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Stay ADvised: What's New This Week, September 4

09.04.20
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In This Issue:

It's All in the Ingredients: NAD OKs Some Natural Cough Syrup Claims

In a challenge of "natural" versus "natural" remedies, Zarbee's (owned by Johnson & Johnson Consumer, Inc., and marketer of "Zarbee's Naturals") challenged claims for competing cough syrups offered by Maty's Health Products. Zarbee's took issue with several express claims about Maty's natural cough syrup's ability to treat coughs and help with sleep, and the implied claim that its cough syrup is "a superior alternative to traditional [over the counter] OTC drug products to treat cold and allergy symptoms."

Maty's agreed to permanently discontinue a host of claims for the honey-based syrups which the challenger had alleged crossed the line into "drug" claims, such as "helps ease common cold symptoms," "When your little one is sick, it's not funny. Give them a spoonful of Maty's as needed," and "help prevent springtime allergies with our immune boosting Organic cough syrups," dramatically narrowing NAD's review.

Consistent with prior decisions, NAD then determined that certain "soothing" claims regarding honey could be supported, based on the weight of the evidence. These included the claim that Maty's "works to help soothe hacking cough" (with some modification) and that it "turns coughs due to dry irritated throats into zzz." NAD recommended, however, that when referring to the products' cough-soothing properties, Maty's modify the claim "works to help soothe hacking cough" to clarify that "the claimed effect was attributable to the ingredient honey, and not to the product as a whole."

The advertiser had submitted no product testing and NAD made it clear that the advertiser could make no product claims or "health" claims. Rather, Maty's could rely on ingredient-based claims, but only to the extent supported by ingredient-based evidence and for claims that did not either imply a claim for the product as a whole or make claims that the product or ingredient could treat or cure any medical condition.

Not surprisingly, NAD recommended the advertiser discontinue its claim that the cough syrup can "loosen troublesome mucus." Maty's sought to base this claim on the "traditional use of thyme [which] supports its product's ability to provide effective treatment of mucus," and provided two supportive letters of opinion from medical doctors as evidence. NAD found that this evidence did not provide a reasonable basis for the claim in the absence of competent and reliable scientific testing.

NAD also concluded that the company should discontinue its product comparison claims, primarily because it was comparing "apples" (natural supplements like Maty's) and "oranges" (OTC drug products), without making this distinction explicit. NAD reaffirmed longstanding policy that "an advertiser has a right to openly compare the ingredients in its products to its competitors and to share factual information about these ingredients with consumers, so long as the comparison is not made in a misleading manner." Here, NAD found Maty's comparison problematic because by inviting a comparison of ingredients, Maty's implied equivalent efficacy to a drug product, but provided no evidence to support such a comparison.

Key Takeaways

NAD has taken a particular interest in claims for natural remedies and continues to provide important guidance to advertiser's who might otherwise tread uncomfortably close to the line between drug products and other remedies.

Parkay Okay: Plaintiffs' "Fat" False Ad Claims Too Thin to Withstand Summary Judgment

In 1976 the burning question answered by the margarine tub in a series of iconic commercials was "Parkay" or "butter." Times have changed and the current issue is "spray" or "butter." A federal judge came down firmly on the side of spray. Class action plaintiffs, attempting to prove that Conagra Brands misled consumers into believing that Parkay Spray was less fattening than it is by using inappropriately small serving sizes, have lost their bid after a California federal court handed down summary judgment in favor of the food company. The court held that plaintiffs' claim was preempted by federal law.

It may not be an eternal question, but in this case it proved to be the question that sank the litigation: Is the fat in Conagra's Parkay Spray a spray-type fat, or is it a butter-type fat? Defendant was rooting for spray; plaintiffs for butter, and on that question hinged the outcome of Conagra's motion for summary judgment, which the company won after Judge William H. Orrick came down on the side of spray-type oil fat.

Filing suit back in 2013, named plaintiff Erin Allen alleged that Conagra falsely advertised the fat content of its Parkay Spray by using an artificially small serving size. In its motion for summary judgment, Conagra argued that Parkay Spray is a "spray-type fat and oil" under federal regulations, subject to a serving size reference amount of .25 grams, and is not in the "butter, margarine, oil and shortening category," subject to a one tablespoon reference amount, as plaintiffs had claimed.

Judge Orrick agreed with Conagra that Parkay Spray fell squarely in the "spray-type fat" category, subject to the smaller serving size reference amount under federal law. The case was dismissed because plaintiff's allegations sought to impose "food labeling requirements that are not identical to federal law." Plaintiff's allegations that Parkay's serving size was too small could not be considered in litigation as the FDA's butter category already outlined allowed serving sizes, leaving no triable issue of fact.

Plaintiff had argued that Parkay Spray was a "butter, margarine, oil and shortening"-type fat because it was intended to be used as a buttery topping and was, in fact, used by consumers in that manner. But the court found that argument unconvincing. Judge Orrick reasoned that plaintiff's own expert witness countered this narrative by finding that Parkay Spray looked, tasted and acted much more like a spray fat than an oil fat.

"On this record, it is not possible to conclude that Parkay Spray is a 'substitute' that can be 'used interchangeably' with butter or margarine such that it belongs in the butter, margarine, oil, and shortening category and is mislabeled under federal law. Accordingly, the plaintiffs' claims seek to enforce state law requirements that are 'not identical to' federal food labeling requirements. They are preempted," wrote Judge Orrick.

Key Takeaways

When they apply, FDA regulations are a boon to advertisers defending a variety of food-related class action suits. When it comes to serving size, the FDA reigns supreme. Oh, and check out the old Parkay commercials.

Plaintiffs Cry Fowl in False Ad Lawsuit Alleging Sanderson Farms Chicken Not "100% Natural"

Continuing the trend in litigation challenging claims of "natural" foods, Sanderson Farms Inc., now faces a lawsuit alleging that the company falsely advertised "100% natural" chicken. Unlike much litigation calling "natural" food marketing bogus, this case was filed not as a class action lawsuit, but by two environmental and animal safety nonprofits.

Plaintiffs allege that Sanderson Farms falsely advertises its chicken as natural even though the chicken contains antibiotics or other pharmaceuticals. Plaintiffs also accuse Sanderson of falsely advertising that its chickens were raised in a "natural environment," and of "mislead[ing] consumers into believing that there is no evidence that the use of antibiotics" in chicken contributes to antibiotic-resistant bacteria.

The allegations in the complaint portray a company that routinely and deliberately lied to consumers via advertising campaigns, such as one that claimed "there's only chicken in our chicken" and that there are "no antibiotics to worry about here," when in fact nothing could be further from the truth, according to the complaint. The complaint also alleges that Sanderson advertises the chickens with the phrase "100% Natural" to emphasize its misleading claims.

According to plaintiffs, reasonable consumers would interpret Sanderson Farms' "100% Natural" advertising claims to mean that the chickens are not fed or injected with antibiotics. In stark contrast, plaintiffs paint a bleak picture of Sanderson Farms' alleged chicken farming practices, depicting a product that they say neither plaintiffs nor the reasonable consumer would consider "natural":

[T]he truth is that the feed Sanderson routinely gives to its chickens contains antibiotics and pharmaceuticals; the chickens are raised indoors in crowded and dirty industrial sheds, which is one reason why its routine use of antibiotics is necessary; there is extensive reliable evidence that the use of antibiotics in poultry contributes to antibiotic-resistant bacteria; and Sanderson's chickens have been found to contain antibiotic and/or pharmaceutical residue.

The suit also details steps the organizations took prior to filing the lawsuit to obtain enforcement action against Sanderson outside the courts, including via the FTC and the NAD.

Key Takeaways

This case may shed some light on what the ubiquitous claims that meat and chicken products are free of antibiotics really mean. Do consumers understand that such claims don't necessarily mean an animal's feed is antibiotic free? Stay tuned.

"OK Google…. Can you stop falsely advertising that you're not secretly recording me?"

Despite representations to the contrary, Google Assistant devices (including Google Home Mini, Google Home Hub, and Google Nest) allegedly record users without their consent, claim plaintiffs in a newly filed class action lawsuit accusing the tech giant of false advertising. Contradictory to Google's marketing, which plaintiffs claim is calculated to "make consumers think that they can control when the Google Home is activated," these devices allegedly "perpetually listen" to and record goings on in consumers' homes.

Plaintiffs also allege that the products are marketed not so Google can profit from sales, but primarily to collect data from consumers—which is where the company's true gain lies. To allay consumer concerns and sell the products, Google advertises that it only records consumers when specially designated phrases are used to engage Google Home—like "Hey Google" and "OK Google." It also represents that consumers have significant control over the devices' privacy functions, while in reality Google records private goings on inside the homes of its customers without consent.

Named plaintiffs Jon Hernandez and Edward Brekhus allege that they separately purchased Google Home Mini devices, relying on Google's representations on packaging and on the device website that the devices would only record when activated by the specific phrases. Google also makes these promises on support pages, advertising, and on YouTube, according to the complaint.

"Contrary to its representations (and promises) to consumers, and without giving consumers any notice, Google configured the Google Home to record audio from users' homes, and to transmit that data to Google for processing, all without any activation command being spoken," say plaintiffs.

To the contrary, Google maintains that the Google Assistant devices are on "standby mode" until "activated," in which case the "[a]ssistant won't send what you were saying, to Google or anyone else." Further, the only time Google Home may inadvertently record users is when it thinks it hears an activation phrase like "OK Google," according to Google websites. But even this can be fixed by users by adjusting the privacy settings.

Plaintiffs base their allegations primarily on recent press reports and social media posts by users who say they noticed that Google Home knew things about them it could only have heard when listening without consent. Among the complaint's alleged "proof" specific to plaintiffs: a posting on Reddit by a user who said he received a notification about a smoke alarm going off after he burned something in the kitchen, and another Reddit user who said that Google detected the sound of breaking glass in his home, as well as early reports by a journalist that Google "uploaded everything they said."

Plaintiffs allege violations of the Federal Wiretap Act and California's False Advertising Law (FAL), common law fraud, breach of contract, unlawful trade practices, and violations of California's common and statutory privacy laws—including the recently enacted California Consumer Privacy Act.

Key Takeaways

Google has been the target of multiple private and government actions questioning the company's adherence to its privacy policies. Plaintiffs in this case allege Google's misrepresentations about its privacy practices not only violate privacy laws, but also amount to false advertising.

Justice Department Wipes Down International COVID-19 Schemers

Deceptive sales of products for COVID-19 protection are not only subject to civil enforcement action but also criminal prosecution, as evidenced by a recent Department of Justice (DOJ) case which shuttered an allegedly fraudulent scheme selling nonexistent personal protective equipment products. According to the DOJ's complaint, the international defendants set up multiple websites that purported to sell COVID-19 necessities such as hand sanitizer and disinfectant wipes but was, in fact, a sham operation that took the money and ran.

The complaint alleges that defendants Thu Phan Dinh, Tran Khanh, and Nguyen Duy Toan undertook the COVID-19 scheme by orchestrating a wire fraud scheme. The trio set up over 300 websites, all of which purported to sell personal protective equipment (PPE) to capitalize on COVID-19, but never actually sold anything. Instead, defendants defrauded American consumers out of their funds, allegedly from Vietnam, though the complaint states that defendants' exact whereabouts are unknown.

While the U.S. government seeks to further investigate its allegations that the defendants violated U.S. law "by executing schemes and artifices to defraud for obtaining money or property by means of false or fraudulent representation with the intent to defraud," it has obtained a temporary injunction that closed down defendants' many websites.

As with any scheme worth its mettle, significantly more illegal activity went into the fraud beyond the main allegations. The schemers are alleged to have hidden the hundreds of email and U.S.-based payment processor accounts they set up to run their scam. Further allegations include that they listed false contact information on the websites—which led third-party companies and individuals to receive calls and complaints meant for defendants.

"The Department of Justice is committed to preventing fraudsters from exploiting this pandemic for personal gain," said Acting Assistant Attorney General Ethan P. Davis of the Department of Justice's Civil Division. "We will use every resource at the government's disposal to pursue scammers who are stealing money from citizens amidst the ongoing public health crisis."

This case is hardly closed, but the DOJ said the injunction shutting down defendants' websites should prevent more harm while it investigates the scheme.

Key Takeaways

COVID-19 fraudsters act at their own peril as they seek to evade the might of multiple federal agencies. Although the Federal Trade Commission has pursued enforcement action against scammers selling deceptive COVID-19 cures and, as seen earlier this month, making deceptive promises of product availability, the DOJ is also pursuing criminal action against such schemes.

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