The California Supreme Court has held that causes of action under two of the state’s most prominent consumer protection statutes—the unfair competition law (“UCL”) and the false advertising law (“FAL”)—are to be tried by the court rather than a jury. In doing so, the court affirmed decades of California Court of Appeal precedent and overturned a lower court’s ruling that a jury trial is required when civil penalties are sought in state court.

In Nationwide Biweekly Administration Inc. v. Superior Court, the district attorneys of four counties filed a complaint alleging that mortgage servicer Nationwide Biweekly, its subsidiary and its owner (collectively, “Nationwide”) had violated the UCL and FAL through false and misleading advertising practices and operating without a license, among other allegations. The government sought an injunction, restitution of all money wrongfully acquired by Nationwide from California consumers and civil penalties of up to $2,500 for each violation found.


Continue Reading California High Court Holds No Right to Jury Trial for False Advertising and Unfair Competition Claims in State Court

The advertised-discount provision of California’s False Advertising Law, California Business and Professions Code § 17501, lives to fight another day. A coalition of national department stores, having found themselves brought together by the regulatory lasso of the Los Angeles City Attorney, recently took a big swing at the validity of that statute by objecting to its constitutionality on vagueness and free-speech grounds. The stores’ argument connected with the district court, but was ultimately thrown out by the California Court of Appeals.

The statute at issue is undoubtedly wonky:

For the purpose of this article the worth or value of any thing advertised is the prevailing market price, wholesale if the offer is at wholesale, retail if the offer is at retail, at the time of publication of such advertisement in the locality wherein the advertisement is published.

No price shall be advertised as a former price of any advertised thing, unless the alleged former price was the prevailing market price as above defined within three months next immediately preceding the publication of the advertisement or unless the date when the alleged former price did prevail is clearly, exactly and conspicuously stated in the advertisement.


Continue Reading California Advertised-Discount Law Safe—For Now

Thought that the FTC and California planned to cool off on enforcing trial and subscription programs? Think again. The FTC and California continue to bring these actions with alarming regularity.

For those of you who haven’t been tracking these issues, last year California’s Automatic Renewal Law was amended to tighten the restrictions on continuity programs. The amendments increased restrictions on companies providing trial or discounted introductory programs, and required companies to provide an “exclusively online” cancellation mechanism for consumers who originally accepted the service agreement online.

In addition, both the FTC and the California Autorenewal Task Force (a team of district attorneys who enforce the statute) have brought multiple challenges against companies offering continuity programs. We wrote a few weeks ago about the FTC’s settlement with Urthbox, which included charges challenging how that company’s free trial and subscription offerings were disclosed.


Continue Reading Updates in FTC and California’s Continuing Enforcement of Continuity Programs

“On August 30, 2018, businesses will be required to provide revised “clear and reasonable” warnings under California’s Safe Drinking Water and Toxic Enforcement Act of 1986 (known as Proposition 65 or Prop 65) if they would like to avail themselves of the safe harbor provided by the implementing regulations of the Office of Environmental Health Hazard Assessment (OEHHA or the Agency). Retailers and manufacturers/distributors alike should ensure that they are in compliance with the new rules, keeping in mind that there are specific requirements related to products sold via the Internet and product catalogs.

Under Prop 65 and the implementing regulations, businesses with 10 or more employees must provide “clear and reasonable” warnings to Californians before exposing them to a chemical listed by OEHHA as a carcinogen or reproductive toxicant (more than 900 chemicals are now on the list). The current regulations, adopted in 1988, established criteria for what OEHHA considered to be a “clear and reasonable” warning, including specific language that, if used, would be deemed compliant with the regulations (known as “safe harbor” warning language).

In 2016, OEHAA adopted new safe harbor warning regulations that become effective later this month. The new regulations place a significantly heavier burden on manufacturers/distributors to provide consumer product warnings. Specifically, manufacturers/distributors must provide revised warnings on the labels of their consumer products or provide notice and materials to retailers so that retailers can post the revised warning on signs or shelf tags at the point of purchase. Manufacturers/ distributors must update the notice to retailers periodically and obtain electronic or written confirmation from the retail seller that it received the notice.


Continue Reading Are You Ready? California’s New Proposition 65 Warning Requirements Take Effect August 30

Social Media AppsIn light of a new California decision interpreting California’s wage and hour law, brand companies should take a careful look at their influencer compliance programs not only for FTC compliance, but also potential employment law consequences. How a company establishes and maintains influencer compliance can potentially convert the influencer from an independent contractor to an employee.

We know the FTC’s view is that it takes a village to ensure influencers disclose any material connection to a brand company with which they have a relationship and that the Commission will hold brands, agencies, influencer networks, and influencers all responsible for compliance lapses. The basic expectation is that brands will train their influencers on the rules of the road, monitor for compliance, and enforce consequences for noncompliance. The consent orders in cases like CSGOLotto, Inc. lay out more detail as to what the FTC expects, including:

  1. Providing each influencer with a clear statement of responsibilities for including clear and conspicuous material connection disclosures and obtaining signed statements from each influencer acknowledging receipt and consent;
  2. Establishing, implementing, and maintaining a system to monitor and review influencer posts; and
  3. Immediately terminating and ceasing payment to any noncompliant endorser.


Continue Reading Walking the Line with Influencers: How to Satisfy the FTC without Your Influencers Becoming Employees in California

comicbook scareScrolling online through the California Business and Professions Code the other day, I was struck by a frightening sight. My pulse raced. My jaw dropped. I called out to an associate for help. I wanted to make sure that what I was seeing was real, i.e., that I wasn’t out of my mind. Many lawyers have read California Business and Professions Code Section 16600 by which California outlaws covenants not to compete. But click a few code sections over and you’ll be shocked!

Section 16603 has to be one of the strangest (and most seasonally appropriate) laws ever. It targets the two-for-one sale of comic books, stating: “Every person who, as a condition to a sale or consignment of any magazine, book, or other publication requires that the purchaser or consignee purchase or receive for sale any horror comic book, is guilty of a misdemeanor” punishable by jail time up to six months or a fine up to $1000. The section goes on to define a horror comic book with specificity:


Continue Reading Creepy Code Section Alert: Cal. Bus. and Prof. §16603

financial lawMany time-strapped consumers count on household subscription services to simplify life. One quick purchase agreement with automatically renewing payments, and consumers can receive uninterrupted access to the latest streaming shows, months of lifestyle subscription boxes, or online cloud storage to back up all the family vacation photos. But sometimes consumers aren’t clear on how to unsubscribe or exactly what price they’ll pay after a discounted or free trial period. Thus, many states are enacting or updating their Automatic Renewal Laws (“ARLs”) to ensure consumer protection.

On the heels of increased class action filings under California’s current ARL (see e.g., Kruger v. Hulu; Wahl v. Yahoo! Inc.), the state continues to tighten the reins on automatic renewals and continuous service providers with newly enacted Senate Bill 313. California’s expiring ARL was enacted in 2010. It requires auto-renewing consumer contracts to clearly and conspicuously disclose terms, obtain affirmative consumer consent before imposing a charge, and provide an acknowledgment that contains the terms, the cancellation policy, and a simple cancellation method. California’s 2010 ARL was already broader and more specific than the federal Restore Online Shoppers’ Confidence Act, commonly known as ROSCA and enforced by the FTC. (Read more about ROSCA here.)


Continue Reading California Tightens Auto-Renewal Requirements

soft drinkSan Francisco found itself in a sticky situation after the Ninth Circuit struck down a city ordinance that would have required soda companies and other makers of sugar-sweetened beverages to place the following warning on their ads:

WARNING: Drinking beverages with added sugar(s) contributes to obesity, diabetes, and tooth decay. This is a message from the City and County of San Francisco.

Advertisers challenged the ordinance under the First Amendment and sought a preliminary injunction to halt its enforcement, but lost in the district court. The Ninth Circuit reversed, agreeing with advertisers that the ordinance unconstitutionally chilled their protected commercial speech because the warning was too one-sided and burdensome – constituting 20% of an ad’s space – and that advertisers were likely to discontinue advertising completely.


Continue Reading 9th Circuit Delivers Sweet Victory to Soft Drink Advertisers

boy drinking from water bottleGatorade recently learned two timeless lessons the hard way from the State of California.  First, never mess with water.  Second, advertising claims are everywhere, including in what some might consider to be just fun and games.  In exchange for these lessons, Gatorade paid the State of California $300,000 and agreed to injunctive relief.

So what attracted California’s attention?  Gatorade in conjunction with Usain Bolt created a cellphone game called “Bolt” in which players help Bolt pick up coins.  Touching a Gatorade icon made Bolt run faster, while touching a water droplet slowed the world’s fastest human down (and decreased the “fuel meter”).  In case the point was too subtle, the game’s tutorial also instructed users to “keep your performance level high by avoiding water.”  California alleged that the game was downloaded 2.3 million times.


Continue Reading California to Gatorade – Don’t Mess with Water

Risk-free trialContinuity, or “negative option,” marketing is a popular and convenient way for consumers to subscribe to products and/or services, receive new issues, receive product replenishment, or continue a service by making automatic payments at predetermined times. From skincare to dietary supplements, to groceries and periodicals, the popularity of continuity-based marketing with consumers is soaring. However, a proposed amendment to Section 17602 of the California Business and Professions Code that passed the California State Senate and is now winding its way through the state Assembly could leave marketers who use continuity-based offers feeling like they have recurring nightmares.

Senate Bill 313 (SB313) takes direct aim at continuity marketing that offers a free trial period or incentivizes consumers with free gifts when it results in an automatic enrollment of the consumer into a continuity program.


Continue Reading Continuity Plans Receive Renewed State Scrutiny