ABA Section of Antitrust LawConsumer Protection Committee

May 2016 Consumer Protection Update

Presented By:Laurie NovionShook, Hardy & BaconKansas Citylnovion@shb.com816.559.2352

Lynn MurrayShook, Hardy & BaconChicagolhmurray@shb.com312.704.7766

Andrew MeerkinsShook, Hardy & BaconChicagoameerkins@shb.com312.704.7737

Jeanne JancharShook, Hardy & BaconKansas Cityjjanchar@shb.com816.559.2170

June 14, 2016

Agenda• Federal Update• State Attorneys General Update• Private Litigation (and Lanham Act False

Advertising) Update• National Advertising Division (NAD) Update

2

Federal Update

3

FTC Wins Jury Verdict Against Utah Defendants Making Illegal Consumer

Telemarketing Calls• The case was filed by the DOJ in May 2011 on behalf of the FTC

against Feature Films for Families, Corporations for Character, Family Films of Utah (and their collective owner).

• Complaint brought claims under the Telemarketing Sales Rule and the FTC Act, alleging that Defendants

– Engaged in deceptive and unlawful telemarketing claims pitching movies– Deceived customers on where the proceeds from movie purchases and

donations would go

• Some of the legal claims were earlier resolved in March 2015– Some calls were illegal marketing, not surveys, fundraising or informational calls– Some of the charitable calls were not misleading

• This is the FTC’s first ever jury verdict in a case to enforce the Telephone Sales (and the FTC’s Do Not Call Registry) Rules.

U.S. v. Corporations for Character, L.C., et al., No. 2:11-cv-00419-RJS-DBP (D. Utah)

4

FTC Wins Jury Verdict Against Utah Defendants (Cont’d)

• After 8-day trial, jury returned a verdict on May 25 in favor of FTC.• Jury found defendants

– Committed 117 million violations of the TSR– Made 99 million illegal calls to numbers on the DNC Registry– Made more than 4 million additional calls involving misleading statements to induce

DVD sales– Had actual or implied knowledge of the violations

• Jury verdict covered 6 different counts of TSR violations, including – Use of deceptive and misleading statements– Calls to phone numbers on the DNC Registry or to persons who stated they did not

want to receive further calls– Requirements to use call identification names that identify the seller– Restrictions on telemarketers making calls to consumers without connecting the call to

sales representative within 2 seconds after the consumer’s greeting

• The Court will decide the appropriate relief in a later proceeding.– Civil penalties of up to $16,000 per violation are available under the FTC Act

5

FTC Settles its First Case Related to the Asia-Pacific Economic Cooperation Cross-Border Privacy Rules System

• FTC sued Very Incognito Technologies, Inc. (doing business as Vipvape), a manufacturer of hand-held vaporizers.

• FTC alleged that Vipvape’s website falsely represented that it was a participant in the Asia-Pacific Economic Cooperation Cross-Border Privacy Rules System (“APEC CBPR”), which violated the FTC Act.

• APEC CBPR facilitates inter-country privacy-respecting data transfers through a voluntary, enforceable mechanism which certifies companies as being compliant with the requirements.

• Under the agreement containing consent order, Vipvape– is prohibited from misrepresenting its participation, membership or

certification in any privacy or security program sponsored by a government or self-regulatory or standard-setting organization

– agrees to various reporting, recordkeeping and compliance provisionsIn re Very Incognito Technologies, Inc., File No. 162 3034 (F.T.C.)

6

Phone Billing Company to Pay $5.2M to Resolve FTC Contempt Charges

• FTC brought contempt charges against the Billing Services Group (BSG) Defendants, alleging that they violated a 1999 court order that settled earlier FTC charges of phone bill cramming.

• The 1999 Order prohibited BSG from engaging in unauthorized billing, misrepresentations to consumers, and billing for vendors who fail to clearly disclose the terms of their services.

• BSG admitted to failing to vet charges before processing or investigate consumer complaints (and violating the 1999 order).

• The terms of the proposed stipulated order include:– A $5.2M judgment, to be paid in 10 quarterly payments of $520k– If Defendants fail to make a payment, the court will impose a $17M judgment– Defendants are banned from (1) placing charges on customers’ phone bills for

enhanced services such as email/voicemail and (2) placing unauthorized charges on any type of consumer bills

– Defendants must monitor their servers’ traffic for possible fraudFTC v. Hold Billings Services, Ltd., et al., No. 5:98-cv-00629-FB-HJB (W.D. Tex.)

7

Marketers of Learning Rx “Brain Training” Programs Settle FTC Charges

of False and Unsubstantiated Claims• Defendants LearningRx Franchise Corp. & its CEO marketed “brain

training” programs.• FTC alleged that Defendants violated FTC Act, deceptively claiming

– Their programs were clinically proven to improve serious health conditions (including ADHD, autism, dementia, strokes, & concussions)

– Their programs substantially improved school grades, test scores, job earnings, & athletic performance

• Terms of proposed stipulated final judgment and order:– $4,000,000 judgment to be suspended upon payment of $200,000 (disgorgement)– Prohibits representations regarding work/athletic performance and improvement of cognitive

function of persons with age-related or health conditions unless claims are backed by reliable human clinical testing

– Prohibits defendants from misrepresenting the results or existence of tests/studies or making unsubstantiated claims regarding program benefits, including academic improvement, increased income and improved general performance

FTC v. LearningRx Franchise Corp., No. 1:16-cv-01159 (D. Colo.)

8

“Mosquito Shield Bands” Manufacturer Settles FTC’s Charges of Misleading

Pest-Control Claims• Defendants marketed Viatek-brand mosquito shield wristbands

containing mint oil, representing they created a 5-foot “vapor shield” providing 96-120 hours of protection from mosquito bites.

• Charges in FTC’s Complaint:– Defendants violated 2003 administrative order prohibiting them from making

product claims without supporting competent and reliable scientific evidence– Defendants violated the FTC Act because they did not have competent and

reliable scientific evidence to back up their marketing claims

• Terms of proposed stipulated order:– $300,000 judgment– Prohibits Defendants from violating 2003 FTC Order– Requires competent and reliable scientific evidence for future claims about the

benefit, performance, or efficacy of any pest control product and appropriate substantiation for such claims made about any product they sell

FTC v. Lentine et al., No. 1:15-cv-00033-HSM-CHS (E.D. Tenn.)

9

Amberen Dietary Supplement Marketers Settle FTC Charges of Misleading

Weight-Loss & Menopause Relief Claims

• Lunada Biomedical allegedly deceptively marketed the dietary supplement Amberen, claiming it is clinically proven to relieve hot flashes and night sweats, increase metabolism, and help users lose weight and belly fat.

• Original complaint was filed in May 2015 and amended in December 2015, alleging:

– Unsubstantiated and false claims – Defendants did not disclose relationships with endorsers, falsely claimed 93%

consumer satisfaction rate, falsely represented a 30-day risk-fee trial– Almost $65M in product sales from 2010-2013

• Terms of proposed stipulated order:– $40M judgment (all but $250k will be suspended due to inability to pay)– Prohibited from (1) making health claims unless substantiated by human clinical testing or

making misleading statements of product benefits regarding any dietary supplement, food or drug; (2) misrepresenting results of product tests; (3) misrepresenting material facts, terms or conditions; (4) failing to disclose financial connections with endorsers

FTC v. Lunada Biomedical, Inc., et al., No. 2:15cv-003380-MWF-PLA (C.D. Cal.)10

Supreme Court and Appellate Rulings• POM Wonderful’s Cert. Petition denied by Supreme Court on May 2

– POM sought review of the D.C. Circuit’s Jan. 2015 ruling upholding a 2013 FTC decision that POM deceptively advertised its pomegranate juice & supplements.

– The Petition raised the following question: “Whether a finding by the FTC that a truthful advertisement nonetheless implies a misleading message to a minority of consumers, and therefore receives no First Amendment protection, must be reviewed de novo?”

– FTC Chairwoman Edith Ramirez commented that “the outcome of this case makes clear that companies . . . making serious health claims about food and nutritional supplemental must have rigorous scientific evidence to back them up.”

Pom Wonderful, LLC v. FTC, No. 15-525, -- S. Ct. --, 2016 WL 1723326 (U.S. May 2, 2016)

• First Circuit affirmed the FTC’s March 2015 summary decision that Jerk.com and its creator deceived customers regarding its sources of information and the benefits of paid memberships

– The May 9 decision also affirms the bulk of the FTC’s remedial order.– Jessica Rich, Director of the FTC Bureau of Consumer Protection, stated “we are

pleased with the ruling, and will closely monitor the defendant’s compliance.”Fanning v. FTC, No. 15-1520, 2016 WL 2621140 (1st Cir. My 19, 2016)

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Requests for Public Comment• CFPB Seeks Public Comment on Proposed New Rules Regarding Binding

Arbitration Provisions– Rules would prohibit the use of binding arbitration provisions in new consumer

contracts for financial products and services.– Arbitration clauses would be required to state that the provision cannot be used to

stop consumers from being a part of a class action in court (and financial service providers to submit arbitration proceeding records to the CFPB).

– August 22, 2016 deadline

• FTC Seeks Public Input on Proposed Changes to Fuel Economy Guide for New Automobiles

– Proposed changes would provide additional guidance on fuel economy marketing claims dealing with EPA mileage estimates, specificity in mileage rating claims, and claims concerning alternatively-fueled vehicles.

– August 8, 2016 deadline

• FTC Seeks Comments on Proposed Rule Amendments to E-Warranty Act – Would revise the Pre-sale Availability and Disclosure Rules concerning written

warranties to implement changes required by the 2015 E-Warranty Act– June 17, 2016 deadline

12

FTC Studies and Warning Letters

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• FTC Studying Mobile Device Industry’s Security Update Practices– Issued a May 6 Order to file a special report to 8 mobile device manufacturers:

Apple, Blackberry, Google, HTC America, LG Electronics, Microsoft, Motorola and Samsung:

• On vulnerabilities that have affected mobile devices, and whether and when the company patched those vulnerabilities

• On factors considered in whether to patch a vulnerability on a particular device

– FTC is conducting a study of the policies, procedures, and practices for providing security updates to mobile devices offered to U.S. consumers in order to evaluate the security of consumers’ mobile devices.

– Manufacturers given 45 days to comply (FTC Matter No. P165402)

• FTC Sent Warning Letters to 39 Eyeglass Prescribers – Addressed potential violations of the Ophthalmic Practice Rules or “Eyeglass

Rule,” which ensures that consumers can comparison shop for Rx glasses– Letter warned that violations could result in legal action, including civil penalties

of up to $16,000 per violation.

State Attorneys General

Update

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Olympus Reaches Settlements With States

• In March 2016, Olympus Medical Equipment Company, the largest distributor of endoscopes and related equipment, agreed to pay $646 million to settle criminal charges and civil claims. The payment was divided roughly in two: a $312 million criminal penalty and a $311 million payment to settle federal and state False Claims Act claims.

• In early May, several state attorneys general announced a $306 million settlement with Olympus and the Federal government to resolve allegations relating to numerous state False Claims Act claims. Presumably this was a subset of the $311 million allocated to federal and state False Claims Act claims, above.

• Various Attorneys General reported their states’ share of the settlement, including New York ($7.7 million), Pennsylvania ($1.6 million), Maryland ($1.1 million) and Arkansas ($1 million).

15

California and Washington File Surgical Mesh Lawsuits

• In May, California and Washington sued Johnson & Johnson for false advertising and deceptive marketing of its surgical mesh product, alleging that Johnson & Johnson concealed the risks of complications related to the product.

• The cases were filed in state court in San Diego and Seattle, with California alleging violations of its broad unfair competition law and Washington alleging violations of its consumer protection laws. The Washington Attorney General stated that he would seek a $2000 statutory penalty for each of 12,000 mesh devices sold in the state.

16

Nebraska Settles With Payday Lenders For $1 Million

• Nebraska sued Western Sky, CashCall and related individuals and affiliates, alleging that the defendants promoted high-interest consumer loans to Nebraska consumers.

• The loans at issue ranged from $700 to $10,000 and carried interest rates of 90-342% per year.

• The suit was brought under the Nebraska UDTPA, Consumer Protection Act and Installment Loan Act.

• The Nebraska Attorney General announced a settlement requiring the companies and their owners to:– establish a $950k restitution fund for consumers;– pay $150k to Nebraska; and– forgive over $550k in loans taken out by Nebraska consumers.

17

Filings Against Student “Debt Relief” Companies

Multiple states filed suit against student debt relief entities in May:• In Florida, the FTC and the State of Florida sued Florida-based Student Aid

Center (“SAC”) and Consumer Assistance Project, claiming violations of the FTC Act, the Telemarketing Sales Rule and Florida UDTPA and the Credit Repair Organizations Act. Among other allegations, they assert that:– Illegal up-front fees– Misrepresentations that the student would meet standards for loan

forgiveness– Failure to deliver on promised audits– False or misleading on-line reviews– Misleading promises of refunds

• The Office of the Attorney General in Washington, D.C. and Washington State filed similar suits against SAC in the following days.

18

Texas Settles With PayPal Over Use of Phone Contact Information

• PayPal acquired Venmo (which advertises itself as a “free digital wallet”) in 2013. At the time, Venmo was already under investigation to determine whether it used consumers’ phone contacts without full disclosure.

• Texas claimed that PayPal failed to explain to users of its “Venmo mobile money transfer” app that users’ personal information could be used or shared.

• PayPal agreed to pay $175,000 to settle the claims and also agreed to stop accessing Venmo user contact lists, absent prior disclosure.

19

Kansas Settles With Billing Services Company to Resolve Cramming Claims

• Kansas alleged that a national billing services company, Billing Services Group North America, Inc., was billing unauthorized third-party services to Kansas consumer’s landline phone bills.

• In late May, a settlement was reached with the company agreeing to cease these cramming practices.

20

Pennsylvania Settles With Videographer and Hand Delivers 8th Grade Videos

• Advanced Media accepted fees for producing videos of an 8th grade graduation, but never produced or delivered the video.

• The Pennsylvania Attorney General settled with the videographer, and the Deputy Attorney General personally delivered videos to the children’s parents.

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Private Litigation (and Lanham Act False Advertising)

Update

22

Supreme Court Finds No Standing in Spokeo

Spokeo, Inc. v. Robins, No. 13-1339, 136 S. Ct. 1540 (May 16, 2016)• The Fair Credit Reporting Act (FRCA) requires consumer reporting

agencies to follow reasonable procedures to ensure accuracy of consumer reports.

• Spokeo operates a “people search engine” that aggregates personal information from numerous sites.

• Robins discovered his Spokeo-generated profile had inaccurate information, and sued. The district court found no standing and the 9th Circuit reversed, finding that Robins had pleaded “particularized” injury.

• The Supreme Court concluded that 9th Circuit’s analysis was deficient because it did not include a full standing analysis.

– Plaintiff must show injury-in-fact, which requires not just particularized injury but also concrete injury. Both particularity and concreteness are required.

– Injury need not be tangible to be concrete, but some concrete harm a problem.

23

Eleventh Circuit Affirms Certification of Cadillac Customers

Carriuolo v. General Motors Company, No. 15-cv-14442, -- F.3d. --, 2016 WL 2870025 (11th Cir. May 17, 2016)• In selling its 2014 CTS sedans, Cadillac displayed a window sticker

claiming a five-star rating from the National Highway Traffic Safety Administration in three safety categories. At the time, the NHTSA had not tested the CTS sedans.

• Later NHTSA testing found that the sedan deserved a five-star rating in two of those categories, but only a four star rating in the other.

• In 2015, a putative class alleged violations of Florida’s Deceptive and Unfair Trade Practices Act and the Tennessee Consumer Protection Act.

• Although the plaintiffs sought certification of four classes, the trial court certified only the Florida class based on FDUTPA claims.

• In May, the Eleventh Circuit affirmed that certification, holding that misleading advertising claims are capable of class resolution without proof that each individual saw the sticker based on the overcharge theory, which is that Cadillac was able to obtain a premium price for the vehicle.

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Ninth Circuit Affirms Dismissal of “VitaRain” Liability Suit

Maple v. Costco Wholesale Corp., No. 14-cv-35059, -- Fed. Appx. --, 2016 WL 2621345 (9th Cir. May 9, 2016)• Costco and Niagara Bottling sold a Kirkland-branded beverage called “VitaRain

Tropical Mango Vitamin Enhanced Water Beverage,” labeling the ingredients “natural.”

• The putative class action alleged that the beverage actually contained caffeine and other artificial ingredients. VitaRain was represented as not containing artificial chemicals and as demonstrably similar to Vitaminwater.

• The trial court dismissed the claim based on the name, saying that the name “VitaRain” was largely nonsensical” and could not lead a consumer to believe it was drinking rain water. The court also held that the putative class representative could not demonstrate he had read the labeling at issue.

• On May 9, the Ninth Circuit upheld the ruling, finding that “VitaRain” was unlikely to mislead and the plaintiff had not proven causation.

• The court distinguished the case against Coca Cola’s VitaminWater because “[i]n that case, the court found important that the beverage’s name — 'Vitaminwater' —contained the full names of two of the ingredients and that the label included misleading statements such as ‘vitamins+water=what’s in your hand.” Here instead “the term ‘Vita’ could mean many things, rain could not be an actual ingredient, and the label contains no misleading statements.”

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Eleventh Circuit Decision on Bankruptcy/FDCPA Overlap

Johnson v. Midland Funding, LLC, No. 15-11240; Brock v. Resurgent Cap. Servs., L.P., No. 15-14116, -- F.3d --, 2016 WL 2996372 (11th Cir. May 24, 2016)• Plaintiffs were Chapter 13 debtors suing debt collectors under FDCPA.• The debts were incurred from 2003 and 2008, respectively, and were

barred by Alabama’s six-year statute of limitations on collection actions.• In contrast to Alabama law, Chapter 13 allows all creditors to file claims

against bankrupt debtors.• The District Court found the bankruptcy code in conflict with FDCPA

and concluded the code prevailed.• The 11th Cir. reversed, concluding that, though the bankruptcy code

permitted all creditors to file, that debt-collectors still exposed themselves to FDCPA claims by filing knowingly time-barred claims.

26

CareFirst Data Breach Claims Dismissed

Chambliss v. CareFirst, Inc., No. 15-cv-02288, 2016 WL 3055299 (D. Md. May 27, 2016)• CareFirst BlueCross BlueShield suffered data breaches in June 2014 and

May 2015 in which personal information was stolen.• Plaintiffs brought putative class action claiming that they and other

subscribers are at risk of having personal information stolen.• The Court dismissed for lack of standing, rejecting Plaintiffs’ four claimed

injuries:– Increased risk of future harm—loss of data without evidence of misuse does not

constitute injury, especially where data breaches occurred more than a year ago, and where it was not obvious how useful the personal information would be.

– Mitigation costs/costs for purchasing credit-monitoring services—plaintiffs may not manufacture injury by incurring expenses to stave off non-impending harm.

– Benefit of bargain loss/data breach reduced the value of the product plaintiffs received—no allegation that the data breach diminished the value of the health insurance.

– Decreased value of personal information—Plaintiffs made no allegation that they attempted to monetize. 27

Anthem Data Breach MDL

In re Anthem, Inc. Data Breach Litig., No. 15-md-02617, 2016 WL 3029783 (N.D. Cal. May 27, 2016) • Anthem, one of largest health insurers in the country, maintained health and

personal information for 80 million people. Anthem’s database was breached in January 2015. Thereafter, Anthem retained Mandiant, a cybersecurity firm, to advise it. The Mandiant Report found Anthem’s security measures inadequate.

• Numerous lawsuits were filed in the spring of 2015, and consolidated into an MDL in June 2015. Those plaintiffs also sued non-Anthem BlueCross BlueShield companies. Parties were limited to addressing ten claims in motions to dismiss.

• Earlier this year the judge dismissed several of the pre-selected claims.• The judge mostly reversed course in this decision, permitting several

previously dismissed claims for breach of contract, unfair competition, unjust enrichment and more to proceed.

28

Olive-Oil Class Action CertifiedKumar v. Safeway, Inc., No. RG14726707 (Alameda Cnty. Super. Ct. May 24, 2016)• Plaintiff filed a putative class action against Safeway alleging false

olive oil labeling —namely, the labels indicate that the oil is “imported from Italy” and is “Extra virgin” grade.

• The judge certified two classes, rejecting Safeway’s arguments:– that Kumar did not have standing, notwithstanding her admission that

she could not determine the quality of the oil herself and could not remember if she had purchased a bottle “imported from Italy.”

– that consumers have no common understanding of “imported from Italy” or “ extra virgin.”

• Kumar has also sued the importer of Filippo Berio and Bertolli in the Northern District of California raising similar claims, and class-certification is pending. (Case No. 4-cv-02411)

29

Second Circuit Affirms Dismissal of Lipitor “Off-Label” Prescription FCA Suit

United States ex rel. Polansky v. Pfizer, Inc., No. 14-4774, -- F.3d. --, 2016 WL 2865610 (2d Cir. May 17, 2016)• Pfizer’s cholesterol drug Lipitor is FDA approved for five “indications.” The

drug label was required to contain, inter alia, “indications” and “contra-indications” for use.

• Plaintiff alleged that Lipitor’s approval was actually narrower than the indications, because Lipitor’s label contained a reference to the advisory guidelines of National Cholesterol Education Program, which have a three-criteria focus.

• Plaintiff also contended that prescriptions for off-label use are not reimbursable under federal/state programs. As such, when claims for reimbursement were made for “off-label” uses not contained in the guidelines, those claims were fraudulent and actionable under the False Claims Act.

• The Second Circuit affirmed dismissal of the complaint, ruling that the Lipitor label did not incorporate the National Cholesterol advisory guidelines.

30

Lanham Act False Advertising Verdict In Hunting Gear Case

ALS Enterprises, Inc. v. Robinson Outdoor Prods., LLC, No. 14-cv-500 (W.D. Mich. May 20, 2016)• ALS Enterprises and Robinson Outdoor Products make scent-blocking

clothing designed for hunting.• Robinson advertised (in national print, TV, web campaign) that its apparel

absorbed “up to 40 percent more odor than carbon,” which was the technology employed by ALS’s fabric.

• ALS claimed the cited scientific testing was insufficiently reliable, making claims literally false.

• Robinson conceded that its technology did not work better than carbon after 48 hours, but wanted to market to “real-world hunters.”

• Jury found for ALS, awarding $2 million in damage control costs, $1.3 million in lost profits and $500k in repayment of Robinson’s wrongful profits.

31

Seventh Circuit Decision on FDCPA Claims for Voluntarily Dismissed

LawsuitsSt. John et al. v. Cach, LLC et al., Nos. 14-2760, 14-3724, 15-1101, -- F.3d. --, 2016 WL 2909195 (7th Cir. May 19, 2016)• Debt collectors sued debtors in Illinois state court and then voluntarily

dismissed suits; FDCPA plaintiffs claim that debt collectors never intended to go to trial.

• FDCPA § 1692e(5) forbids debt collectors from threatening to take action they do not intend to take.

• Plaintiffs claimed that:– debtors hoped to secure a quick default judgment or settlement and

quickly abandoned the claim when plaintiffs began to defend.– filing suit contained an “implied threat” to proceed to trial and was

therefore a misrepresentation.• 7th Circuit concluded that the debt collectors made no such

misrepresentation, and, in any event, were permitted to file suit without intending to go to trial under the FDCPA because debt collectors are permitted to weigh costs and benefits of trial, as can any other litigant.

32

Biotech Theranos Hit with Two Lawsuits Amid Scrutiny

MPB v. Theranos, Inc., No. 16-cv-02810 (N.D. Cal., May 25, 2016); Jones v. Theranos, No. 16-cv-02835 (N.D. Cal. May 26, 2016)• Theranos is a blood-testing company started by wunderkind Elizabeth

Holmes that gained notoriety for its claims to revolutionize blood testing industry.

• Since late 2015, Theranos has been under intense regulatory scrutiny from CMS, DOJ, and the SEC and seen Walgreens put partnership plans on hold.

• The first suit, in N.D. Cal., makes false advertising and consumer fraud claims. The suit alleges that Theranos promoted its Edison blood-testing machine as able to collect accurate results outside a lab but that Theranos’ claims were not true.

• The second suit, also in N.D. Cal. and filed the next day, makes several claims sounding in consumer fraud, false advertising and marketing, and breach of contract. The suit alleges that Theranos misled consumers into thinking the tests were technologically advanced and accurate.

33

Snapchat Facial Recognition Suit

Martinez et al. v. Snapchat, Inc., No. BC-621391 (Cal. Super. Ct., L.A. Cnty. May 23, 2016)• Snapchat filed a putative class action in California state court alleging

violations of the Illinois Biometric Information Privacy Act (BIPA) for collecting and using biometric identifiers without sufficient notice or consent.

• Snapchat acquired facial recognition and modification software in 2015 when it bought Looksery, Inc.

• Illinois passed the BIPA in 2008 over concerns about biometric data theft—legislators were concerned that theft of biometrics would be unremediable.

• The BIPA makes capture/collection/retention of biometrics illegal without written disclosure and consent.

• The complaint seeks $5,000 statutory damages for each intentional violation of BIPA, $1,000 for negligent violation.

• Facebook and Shutterfly also have been sued under BIPA. The Facebook suit is pending in C.D. Cal., and has recently survived summary judgment.

34

General Motors Miles Per Gallon Misrepresentation

Tolmasoff v. General Motors, LLC, No. 16-cv-11747 (E.D. Mich.) • Three 2016 GM models (Chevy Traverse, GMC Acadia, Buick

Enclave) had fuel-economy estimates that overstated MPG by 1-2 miles per gallon. GM estimates 135,000 customers will be affected.

• A problem arose when new emissions-related hardware was installed but the effect on MPG wasn’t reflected in the table.

• GM has announced that it will offer customers a prepaid debit card (value between $450 and $900) or a 4-year, 60,000 mile protection plan.

• The wrong fuel-economy ratings have already inspired at least one lawsuit in E.D. Mich., which seeks recovery under state consumer-protection statutes and common-law theories.

35

National Advertising Division (NAD)

Update

Genomma Lab USA’s Silka(Case #5950)

• Bayer Healthcare challenged express and implied claims of an athlete’s foot product, Silka, related to Spanish advertisements that aired in Mexico City. Examples of the challenged claims included:

– “Silka is 400% faster than other products in alleviating the itching, burning, dryness, and scaling of athlete’s foot between the toes.” “Silka is the fastest to cure athlete’s foot or treat athlete’s foot symptoms.” “Consumers will not have itchiness or burning after seven days of using Silka.” “Consumers will experience complete relief from athlete’s foot after only four days of using Silka.” Consumers will be cured of the condition in less than four weeks.”

• Genomma Lab advised that challenged ads had been discontinued in October 2015 but had continued broadcasting in error and that internal processes had been put in place to prevent airing in the US. Thus, NAD did not review this commercial.

• Upon reviewing the revised commercial, NAD concluded that the “one week topical treatment between the toes with Silka” combined with the visual images was supported. NAD, however, recommended that the current commercial be modified to remove “compared with other OTC products to treat athlete’s foot” to avoid implying that Silka is faster than competing products.

37

Clorox’s Glad Tall Kitchen Drawstring Bags (Case #5951)

• Reynolds Consumer Products challenged express claims that the statement “antimicrobial protection of the Drawstring from Odors” reasonably conveyed an unsupported public health message that the product provides protection against food-borne or disease-causing bacteria/germs. It also challenged implied claims.

• In support of its challenge, Reynolds commissioned an online consumer survey to which nearly 24% of respondents indicated the product reflected disinfectant properties. Thus, they believed the claim to mean that the presence of an antimicrobial agent provides a health benefit.

• NAD concluded that the claim “antimicrobial protection of the Drawstring from Odors” was technically true, but NAD determined that the bag’s design elements found on product packaging conveyed a confusing and potentially inaccurate message. To that end, NAD recommended modifications to the box’s front and side panels to avoid consumer confusion with disinfecting products.

• NAD further recommended that Clorox discontinue using the phrase, “now with Clorox” from its FSI/Coupon insert. NAD determined that consumers could reasonably take away the unsupported message that the product contains the active ingredient found in Clorox bleach. 38

Mega-T’s Green Tea Fat Burning Supplement (Case #5952)

• Council for Responsible Nutrition (CRN) challenged express radio, website and internet advertising claims concerning a health supplement. Some examples of those claims include:

– “Every Mega-T product is formulated to help you burn more calories than you would otherwise.” “Mega-T will help increase your energy level and fight fatigue, so you can enjoy an active healthy lifestyle.” “Green Tea helps promote ‘good bacteria’ and burn fat.”

• CRN argued that the dosage and formulation of the products failed to match the supporting studies and that the advertiser lacked sufficient evidence that Mega-T increases metabolism, burns fat and/or assists with weight loss. Mega-T’s main study was very small in scale and not representative of the relevant population.

• Mega-T explained it had recently acquired the brand and had not developed any of the challenged claims. Upon review of those claims, Mega-T agreed to voluntarily and permanently discontinue the claims. NAD recommended that Mega-T also discontinue claims of “boosts metabolism” and “burns fat” because the claims were unsupported by limited record evidence.

39

Intraceuticals’ Atoxelene Skin Care Products (Case #5953)

• As part of ongoing monitoring, NAD challenged express and implied claims concerning an anti-aging skin care product, examples of which included:

– “Instantly reduce the visible signs of premature skin aging. Results accumulate with continued use.” “Results are immediate.” “Gets rid of wrinkles instantly—and they actually stay gone.”

• For its position, Intraceuticals explained that it relied on testing of the product ingredients as well as on small-scale studies (10 staff members). Intraceuticals represented that many of these claims were made by an online retailer, which it requested the retailer discontinue.

• NAD weighed Intraceuticals’ testing studies against the standard for anti-aging cosmetic products that (1) quantitatively measures wrinkle reduction, skin tone or age-related skin changes using industry standard methodologies and (2) qualitatively measures changes in skin condition to insure that any improvement is perceptible and consumer relevant.

• NAD determined that Intraceuticals failed to provide reasonable basis for these claims and recommended they be discontinued.

40

Beiersdorf’s Aquaphor Baby Diaper Rash Cream (Case #5954)

• NAD challenged express diaper rash cream advertising claims, examples of which included:

– “Make It All Better, Treat and Relieve diaper rash within six hours.” “Clinically proven to relieve diaper rash within 6 hours.”

• Beiersdorf maintained that the claims are substantiated with competent and reliable evidence but were discontinued permanently for business reasons – unrelated to NAD’s inquiry.

• Beiersdorf also indicated it had redesigned its product packaging and had begun the process of introducing new packaging at retail stores.

• And while Beiersdorf requested NAD administratively close this claim, NAD declined. Instead, it closed the file based on voluntary compliance of discontinuing claims.

41

Joyus’s Dr. Brandt’s Needles No More Wrinkle Relaxing Cream (Case #5956)

• NAD challenged advertising claims of an anti-wrinkle product sold by Joyus that appeared in the online version of People magazine. NAD reviewed the online video advertising in the online People magazine, which included express claims of:

– “Instant Wrinkle Relaxing Cream.” “Botox in a bottle.” “Younger looking skin in just 60 seconds.” “Skin will feel and look smoother in 60 seconds.” “84% of people see visible smoother skin in just one minute.”

• NAD agreed that videos make clear that consumers are viewing a shopping video, however, it determined that the pages and links before the video reasonably conveyed that the ad content is editorial.

• NAD recommended that the advertiser disclose to consumers that the “Stuff We Love” page is a shopping page, that the linked videos are shopping videos, and that text should advise consumers that linked content relates to shopping links.

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Bompas & Parr/Warner Leisure Hotels’ Anti-AGin Gin (Case #5957)

• NAD challenged express claims made in internet advertising for an anti-aging gin—a 40% proof gin distilled with collagen and a mix of botancials. Some examples of those claims included:

– “Rejuvenates the skin while you drink.” “For people who want to stay young but don’t want to give up alcohol.” “Include[s] a host of age defying botanicals and combining them with drinkable collagen, this is the alcoholic equivalent of a facial”

• NAD also challenged an implied claim that the gin laced with “Age-Defying Botanicals” (and their alleged properties) on the advertiser’s website reasonably conveyed the message that these ingredients offer the claimed health benefits to the skin.

• Bompas defended its claims by maintaining (1) its product was not advertised anywhere using paid–for media; (2) only a very limited number of products were available on the drink’s supermarket website during promotion; (3) the label on the bottle specifically disclaims any associated health benefits; (4) the product no longer was for sale; and (5) the challenged claims were for a UK initiative, not part of US media/promotion. It also contended NAD lacked jurisdiction.

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Bompas & Parr /Warner Leisure Hotels’ Anti-AGin Gin (Case #5957) (cont’d)

• NAD’s inquiry stemmed from the fact that the advertiser’s claims could reasonably be interpreted by consumers to mean that the product actually achieved the ascribed health benefits or that the product can deliver the same benefits as the individual ingredients (e.g., collagen, witch hazel oil, green tea), known for rejuvenating properties listed.

• Other than rejecting NAD’s asserted challenges, Bompas presented no supporting evidence, aside from its press release associated with the product launch. Because Bompas represented the gin was no longer for sale, and Warner had no plans to reinstate it, NAD did not review the merits.

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Sprint Corporation’s Advertising(Case #5958)

• Competitor T-Mobile challenged express and implied claims, which included various iterations of saving 50% if one switches from another phone provider to Sprint. A few examples of the express claims include:

– “[C]ome save 50% on most Verizon, AT&T or T-Mobile rates.” “Switch to Sprint and Save 50% on Your Monthly Rates.” “Get 50% off your bill.”

• The challenged implied claims focused on the customer’s perception that Sprint will charge a customer half of what it is currently paying for wireless service by switching from T-Mobile; that switching customers will receive the same benefits they currently receive; and that there are no material differences between what a switching customer would receive from Sprint for “50% off.”

• T-Mobile’s challenges were threefold: (1) Sprint’s advertisements promised consumers savings that they would not receive; (2) Sprint’s comparison was an inappropriate apples-to-oranges one; and (3) Sprint’s advertisements did not adequately explain the limits of its offers.

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Sprint Corporation’s Advertising (Case #5958) (cont’d)

• Sprint rejected the claims in total: (1) its ads make clear of the potential savings a switching consumer will receive; (2) Sprint’s comparison was permissible because the material differences are clearly and conspicuously disclosed; and (3) the challenged advertising adequately explains the limits of Sprint’s offer, including numerous disclosures explaining the differences between Sprint’s and T-Mobile’s plans/services.

• NAD concluded that the challenged television commercials reasonably conveyed the messages that consumers can expect to retain the same benefits but reduce their bill by 50% when switching from their current provider but NAD disagreed that the rate plan benefits and limitations were clear. NAD determined that the fast-moving audio and visual images were difficult to read, notice and understand. As a result, NAD recommended that the commercials be discontinued.

• With respect to Sprint’s internet and in-store advertising, NAD determined the ads provided a reasonable basis for its 50% off claim, but recommended some modifications to clearly state the basis of its comparison. NAD also determined that for customers looking for a less expensive rate plan with features common to wireless carriers, the savings Sprint offers are a valuable benefit that Sprint should be able to advertise but recommended modifications to clearly disclose the material differences in Sprint’s plans versus those offered by T-Mobile. 46

Advanced Nutritional Innovations’ ionDEFENDER

Dietary Supplements (Case #5959)

• Council for Responsible Nutrition challenged numerous claims concerning health benefits found in internet advertising of a dietary supplement. A few examples include:

– “Protect the body against damaging radiation!” “ionDEFENDER provides protection by dramatically boosting the body’s powerful natural protection.”

• The supplement’s advertising claimed the product elevated superoxide dismutase (SOD) antioxidant levels within one’s body. And that increased SOD levels, in turn, increases the cells’ antioxidant capacity by protecting the body from damaging ionizing radiation and a whole host of health conditions.

• In support, the advertiser presented medical literature consisting of review articles, two abstracts of antioxidant blood tests with the proprietary ingredient contained in ionDEFENDER, and in vitro, animal studies.

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Advanced Nutritional Innovations’ ionDEFENDER

Dietary Supplements (Case #5959) (cont’d)

• NAD determined that the medical literature and in vitro animal studies failed to provide a reasonable basis for any of the claims concerning damage/disease protection, aging, radiation and hangovers.

• NAD concluded that the presented support failed to rise to the level of competent and reliable evidence, and that the totality of the advertiser’s evidence was insufficient to reasonably support the extensive health-related claims. That is, NAD concluded the studies were flawed, that the literature was limited (abstracts), and that the clinical studies did not match the health-related performance claims. Additionally, the studies and literature lacked consensus on the health benefits of SOD.

• While NAD determined that Advanced Nutritional had provided a reasonable basis for one factual claim—a description of antioxidants’ working mechanisms —it recommended the advertiser discontinue the remaining 15 challenged claims.

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Procter and Gamble’s Charmin Ultra Strong and Ultra Soft Products (Case #5960)

• Kimberly-Clark challenged the truthfulness and accuracy of express and implied claims of television and website advertising and product packaging related to Charmin toilet tissue. A few examples of the express claims include:

– “USE UP TO 4X LESS.” “Plus it even lasts longer than the leading thousand-sheet brand.” “With more gos per roll.” “It pays to use Charmin Ultra Mega Roll.”

• The implied claims focused on value—(a) consumers who choose Charmin will save money and (b) that Charmin provides a better value than Scott 1000 (P & G’s competing toilet tissue). All claims related to comparisons between Charmin and Scott (“the leading bargain brand”) products.

• For its review, NAD sorted the claims into three categories: (1) Charmin Ultra consumers use “up to 4x less” toilet paper than users of the leading bargain brand, (2) Charmin Ultra Mega Rolls “last longer” than Scott 1000 and provide “more ‘gos’ per roll,” and (3) purchasing Charmin Ultra will save money, a better value than Scott 1000.

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Procter and Gamble’s Charmin Ultra Strong and Ultra Soft Products (Case #5960) (cont’d)

• P & G’s supporting evidence included the results of two consumer utility studies. And while NAD determined those studies met its sufficiently reliable standard, it noted that the “up to” portion of the claim on the packaging appeared in small type yet the “Use” and “4x less” are in much larger type. Thus, NAD recommended that P & G enlarge the “up to” type to avoid conveying a misleading message of simply “use 4x Less.”

• For the “Last Longer” and “more ‘gos’ per roll,”claims that appear in television ads featuring the Charmin bears, the advertised comparison (the Mega Roll to Scott 1000) differed from the testing that P & G relied upon (the Double Roll to Scott 1000). As additional support, P & G relied on its predictive model. Yet NAD concluded that a consumer would reasonably expect the testing featured in the television ad to have been conducted on the Mega Roll and that the predictive model did not adequately substantiate the claim. Thus, NAD recommended that the “Last Longer” and provide “More ‘Gos’ Per Roll” ads be discontinued.

• NAD also recommended that P & G discontinue the express and implied value claims as related to Scott 1000. NAD explained that the record evidence was insufficient to support the message that the Mega Roll will outlast a Scott 1000 roll.

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