The plaintiffs argued that reasonable consumers would understand the claim to mean “that Energizer AA MAX batteries last up to 50% longer than most, if not all, alkaline batteries in most, if not all, devices.” In a short unpublished opinion, a three-judge panel with the Ninth Circuit upheld a lower court’s order dismissing the proposed class action, holding that the plaintiffs’ interpretations of the claims were unreasonable and contradicted what was on the package.

The court noted that Energizer “promises only an upper limit of performance (a ceiling of 50%) compared to a certain category of competitors (basic alkaline batteries) in a subset of applications (demanding devices).” It rejected the plaintiffs’ allegations that the disclosure was too small and that it was too vague. On the first point, the court noted that disclosures were not unreasonably small and that they appeared immediately next to the representations they qualified.

Although the court agreed that the disclosure may have been a little vague, it held that “these words are not particularly technical or difficult to understand, and though not exact, they cabin the scope of Energizer’s claim in a way that renders Plaintiffs’ reading of the advertising unreasonable.” In other words, reasonable consumers would not understand the claim to mean that the AA MAX batteries last 50% longer than all competing batteries in all circumstances.

The decision is persuasive authority but, as an unpublished opinion, it isn’t binding on district courts. It’s important to remember that what messages may be conveyed by an “up to” claim – and what substantiation is required for those messages – will depend on the context. It’s also important to remember that both the FTC and NAD have read “up to” claims more broadly in some circumstances and have concluded that consumers expect to achieve the advertised results in “almost all” cases.

According to undisputed evidence in the record, some of I Dig Texas’ products had been assembled in the United States, while others had been assembled in China. Even for the products that I Dig Texas had assembled in the United States, some components – such as a nitrogen power cell – had come from other countries. If you’ve followed our coverage of Made in USA claims and the FTC’s strict standard for supporting those claims, you might think you know how this case turned out. In this instance, though, you’d probably be 110% wrong (give-or-take about 10%).

The 10^th Circuit noted that under the Lanham Act, “a statement can be literally false only if it is unambiguous” and that “a statement without objective meaning can’t be literally false.” The court then asked itself “what does it mean to make a product in the United States or in America” and didn’t come up with a clear answer to its question. The term “make” could refer “either to the origin of the components or to the assembly of the product itself.” The challenged ads “are thus ambiguous when they say that the products are made in the United States or in America” and cannot be literally false.

How does the 10^th Circuit square its reading with the FTC’s Made in USA Rule? It doesn’t. In a short footnote, the court writes that “even if the FTC policy were otherwise instructive, it would not bind us when addressing false advertising under the Lanham Act.” The court then went on to say that given the absence of a “bright line” rule in the FTC’s policy, “it doesn’t remove the ambiguity of the phrase made in the United States or American-made.” The decision doesn’t go into more detail or discuss the FTC’s specific guidance on this issue.

If you want to know more about the FTC’s specific guidance on this issue and the consequences of ignoring that guidance, take a look at this post in which we covered a recent settlement over “Made in USA” claims that involved a $2 million penalty. The requirements in that settlement provide a good outline of what you should consider when making these types of claims. Even if you dig the 10^th Circuit’s analysis, you should know that the decision is a probably an outlier. The FTC, NAD, and other courts are likely to have a much different view of what it means for a product to be “made” somewhere.

Sephora sells a line of ​“clean” products under its ​“Clean At Sephora” line. The company explains that those products are “formulated without phthalates, formaldehyde or formaldehyde releasers, oxybenzone and octinoxate, and more.” In some places, the company also links to a more detailed list of ingredients that are not included in the products.

As we posted last year, a consumer filed a purported class action against Sephora, alleging that although Sephora advertise the products as being “clean,” they “contain ingredients inconsistent with how consumers understand” that word. The complaint provides a list allegedly synthetic and potentially harmful ingredients that are included in the products.

At the time, we noted that this case is a litmus test for the ​“reasonable consumer” standard. Given that Sephora clearly disclosed what it meant by “clean,” it wouldn’t be reasonable for consumers to assume that it means anything else. Luckily, the court gave reasonable consumers some credit and determined that they wouldn’t be misled by Sephora’s explanations.

The complaint left the court “guessing as to how a reasonable consumer could mistake” the company’s claims and “believe that the cosmetics contain no synthetic or harmful ingredients whatsoever.” Sephora explained that products were formulated without specific ingredients. The court noted that “nowhere on the label or in the marketing materials plaintiff cites does defendant make any claim that the products are free of all synthetic or harmful ingredients.”

From a false advertising perspective, it doesn’t matter that the plaintiff provided “a laundry list of synthetic ingredients found in ‘Clean at Sephora’ cosmetics that she claims have been known to cause irritation or other human harm.” To determine whether or not Sephora’s claims are false, it’s necessary only to consider whether the products included any of the ingredients that Sephora claimed the products did not contain. Because that wasn’t the case, the court dismissed the false advertising claim.

This analysis is similar to the one we discussed in last week’s NAD case, though NAD added the additional caveat that the list of excluded products should “reflect the ingredients banned that are typically used in cosmetics products.” As the law in this area evolves, these two decisions should help to provide a helpful framework for companies that make “clean” claims.

The framework may also be helpful for companies that make other claims using broad terms – such as “sustainable” – that don’t have established definitions. Advertisers should provide a clear and reasonable explanation of what they mean by those terms. Challengers may disagree with the definitions, but advertisers may argue that reasonable consumers won’t be misled as long as the advertisers meet the definitions.

• Regulators’ Favorite Shade – Dark Patterns: Following the FTC’s 2022 Dark Patterns Report and high profile enforcement action against Epic Games, regulators including the FTC, CFPB, and state AGs continued to bring enforcement and provide guidance on perceived “dark patterns” – primarily related to automatic renewal and continuous service options, but also as to chat bots, disclosures, and marketing practices more broadly. In January, the CFPB released guidance focused on dark patterns in negative option marketing. In March, the NAD joined the discussion in a decision highlighting potential issues with Pier 1’s advertising of discounted pricing only available with a paid subscription and its use of a pre-checked box for enrollment with that same subscription. The FTC continued to lead the charge – with dark patterns allegations playing a key role in a number of enforcement actions, including against Publishers Clearing House, Amazon, and fintech provider Brigit.

• Beyoncé and Taylor Swift Concerts Lead to War on Junk Fees: Okay, the war against junk fees may have predated the fees associated with the pop stars’ mega tours, but it continued in earnest throughout the year. As with dark patterns, the FTC, CFPB and state AGs all took on junk fees at various times. Most notably, the FTC proposed a far-reaching rule that could fundamentally alter how prices and fees are disclosed in businesses across the country. The comment period was just extended until February 7, 2024 for the proposed rule. Not to be outdone, California passed new legislation banning hidden fees and the Massachusetts AG issued draft regulations that would prohibit hidden “junk fees,” enhance transparency in various transactions, and make it easy for consumers to cancel subscriptions.

• Endorsement Guides: In June, the FTC released its long-awaited update to the Endorsement Guides. We noted that the Guides include some significant changes, including new examples of what constitutes an “endorsement,” details about what constitutes a “clear and conspicuous” disclosure, and an increased focus on consumer ratings and reviews. We also examined how the revisions could affect influencer campaigns. In November, we reported that the FTC had sent warning letters to two trade associations and 12 influencers over their posts, giving us a glimpse of enforcement to come. Meanwhile, NAD has also been active in this space and even referred a case to FTC for enforcement. Expect this to be a priority for both FTC and NAD in 2024.

• Green Guides: The FTC’s Green Guides review progressed this year with an initial comment period closing in April, followed by an FTC workshop on “recyclable claims,” which we attended and highlighted here. With its history of hosting several workshops on hot green topics, we expect to hear of more workshops in the new year. California has been active as well with the governor signing a new law in October that aims to regulate carbon claims and make businesses more transparent about their carbon reduction efforts by requiring certain website disclosures (see our summary of the law here). The effective date is the first of the new year, but according to a recent letter from the bill’s sponsor, we expect that California will defer enforcement until January 1, 2025 to give companies time to comply (see here). With ESG efforts continuing to be front and center for most companies, consumers and regulators are holding companies accountable for those claims by questioning messaging about their efforts, aspirations for the future, and basis for the claims (see, for example, here, here, and here).

• State Privacy Laws: It’s getting increasingly hard to remember a time before state privacy laws regulated data sales, targeted advertising, sensitive data, and privacy disclosures. At the start of the year, five states had enacted privacy laws, and now there are 13 comprehensive consumer privacy laws (CA, CO, CT, DE, FL, IN, IA, MT, OR, TN, TX, UT & VA) and an additional two health-focused laws (WA, NV). What does this mean for advertisers? (1) Know who your vendors are and their data practices. (2) Obtain consent before building inferences based on sensitive data, like race/ethnicity, religion, or health. (3) Disclose up-front the collection, use, and disclosure of personal information. (4) Finally, recognize the limitations of third-party data as new regulations and laws take effect.

• Children’s Privacy: Congress, regulators, and advocates focused time and energy on children’s privacy issues in 2023. The House and Senate held hearings focused on children’s safety and privacy. Although the Senate Commerce Committee advanced the Kids Online Safety Act, it never received a floor vote; Senators Markey and Cassidy continued to advocate for approval of the Children and Teens’ Online Privacy Protection Act (COPPA 2.0). The FTC reached settlements with companies about practices it alleged violated the Children’s Online Privacy Protection Act (COPPA) on the Xbox and Alexa platforms and with edtech provider, Edmondo. In September, the FTC released a ​“Staff Perspective” on digital advertising to children, which included recommendations on how to protect kids from the harms of “stealth advertising.” Also in September, a federal court agreed with industry advocates that California’s Age Appropriate Design Act, which imposes a variety of obligations on businesses that provide online services “likely to be accessed by children,” violated the First Amendment. California is appealing the decision, and regulators, including a number of Attorneys General and FTC Commissioner Alvaro Bedoya, have joined the state as amici. One of the most anticipated developments occurred with just 11 days left in the year, when the FTC proposed revisions to the COPPA Rule—more than four years after initiating its review process. Among other things, the proposed Rule would require new, additional consents for third-party disclosures and could affect operators’ approach to “internal operations.” Online services with children’s audiences have lots to consider in 2024 and beyond. Stay tuned for further updates.

• State AG: State Attorneys General continued to make their presence felt in 2023. State AGs continued to go after companies for using fake reviews and false endorsements, enforced and proposed new price gouging rules, pursued telehealth companies for deceptive practices, supported the FTC’s Negative Option Rulemaking while bringing their own auto-renewal actions, continued to impose significant penalties against companies for data breaches, pursued companies for misleading consumer financial practices, and focused efforts on so-called “junk fees.” But two topics continue to be the highest priority of AGs – the impact of developments in AI (which we’ve written about here, here, and here – just to name a few) and protecting the most vulnerable consumers – especially our nation’s youth. The incoming president of the National Association of Attorneys General president, Oregon Attorney General Ellen Rosenblum, has already made protecting youth, especially teens, this year’s presidential initiative. Look for AGs to continue to this focus well into 2024.

• Automatic Renewal: While auto-renewal service sign-up flows remain important, this year, we have seen a transition to cancellation processes being the hottest topic as states enforce their specific requirements and the FTC has drawn attention to “click to cancel” through its proposed rule. But we shouldn’t forget all of the FTC’s other proposals under the negative option rule NPRM, including expanding the scope, requiring more specific disclosures, separate consent for negative option, consent for save offers, and expanded notice requirements. Regardless of whether a federal rule formally comes into play in 2024, as referenced above certainly states have agreed are on board with FTC’s proposals, and they also resolved a multistate investigation this year requiring checkbox consent, online cancellation, and limiting save attempts. And don’t forget Massachusetts is working on its own rulemaking involving online cancellation.

• NAD: This year, NAD issued number of decisions that caught our attention. For example, a decision in February narrows the scope of what claims may be considered puffery. NAD later elaborated on what it thinks advertisers must do in order to substantiate aspirational claims about future goals. NAD also issued a number of decisions involving endorsements – including employee endorsements and disclosure requirements – and even referred a case to FTC for enforcement. In August, NAD held that emojis could convey claims, though NARB later disagreed with how NAD had applied that principle. As always, NAD plays a big role in the advertising law landscape, so companies will want to continue to watch what NAD does in 2024.

• Same Product/Different Label Litigation: We chronicled a Connecticut district court’s denial of a motion to dismiss in a case in which the plaintiff alleged that Beiersdorf, maker of Coppertone sunscreens, engaged in false advertising by selling the same sunscreen formula in two different packages, one of which was labeled as “FACE” and sold in a smaller tube at twice the price of the regular Coppertone Sport Mineral sunscreen. That case is one to watch but it is not the only one of its kind. In fact, 2023 saw several similar cases involving allegedly the same formula marketed as different products with varying price points, such that the plaintiffs alleged that they were misled into purchasing the more expensive item because they believed it was uniquely suited to their needs when, in fact, it was the same as the lower-priced item. These cases involved a range of products, such as baby/adult lotions, infant/children’s acetaminophen, children’s/adult cold remedies, to name a few. So far, decisions are mixed, with some courts being more willing than others to find that the differing prices were justified. Marketers of food and personal care brands that merchandise the same formula in varying iterations will want to remain mindful of these cases as they update packaging and claims.

Keep following us in 2024, and we’ll keep you posted on how these trends develop. In the meantime, have a great holiday!

About 35 years later, SharkNinja released a line of cookware that is purportedly manufactured at 30,000° Fahrenheit. New Jersey resident Patricia Brown purchased two of the pans. She later used the internet to attempt to verify the claims and learned that 30,000° F is three times the surface temperature of the sun and that the melting point of aluminum is 1,220° F. That made her suspicious.

You may ask – as eventually did Ms. Brown – why you’d buy a pan with maximum manufacturing temperature of 30,000° F when you could buy one with a maximum manufacturing temperature of 900° F for less money. SharkNinja has an answer: “the difference is in the degrees,” and unlike cookware that is manufactured at cooler temperatures, theirs “never sticks, chips, or flakes.”

(You may also ask – as immediately did I – whether you could use a SharkNinja pan to melt rocks. SharkNinja has an answer to that, too: the pan is only “oven safe to 500° F,” so probably not. In that case, it’s best to leave melting rocks to professionals, like Jon and the band.)

Ms. Brown filed a lawsuit arguing that SharkNinja’s claims are false and that the claims violate (a) the laws of New Jersey and (b) “the laws of physics and thermodynamics.” (Only the former have a private right of action.) In support of her allegations, Ms. Brown cites a 2021 case in which NAD reviewed SharkNinja’s “never stick” claims. The temperature claims weren’t part of the challenge.

NAD had several concerns with the company’s test methodology. For example, SharkNinja only conducted tests with one food: scrambled eggs. NAD determined that SharkNinja “did not provide sufficient support that scrambled eggs are representative of all the types of foods that consumers typically cook in nonstick pans.” Although NAD didn’t opine on how many foods or variables had to be tested, one was not enough. Accordingly, NAD recommended that SharkNinja drop the comparative claims.

We’ll have to wait to see whether SharkNinja uses the same protocols to support its comparative claims in this lawsuit or whether it has expanded its testing to address NAD’s concerns. It’ll be interesting to see whether the court relies on the 2021 NAD decision when evaluating those tests. It’ll also be interesting to see whether the court delves into the substantiation for the 30,000° Fahrenheit claims. Otherwise, unless Bon Jovi uses that for a new album title, we may never know.

In January 2023, Beiersdorf moved to dismiss the amended complaint. The company concedes that the formulas are the same. However, the company asserts, among other things, that the product claims are true and therefore the complaint fails because there is no deception. That is, Ms. Akes cannot succeed on her claims because the claims that she points to as the basis for her understanding that the product was specifically designed for facial use, i.e., the use of “FACE”, “oil free” and “won’t run into eyes” are, in fact, true. Beiersdorf points out that Akes does not allege that she looked at the regular version of Coppertone Sport Mineral prior to purchasing the “FACE” version and, therefore, her argument amounts to little more than regret over paying more than she would have liked. The court’s ruling is pending.

Courts have been skeptical of arguments that brands necessarily deceive consumers by packaging the same product at varying price points, e.g., rejecting arguments that infant acetaminophen is deceptively marketed when sold at a higher price as compared to children’s acetaminophen because there was nothing about the packaging that suggested that the products had different formulations. Here, had Akes looked at the 5 oz version, she presumably would have seen that the active ingredient in both was zinc oxide and would have also seen that the ingredient listings and Drug Facts were identical. But, courts are also skeptical of requiring consumers to actually read ingredient lists.

So, what’s a marketer to do? Beiersdorf rightly points out that “[t]here is nothing deceptive about emphasizing different but equally true aspects of a product to different market segments or pricing products differently when sold to different market segments or in different retail channels. This happens every day.” When confronting this issue, companies should keep in mind that differences in branding, packaging, merchandising (store and shelf placement) and other factors can help establish a valid legal basis to support an argument that, even if two products have the same formula, one rightly commands a higher price point.

Alas, life isn’t always that easy, and a close look at the instructions reveals that 3¹/₂ minutes is just the amount of time it takes for the product to cook in the microwave. You also need to do things like remove the lid, add water, and stir. That takes extra time, so our woman in Florida argues that the claim on the front of the package is false and misleading.

(The woman doesn’t say how long it took her to complete these extra steps, but in our tests, a person with moderate culinary skills can manage them in under 60 seconds. You may quibble and say that if I had waited for the cheese to thicken, it would have taken longer. But I’d tell you that if I didn’t have two dogs underfoot, I could have moved faster. So let’s call it 60 seconds.)

The extra 60 seconds may not be a big deal to some, but the plaintiff argues that underestimating cook time “offends established public policy and is immoral, unethical, oppressive, and unscrupulous to consumers.” It has shaken her faith not only in the instructions for this particular product, but also for “other similar products that claim they are ready in a specific amount of time.”

The plaintiff claims that she and other class members who endured extra minutes of hunger have suffered over $5 million in damages. But the case isn’t just about the money. The plaintiff also wants the court to order Kraft Heinz to “engage in a corrective advertising campaign” to inform consumers that the product takes longer than 3¹/₂ minutes to be ready for consumption.

What can you learn from this suit? If you’re a business, review claims to make sure they are as precise as possible. Even though Kraft Heinz will likely win this case, a slight change in wording may have helped them avoid it, in the first place. If you’re a consumer who is pressed for time, review cooking instructions before you buy something. Five seconds up-front could save you 60 seconds of frustration later.

Just two weeks later, Coca-Cola scored a second victory, this time in a case brought by the Sierra Club and a group of consumers over claims that certain water bottles were “100% recyclable.” The plaintiffs alleged that the claims were false and misleading because most plastic bottles are not recycled. Plaintiffs argue that most bottles end up in landfills or incinerators due to a lack of recycling capacity and a lack of demand for recycled plastics.

In a short opinion, a California federal court determined that “no reasonable consumer would understand ‘100% recyclable’ to mean that the entire product will always be recycled or that the product is ‘part of a circular plastics economy in which all bottles are recycled into new bottles to be used again.’” Instead, the court held that “recyclable” simply means that a product is capable of being recycled. The plaintiffs’ interpretation of the word ran counter to common sense, the FTC’s Green Guides, and California law.

This decision is good news for Coca-Cola and any other company that wants to advertise that a product is “recyclable.” Had the plaintiffs prevailed, that could have resulted in a standard that would require companies to foresee whether a product will actually be recycled before advertising that it can be recycled. Not only is that standard unworkable, if companies were prohibited from informing consumers that a product can be recycled, it’s likely that even fewer products would be recycled.

We’re likely to see a lot more activity in this area over the coming months, both in terms of litigation and (eventually) in terms of the FTC’s eagerly-awaited update to the Green Guides. Stay tuned.

The DC Superior Court determined that many of the challenged statements are aspirational and do not including anything that can be measured to determine whether they are true or false. For example, phrases such as “a more sustainable future for our communities and our planet” and “help develop more effective recycling systems” are extremely vague. “[W]hile they point to a general theme of sustainability and corporate improvement, there is not a measurable standard to apply as to whether or not Defendant has met these general goals.”

Other statements – including statements about the company’s plan “to help collect and recycle a bottle or can for every one we sell globally by 2030” – were more specific. However the court determined that “a consumer would not be able to determine if the goal has yet been met in 2022 as it is set significantly in the future.” Moreover, “the inclusion of the word ‘help’ muddles the promise, such that the enforceability, even in 2030, appears to be somewhat uncertain.” Bottom line:

As future, aspirational goals, these statements cannot successfully create a valid claim under the [Consumer Protection Procedures Act (or “CPPA”)] until they have been found to be inaccurate or misleading.

Bass Pro sells a product called “RedHead® Lifetime Guarantee All-Purpose Socks.” As the name suggests, the company prominently advertises that the socks are subject to a lifetime guarantee and that “if they wear out, they get replaced.” In a YouTube video, a store manager elaborates on that, saying: “If anything ever happens — if the dryer steals one of them on you — you bring the other one in, and we give you a brand new pair of socks.”

Whether or not our man in Missouri had socks stolen by his dryer we may never know, but we do know that he took advantage of the lifetime guarantee a number of times since 2015, “typically 2-4 pair at a time.” Each time, Bass Pro replaced the socks with new socks that were subject to the same lifetime guarantee. That changed last year, though, when he attempted to exchange four pairs of socks. This time, he was given “distinctively-marked 60-Day Socks.”

(If you’re not sure what you’re wearing, glance down towards your calves. If you see a “distinctive stripe pattern” on your socks, that could be a warning that they’re just 60-Day Socks. Tread carefully.)

The lawsuit alleges that Bass Pro has engaged in false advertising and that it failed to honor its warranty. Although it’s too early to tell how this case will turn out, this lawsuit is worth contemplating for any company that is considering a lifetime warranty. A lifetime warranty may be a big selling point but, as the saying (sort of) goes: “With big selling points come big responsibilities.” Absent any clear disclosures, those responsibilities could last a lifetime.

Specifically, the complaint alleges that the company violated Oregon’s automatic renewal law by:

• failing to present the automatic renewal offer terms in a clear and conspicuous manner and in visual proximity to the request for consent;
• charging consumers without first obtaining their affirmative consent; and
• failing to provide an acknowledgment that includes the offer terms, cancellation policy, and information on how to cancel in a manner that can be retained by the consumer.

We expect that suits involving automatic renewals are likely to increase, so if you offer subscription services, you should take steps to assess your level of compliance. Even if you don’t offer subscriptions, it’s worth noting how the allegations in this suit fits into some of the broader trends we’ve written about recently.

For example, the complaint accuses YouTube of using “dark patterns,” a topic that is receiving increased attention from federal and state regulators. And it questions the effectiveness of the company’s disclosures, a topic about which the FTC intends to issue new guidelines.

Prop 65

Our friends at Kelley Green Law Blog get the starting position for this issue by highlighting a precipitous uptick in the number of Prop 65 filings over the prior year. While the Covid-19 pandemic caused all sorts of disruptions to society and the economy, at least one area of business has thrived over the last two years: private plaintiff enforcement of California Proposition 65. In 2020-2021, over 40% more Prop 65 actions were brought by private plaintiff “bounty hunters” than in the two years prior to the pandemic (2018-2019). Compared to a decade ago, private plaintiff groups now initiate three times more Prop 65 actions each year, and five times more than in 2008. Learn more here about the most frequently cited chemicals and those that are emerging, including PFAS.

Notable Dishes From the Food Court

The close of 2021 included two notable class action decisions for the food industry. In the first, Bolden v. Barilla America, Inc., the Northern District of Illinois denied a motion to dismiss various state law consumer fraud and express warranty claims alleging that Barilla deceptively labeled its pasta sauces as containing no preservatives, even though the products contain the known preservative citric acid. However, the court granted Barilla’s motion to dismiss the implied warranty claim for lack of privity, and as also dismissed the negligent misrepresentation claim because it was barred by the economic loss doctrine. The court also denied the plaintiffs’ request for injunctive relief, ruling that they could avoid Barilla’s allegedly deceptive products by purchasing other branded sauces.

In the second, Warren v. Whole Foods Market Group, Inc., the Eastern District of New York dismissed claims that Whole Foods Markets tricked consumers into believe its instant oatmeal product was sugar-free or low in sugar by using allegedly misleading phrases such as “dehydrated cane juice solids” and displaying picture of fresh raspberries on the label. The court found that, in the absence of any express claim that the product was sugar-free or low in sugar, consumers are “trained to look” to the ingredient list, which disclosed the use of dehydrated cane juice solids, and found it “improbable” that reasonable consumers would gloss over the words “Sugar 11 g,” which were prominently displayed in the nutrition panel immediately next to the ingredient list and, in the court’s view, “hard to miss.”

In January, the Southern District of New York followed the overwhelming number of courts that dismissed “vanilla” claims throughout 2021. In this most recent case, Santiful v. Wegmans Food Markets, Inc., the plaintiffs had alleged that the use of the words “vanilla” and “naturally flavored” on the label of Wegmans’ Gluten Free Vanilla Cake Mix misled consumers into believing that the product was flavored mainly from vanilla beans when it allegedly contained artificial flavors. The court disagreed, finding that the vanilla representations conveyed to consumers the flavor of the product rather than the specific ingredients used to impart that flavor. As to the artificial flavoring aspect of the complaint, the court held that that because the ingredients that contributed to the vanilla flavoring (ethyl vanillin, vanillin, maltol and piperol) can be artificial or natural depending on how they are derived, the plaintiffs were required to allege exactly how these ingredients were derived for this product. Because they had not done so, the court dismissed the complaint but permitted the plaintiffs to file an amended complaint.

Food Filings Trends

Furthering one of the growing trends of the last year, 2021 ended and 2022 started with a number of new “ingredient” class actions, including three suits challenging the use of non-dairy ingredients in “fudge”-based products, as well as others challenging the use (or rather, lack of use) of real cinnamon in cinnamon-flavored cereal, the lack of butter in “butter snaps pretzels,” and the minimal use of whole grains in various cracker products. We also saw a number of new “natural” and “preservative-free” lawsuits, and multiple new lawsuits challenging “healthy” marketing claims and protein content claims.

Hot Tip: For those reviewing or refreshing food labels, here are a couple of practical watch-outs:

• Terms that are subject to a “standard of identity,” i.e., a regulatory definition for what must be in a product to bear a particular name. Using defined names without meeting the regulatory definitions is increasingly drawing scrutiny.
• Multi-function ingredients such as malic acid, citric acid or fumeric acid, which can perform multiple functions in a product in conjunction with claims such as “preservative free”. Even if not acting as a preservative, courts have been reticent to dismiss claims of false advertising where the product include a multi-function ingredient and a claim that directly relates to one of those functions.

What’s in a name? NAD determined that Goli Nutrition had a reasonable basis for use of the name Apple Cider Vinegar (ACV) Gummies but also found that the advertiser could not substantiate that the gummies provided the health benefits typically associated with ACV and thus recommended that the advertiser qualify the use of ACV – including in the product name – to avoid conveying unsupported health benefit claims.

In a challenge brought by Bragg Live Food Products, maker of a competing apple cider vinegar shot, Bragg took issue with Goli’s use of “apple cider vinegar” in the product name, alleging that they do not contain enough acetic acid to qualify as apple cider vinegar or an ACV supplement. As such, Bragg also alleged that Goli's use of the term "vinegar" in the product name and labeling runs afoul of FDA labeling requirements and Goli’s gummies have little chemical similarity to apple cider vinegar or a true ACV supplement.

More specifically, Bragg alleged that Goli’s gummies did not have sufficient acetic acid to be labeled “vinegar” per FDA’s regulations and also fell short of the 5% naturally occurring acetic acid concentration found in traditional ACV. Goli countered that its ingredient is made from dehydrated apple cider vinegar. In support of its argument, Goli submitted Specification and Cook Sheets indicating that the apple cider vinegar powder component contained 5.88% acetic acid along with multiple laboratory tests demonstrating acetic acid at 25-33 mg. Based on this, NAD determined that Goli had established a reasonable basis for its product name.

NAD then examined Goli’s advertising for its ACV product, which “created a powerful connection between the product and the expected health benefits of ACV” based on the combination of visual imagery and product scenes featured in ads. In evaluating the substantiation for those claims, NAD noted that the accepted threshold dose of liquid apple cider vinegar is one tablespoon, which delivers 750 mg of acetic acid. When consumed as directed or even at a modified dose, NAD found that the Goli gummies provided far less than 750 mg of acetic acid and that the advertiser did not provide support for a health benefit below that level. As such, NAD recommended that Goli discontinue or modify its advertising to avoid conveying the unsupported message that the amount of ACV contained in its gummies are associated with the health benefits of traditional liquid ACV. NAD noted that this includes modifying or qualifying the use of “Apple Cider Vinegar,” “ACV,” or “Vinegar” including in its product name when in the context of the challenged advertising so as to avoid conveying an unsupported implied health message.

Unsurprisingly, Goli is appealing the decision to the NARB. Given the popularity of ACV and gummies generally, this is one to watch.

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FDA

The big news at FDA is that the agency finally has a confirmed commissioner after over a year without one. Dr. Robert Califf was narrowly confirmed by the Senate earlier this week.

In a sign of things getting back to “normal,” FDA also announced that it will be resuming in-person inspections for domestic facilities.

FDA released a list of guidance topics that the FDA Foods Programs expects to publish by the end of December 2022, which includes the following:

• Labeling of plant-based milk alternatives
• Labeling of plant-based alternatives to animal-derived food
• Multiple guidance documents relating to hazard analysis for various food types
• Three guidance documents relating to heavy metal levels in foods
• Two guidance documents relating to the new dietary ingredient process
• Guidance relating to testing methods for asbestos in cosmetic products that contain talc

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The FTC and state attorneys general are also hard at work. Companies that offer a subscription service or autoship options will want to pay attention to guidance and enforcement regarding allegedly deceptive practices, now branded as “dark patterns”. See here and here for our expert analysis on these topics.

And finally, in-house counsel should check on whether their marketers may be cherry-picking reviews in a way that could be deceptive. The FTC’s settlement with Fashion Nova regarding failure to post negative reviews is a helpful lesson for any company that curates reviews, whether manually or by algorithm.

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Noom allows customers to try its weight loss coaching program “risk free” for two weeks. After that period, Noom automatically enrolls customers in a program and begins charging membership fees. The problem, according to the complaint, is that Noom fails to adequately disclose material terms of the offer or get explicit consent to the renewal. (Although a screen shot in the complaint shows that Noom does disclose the automatic renewal terms, plaintiffs claim the disclosure isn’t sufficiently clear.)

The lawsuit also takes issue with Noom’s cancellation system. To cancel their memberships, customers would have to send a message to their “coach,” who is actually a bot. (We’ve warned about the dangers of bots before.) The bot would then provide instructions to cancel on the iTunes App Store or Google Play Store. According to complaints filed with the BBB and on other sites, many consumers were frustrated when they were not able to avoid charges or get refunds.

According to the proposed settlement, Noom will substantially enhance its auto-renewal disclosures, as well as require consumers to take a separate action through a check box or digital signature to accept auto-renewal. The company will also include a “cancel” button on a customer’s account page to allow for easier cancellation. In addition to these (and other) changes, the company has agreed to pay $56 million, and provide an additional $6 million in subscription credits.

If you haven’t taken a look at your automatic renewal disclosures or your cancellation process recently, it may be time to take a fresh look. Simply having disclosures or cancellation process isn’t enough, as recent lawsuits are targeting just how clear disclosures are or just how easy it is to cancel. (Read our posts on dark patterns to see how this may play out in a state AG investigation.) It’s also a good idea to take a look at your complaints, especially on public sites. There’s a good chance that regulators and class action attorneys are looking at them, too.

Litigation

Last year, we discussed an early blow to the pink tax theory of liability in Schulte v. Conopco, d/b/a Unilever, et al. In Schulte, the plaintiffs alleged that various personal care manufacturers and retailers violated the Missouri Merchandizing Practices Act (MMPA) by charging more for deodorants marketed for women than allegedly similar deodorants marketed for men. The product lines at issue contained similar, but not identical, ingredients, came in different sizes, and were available in different scents (fifteen “feminine” scents in the line marketed for women and five “masculine” scents in the line marketed for men). The Eastern District of Missouri dismissed the complaint, ruling that “Missouri law does not compel identical products to be sold at the same price” and that the plaintiff’s remedy “lies with legislation, not litigation.” The Eighth Circuit affirmed on the grounds that the plaintiff mistook “gender-based marketing for gender discrimination.” In order to state a claim, the court ruled that the plaintiff would have to allege that the only difference between the products was the price and the intended target of the marketing. Here, because the plaintiff conceded that the products were, in fact, different, thus dismissal was appropriate.

In Lowe v. Walgreens Boots Alliance, Inc., et al., the Northern District of California dismissed another pink tax putative class action, albeit on different grounds. In Lowe, the plaintiffs alleged that the price of Walgreens’ hair regrowth treatment for women (a generic alternative to Rogaine) was almost 1.5 times higher than the male-marketed alternative. The plaintiff alleged that the products had identical active ingredients, and that the only differences were the dosing instructions and the price tag. The court’s justification for the dismissal was twofold. First, the court ruled that the plaintiff’s state consumer protection claims were preempted because, under the Federal Food, Drug Cosmetic Act (“FDCA”), Walgreens’ generic product labels were required to exactly mirror the brand-name label. Thus, to the extent the plaintiff claimed that the products labels were deceptive, such claims were preempted. The court also dismissed the plaintiff’s claim under California’s Unruh Act because the statute does not apply to goods, but rather to “accommodations, advantages, facilities, privileges, or services.” Lowe has appealed the decision to the Ninth Circuit.

While California’s Unruh Act seems to be a dead end for product pricing discrimination claims (at least for now), courts have applied the Unruh Act to claims alleging gender-based pricing discrimination in services. For example, in Department of Fair Employment and Housing v. M&N Financing Corp., et al., the plaintiff alleged that M&N Financing purchased retail installment contracts from used car dealerships, and that the gender of the purchaser of the car factored in to how much M&N would pay for the contract. The Court of Appeal found that this practice was a “per se” violation of the Unruh Act warranting statutory damages even though the plaintiff had not demonstrated actual injury.

State Legislation

In September 2020, New York passed a law prohibiting individuals and entities, including retailers, suppliers, manufacturers, or distributors, from charging a different price for two “substantially similar” goods or services based on the gender for whom the goods or services are marketed. As in the litigation context, this concept of “substantial similarity” is the key. Substantially similar goods are defined as two goods that exhibit no substantial differences in the materials used in production, intended use of the good, the functional design and features of the good, and the brand of the good, and substantially similar services are defined as two services that exhibit no substantial difference in the amount of time to provide the service, the difficulty in providing the service, and the cost in providing the service. An individual or entity charged with violating the law can avoid liability by proving that any price difference is based upon a number of gender-neutral factors including, but not limited to, the additional time or cost of manufacturing such goods or providing such services. While the new law does not provide a private right of action to consumers, it permits the attorney general to obtain an injunction against such prohibited sales, as well as restitution for consumers and civil penalties.

New Jersey also recently proposed a bill that prohibits discriminatory pricing with respect to substantially similar services and consumer products. The definition of “substantially similar” is, on its face, almost identical to the one adopted under the New York law. Under the proposed law, certain services providers (including tailors, barbers, hair salons, and dry cleaners) would be required to clearly and conspicuously disclose to the customer in writing the pricing for each standard service provided, along with a clearly visible sign notifying customers that gender-based price discrimination is prohibited under New Jersey law. This bill is currently under review by the Assembly Consumer Affairs Committee.

A similar bill was introduced in Massachusetts creating a 15-member working group on gender equity regarding the pricing of items marketed towards women in Massachusetts. The group will report its findings and recommend any changes in current law by the end of 2022.

Federal Legislation

In June 2021, California Congresswoman Jackie Speier reintroduced the Pink Tax Repeal Act, a bipartisan bill that seeks to end gender discrimination in the pricing of goods and services. The bill would prohibit the sale of substantially similar goods or services that are priced differently based on gender, allow the Federal Trade Commission to take enforce violations, and permit State Attorneys General to take civil action on behalf of wronged consumers. Currently the bill is before the Subcommittee on Consumer Protection and Commerce.

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Before the pandemic, StubHub offered consumers cash refunds for tickets to events that were later canceled. As we noted in our post, StubHub later changed its policy to state that “if the event is canceled and not rescheduled, you will get a refund or credit for use on a future purchase, as determined in StubHub’s sole discretion (unless a refund is required by law).” Other communications omitted that parenthetical, suggesting that all consumers would get a coupon.

Although StubHub argued that it was forced to change its policy due to a near complete loss of revenue during the pandemic, regulators didn’t think that justified a retroactive application of the changes in a manner that shifted StubHub’s burden to consumers. For example, the Virginia Attorney General said that “the COVID pandemic should not be used as an excuse to withhold refunds owed to customers for cancelled events.”

If events over the past year have made you rethink whether your cancellation policy still makes sense, it’s fair to consider making changes to the policy, even if those changes limit consumers’ rights. But while those changes can be applied to future purchases, you generally should not apply them to purchases that were made while the previous policy was in effect.

The complaint – which is based largely on a PETA article – alleges that the life cycle assessment tool Allbirds uses to identify the carbon footprint of its products does not assess the environmental impact beyond the manufacturing of the shoes. Because it excludes things like the impact of wool production on the environment, it understates the environmental impact. Moreover, the complaint alleges Allbirds bases its carbon footprint figures on “the most conservative assumption for each calculation,” so that it can make more aggressive claims.

The plaintiff also argues that Allbirds makes “misleading animal welfare claims,” including by advertising “happy sheep” that live the “good life.” Based on the PETA article, the plaintiff alleges that the sheep may not be quite so content.

Although the FTC’s Green Guides provide guidance on various types of environmental claims, there isn’t a lot of clarity on the types of claims mentioned in this complaint. It’s too early to predict how this case will turn out, but this case and others like it – such as the lawsuit against Coca-Cola we wrote about this summer – suggest that plaintiffs will take advantage of that lack of clarity and continue to challenge ESG initiatives.

Jessica and Laura join our impressive list of former FTC officials, including the firm’s managing partner, Dana Rosenfeld, who served as Assistant Director of BCP and attorney advisor to FTC Chairman Robert Pitofsky, former Bureau Directors Bill MacLeod and Jodie Bernstein, as well as Aaron Burstein, having served as senior legal advisor to FTC Commissioner Julie Brill.

Jessica served at the FTC for 26 years and led major initiatives on privacy, data security, and financial consumer protection. She is credited with expanding the FTC’s expertise in technology and was the driver behind FTC policy reports relating to mobile apps, data brokers and Big Data, the Internet of Things, and federal privacy legislation. She also directed the agency’s development of significant privacy rules, including the Children’s Online Privacy Protection Rule and Gramm-Leach-Bliley Safeguards Rule. She is a recipient of the FTC Chairman’s Award, the agency’s highest award for meritorious service and the first-ever recipient of the Future of Privacy Forum’s Leadership Award. Jessica is also a fellow at Georgetown University’s Institute for Technology Law & Policy. Prior to joining Georgetown, she was an Independent Consultant with Privacy for America, a business coalition focused on developing a framework for federal privacy legislation.

Laura also brings significant experience to Kelley Drye. As Assistant Director for the FTC’s Division of Privacy & Identity Protection, Laura led the investigation and prosecution of matters relating to consumer privacy, credit reporting, identity theft, and information security. Her work included investigation initiation, pre-trial resolution, trial preparation, and trial practice relating to unreasonable software security, mobile operating system security update practices, and many other information privacy and identity protection issues. She joins the firm from AT&T where she served as an Assistant Vice President – Senior Legal Counsel advising business clients on consumer protection risks, developing and executing strategies in response to regulatory inquiries, and participating in policy initiatives within the company and across industry.

Jessica and Laura are an impressive duo and are sure to be an asset to our clients as they prepare for the future of privacy and evolving consumer protection law.

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These types of lawsuits aren’t new. As more companies have started to develop Environmental, Social, and Governance (“ESG”) goals and to make claims about their progress towards achieving those goals, we’ve seen more suits challenging the accuracy of those claims. But this lawsuit is a little different.

While most lawsuits target claims about past or present results (which, in many cases, can be proven or disproven), the current lawsuit targets many aspirational and forward-looking statements (which are inherently harder to prove or disprove).

Here are a few examples of the claims Earth Island Institute cites in their complaint:

• “Our planet matters. We act in ways to create a more sustainable and better shared future. To make a difference in people’s lives, communities and our planet by doing business the right way.”
• Coca-Cola plans to “make 100% of our packaging recyclable globally by 2025.”
• “Scaling sustainability solutions and partnering with others is a focus of ours."
• “Part of our sustainability plan is to help collect and recycle a bottle or can for every one we sell globally by 2030.”
• “We’re using our leadership to achieve positive change in the world and build a more sustainable future for our communities and our planet.”

It’s too early to tell how this case will turn out, but companies that make claims based on future ESG goals will want to pay attention. If the court allows the case to go forward, it could suggest that companies will have to take greater care when talking about future goals.

Our team has represented both website and software defendants in these cases. However, this post is not intended to reflect on any specific claim, website, or software. Rather, our goal is to provide an introduction to the general nature of the consumer claims and current landscape of these litigations.

This post summarizes (1) the “session replay” technology at issue in these claims; (2) arguments presented by the Complaints; (3) an overview of common defenses; and (4) where things stand. With that context, we then provide our list of practical considerations for the use of session replay software.

What is “Session Replay” Software?

A significant branch of the Software-as-a-Service (Saas) industry has arisen to support website owners/operators in effectively maintaining and leveraging their consumer-facing websites. These software products are generally scripts placed in the JavaScript of a given website to capture specific information related to a consumer’s interactions with a given page. The software can capture consumer’s keystrokes and mouse movements to provide information on everything from broken links or error messages to support IT teams, create heat maps showing website usage, and/or capture consumer information for validating consent to be contacted or agreement to receive products and services.

Despite how these products are often described, the software does not actually record the consumer’s session in the way that a security camera in a brick-and-mortar store would capture a consumer’s movements. Rather it captures the consumer’s interactions with the website at regular intervals and allows those movements and data points to be laid over an existing image of the website so that owners/operators can review a recreation (or dramatization) of an individual consumer’s experience.

What are the Allegations?

Generally, Plaintiffs in these cases have alleged that session replay software are improper wiretapping and eavesdropping devices that are recording consumer communications without required consent. These cases have arisen where state law requires both parties to a communication to consent to any recording. Thus, California and Florida have become hot beds for these claims.

Both the California Information Privacy Act (“CIPA”) and Florida Security of Communications Act (“FSCA”) were designed to prevent improper interception of telephone calls. These statutes were crafted before the advent of the internet and focused on improper tapping into telephone lines to listen into or record conversations. Over time, the statutes have been interpreted to protect certain other forms of communication, including interception of emails or text messages in transmission. The Courts have essentially analogized those communications to the written transcript of the telephone conversation intended to be protected by the statutes.

But these new claims seek to expand the statutes further to restrict the capture of information using session replay software. The statutes are appealing targets for plaintiffs because they include statutory damages that, on a class wide basis, can escalate quickly. In California, plaintiffs have also relied upon the state’s constitution, which protects citizens’ right to privacy.

What are the Defenses?

There are many arguments that defendants have raised and each situation is unique; however, several trends have started to emerge as more motions to dismiss have been filed:

Consent is a complete defense to any of these claims. That can be in the form of browsewrap acceptance of a website’s Privacy Policy that disclosed the use of such software. Or it could be affirmative consent to that policy and/or the site’s terms of use at the time of account creation, purchase, or other information submission. The first court to weigh in on a motion to dismiss of claims based on session replay allegations leaned heavily on the consumer’s affirmative consent in dismissing the claims. Javier v. Assurance IQ, LLC et al., No. 4:20-cv-02860-JSW, 2021 WL 940319 (N.D. Cal. Mar. 9, 2021).

Defendants have also successfully challenged whether the information captured by session replay software is actually recording the contents of a communication. For example, information concerning consumer’s IP address, device model, and operating system are not, themselves, the content of communications. Similarly, mouse movements and keylogging software have, in other contexts, been found to not capture the “content” of a communication.

To bring a valid statutory (or constitutional) claim, consumers must also show that the communication at issue is confidential. Plaintiffs’ claims are vulnerable both because any information input to the website is direct at, and intended for, the website’s owner/operator and therefore, how could the contents be considered confidential from those owners/operators? Additionally, multiple courts have found that there is no per se reasonable expectation of privacy for communications over the internet. One Court has also confirmed (in multiple, similarly-pled cases) that any distinction between the website owner/operator and their software provider is irrelevant; therefore, that fact pattern cannot give rise to a claim of third-party eavesdropping. See, e.g., Graham v. Noom, No. 20-cv-06903-LB, 2021 WL 1312765 (N.D. Cal. Apr. 8, 2021).

On a more technical level, defendants have also challenged whether the software at issue is actually intercepting any information while it is in transmission between two parties, as required by the statutes. To meet the elements of these particular statutes, the data cannot simply be captured from the consumer’s browser or hard drive, but must be recorded while in transit. And evidence supports finding that is not how these software products operate.

Finally, as a procedural matter, where a consumer affirmatively accepts terms of use or creates an account, the defendant may have a valid claim to compel arbitration.

Where Do Things Stand?

As with any new, developing area of the law, there are lingering unknowns. Thus far, Courts have shown skepticism of Plaintiffs’ claims and rejected several of the Complaints at the pleading stage. Some cases have been resolved and others abandoned following the filing of motions to dismiss or to compel arbitration. We expect that the interested parties will continue to jockey for position and litigate these issues over the next several years to flesh out a more complete body of law.

Practical Considerations for Using Session Replay Technology

As any company evaluates the use or sale of session replay products, answers to the following questions will be informative:

• What information is the software capturing about consumers or otherwise individual user-level activity?
• What consumer/user level information captured is necessary for the business purpose?
• Is the software capturing any additional consumer/user-level data that is not shared with the first-party company, but could be reviewed/used by the provider?
• How do the terms address ownership rights and permissions (and any restrictions) on the consumer/user-level data collected via the software?
• Are any potential contents of communications captured?
• What are the individual steps enabling the capture of data on the websites? Does the capture of the data occur during transmission?
• What specific individual pieces of consumer/user-level data are captured?
• How does the software avoid collecting information that we do not want to capture?
• What disclosures are we providing to consumers concerning the use of session replay software (and other similar programs)?
• How and where is the disclosure presented to the consumer?
• Regardless of whether it’s required, are we obtaining consent for use of the software, and if so, how so?
• Are we complying with all contractual requirements concerning disclosures and data?
• Does our contract protect our interests should litigation arise over the software?
• Would our insurance policies cover any potential claims?

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