FTC Wish List – Our Final Wish

Inauguration Porta-PottiesFor those of you not living or working in or near Washington DC, the moving trucks have arrived at the White House, the porta potties, security barriers and bleachers are in place. The transfer of power is about to take place. And we have one more item on our wish list for the new FTC.

The FTC creates educational materials that are second to none (and if you’ve ever tried to read an IRS Tax Publication you know what we are talking about.) On the business side, we love the FTC’s blog and we sometimes wonder whether the various business guides won’t eventually turn outside counsel into potted plants. On the consumer side there are an abundance of resources, including consumer friendly guides, videos and Spanish language materials. Yet, every year millions of Americans fall prey to outright fraud or marketing schemes that they should realize are too good to be true, and the FTC devotes time and energy to putting these folks out of business. We staff a local consumer law resource center once a month and we hear lots of these stories first hand. No doubt many of these individuals are part of the most vulnerable populations and probably don’t check out potential vendors online or even realize that other online resources are available.

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And Then There Were Three Two

empty roomLast March, after Commissioner Brill stepped down from the FTC, we blogged about the almost unprecedented situation where the FTC is down to three sitting Commissioners. Notwithstanding the unusual situation the Commission found itself in, it seems to have done well with just three Commissioners over the past 10 months. Today, however, Chairwoman Ramirez announced her resignation, effective February 10. Unless the incoming administration quickly nominates individuals to fill one or more of the now three vacancies and the Senate confirms them, the FTC will truly be in unchartered territory with just two Commissioners.

The rules, however, remain the same. And while the possibility of a deadlocked Commission is greater, as Commissioner Ohlhausen (one of the last two members of the tribe left on the island) recently pointed out in an article, most of the FTC’s decisions are unanimous and bipartisan. And what are the rules? The Commission can act as long as a majority of sitting and not recused Commissioners participate – in this case two, although if one of the two Commissioners recuses herself, then a single Commissioner would constitute a quorum (and the FTC starts to look a whole lot more like the CFPB). You can actually see this principle in action if you look at the Commission’s decision in the Prevagen case that we blogged about earlier this week where one of the three current Commissioners recused herself.

And in case you’re wondering, the remaining two Commissioners’ terms expire in September 2017 (Comm. McSweeny) and September 2018 (Comm. Ohlhausen) (Commissioner terms are 7 years but those terms start and stop on a fixed date rather than when the Commissioner is sworn in. Often Commissioners are appointed to fill out the remaining term of a Commissioner who resigned, so Commission terms don’t necessarily expire in the order they arrived). Presumably Congress and the President-elect will act to fill the three vacancies quickly so that we don’t have to blog (and do the abstract math required) about what constitutes a quorum of zero.

FTC, New York AG File Complaint Against Marketers of Dietary Supplement Prevagen

jellyfishHave you seen an ad like this (we have, more times than we can remember): “Ever walk into a room and forget why? Spend extra time looking for your car keys or purse? Have trouble remembering names or faces?”

If the answer is yes, the dietary supplement Prevagen may be just what the doctor ordered.

That’s because Prevagen contains the active ingredient apoaequorin, a dietary protein originally derived from a species of jellyfish living in the Puget Sound. (Don’t worry—no jellyfish are harmed in the making of Prevagen.) According to Prevagen’s marketers, this dietary protein can help reduce common memory problems—now you remember where you put those car keys—that we begin to encounter all too often as we age.

Or maybe not.

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Happy Holidays!

As we begin to wind down for the year (and we hope that holds true for you), we wanted to take a moment to thank each of you for your support and to wish you and your loved ones a joyous holiday season and a terrific 2017.  We know that – in this era of increased regulatory scrutiny of disclaimers – many of you struggle with convincing your marketers to make their disclosures clear and conspicuous.  And so we present below our holiday gift to each of you.  We recently saw this great example of what a disclaimer looks like when the marketers affirmatively want the viewer to see it.  Keep it handy the next time you find yourself in a debate over disclaimers.

Happy holidays!

Amy and Randy

Slack-Fill Consumer Class Action Challenge Not Enough Muscle to Survive

Last week, the Southern District of New York dismissed with prejudice a putative consumer class action alleging that containers for Muscle Milk protein powder violated New York consumer protection laws because they were approximately one-third empty at the time of purchase. More specifically, the plaintiff’s Amended Complaint contended that “Defendant CytoSport, Inc. intentionally packaged its Muscle Milk powder products . . . in large, opaque containers that contain approximately 30% or more of empty space” and that “[c]onsumers, in reliance on the size of the containers, paid a premium price for [the products] which they would not have purchased had they known the containers were substantially empty.”

This case involves a challenge to what is known in the legal vernacular as food container “slack-fill,” which is the empty space in a food product container (usually the space between the food itself and the container’s opening; think of a bag of potato chips). More technically, the FDA defines slack-fill as “the difference between the actual capacity of the container and the volume of the product contained therein.” Under the federal Food, Drug and Cosmetic Act (FDCA) and FDA regulations implemented thereunder, a food product is considered misbranded “[i]f its container is so made, formed or filled as to be misleading.” Similarly, a container is misleading under FDA regulations if its contents cannot be fully viewed and it contains “nonfunctional slack fill.” So unless you are using clear plastic packaging or some other form of packaging where consumers can easily see exactly how much is inside, you need to look at how much slack-fill is present and why.

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The FTC Weighs in Further on All Natural Claims

sunblockAt last year’s Kennedy Center Honors, Aretha Franklin brought down the house and brought President Obama to tears with her rendition of Natural Woman. Marketers relying on “all natural” claims also may feel like crying these days. We’ve blogged frequently about natural claims; see this recent post. Much of the misery in this area results from confusion over the use of the term “natural” in food. The Food and Drug Administration (FDA) has requested public comments on the use of the term, issued rather circular non-binding guidance, but thus far not issued regulations. The Federal Trade Commission (FTC) also has refused to issue guidance regarding natural claims. All of this confusion, however, will not stop the FTC from going after marketers making “all natural” claims that the FTC deems deceptive. In April, we discussed the FTC suing several marketers of sun screen and beauty products for deceptive all natural claims based on the presence of synthetic ingredients in the products. Four of those companies choose to settle, one choose to fight the FTC on the FTC’s home court — administrative litigation. Anyone want to guess how that turned out?

On December 12th, the FTC announced that it had granted summary decision in staff’s favor against California Naturel, Inc. The personal care products sold by California Naturel include an “all natural” sunscreen with SPF 30, which California Naturel described on its website as containing “only the purest, most luxurious and effective ingredients found in nature.” California Naturel conceded that its “all natural” sunscreen actually contained the synthetic ingredient dimethicone—making up 8% of the sunscreen formula. The FTC found that was sufficient to find the “all natural” claim deceptive in violation of Sections 5 and 12 of the FTC Act.

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FTC Wish List Part II

gift boxIn part II of our series on our wish list for the new FTC, we look at the issue of the pace of FTC investigations. And just like Tom Cruise, we feel the need, the need for speed.

Now it’s no secret that, for the most part, FTC investigations proceed slowly. Some of that is no doubt due to resource limitations and a wish for more FTC resources is just not likely one that Santa can make come true. Putting aside more resources, are there other creative alternatives that could be considered?

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NY AG Keeps up the Pressure on Astroturfing

turf toeWhen I think of Astroturf this time of year I think of football. That probably isn’t true for the New York AG’s office, which has continued its assault on the posting of fake reviews, also known as “astroturfing.” Earlier this month the NY AG announced two more enforcement actions against an urgent medical care facility and a car service. The two actions and the difference in their business models demonstrate that this issue is not going away and that any business type that uses online reviews to help market its product can be at risk. See these prior posts on the AG’s efforts: AG rips up Astroturf; and NY AG targets deceptive endorsements.

According to the AG, the urgent care provider Medrite paid Internet advertising teams thousands of dollars to post favorable reviews on Yelp, CitySearch, Yahoo Local Page, and Google Plus. Medrite also hired freelancers through Craigslist and other sources to post favorable reviews. Medrite did not require that the reviewers actually visit its clinics or that the reviewers disclose that the reviewers were being compensated for their reviews. Both are big no nos in using reviews to market your product.

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Deceptive Claims for Health App and Endorsements by Employees Raise FTC’s Blood Pressure

medical appsAs 2017 quickly approaches, and consumers look for gift ideas or help with their New Year’s resolutions, “apps” that focus on fitness and health are increasingly popular. A recent FTC settlement against Aura Labs, Inc. (“Aura Labs” or “Aura”) and its principal, for allegedly making deceptive claims regarding the accuracy of its blood pressure measuring app, confirms that the same advertising rules apply to claims made for an app as for “hard goods.”

Aura Labs sold the “Instant Blood Pressure App,” a mobile device software application that uses mathematical algorithms, mobile device measurements, and consumer inputs (gender, birthdate, height, and weight) for the purported purpose of blood pressure measurement. The app was available for purchase and download through the Apple App Store or the Google Play marketplace for $3.99 or $4.99.

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What Advertisers of Consumer Financial Services Need to Know About State Attorneys General – a Venable hosted Webinar

financial lawState attorneys general have become increasingly involved in consumer financial services investigations and enforcement, a trend that is expected to continue into the next presidential administration. Whether involving a single state attorney general or multiple attorneys general, investigations and litigation can lead to high costs, administrative burdens, distractions, and reputation damage. Often there may be parallel investigations by federal agencies, and risks and exposure from private litigation.

On Friday, December 9, 2016 at 3 – 4 pm ET, lawyers from Venable will present a webinar (with CLE*) on the “Present and Future Role of State Attorneys General in Consumer Financial Services Regulation and Enforcement.”

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