rule. The FDA also proposed a separate regulation implementing calorie labeling requirements for vending machines.  Comments on that proposed regulation are due on July 5, 2011.

- Dan Kracov and George Langendorf

Does the Alcohol Industry Have Self-Control?

That’s what the FTC wants to find out.  On March 8, the FTC announced that it published a notice in the Federal Register seeking public comment on a proposal to collect self-regulatory compliance and other advertising and marketing data from beverage alcohol manufacturers.  Comments are due by April 26.  The announcement of a new alcohol industry study comes after the FTC sent warning letters to four makers of caffeinated alcoholic beverages last Fall.

In its 1999, 2003, and 2008 reports, the FTC looked at industry self-regulation of advertising to underage consumers and offered recommendations to improve self-regulation. As a result, the industry has improved self-regulations practices by, among other things, increasing the placement standard for advertising from audiences that are at least 50% adults of legal drinking age to 70%, improving compliance with this placement standard, adopting third-party compliance review, and increasing attention to advertising content that may appeal to underage consumers.

The current data collection proposal is aimed at verifying and studying the industry’s compliance with its voluntary standards. Keeping pace with evolving marketing practices and the Commission’s focus on privacy issues in on-line and mobile marketing, the FTC is also proposing to collect data on the industry’s digital and social media marketing and its data collection practices with respect to underage consumers.

All in all, it appears that the beverage alcohol industry and the FTC can count the industry’s self-regulation practices as a success. The FTC has long encouraged self-regulation because it “can be more prompt, flexible, and effective than government regulation.”  But, as on-line marketers are finding out, the FTC’s patience will last only so long if industry is seen as non-responsive to its concerns.

- Matthew Shultz

Lady Gaga May Have Been "Born This Way", But Jury's Still Out on Snapple

Snapple has won another round in the longstanding battle over whether it is "All Natural" but that issue itself remains undecided.  The company was granted summary judgment in the Southern District of New York case blogged about here.  Plaintiffs had alleged that the use of high fructose corn syrup made Snapple's use of "All Natural" misleading (Snapple has since switched to sugar.)  The judge granted summary judgment finding that plaintiffs have failed to show injury because they were unable to offer any evidence showing that they paid a premium for the "All Natural" label.

In addition to finding that plaintiffs did not establish the actual price they paid for the product nor amount of any premium paid, the judge held that plaintiffs did not offer evidence as to the price of competing beverages that did not claim to be "All Natural."  One plaintiff testified that he thought Snapple was more expensive at the time but he hadn't actually looked at prices of comparable products.  Another could only guess at the price he paid for other products.  In short, the judge found that plaintiffs' allegations had laid an egg.

- Randy Shaheen and Deborah Birnbaum

Failure to Plead Essential Elements of Fraud Claims Leaves Bad Taste in Florida Court’s Mouth

Fresh off of settling claims related to advertising the use of magnolia bark in gum, Wrigley is now under attack for its claims about cardamom’s breath-freshening capabilities, particularly that it “is scientifically proven to neutralize even the toughest breath odors from coffee, garlic, onions and even smoking.” A class of plaintiffs filed Nichols v. Wm. Wrigley Jr. Co. in the Southern District of Florida, seeking relief on five theories: fraudulent concealment, negligent misrepresentation, intentional misrepresentation, breach of express warranty, and unjust enrichment. Plaintiffs did not seemingly take on the notion that cardamom helps with bad breath, just the establishment claim that Wrigley had “scientific proof” of this assertion. Wrigley sought dismissal of the suit, stating that the class had not pled facts sufficient to establish that any of the claims on Wrigley’s packaging were false.

The court recently dismissed the entirety of the lawsuit without prejudice, noting that the plaintiff had not sufficiently pleaded any of the five causes of action with which the class was charging Wrigley. The court did opine that the plaintiffs had pled sufficient facts to properly allege falsity as the Complaint “identifie[d] a particular statement and submit[ted] that the statement [was] false.” Though the class plaintiffs achieved this small victory, in the end, they failed to satisfy the pleading requirements for each of their five causes of action.

The class’s first claim--fraudulent concealment--failed as there was no allegation that Wrigley had concealed any information. Both the negligent and intentional misrepresentation claims failed because the class had not claimed that its participants would have behaved differently if they had not been led to believe that the packaging’s claims about “scientifically proven” bad-breath-fighting ingredients. The court dismissed the breach of warranty claim because the plaintiffs had not notified the defendant of any alleged breach. Finally, the unjust enrichment claim was dismissed because the putative class has an adequate remedy at law.

Given that the court dismissed the original Complaint without prejudice and determined in dicta that the Complaint sufficiently alleged a false claim, it was only a matter of time before the plaintiff came up with another theory for the case -- in its Amended Complaint, the plaintiff dropped all but the negligent and intentional misrepresentation claims, while adding a count alleging violation of the Florida Deceptive and Unfair Trade Practices Act. In its opinion dismissing the original Complaint, the court made it clear that any putative class will have difficulty proving injury and damages or in other words that they would have paid less for the gum had they known the claim is false that cardamom is scientifically proven to improve stinky breath. The Amended Complaint tries to bolster the original Complaint by adding an allegation that the gum failed to neutralize bad breath and that Wrigley has engaged in unfair and deceptive practices” by not possessing information substantiating its claims about scientific proof.

In an attempt to deal with the damages issue, the Amended Complaint alleges that consumers paid a “premium price” for the gum. Whether there was some sort of extra price paid for the cardamom gum will likely be a factual issue. Whether the plaintiffs can prove that all of the class members bought the gum because of the allegedly false claims (as opposed to some other reason -- such as they liked the flavor) seems unlikely and should give the judge something serious to chew on in considering future motions.

- Amy Mudge and Michael Thorpe

Natural and Organic Claims Have Their Day in the Sun (i.e., Court)

Consumers increasingly seek out and are often willing to pay a premium for “All natural” and “organic” products. Yet, these terms are often not precisely defined. Most recently, the FTC in its proposed Green Guides declined to define them “either because the FTC lacks a sufficient basis to provide meaningful guidance or because the FTC wants to avoid proposing guidance that duplicates rules or guidance of other agencies.” However, increasingly courts are being asked to provide legal definitions for these terms as consumers turn to them for relief from allegedly misleading uses of these terms.

No free pass for “Organic” related marketing claims under state law

In September the Eighth Circuit issued an opinion addressing to what extent the Organic Foods Production Act of 1990 (OFPA) preempts state consumer protection law. The OFPA establishes national standards for the sale and labeling of organically produced agricultural products and creates a certification program through which agricultural producers can become certified to sell organic products. Thus, in order to sell agricultural products as “100 percent organic,” “organic,” or “made with organic ingredients,” a producer must receive a certification from the USDA or pay a civil penalty of up to $10,000. In April 2007, the USDA proposed revoking Aurora Dairy Corporation’s certification for organic milk, alleging fourteen willful violations of OFPA and NOP, including multiple cases of using nonorganic cows to produce organic milk; willfully selling, labeling, and representing that milk was organically produced when such milk was not produced and handled in accordance with NOP regulations, failing to notify its certifying agent it had terminated its contract with a pasture and livestock management service provider, and failing to report and keep records in accordance with OFPA and NOP guidelines. Aurora entered into a consent decree with the USDA in August 2007.

Shortly thereafter, plaintiffs filed class action lawsuits in federal district courts around the country against Aurora; retailers that sold Aurora’s organic milk; and QAI, the certification agent that certified Aurora to produce organic milk. The plaintiffs alleged that from 2003 to 2007, Aurora’s milk did not meet the NOP regulations. The plaintiffs also alleged that Aurora and the retailers’ packaging and advertisements were false and deceptive under state consumer protection laws. Examples of allegedly deceptive statements include the following:

• Aurora advertised on their “High Meadow” branded cartons that “our motto is ‘Cows First,’” and “[w]e believe that animal welfare and cow comfort are the most important measures in organic dairy.”
• Wal-Mart said the milk was produced without the use of antibiotics or pesticides.
• Safeway, Target and Costco all made claims related to how their cows were raised and fed, including claims that their cows had “plenty of exercise,” “clean drinking water,” and access to “organic pastures for grazing.”

The cases were centralized in the Eastern District of Missouri., which dismissed all plaintiffs’ claims as preempted by the OFPA.

On appeal, the Eighth Circuit affirmed the district court’s ruling that state law claims related to QAI’s decision to not revoke Aurora’s certification under the OFPA, and claims against Aurora and the retailers for falsely selling milk as organic are preempted because they conflict with the OFPA. The court reasoned that if it allowed state laws to apply to the certification process, it could potentially lead to conflicting legal interpretations of the same provisions of the OFPA and NOP such that it would almost be impossible for certifying agents to meet both the federal standard and the various state standards, thus potentially undermining Congress’ intent to creating a uniform, national standard in governing the marketing and interstate commerce of organically produced products.

On the other hand, claims related to facts underlying the certification process (including the marketing claims regarding how the cows are raised and fed) are not preempted by the OFSA. The court stated that broad preemption over claims unrelated to the certification decision and certification compliance would not advance the goals of assuring consumers that organic products meet a consistent standard. In fact, granting broad preemption may decrease consumer confidence in such products based on the realization that organic producers have free license to defraud consumers and avoid liability under state law. These claims were remanded to the district court to determine which of plaintiffs’ claims are preempted. In other words, it appears that the use of the term “organic” itself under the OFPA is preempted but related marketing claims may not be.

FDA leaves it to the courts to define “All Natural”

With respect to “natural” we have previously blogged on cases dealing with this issue here and here. Stays in several of these cases, Ries v. Hornell Brewing Co.(N.D. Cal. Aug. 24, 2010); Holk v. Snapple Beverage Corp. (D.N.J. Sept. 2, 2010); and Von Koenig v. Snapple Brewing Corp. (E.D. Cal. Sept. 9, 2010) had been granted based upon the doctrine of primary jurisdiction, which applies when an action falls within the expertise and experience of an administrative agency. The purpose of the doctrine is “to maintain uniformity and consistency, uphold the integrity of a regulatory scheme, and establish a ‘workable relationship between the courts and administrative agencies.’”

If the doctrine applies, a court must “refer” the issue to the proper agency. The court can then stay or dismiss the action without prejudice so that an agency can issue a determination. In September, the FDA declined to issue a determination on the definition of “all natural.” Thus, in the short term look for the courts to continue to wrestle with this issue. Depending upon the outcome of these cases, regulators may or may not be prompted to more actively engage in this area.

- Randy Shaheen and Chester Choi

Implied Claims of Vegetable Content Sprouts NAD Recommendation for Label Change

Is a tomato a fruit or a vegetable? Is it material or does it fall into the "you say tomato; I say tomato" category? If you’re attempting to measure the fruit to vegetable ratio in your juice blend, it may well be a material claim requiring substantiation.

Campbell Soup Company recently challenged Ocean Spray’s advertisements for its 100% Fruit & Veggie Juice with the National Advertising Division (NAD). The inquiry focused on certain content and nutrition claims made by Ocean Spray and whether such claims amounted to an implicit statement that the juice contained equal amounts of fruit and vegetable juices. This is not Campbell’s first foray into challenging beverage advertising; we recently blogged on Campbell’s complaint to NAD concerning Sunny Delight’s Fruit2O line for its claim that the beverage contained the equivalent of two fruit servings.

In this instance, Campbell’s initially claimed that Ocean Spray’s drinks did not have enough vegetable juice to use the phrase “100% Fruit and Veggie,” although evidence submitted by Ocean Spray showed that all the juices in this line contain at least 25% vegetable juice, which NAD said was a sufficient amount to justify Ocean Spray’s product name.

While the express announcement made by the juice’s name was not considered misleading, NAD had trouble with the juice bottles’ graphics and what several of the express phrases describing the beverage could lead consumers to believe. These statements included phrases such as “2 servings of fruit and vegetables” and “[t]he tastiest way to drink your veggies.” Given these declarations, Campbell’s complained to NAD that Ocean Spray was implicitly stating that its product line contained equal amounts of fruit and vegetable juices, which is not the case. Campbell’s specifically cited the fact that the words “fruits” and “veggies” have equal prominence on the products’ labels:

Ocean Spray countered with the fact that it made no express or implied claims about the beverages’ vegetable content, and that any vegetable prominence would constitute mere puffery. Additionally, the specific flavors in the product line highlight fruits--not veggies--with flavors such as “Tropical Citrus” and “Cranberry Strawberry Banana.” Likewise, Ocean Spray states that the product labels have pictures of fruits in the foreground.

Given that neither side had presented any consumer perception data, NAD used its own judgment to conclude that, while the names and pictures of specific fruits do emphasize the fruit-forward nature of the product, the emblem promoting “2 servings” of fruits and vegetables increases the likelihood that consumers would reasonably come to the conclusion that the product contains more vegetable content than it really does. As Ocean Spray had not provided evidence to support this reasonable conclusion, NAD recommended that Ocean Spray make fruit and vegetable proportions available to consumers on the product labels.

In the current environment, since the 9th Circuit's Gerber Fruit Snacks decision, any food or beverage company making claims about the content or health-value of their products should consider a fresh review to determine what implied claims consumers could reasonably take away and make sure they are substantiated. That's as healthy for the bottom line as eating 5 servings of fruits and veggies daily!

- Amy Mudge and Michael Thorpe

The Empire Strikes Back: FTC Sues POM

We've blogged a lot about POM lately.  We have yet one more quick update on our recent blog post about POM's suit against the FTC.  The FTC struck back this week, filing suit against POM, its sister corporation Roll International Corp., and principals Stewart Resnick, Lynda Resnick and Matthew Tupper, alleging that the Company's advertising overstated the health benefits of its products.

The Complaint against POM alleges that the Company's advertising contains "false or unsubstantiated claims" about preventing or treating a number of diseases, including prostate cancer, heart disease, and erectile dysfunction.  The FTC's proposed relief, among other things, would require POM to have FDA approval for any future claims it wishes to assert relating to the preventative or curative nature of its products.  Because the FTC filed an administrative complaint the requested relief does not include consumer redress but the agency reserves the right to petition a federal court for such relief. 

- Randy Shaheen and Jessica Halbert

UK Regulator Bans Advertisement Glamorizing Alcohol

The UK’s advertising regulator, the Advertising Standards Authority (ASA), has banned an advertisement for Virgin Holidays’ ‘Rockstar Service’ campaign on the grounds that is likely to encourage unwise drinking styles (the decision can be found here).

The advertisement showed four rockstars drinking champagne in a jacuzzi, with a number of empty bottles and glasses lying around. One of the rockstars and a female staff member were pouring champagne into the jacuzzi. Virgin Holidays defended the advertisement by stating that the rationale behind the campaign was to emphasise that the service allowed every customer’s desires to be met. They said that the advertisement portrayed “an example of the most outlandish and decadent request” that someone might make, and the emphasis was on that request being met, not on the drinking. The ASA stated that although Virgin Holiday’s intention had been to promote the level of service offered, the prominent feature of alcohol and the depiction of rockstars, which are “widely accepted as glamorous and exciting figures”, indicated a casual attitude towards the handling and consumption of alcohol. As such the ASA concluded that the scene would be likely to encourage people to adopt unwise drinking styles.

Moral: Take care when featuring the use of alcohol in advertising.

- Richard Dickinson and Jake Marshall

Green Tea Antioxidant Claims Trigger FDA Warning Letters as Agency Focuses More on FOPs

Last October, we wrote about FDA’s intention to adopt a more aggressive approach to regulating “Front-of-Package” (FOP) food labels. On March 3, 2010, FDA wrote an open letter to the food industry outlining its focus on developing “practical, science-based” criteria for FOP labeling as well as its plans to review FOP labels to determine compliance with existing regulations. At the time, the Agency issued 17 Warning Letters asserting that FOP statements for various products were misleading because they were unauthorized or unsubstantiated health or nutrient claims or were supplemented by or linked to claims or health information on company websites or in other materials that created an mistaken impression about the product or its potential health benefits.

A Warning Letter issued on August 30, 2010 to Dr Pepper Snapple Group and directed at FOP statements regarding antioxidants suggests that FDA is continuing its aggressive approach to regulating FOP statements as well as statements on company websites to which consumers are referred by the product labels (For example, see a warning about dietary supplements focused on a company website here).

The principal display panel of Dr Pepper Snapple Group’s “Sparkling Green Tea Ginger Ale” label contained the claim, “ENHANCED WITH 200 mg OF ANTIOXIDANTS FROM GREEN TEA & VITAMIN C” with the double asterisk referring to the statement, “**Each 8oz serving contains 200mg of antioxidants from Green Tea Flavonoids and Vitamin C.” The warning letter suggests that this claim is misleading for the following reasons:

• The use of the term “enhanced” suggests that the Ginger Ale is fortified with antioxidants - i.e., that it contains at least 10 percent more of the Reference Daily Intake or Daily Reference Value for antioxidants. However, “the FDA does not consider it appropriate to fortify snack foods such as carbonated beverages.”
• The Nutrition Facts on the back label of the bottle indicate that Vitamin C only accounts for 60mg of the 200mg of antioxidants identified. This implies that the remaining 140mg of antioxidants come from “green tea” or “green tea flavonoids;” however, “green tea” is not a recognized source of antioxidants by the FDA.

These “Green Tea” letters are yet another example of FDA’s renewed focus on food labeling as a part of its broader food safety agenda. They illustrate that FDA’s regulatory approach to food labeling focuses not only on the individual label statements, but what those statements imply about the product’s nutrient content when examined in conjunction with the Nutrition Facts on the back panel and the package as a whole. Moreover, as FDA increases its focus on regulating product-related internet and social media content, online content that supplements or explains FOP or package label statements will receive greater scrutiny. For companies, this trend underscores the importance of coordinating the development and review of FOP and other labeling with any supplemental online marketing.

Consistent with FDA’s practice, Dr Pepper Snapple Group had 15 days to respond to FDA with its plan to correct current violations and prevent future violations. Failure to correct the violations may result in regulatory actions without further notice, such as seizure or injunction.

- Vernessa Pollard and Daniel Stuart

Verdict in Pom v. Welch Suit: Deception But No Harm

A quick update on the The Pom Wonderful LLp v. Welch Foods Inc. et al. Lanham Act case previously blogged about here and here. The case finally saw resolution last week when the jury found that Welch had deceptively marketed its product but Pom had not proven that it suffered lost sales. This left both sides claiming victory.

The jury agreed with Pom that Welch’s labeling and packaging for its White Grape Pomegranate juice was misleading and deceptive. The jury also found that Welch intended to deceive consumers through the labeling and packaging of its product. However, the jury returned an answer of “No” when asked if Pom had proven by a preponderance of the evidence that it suffered injuries consisting of lost sales or lessening of goodwill as a result of Welch’s conduct. As a result, the trial did not proceed to the second stage to determine the amount of injury. Some press reports (here, here and here) have stated that the judge excluded Pom’s damages expert. We talked to Welch’s counsel, Rick Shackelford at Greenberg Traurig LLP, and he explained that the experts were not excluded; rather because the trial did not proceed to the second stage, they simply did not have an opportunity to testify.

Pom views the verdict as a win for Pom and for consumers, since the jury recognized that Welch’s practices were deceptive. Welch's counsel, on the other hand, has noted to us that the verdict was in its favor and that Pom lost the trial. Judgment will be entered either this week or next week. In the meantime, as noted in prior blogs, Pom’s lawyers will not lack for other things to do.

- Randy Shaheen and Deborah Birnbaum