Retail & Consumer Products Law Observer

Retail & Consumer Products Law Observer

Legal Insight for the Retail and Consumer Products Industry

The FTC (Finally) Goes Organic

Posted in Advertising & Product Risk Management

In its 2012 revisions to the Green Guides (16 C.F.R. Part 260) on environmental marketing claims, the FTC declined to provide guidance regarding “organic” claims, “either because the FTC lacks a sufficient basis to provide meaningful guidance or wants to avoid proposing guidance that duplicates or contradicts rules or guidance of other agencies.” That self-imposed silence ended with the FTC’s release of a staff report and study results, “Consumer Perception of ‘Recycled Content’ and ‘Organic’ Claims,” and its announcement of an October 20, 2016 joint FTC/USDA Roundtable, “Consumer Perceptions of ‘Organic’ Claims for Non-Agricultural Products.”

The FTC’s “organic” activities fall squarely within the larger regulatory movement toward providing guidance to businesses and consumers regarding the use of powerfully effective marketing terms such as “natural,” “organic,” “GMO-free,” and “locally grown.” For example, the FDA continues to work on developing a policy for using “natural” in food claims, and states and now the federal government are struggling with labeling requirements for genetically modified organisms (GMO).

The FTC staff report concluded, based on a study of consumer perceptions regarding unqualified and qualified organic claims, that sufficient concern existed about deceptive “organic” marketing claims for the FTC and USDA to convene the October 20 Roundtable “to explore organic claims for non-food products, and how we can work together to reduce deceptive organic claims.” The staff report also concluded that the study results regarding “recycled content” claims did not merit further FTC follow-up or require revision to current Green Guides guidance.

The portion of the study regarding organic claims asked consumers about scenarios involving shampoos, mattresses, and dry cleaning services, all described with unqualified “organic” claims, that included a percentage range of content that was “made by a man-made, chemical process” (0%, less than 1%; 1% to 5%; and 5% to 10%). There was widespread agreement among respondents that the “organic” claim was appropriate for products with no non-organic materials, but a “significant minority of respondents” – the FTC trigger for deceptive claims – believed that an unqualified “organic” claim was not proper if non-organic materials were present in any percentage. That “not organic” result did not change significantly if respondents were advised that the non-organic materials “pose[d] no health or safety hazard to consumers.” FTC staff also concluded from the study – consistent with current Green Guide guidance for general environmental marketing claims – that “qualified claims stating which parts of the product are organic are significantly less likely to mislead consumers than unqualified organic claims,” and, alternatively, that “a percentage qualification may also make the claim less misleading.”

Notwithstanding FTC staff’s concessions of limitations in the study design and the results, the report concludes that the consistency of the results demonstrates the need for follow-up regarding “organic” claims used to market non-agricultural products, including personal care products. Accordingly, the October 20 Roundtable will, among other things, address

  • Consumers’ interpretations of “organic” claims for products and services that are not covered by USDA’s Agricultural Marketing Service’s National Organic Program;
  • The staff report; and
  • Approaches to address potential deception, including consumer education.

The FTC has a dedicated email address for questions and proposals regarding the October 20 Roundtable, green@ftc.gov, and, separately, will be accepting public comments regarding “organic” claims until December 1, 2016.

Would “Juice” by Any Other Name Taste as Sweet? Court Cites FDA Guidance in Resuscitating “ECJ” Class Action

Posted in Advertising & Product Risk Management, Consumer Class Action

Sugar Cane

In a long-awaited pronouncement, on May 25, 2016 the Food and Drug Administration issued its final guidance recommending that food and beverage manufacturers discontinue their use of the term “evaporated cane juice” (ECJ) to refer to sweeteners extracted from sugar cane. As the agency explained, “the use of ‘juice’ in the name of a product that is essentially sugar is confusingly similar to the more common use of the term ‘juice’”—which FDA regulations define as a liquid, puree, or concentrate derived from “one or more fruits or vegetables.”

When the FDA first issued this Guidance, many questioned whether it would reinvigorate a genre of litigation that had recently grown quiet: class actions alleging that the use of “ECJ” on product labels and packages misled consumers. Now, thanks to the Northern District of California’s July 27 decision in Reese v. Odwalla, Inc., the answer is becoming clearer: the ECJ class action is due for a comeback. Continue Reading

Beauty with a Side of Mercury?

Posted in Advertising & Product Risk Management, Consumer Class Action, Product Liability & Torts, Torts

On July 26, 2016, FDA issued an updated warning on beauty products, warning consumers to avoid certain “skin creams, beauty and antiseptic soaps, and lotions,” particularly those boasting “anti-aging” or “skin lightening” benefits, as potentially containing mercury.  While the dangers of mercury exposure are well-known, mercury’s ubiquity in certain beauty products is not.  Products that claim to “remove age spots, freckles, blemishes, and wrinkles,” including products targeting teenagers enduring acne, may contain mercury.  Checking the label can help—look out for words like “mercurous chloride,” “calomel,” “mercuric,” “mercurio,” or of course, “mercury”, but it’s not fool-proof.  As FDA points out, many of these beauty products are often made abroad and can be sold illegally in the U.S., without any labels. FDA continually monitors products like these, but is unable to catch all of them, especially due to their dubious channels of trade.  For those that FDA does catch, FDA sets up an import alert to prevent future influxes of such products.  Check here for all Consumer Updates from FDA.  Thus, retailers should do their due diligence to know what the chemical content is of the products they sell beyond the labels.

In its warning, FDA again mentioned one of its growing complaints levied against cosmetics – that the product may actually be an unapproved new drug under the law. Continue Reading

A New Federal GMO Labeling Standard in the Works?

Posted in Advertising & Product Risk Management, Consumer Class Action

One week before the Vermont GMO labeling law will take effect, a bipartisan bill requiring mandatory labeling for products containing genetically modified ingredients has been agreed to by Senate AG committee ranking member Debbie Stabenow (D-MI) and Committee Chairman Pat Roberts (R-KS).  The bill, which would require the Secretary of Agriculture to establish a national disclosure standard for bioengineered foods, will need to be passed in the Senate and the House of Representatives, and would go into effect two years after passed.  If successful, the new law would specifically preempt all state GMO labeling laws and would prevent the feared patchwork of conflicting state labeling laws.

The bill has a narrow definition of genetic engineering — traits developed through in vitro recombinant DNA techniques, which could not be obtained through conventional breeding or found in nature.  It excludes food served in a restaurant and food derived from animals that consumed genetically modified feed.  The Secretary would be responsible for establishing a specific regulation setting forth the amount of a genetically modified substance that would require labeling. Continue Reading

The FDA Unveils an Updated Nutrition Facts Label

Posted in Advertising & Product Risk Management

On Friday, May 20, 2016, the U.S. Food and Drug Administration (FDA) announced a “refreshed” Nutrition Facts label, which, except for the addition of trans-fats in 2006, had gone largely untouched since 1994. Consumers will not only notice an updated design, which makes the label larger and bolder, but there are more substantive changes that, according to FDA, “are based on updated scientific information, new nutrition and public health research, more recent dietary recommendations from expert groups, and input from the public.”

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Keeping It “Real”: Supreme Court Holds That Consumers Must Allege Real Harm

Posted in Advertising & Product Risk Management, Consumer Class Action, Privacy & Data Protection

In Spokeo, Inc. v. Robins, the U.S. Supreme Court has issued yet another narrow decision—apparently designed to avoid a 4-4 deadlock—in another hard-fought, potentially divisive case on its docket this term. On May 16, 2016, the Court held 6-2 that the Ninth Circuit had erred in not asking whether plaintiff Robins had alleged that he suffered a “concrete” harm—actual, rather than hypothetical, damage—as a result of statutory violations by defendant Spokeo.

In reaching this decision, the Court reaffirmed that plaintiffs bringing class actions in federal court must do more than allege a “mere technical violation” of a statute or regulation. In order to demonstrate that they have a real stake in the case—or “standing”—as required in federal court by Article III of the Constitution, they must also explain how the violation in question caused them real harm. At the same time, however, the majority was careful to point out that, “in some circumstances,” plaintiffs could base standing on procedural or technical violations if coupled with a “real risk of harm.” And the Court remanded the specific question of whether Robins himself had alleged that he suffered real harm as a result of Spokeo’s technical violations.

In sending the case back to the Ninth Circuit, then, the Court left the deeper issues in the case unresolved—inviting further litigation over what its holding means in specific cases.

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Ninth Circuit Refuses to Cut Plaintiff Slack in Ebner v. Fresh, Inc.

Posted in Advertising & Product Risk Management, Consumer Class Action

Companies from Procter & Gamble and Unilever to Mars and Starbucks have recently been hit with class actions slightly different from the false advertising claims we have gotten used to seeing. Now, instead of just alleging that companies are deceiving consumers through the language used in their advertising claims, consumer plaintiffs are expanding their allegations to target visual impressions created by product packaging.

These suits typically raise one—or both—of two theories. First, they often allege that defendants have violated federal and state regulations by including too much nonfunctional empty space—or “slack fill”—in their packages. Second, even if the defendants’ practices do not violate such regulations, their packages are still deceptive and unlawful because they run afoul of the “reasonable consumer” standard. Put differently, the defendants have intentionally manipulated their packaging, the theory goes, in order to dupe ordinary consumers into believing they are getting more product than they actually are—whether that means consistently underfilling lattes, dumping too much ice into iced coffees, or housing small amounts of product in oversized containers. These two distinct theories, often raised together, belong to a common genre of litigation that is relatively new but growing: the “slack fill-inspired” class action.

These cases have had a mixed track record so far, and the pace of new filings continues unabated. But recently, on March 17, 2016, the Ninth Circuit issued a decision that could give companies a potent tool in combatting these suits. That decision, Ebner v. Fresh, Inc., confirmed that the district court had properly dismissed with prejudice the plaintiff’s complaint, which alleged both that (1) Fresh had used deceptively large packaging that was misleading to “the reasonable consumer,” and (2) its packaging violated California’s slack fill rules.

The Ninth Circuit in Ebner rejected both of these commonly-used theories, making the Court’s reasoning instructive for companies facing similar slack fill-inspired class actions going forward. But it is worth noting that this decision is no get-out-of-litigation-free card: as we will explain, companies must still pay close attention to the specific slack fill rules applicable to their products in order to minimize their exposure to these opportunistic class actions.

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UPDATE: R-E-V-E-R-S-A-L Spells Reversal! The Sixth Circuit Holds Varsity Brands’ Cheerleading Uniform Designs to be Copyrightable.

Posted in IP/Brand Protection

U-P-D-A-T-E! On May 2, 2016, the U.S. Supreme Court granted certiorari to address the question: “What is the appropriate test to determine when a feature of a useful article is protectable under § 101 of the Copyright Act?”. The answer to this question may have far-reaching implications for the retail and fashion industries – stay tuned for future u-p-d-a-t-e-s!

Group of Cheerleaders in a Row

Originally published September 10, 2015

A recent decision from the Sixth Circuit highlights the ongoing significance of copyright law for the retail and garment industries. On August 19, 2015, the Sixth Circuit, in reversing the lower court’s decision, held that the “stripes, chevrons, zigzags, and colorblocks” on Varsity Brands’ cheerleading uniforms are protectable by copyright. In Varsity Brands et al v. Star Athletica, the Sixth Circuit dipped into the murky waters of copyright protection for fashion design, reiterating the need for greater legislative or judicial guidance when it comes to fashion design and copyright law. Nonetheless, the Court ultimately found, as other Circuits have, that “fabric design”, unlike “dress design”, is protectable.

At the district court level in Tennessee, Varsity Brands sued Star Athletica for infringing its registered copyrighted designs for cheerleader uniforms. On summary judgment, the district court determined that a cheerleading uniform cannot exist without the hallmark “stripes, chevrons, zigzags, and colorblocks,” and therefore found Varsity’s copyrights of such designs invalid as inseparable from the utilitarian aspect of a cheerleading uniform.

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Won’t Get Fooled Again: Recent Bigelow Decision Raises Roadblock to Consumer Plaintiffs Seeking Injunctions in False Advertising Class Actions

Posted in Advertising & Product Risk Management, Consumer Class Action

Green Tea

Federal judges often find themselves confronting a familiar conundrum in consumer class actions that challenge misleading practices. The typical plaintiff will file a suit after somehow discovering that one of the defendant’s advertisements, product labels, or other representations is “false” or “misleading.” The self-nominated “representative” asks the court to certify a class of all consumers “similarly situated”—that is, other consumers who bought the product or were exposed to the misleading message. The plaintiff then seeks not only compensation for the class, but also an injunction or ban prohibiting the defendant from making the challenged claims going forward.

Since an injunction is to stop the likelihood of irreparable future harm, the deceptively tricky question that judges face is whether the named plaintiff can seek an injunction prohibiting the misleading claims when she herself is no longer at risk of being deceived by something she now knows is false. In other words, if the named plaintiff won’t get fooled again, does she have standing to obtain injunctive relief on the class’s behalf? One California Federal court’s take: fool the plaintiff twice, shame on him.

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Join C&M and other Industry Experts for an Advertising for Associations Seminar

Posted in Advertising & Product Risk Management

Gavel 2

On May 4, 2016, Crowell & Moring LLP will host a complimentary seminar on Advertising for Associations in their Washington, DC office. This afternoon program will focus on key issues affecting advertising communications and public relations strategies of major trade associations. It brings together leading trade association executives and lawyers, public relations specialists, and ad agency creatives to discuss the laws, strategies, rewards and risks of association-sponsored ad campaigns. It will also discuss how associations can bring, or defend against, advertising-related litigation. The interactive seminar will be followed by an opportunity to network with colleagues in the association and legal communities.

Click here to learn more or to register for this event.