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Stay ADvised: What's New This Week, February 22

02.25.21
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In This Issue:

Oregon Court Doesn't Go Soft on Hard Seltzer Claims

Will consumers parse the difference between a national brand and a national certification? An Oregon federal court says not likely, and granted Suzie's Brewery Company a temporary restraining order preventing Anheuser-Busch from claiming it is the first or only hard seltzer to receive certification pursuant to the USDA's national organic certification program.

Anheuser-Busch's advertising referred to its Michelob Ultra Organic Seltzer as the "only national USDA certified organic hard seltzer." Suzie's, maker of the hard seltzer product Suzie's Seltzer, accused the beverage giant of falsely claiming its product is the "first" or "first-of-its-kind" or "only" organic hard seltzer to receive a national USDA certification. Anheuser-Busch disagreed, claiming it only meant it was the first such product in national distribution, a claim Suzie's agreed was truthful.

On February 9, 2021, Judge Michael H. Simon of the U.S. District Court for the District of Oregon sided with Suzie's, granting a TRO requiring Anheuser-Busch to revise its claims. In a 25-page opinion, and despite the absence of consumer perception evidence, the court noted that "[t]ruth matters. Whether the context is politics, science, or commercial advertising, dishonesty has consequences." To the judge, the issue was not merely one of semantics, although the lengthy opinion includes a grammar lesson on cumulative modifiers and coordinate modifiers.

The question before the court was whether Anheuser-Bush's use of the word "national" implied that its product is the only hard seltzer that has a national USDA organic certification, even though Suzie's Seltzer obtained the same certification, and (claims Suzie's) it received such certification well before Michelob Ultra. Anheuser-Busch countered that its marketing is true because "no other national hard seltzer is organic; no other organic hard seltzer is national."

In reviewing and weighing the standards for granting an injunction, the court noted that where statements are expressly false on their face, or false by necessary implication (subject to only one meaning), consumer deception may be presumed. When reviewing implied messages, the Oregon court (like most courts), generally requires extrinsic evidence of consumer confusion. Here, the court held the statements expressly false, adding that even if not "literally false on their face," the "challenged statements still are likely to mislead, confuse, or deceive consumers."

So for now the score is Suzie's Brewery 1 - Anheuser-Busch 0, as the Oregon court granted the small-batch brewery a restraining order. The opinion noted that the Anheuser-Busch claims are "false" because "Suzie's Organic Hard Seltzer is certified organic under the USDA's National Organic Program and was certified under the national program before Michelob Ultra was."

The judge noted that Anheuser-Busch is free to advertise, clearly, that it is the first national brand to receive the national certification, that it is "the only" or "the first" "USDA certified organic hard seltzer[] . . . distributed nationally." Anheuser-Busch claims this is what it has been doing all along. The temporary restraining order will remain in effect until June 2, 2021, when Judge Simon is scheduled to rule on a motion for preliminary injunction filed by Suzie's Brewery.

Key Takeaways

Injunctions in false advertising cases are relatively rare and hard to obtain. Armed here with presumptions both for consumer deception and irreparable harm—not a given in all circuits—the court gave powerful support, at least in the short-term, to David challenging Goliath. Should it stand, the case may pave the way for more Lanham Act

Cue the 'Fishy' Puns: Class Action Claims Subway's Tuna Is Anything but 'Reel'

There's something fishy going on at Subway Subs, and it isn't the tuna, claims a class action complaint recently filed in California. The suit alleges that the popular sandwich chain falsely advertises its tuna sandwiches because … they do not actually contain any tuna.

According to plaintiffs, the issue is not that subway sandwiches contain less tuna than advertised, or are only partially made of tuna fish (similar to a past lawsuit's claims about the composition of Subway's chicken). The complaint instead alleges that Subway's tuna contains "no scintilla of tuna at all." It calls Subway's marketing of its 'tuna' products "malicious" and says they amount to false advertising and misbranding.

Subway "deliberately make[s] false and misleading claims about the composition of the Products to increase profits at the expense of unsuspecting buyers," say plaintiffs. According to the complaint, the company makes these intentional misrepresentations to capitalize on consumers' willingness to pay more for real tuna because it is perceived as a premium ingredient with higher nutritional value.

The class-action plaintiffs allege that as reasonable consumers, they expected sandwiches advertised as "tuna" to contain tuna and purchased the product in reliance on these misleading statements. Plaintiffs allege violations of California's prohibition against unfair and deceptive business practices, as well as misrepresentation, fraud, and unjust enrichment.

As to what Subway's tuna sandwiches are actually made of, that will have to remain a mystery while the case proceeds. Plaintiffs allege only that "independent testing has repeatedly affirmed" that the product is "made from a mixture of various concoctions that do not constitute tuna, yet have been blended together by Defendants to imitate the appearance of tuna."

In a statement, Subway denied the allegations, saying there "simply is no truth" to them. "Subway delivers 100% cooked tuna to its restaurants, which is mixed with mayonnaise and used in freshly made sandwiches, wraps and salads that are served to and enjoyed by our guests," the restaurant chain maintained.

Key Takeaways

From tuna to crab, it's a good time to be a fish (and not be eaten), if claims in recent lawsuits hold water. A separate suit that recently escaped dismissal in the 9th Circuit also tackles bait-and-switch tactics, alleging that a restaurant using the word "krab" on its sushi rolls falsely advertised them as containing real crab, despite what defendant alleged is spelling that should have denoted the difference to the reasonable consumer.

Made in Iceland? More Like Made in the USA, Claim Plaintiffs

In a twist on the recent spate of false "Made in the USA" claims, a recent putative class action claims a company selling "Traditional Icelandic skyr" falsely implies the yogurt-like product hails from Iceland, rather than from upstate New York where the product is actually made.

The company does so, plaintiffs allege, to capitalize on the association between skyr and Iceland—similar to that of Scotch whisky and Scotland, maple syrup from Vermont, tomatoes from Italy, and chocolate from Switzerland—because consumers will pay a premium for authentic products from a "specific place."

Icelandic Provisions sells skyr, a "traditional Icelandic dairy product" renowned for its low fat and high protein value, and strongly associated with Iceland, charges plaintiffs. They allege Icelandic Provisions deliberately advertises the product using misleading messaging to dupe the reasonable consumer into believing they are purchasing a product made in Iceland.

Interestingly, Icelandic Provisions never expressly claims the product is made in Iceland.
But to plaintiffs, the marketing uses words and imagery to make the point crystal clear, albeit implied. In addition to the name, the product container depicts an idyllic Icelandic pastoral scene, and the product side panel tells the story of skyr and its associations with Iceland "for nearly 1000 years."

It further describes a product "Made With Original Skyr Cultures." That statement, say plaintiffs, leads consumers to believe the product is made in Iceland and not the more limited and apparently truthful claim that its dairy cultures are transported to New York.

The company's website, featuring a picture of two people in the snow with the words "Hallo from Iceland," also allegedly implies the product is made in the Nordic island nation, and the same goes for a "national advertising campaign filmed 'on location in the coastal village of Vik.'"

Plaintiffs find further evidence of false advertising in the fact that the product back panel first lists a distributor and only at the bottom states the product is "proudly made" in New York "with domestic and imported ingredients." They claim, however, that consumers will stop reading after the distribution information, assuming a "distributed" product is not made in the USA.

The complaint alleges causes of action under Pennsylvania and New York consumer protection statutes and for misrepresentation, fraud, and unjust enrichment.

Key Takeaways

Although using Icelandic imagery, the packaging does, indeed, state the product is made in New York. It remains to be seen whether this case joins those cases finding that the fine print (or ingredient list in a number of food cases) cannot contradict the false impression created by words or images used on the rest of the packaging.

FTC Puts Senior Citizen Newsletter Scam Above the Fold

A publisher accused of peddling publications promising outlandish and deceptive health cures and financial windfalls to seniors has settled a Federal Trade Commission (FTC) complaint by agreeing to pay $2 million in restitution to defrauded consumers.

On its website, Agora Financial bills itself as a trustworthy financial publisher. However, a 2019 FTC complaint tells a different story, alleging that the company made a multitude of false claims to sell its newsletters to seniors. Now the company has agreed to pay the FTC a two million dollar fine to settle allegations it deceptively marketed its newsletters The Doctor's Guide to Reversing Diabetes in 28 Days (The Doctor's Guide), Congress' Secret $1.17 Trillion Giveaway and Lifetime Income Report.

According to the FTC, the company advertised these publications with false promises of health and wealth to capitalize on the concerns of vulnerable senior citizens. To market the "Doctor's Guide" pamphlet, which sold for a whopping $249, Agora touted it as a "shocking new cure" for diabetes.

Advertising for the newsletter was allegedly fraught with falsehoods that ran counter to well-supported, respected medicine, said the FTC. These included baseless claims that doctor-recommended diabetes management techniques such as dietary changes and exercise were inventions of the "mainstream," said the FTC.

Instead, Agora promised, the newsletter would offer the "real cures" and truths about diabetes, which included claims that "radiation" from household items caused diabetes and recommendations to treat diabetes with metals. Agora marketed the diabetes cure newsletter as having a "100 percent success rate."

Agora also marketed newsletters touting financial rewards. The complaint alleges that the company falsely advertised a newsletter that promised to teach consumers how to obtain monetary funds from a law Agora said Congress had passed mandating payments to Republican taxpayers. All consumers had to do to get the money from this fabricated law was pay "a small shipping fee," which signed them up for a subscription to Lifetime Income Report they could cancel within 30 days.

Aside from the monetary penalty, the stipulated settlement prohibits Agora from making any health-related and financial misrepresentations like those that gave rise to the allegations.

Key Takeaways

Older adults are especially vulnerable to scammers, and the FTC has made action against these types of false advertising schemes a priority. Notably here, Agora is on the hook for the entire amount, unlike in many FTC cases where the agency has suspended significant portions of penalty amounts owed by defendants.

These multimillion dollar monetary penalties put teeth into the agency's enforcement actions. That's as sure a message as any that the FTC is serious about pursuing consumer protection actions that target seniors with false promises that hit at the heart of their vulnerabilities.

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