Stay ADvised: What's New This Week, July 6
In This Issue:
- FTC Shines a Light on Deceptive Light Therapy "Pain Relieving" Device
- FTC's Coronavirus Warning Letters Streak Continues Targeting Deceptive SBA Loans
- Doctors Urge Ad Curbs for Kids
- Court Drops a "Bomb" With Stay of Suit v. False Advertising for CBD Gummies
- 11th Circuit Rules "Miscertification" Not "Misrepresentation" Under Lanham Act
FTC Shines a Light on Deceptive Light Therapy "Pain Relieving" Device
A rose by any other name is still a rose, and so it goes with deceptively marketed devices: a device that's deceptively marketed is still so, even if it's new-fangled. In the instant case, the device at issue promised natural pain relief in the guise of "light therapy," but per the FTC, was all fluff and no results.
The federal complaint alleged that Physicians Technology, Willow Labs, and their owners Dr. Ronald Shapiro and David Sutton marketed a low-level light therapy (LLLT) device called the Willow Curve. As advertised, Willow Curve is a "curved plastic device that applies low-level light and mild heat to the site of pain," relieving both chronic, severe pain and inflammation.
Customers raved in testimonials that their pain felt better than it had in over a year after just one Willow Curve use. Television advertisements described it as a wearable device that "gets rid of your pain." Nonetheless, the FTC alleged that the defendants lacked the scientific evidence required to back up the claims for their "clinically proven" product.
According to the complaint, the advertiser supplemented its false claims with deceptive native advertising (advertising disguised as independent journalistic content). They also promised a "risk free money back" guarantee, when in fact any consumers who returned the device had to pay shipping and handling costs, and either did not receive a refund at all, or waited more than a year for it. Defendants also falsely claimed that Willow Curve was an FDA-registered medical device, when no such registration had been sought by defendants.
What likely caught the FTC's attention was the marketing of Willow Curve to people taking "opioids or other pain medications." In the past, the FTC has chastened companies seeking to take advantage of consumers concerned about the addictive qualities of opioid drugs, especially in light of the opioid epidemic. The FTC also has a long history of monitoring claims directed at those with chronic pain.
"People looking for drug-free pain relief deserve truthful information about these products," said Andrew Smith, Director of the FTC's Bureau of Consumer Protection. "When LLLT sellers say their devices will relieve pain, they'd better have the scientific proof to back it up," he added.
Defendants entered into a consent decree that included a $22 million judgment, which will be partially suspended once the two individual defendants kick in $200,000 each. Defendants are also barred from making further false health and refund claims and using deceptive native advertising.
FTC's Coronavirus Warning Letters Streak Continues Targeting Deceptive SBA Loans
The FTC continued its pursuit of COVID-19 scams this week by sending a second round of letters to companies that are deceptively claiming affiliation with the U.S. Small Business Administration (SBA).
The letters allege that the recipients may be misleading consumers by claiming they are affiliated with the SBA, or that consumers can apply on the company's website for Paycheck Protection Program (PPP) loans that the federal government is providing through the Coronavirus Aid, Relief and Economic Security (CARES) Act.
From companies using the SBA's official logo without authorization, to others falsely calling themselves "SBA Lending Experts," to still more companies falsely claiming they can "process your SBA Paycheck Protection Loan faster than any other source," the recipients of these warning letters all seek to capitalize on small business economic pain, likely by luring consumers in with references to the SBA, and then selling alternative financial products that have nothing to do with CARES or SBA loans.
The letters warn recipients that if they do not take immediate action to remove any offending marketing material and "remediate any harm to small business consumers stemming from such claims," the companies face enforcement action: "To the extent that any of these claims are not truthful, omit material information needed to prevent the claims from misleading consumers, or are not substantiated, they would violate Section 5 of the FTC Act," they note.
That's not an empty threat. The FTC has already filed suit against one counterfeit SBA loan relief scam. The FTC filed a complaint in April against Ponte Investments accusing the company of falsely marketing itself as a lender under the SBA loan program.
These letters brings the agency's tally of warning letters sent to fake SBA schemes to eight, with an additional two sent in May, but they might be among the agency's last on this subject, as the SBA program may or may not wrap up this week. Still, if past conduct is any predictor of future behavior, the FTC may still face scammers trying to capitalize on misinformation about the program, even after it ceases to exist.
Doctors Urge Ad Curbs for Kids
A new policy document issued by one of the country's foremost authorities on children's health is urging major changes to the way advertisers reach children and teenagers.
The American Academy of Pediatrics (AAP) is recommending strong changes to marketing practices for children to protect them from the negative health effects of digital advertising. The AAP forcefully argues that children "are uniquely vulnerable to the persuasive effects of advertising because of immature critical thinking skills and impulse inhibition."
Accordingly, the AAP asserts that children are particularly susceptible to advertising messages communicated via digital advertising, including sponsored content, the use of influencers, and "user-created content on social media platforms and video-streaming services." In addition, the AAP notes that some apps used by kids permit advertising outlets to place cookies on user devices, and children often do not understand the amount of data that is collected in this way.
"Children's and teenagers' unique developmental needs make them more vulnerable to negative physical, mental, and financial health effects of digital marketing," write the authors of a policy paper published in the official journal of the AAP. Moreover, the AAP argues that studies suggest that children who are exposed to ads for unhealthful products tend to consume more of these products or to engage in "unhealthy behaviors, such as intake of high-calorie, low-nutrient food and beverages; use of tobacco products and electronic cigarettes; use of alcohol and marijuana; and indoor tanning." The AAP also argues that targeted marketing campaigns may contribute to health disparities among vulnerable populations, as defined by the AAP.
The AAP's statement recommends that policymakers and industry implement a number of changes to further protect children from the negative effects of digital marketing.
The AAP urges legislators to expand privacy protections for minors under the Children's Online Privacy and Protection Act (COPPA). Originally enacted in 1998 (revised in 2013), the law applies only to children under the age of 13 and does not regulate data collection and use by apps that are "for general audiences."
The AAP recommends expanding the protections of COPPA to children up to the age of 17, requiring websites for general audiences to provide alternative services that do not collect or aggregate data from individuals younger than 18 years. AAP also recommends prohibiting all commercial advertising for children under seven years of age, and requiring marketers to clearly label all ads, prohibit in-app purchases, and have a "clear separation of content and advertising in media designed for children."
Finally, the policy statement includes recommendations for parents and pediatricians on how best to navigate the advertising landscape in a way that protects kids. For example, the AAP suggests parents use the AAP's Family Media Use Plan as an online tool to limit kids' exposure to ads.
Court Drops a "Bomb" With Stay of Suit v. False Advertising for CBD Gummies
One man's quest for justice concerning alleged false advertising for CBD gummies will have to wait for now. A California federal court told the plaintiff in the proposed class action that his suit will be stayed pending the FDA's review on how to classify and regulate cannabidiol-containing products.
The suit, filed by presumptive lead plaintiff Kenneth Glass, alleges that Hemp Bombs sold him and others like him CBD gummies, capsules, oils, and other edibles, claiming that the products that contained anywhere from 7 to 82.3 percent more CBD than they actually do.
Agreeing with Hemp Bombs, the California District Court stayed the suit, reasoning that it concerns issues of first impression for the court which are directly dependent on upcoming FDA decisions about classification and regulation of CBD edibles. The court reached its conclusion by relying first on the primary jurisdiction doctrine, which "allows courts to stay proceedings, or to dismiss a complaint without prejudice pending the resolution of an issue within the special competence of an administrative agency."
Further, the decision noted that other courts are wrestling with how to treat cases dealing with CBD sales "given ongoing FDA activities in clarifying its position on CBD." It specifically called out one recent case decided in the Northern District of California, Collete v. CV, in which the plaintiff also argued that she would not have purchased a CBD product if she had known it was not legally sold in the United States. In that case, the court, after noting that "its case was one of several cases already pending that relate to the marketing and sale of CBD products," also stayed the suit pending FDA guidance.
The FDA has said it "recognizes the significant public interest" concerning CBD and "is working on answering these questions through ongoing efforts including feedback from a recent FDA hearing and information and data gathering through a public docket."
11th Circuit Rules "Miscertification" Not "Misrepresentation" Under Lanham Act
The Court of Appeals for the 11th Circuit affirmed the lower court's dismissal of a suit brought by heating manufacturer Warren Technology Inc. against competitor Tutco LLC and industry certifying body UL LLC. The appellate court ruled that the company failed to show that UL's certification of Tutco's heaters constituted a misrepresentation under the law.
It all started with what Warren Technology said was a botched certification of a competitor's product. UL, the certifying body for unitary electrical heaters, certified Tutco's heaters as compliant with all the relevant safety standards, including the "UL 1995 safety standard."
Warren Technology claimed that certification was inappropriate, and that Tutco was engaging in false advertising by placing the UL 1995 certification on its products, as was UL by giving Tutco the certification in the first place. In other words, Warren Technology claimed this miscertification resulted in a misrepresentation and sued Tutco and UL, alleging claims of false advertising and contributory false advertising under the Lanham Act, common law unfair competition laws, and the Florida Deceptive and Unfair Trade Practices Act (FDUTPA) against both Tutco and UL.
The district court granted Tutco and UL's joint motion to dismiss on the grounds that Warren failed to show that the alleged misapplication of the certifying standard resulted in an actionable misrepresentation. Warren appealed the decision, and the appeals court sided with the lower court.
According to the appeals court, Warren's case rested on the premise that UL and Tutco "made a misrepresentation of fact." In finding for defendants and upholding the lower court's decision, the appeals panel reasoned that even if UL's interpretation of the 1995 safety standard was flawed—a misrepresentation—it would be a misrepresentation of the safety standard, and not a misrepresentation constituting a false and "deceptive act" under the Lanham Act.
"Because all of Warren's claims against UL and Tutco are based upon the same allegation of falsity, they fail for want of a misrepresentation or a deceptive Act," wrote the court.
The court did note that Warren could have brought a successful action alleging that, for instance, UL failed to meet its own standards, or interpreted the standard inconsistently over time, or applied it inconsistently to Warren and Tutco, or "lacked independence relative to Tutco."
At the core of the court's decision is the reasoning that UL is entitled to interpret its own safety standards. As the court wrote, "Determining the conformance of a product with a UL standard obviously requires UL to interpret the standard, just as conformance with a statute requires a court to interpret the statute." To make its case, Warren had to show that UL's (mis)interpretation of the standard rose to the level of a deceptive act. Simply having a difference of opinion about the interpretation of the standard didn't make it a misrepresentation.