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A new trend in false advertising lawsuits targets specific characterizing flavor claims on the labels of foods and beverages. For example, Frito-Lay was recently sued in California federal court alleging the company’s “Tostito’s Hint of Lime” tortilla chips falsely implies that natural lime is a primary flavoring ingredient and that consumers were misled by various misrepresentations of lime on the product packaging. Kellogg, Hershey, and Bimbo Bakeries were all sued because the “fudge” in their respective products allegedly are produced with vegetable oil substitutes instead of butter and milk, which the complaint alleges is known to consumers as the traditional way of making fudge.

Typically, in these false or misleading flavoring ingredient lawsuits, a plaintiff attempts to represent a class of consumers and alleges they were charged a premium price for the products because of the specific ingredient, based on the misleading representation.  The plaintiff generally must also allege that they would not have purchased the product in the first place if they had known that the specific ingredient was missing.Continue Reading Despite the Pandemic, Food-Related False Advertising Lawsuits Continue to be Frequent Filers

Last week the Supreme Court unanimously held that §13(b) of the Federal Trade Commission Act does not give the Federal Trade Commission the power to seek equitable monetary relief such as disgorgement or restitution. The Court’s opinion in AMG Capital Management LLC v. Federal Trade Commission removes a powerful tool that the FTC has long relied on to pursue monetary relief for consumers in both consumer protection and competition matters.

By way of background, the FTC has authority to protect consumers from unfair or deceptive acts or practice (“UDAP”) and unfair methods of competition (“UMC”) with an overlapping but distinct set of tools it can use to pursue its dual consumer protection and competition missions:

  • Administrative Proceeding: The FTC can initiate an administrative proceeding to seek a cease and desist order for either a UDAP or UMC violation from an administrative law judge. If necessary, the FTC can later bring a contempt proceeding in federal court seeking to enforce the terms of an administrative order. A defendant may respond by arguing that it has “substantially complied” with the terms of the order. If the FTC prevails in such a case, it can seek civil penalties and other equitable relief necessary to enforce the order (however monetary relief only applies to UDAP violations).
  • Rulemaking: The FTC has authority to promulgate rules that define UDAP with specificity. Generally, this requires a lengthy, formal rulemaking process that allows for public comment, and a final rule can be challenged in federal court. If a defendant later violates a duly enacted UDAP rule, the FTC can seek civil penalties for a knowing violation. The FTC can also file suit in federal court and obtain monetary relief “to redress consumer injury,” including an order compelling “refund of money or return of property,” but only if “a reasonable man would have known under the circumstances [that the challenged conduct] was dishonest or fraudulent.”
  • Federal Court: The FTC can sue in federal court under §13(b) of the FTC Act to enjoin a defendant when the defendant “is violating, or is about to violate” a law that the FTC enforces and such an injunction is in the public’s interest. While courts have historically read §13(b) as giving the FTC an implied right to recover equitable monetary relief in addition to injunctive relief, the Supreme Court’s ruling now limits the FTC to seeking injunctive relief only.

Continue Reading The Supreme Court Limits FTC’s §13(b) Powers

With the recent rise of federal Food & Drug Administration (FDA) warning letters to the manufacturers of various ingestible cannabidiol (“CBD”) products, we can expect an increase in false advertising claims against manufacturers, distributers and sellers of those products. Nonetheless, in an important case of first impression in this arena, a federal trial court in