You better not lie

About shipping times

I’m telling you whyBuyer lawsuits are coming to town 🎶

The holidays are upon us, and Black Friday sales have already kicked off as companies anticipate shipping delays due to current supply chain issues.  As such, some companies, such as Disney, will not be offering rush shipping at all this holiday season.  Walmart has gone so far as to charter its own cargo ships to various ports throughout the country to ensure goods make it to consumers on time.  Product distributors may want to implement similar policies and tactics through year-end to avoid be gifted lawsuits in their stockings for failure to timely ship to consumers pursuant to state and federal laws.

Case in point, Kanye West (or “Ye” as the billionaire is going by these days) recently saw his companies Yeezy Apparel LLC and Yeezy LLC slapped with a lawsuit in California alleging “unlawful business practices and false advertising by failing to ship items in a timely manner.”  According to the complaint, Yeezy “repeatedly violated” state law by (1) failing to ship items within thirty days; (2) failing to provide adequate notice of shipping delays to California consumers; and (3) failing to offer and provide refunds to those consumers whose goods were not shipped within the requisite 30-day time frame. Moreover, the complaint goes on to contend that Yeezy made misleading statements by posting two-to-seven-day shipping estimates on its websites; and, most egregiously, charged consumers additional fees for expedited shipping.  Yeezy will pay $950,000 to settle the claims which includes $50,000 in restitution, $100,0000 for investigative costs, and $800,000 in civil penalties.

The 30-day shipping requirement that Yeezy ran afoul of is not unique to California.  Many states have similar laws, and the Federal Trade Commission requires sellers who solicit buyers to order merchandise through the mail, via the Internet, or by phone to have a reasonable basis to expect that the sellers can ship within the advertised time frame, or, if no time frame is specified, within 30 days. The rule also requires that, when a seller cannot ship within the promised time, the seller must obtain the buyer’s consent to a delay in shipping or refund payment for the unshipped merchandise.

To ensure a happy holiday for all parties involved, product distributors must be transparent about shipping times (and delays) and offer consumers the right to cancel and receive a refund for product that does not ship within 30 days.  Contact and attorney familiar with FTC regulations if you need help drafting or reviewing consumer policies and website ordering terms. 

Title III of the ADA states that “[n]o individual shall be discriminated against on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation by any person who owns, leases (or leases to), or operates a place of public accommodation.”  Although there is no mention of websites in the Act, “public accommodation” has largely been interpreted, particularly in New York, to include websites and mobile apps.  As such, the practical implication of the ADA requires that commercial websites be navigable by all users, including the visually impaired.  

The plaintiffs who file these cases are typically serial filers – some with hundreds of lawsuits over the span of just a couple of years.  These plaintiffs can make decent money from these matters, and the attorneys are motivated to take the cases on a contingency basis because the ADA allows for the award of attorneys’ fees. Thus, quick settlements are almost guaranteed since it is usually less expensive for the defendant to settle than to fight the case in court.  

Given the exponential increase in the number of cases being filed out of New York, Georgia, Arizona, California, Florida, and Texas, it is highly recommended that website owners take immediate action to become ADA compliant (such as making websites compatible with screen-reading software).  Web Content Accessibility Guidelines (WCAG) can be found here.  Making your website ADA compliant is of course the right thing to do in general, and could even result in increased revenues for your company.

If you have been served with an ADA lawsuit, immediately contact an attorney (as you will likely have only 21 days to respond to the suit) and get your site compliant prior to engaging in settlement discussions.

Over the past month, most everyone, whether a California resident or not, has received notices from numerous online companies encouraging users to review updates made to the companies’ terms of use and privacy policies. These seemingly synchronized updates are certainly not a coincidence, but rather last-minute efforts to wrap up compliance with the California Consumer Privacy Act (CCPA), which is set to go in effect on New Year’s Day.

Coming on the heels of Europe’s GDPR, the CCPA is the most comprehensive set of online privacy regulations in the U.S. The new rights granted to consumers under the CCPA include:

• The right to know what personal information is collected, used, shared or sold, both as to the categories and specific pieces of personal information;

• The right to delete personal information held by businesses and by extension, a business’s service provider;

• The right to opt-out of sale of personal information. Children under the age of 16 must provide opt in consent, with a parent or guardian consenting for children under 13.

• The right to non-discrimination in terms of price or service when a consumer exercises a privacy right under CCPA.

Businesses are subject to the CCPA if one or more of the following are true:

• It has gross annual revenues in excess of $25 million;

• Buys, sells or receives the personal information of 50,000 or more consumers, households, or devices; or

• Derives 50 percent or more of annual revenues from selling consumers’ personal information.

The burden imposed by the CCPA is significant, as it not only requires companies to overhaul their websites to ensure that all notices and opt-out links are provided to users, but it also likely requires changes to company internal procedures and employee training in order to maintain compliance.

Violations of the CCPA create private causes of action for consumers, and also empowers the CA Attorney General (AG) to pursue cases against businesses for damages of up to $7,500 per violation for intentional, or willful violations. So, the countdown is on for companies to contact a privacy attorney and, at a minimum, take steps to reduce exposure to private suits. AG enforcement isn’t set to begin until mid-2020, so there is still time to get your reindeer in a row.

According to their marketing materials, the elegantly packaged products sold by several retailers including Dillard’s, Overstock.com and Anthropologie, were “tested in the rice paddies of Southeast Asia as well as the finest locations in the Caribbean, Hamptons, and cottage country in the peak of summer,” and effectively repel mosquitoes for 2.5 hours. Further, the company claimed that the sprays and candles repel mosquitoes as effectively as 25% DEET. According the FTC’s complaint, the product website also stated that the sprays and candles were “rigorously tested at one of the world’s leading Universities” and “repels mosquitoes that may carry Zika, Dengue, Chikungunya, and Yellow Fever.” The FTC contends that none of these claims can be substantiated.

In addition to the lack of scientific evidence supporting the veracity of the products’ claims, the FTC was bugged by the fact that many of the purported impartial positive product reviews posted on the company’s Amazon storefront were, in fact, written by the owners of Mikey & Momo, as well as other individuals with a financial interest in the company.

Fortunately for Mikey and Momo, the proposed order settling the FTC’s charges does not include a monetary penalty. It does, however, prohibit the company and its owners from making any of the misrepresentations alleged in the complaint, and requires them to disclose clearly, conspicuously whether there is a connection between an endorser and the product or anyone associated with it.

Avoid the sting of the FTC by consulting with an attorney to make sure your product claims pass the smell test.

Please email us if you have any questions or if you would like more information regarding the content above.

The Kellogg Company was the latest brand to be roasted by consumers for allegedly promoting racist stereotypes in a cereal box cartoon that displayed a lone brown janitor corn pop cleaning the floor of a shopping mall full of yellow corn pops who appeared to be enjoying themselves.  Consumers were quick to smear Kellogg for this supposed portrayal of race and status, but was it really warranted?  If you just glance at the cartoon, the yellow pops appear to be a bunch of ill-behaved, nude delinquents, with dilated pupils that lead us to question whether they were enjoying a different kind of “puff.” On the other hand, the brown corn pop is the only one who is being productive and wearing clothes.  He (she?) is also the only one actually smiling.  We liked the brown corn pop.  Obviously, not everyone felt the same, and we certainly understand how this cartoon could be considered offensive.

Similarly, Unilever came under attack for its ad that portrayed a black woman’s skin undergoing a transformation to a white woman following the use of Dove soap.  For many, this evoked a long-running racist allegory in soap advertising: a “dirty” black person cleansed into whiteness; so much so that Unilever removed the ad and issued extensive apologies.  However, the African American actress who appeared in the commercial supported it by saying that it was not racist, but rather, celebrated ethnic diversity.

While avoiding the use of imagery or notions generally known to be discriminatory is advisable, interpretation of an advertisement is subjective and thus, it is hard to please everyone.  Likewise, when it comes to marketing and labeling guidelines as defined by entities such as the FDA and FTC, there are black and white do’s and don’ts, as well as gray areas as to what can and cannot be said.

Product marketers and distributors may not be able to anticipate what may or may not be offensive in every scenario, nor can they please every consumer, but with the help of a knowledgeable attorney, they can ensure compliance with federal and state regulations.  If your company is launching a product or creating new ad content, be sure to hire counsel with experience in federal advertisement and consumer protection laws.

Please email us if you have any questions or if you would like more information regarding the content above.

According to the FTC complaint, the brothers advertised and sold Infinity and Olympus Pro trampolines through various websites. These e-commerce websites displayed logos and seals for the Bureau of Trampoline Review, Trampoline Safety of America, and Top Trampoline Review. As a result, consumers were led to believe that these review sites containing ratings based on safety and performance, were comprised of unbiased, expert reviews. In reality, these organizations were made up by the brothers.

Not only did the websites for these “independent” bodies promote the products being sold by the brothers, but they also made representations regarding product safety. The Trampoline Safety of America site stated the organization included structural engineers. The Bureau of Trampoline Review website stated that safety was one of the bureau’s primary focuses, and that trampolines were put through rigorous testing such as having cars dropped on them. Allegedly, the only product to pass the car test was one of the brands sold by the brothers.

This of course is not the first time that product owners have created fake review sites; however, the safety claims contained in the brothers’ websites take these reviews to a dangerous new height. Despite this, the FTC surprisingly did not impose a monetary penalty. Perhaps no injuries resulted from the brothers’ claims on the review sites, and therefore the FTC was lenient. Instead, the brothers must refrain from engaging in these deceptive practices and must provide compliance reports and remain subject to compliance monitoring. As such, the pair has already made changes to the review sites, including identifying their company as being the owner and author.

Fake review sites and false claims are very common in the consumer product industry, and should they become the focus of an investigation, a company exposes itself to hefty monetary penalties. Be sure to contact an attorney prior to making product claims or participating in review sites.

Please email us if you have any questions or if you would like more information regarding the content above.

According to the complaint, the defendants engaged in deceptive labeling practices by marketing the food as “natural” and containing “no artificial preservatives.” The ingredients at the center of the lawsuit are synthetic versions of vitamins B, C and K, as well as caramel color. Although not proven to be harmful, and present in animal and human foods, the ingredients are technically not “natural.”

The FDA regulates animal feed, including dog food. Although it has not defined the term “natural,” in human food labeling, the FDA considers “‘natural’ to mean that nothing artificial or synthetic (including all color additives regardless of source)” has been included or added to a food that “would not normally be expected to be in that food.” Further, according to an FTC publication, if companies market their products as “all natural” or “100% natural,” consumers have a right to believe they do not contain any artificial ingredients.

There has been much litigation in the last few years regarding use of the word “natural;” so much so that at the end of 2015, the FDA put out a call for comments on how to define the term. It received over 7000 responses! This probe by the FDA has had the effect of halting some, but not all, litigation. In fact, the judge presiding over a California class action lawsuit against Kraft Foods for using the term “natural cheese” to describe cheese containing artificial coloring, stated that FDA standards were not determinative of whether Kraft violated the relevant California laws; but rather, the issue is whether a reasonable consumer is likely to be deceived by the product’s packaging. The case is still pending.

These “natural” cases will be interesting to track, and it is not far-fetched to believe that if a definition is established by the FDA, the FTC and FDA may start barking up the trees of other companies engaged in similarly deceptive or misleading labeling practices.

Stay out of the dog house and treat yourself to a consultation with an attorney regarding product packaging.

Ohlhausen will be bringing a new focus to the FTC; specifically, an emphasis on pursuing claims based on actual consumer harm, not just whether a regulatory violation occurred. For example, on a recent $2.2M settlement with Vizio regarding the software in its T.V.s that tracked viewing activity of 11 million consumers without their knowledge, Ohlhausen agreed that although Vizio’s actions were deceptive, she seemed to oppose the notion that television viewing activity constitutes sensitive information. Ohlhausen also stated that the FTC needs to reexamine how it defines “substantial injury” to consumers and focus on the misuse of historically sensitive private consumer information, including health and financial information, information on children and social security numbers.

Not wasting anytime in this regard, Ohlhausen just announced that Jessica Rich, Director of the Bureau of Consumer Protection, is leaving the agency on February 17 and is being replaced by Thomas Pahl. During Rich’s tenure, the FTC brought numerous actions against businesses that resulted in billions of dollars being returned to consumers. These awards may soon be a thing of the past as Pahl, like Ohlhausen, supports deregulation.

While deceptive marketing practices will still be on the FTC’s radar, the good news for marketers is that Ohlhausen is not a proponent of how cavalierly investigations have been initiated; nor does she believe in the total disgorgement of profits of companies found to be in violation of (some) consumer protection laws.

Ohlhausen is just the interim chair, but it is rumored that Trump has a couple of like-minded candidates for the permanent position, including Sean Reyes, a former attorney general of Utah. Dietary supplements are the largest industry in Utah (worth over $7B annually). If selected, Reyes could be much welcome news for nutraceutical marketers. In fact, Utah Senator Orrin Hatch helped draft the 1994 Dietary Supplement Health and Education Act which regulates product claims, labeling, etc., and he is a strong supporter of the industry.

Regardless of who is chosen to permanently chair, recent moves should be encouraging to most product marketers and nutraceutical producers alike, though they may be less protective of consumer interests.

For questions or more information regarding the above content, email DLG@DigitalLawGroup.com

JDI Dating has entered into a settlement order that prohibits them from selling or benefiting from customers’ personal information, and to refund fees to the duped daters.

This case highlights two important issues that the FTC does not hesitate to prosecute: negative option marketing and violation of privacy policies.

Negative Option Marketing is where a seller automatically signs the consumer up for a product or service with a recurring fee, unless the consumer chooses not to receive the offer. The law states that before charging a consumer for any goods or services sold in an internet transaction via a negative option feature, the person/company must:

-provide text that clearly discloses all material terms of the transaction before obtaining the consumer’s billing information;

-obtain a consumer’s express informed consent before charging the consumer; and

-provide a simple method for a consumer to stop recurring charges.

Privacy:  JDI’s practices make us question whether its use of consumer information was disclosed in its privacy policy.  It is necessary to accurately disclose to consumers how you will use their information and whether it will be shared with third parties.

Contact Digital Law Group if you need assistance with your billing and privacy practices.

Although many companies make an effort to play by the rules, some have no reason to.  Selling for up to $80.00 each, Wacoal likely still came out on top financially; despite the fines.  However, this is not the case for all.  Some companies cannot afford the risk of walking the fine line between clever and deceptive advertising.  So what do you do?  We advise that you keep your potential enemy close – when in doubt, get an advisory opinion from the FTC.

The FTC provides opinions to companies and industry organizations on a vast array of issues, including product claims.  Although they are only “advisory,” and not binding on the FTC, the opinions provide insight as to whether your proposed practices or claims may lead to consumer complaints and an FTC investigation down the road.  The bottom line is, it could save you a lot of money in the end to ask for a little guidance in the beginning.

The FTC attorneys only consider the facts presented to them in your inquiry.  This means that it is critical to include all of the relevant rules and regulations, as well as all of the facts.  Digital Law Group can help you determine what issues to present to the FTC, draft your inquiry letter and evaluate the issued opinion.