Stay ADvised: What's New This Week, June 21
In This Issue:
- Lawsuit Targets Sunscreen Manufacturer Over Product Labeling
- Smorgasbord of Factors Help Plaintiff Escape Subway Ads + Arbitration
- Coca-Cola Ads Call for a "World Without Waste," but Lawsuit Claims That's a "Mountain of Greenwashing"
- It's Refund Time for Consumers Misled by Rent-To-Own Co.
Lawsuit Targets Sunscreen Manufacturer Over Product Labeling
A recently filed class action lawsuit alleges that Neutrogena and its parent company are marketing a number of sunscreens as "safe and effective" even though the products allegedly contain the potentially carcinogenic chemical benzene. The lawsuit seeks to capitalize on a recent report by the so-called independent testing company Valisure, which found that a wide range of sunscreens by a number of different manufacturers contain unsafe levels of benzene—a finding that is by no means universally accepted.
Nonetheless, the lawsuit alleges that the sunscreens contain benzene in amounts above those considered acceptable by the scientific community and the Food and Drug Administration (FDA). Plaintiffs allege the Neutrogena products were falsely advertised because the label did not alert consumers to the presence of benzene, despite the manufacturer's knowledge of its presence.
The suit, filed in Florida federal court, bases the allegations on the "independent testing" by Valisure, which markets itself as an "analytical pharmacy," meaning that it conducts chemical analysis of drugs to test for issues relating to public health—for example, the presence of potentially dangerous substances such as benzene—and provides "drug product certification" as an assurance to wholesalers and consumers. Valisure is a for-profit corporation that in early May 2021 unveiled a new partnership with an online pharmacy through which it will provide Valisure-certified drugs exclusively to consumers.
Valisure earlier filed a citizen petition with the FDA that put in motion the consumer complaint and significant media coverage concerning the presence of benzene in sunscreen that followed. The petition warned the FDA that Valisure's laboratory testing showed high levels of benzene in certain batches of sunscreen products from many brands, including some Neutrogena products. It noted that the World Health Organization (WHO) classifies benzene as carcinogenic and that the FDA has stated the chemical should not be used because of its toxicity.
Valisure alleged that the products were misbranded under the Federal Food, Drug, and Cosmetic Act (FDCA) and asked the FDA to take action including, among other things, by developing guidance on the use of benzene in sunscreens. The petition contains a chart listing the sunscreens it says contain benzene at unacceptable levels, as well as those sunscreens where no benzene was found.
Valisure's petition noted that "the presence of this known human carcinogen in sunscreen products widely recommended for the prevention of skin cancer and regularly used . . . in large volumes… [is] especially troubling." Experts, however, disagree on whether Valisure's interpretation of the data stands up to scrutiny, noting benzene is difficult to avoid as it is a byproduct of many chemicals used in the world and, in fact, is one of the top 20 chemicals used in the United States.
According to these experts, the benzene levels in Valisure's report are equal to just half the amount a person would breathe in city air during one day. Dermatologists have also noted that the issue is not with sunscreen generally but is a contamination issue with certain sunscreens.
Indeed, even Valisure noted that "we want to make sure that people understand this particular problem doesn't appear to be an issue directly with sunscreen." Further, for many of the sunscreens it tested, Valisure found less than 0.10 ppm of benzene, which even Valisure said "warrants further investigation but is likely of less concern."
For its part, as of this writing, the FDA has yet to respond to the allegations in Valisure's petition, and the FDA's response, if and when it comes, will likely impact these proceedings.
Although there have been other lawsuits alleging harm caused by benzene, this is the first lawsuit alleging false advertising related to the presence of benzene in sunscreens. Given the lack of precedent, arguably questionable testing, and because experts disagree on whether the presence of benzene in sunscreens is harmful and, if so, at what amounts, plaintiffs may face an uphill battle here.
Smorgasbord of Factors Help Plaintiff Escape Subway Ads + Arbitration
"A combination of barriers" encountered by a plaintiff who alleged that Subway sandwiches would not stop sending her ads in violation of the Telephone Consumer Protection Act (TCPA) has led the Second Circuit to rule that she is not bound by the arbitration clause in Subway's terms and conditions.
Ostensibly looking to "eat fresh," plaintiff Marina Soliman walked into a Subway store and, after purchasing her sandwich, was directed to a print advertisement hanging in the store that offered a free sandwich in exchange for signing up to receive weekly text message deals from the chain.
Alongside the advertising text, the print ad contained a block of small print that said many things (including the offer was time limited, additional charges could apply, and more.) Most importantly for plaintiff's case, it said that full terms and conditions could be found at the Subway website and provided the URL.
Soliman signed up by texting Subway and got her electronic coupon for a free sub. A few months later, apparently tired of the offers for sandwiches, she texted "STOP" to the number provided and was texted back assurances that the messages would cease.
The text messages did not end, however, and Soliman sued Subway, alleging violation of the TCPA. Subway moved to compel arbitration based on its terms and conditions obliquely referenced in the ad in question. The district court denied the motion and Subway appealed.
The Court of Appeals disagreed with Subway (Soliman v. Subway Franchisee Adver. Fund Trust, Ltd., No. 20-946, 2021 U.S. App. LEXIS 16943 (Second Cir. June 8, 2021)) that the advertisement put plaintiff on reasonable notice of the terms and conditions, including the arbitration terms. The court held that "a reasonable consumer would not realize she was agreeing to be bound by such terms and conditions by texting Subway in order to begin receiving promotional offers."
The court outlined a number of factors that rendered the ad and its small print disclaimer insufficient notice to bind plaintiff:
- It was unclear what the size of the advertisement was, which was material to the conspicuousness of the text referencing the terms and conditions, "a critical factor" in determining whether there was "clear and conspicuous notice to Soliman."
- Subway buried the reference to the terms in a large paragraph of fine print, neither offsetting nor emphasizing it.
- There was no attempt to clearly signal to the consumer that by "continuing with the transaction, she will be agreeing to the terms." The ad merely mentioned the terms and conditions but said nothing about the customer agreeing to them by taking part in the offer. This was especially important in the context of a coupon where the reasonable consumer could just assume the terms were included to provide more information about it.
- The URL was in hard copy, requiring plaintiff to type in a 37-character URL to reach the terms.
- Even if Soliman would have typed the full URL it would have taken her to a website that emphasized that these were the terms and conditions for use of the Subway website, which would have led the reasonable consumer to assume that the terms did not apply to the text offer but to users of the website.
This is not Subway's first rodeo seeking to defend a "cluttered site." There have been a slew of TCPA suits against the company, which have gone both ways on arbitration. Less than a year ago, the Second Circuit similarly jettisoned Subway's arbitration clause in an analogous TCPA suit, finding that plaintiff's so-called agreement was not binding because the link to it was difficult to locate on a "cluttered" website.
Nonetheless, as the Second Circuit emphasized here, Meyer v. Uber Techs is still good law, and terms and conditions are generally binding on users in analogous circumstances. But there are limits to this rule in the Second Circuit, reminding advertisers that the ABCs of clear and conspicuous disclosure apply and informed consent must be informed.
Coca-Cola Ads Call for a "World Without Waste," but Lawsuit Claims That's a "Mountain of Greenwashing"
In a new lawsuit against the Coca-Cola Company, an environmental organization is claiming the beverage maker's "World Without Waste" marketing campaign against plastic waste is false advertising amounting to nothing less than "greenwashing."
Environmental nonprofit Earth Island Institute filed a suit against Coca-Cola in the Superior Court of the District of Columbia, alleging Coca-Cola's sustainability marketing claims are an "unlawful trade practice" in violation of the District of Columbia's Consumer Protection Procedures Act (CPPA). The group's complaint alleges that Coca-Cola deliberately and falsely paints the company and its practices as sustainable to appeal to the growing market of consumers concerned about the impact of plastics on the environment.
According to the complaint, the company markets its commitment to "taking responsibility" for plastic waste by encouraging recycling and introducing a paper bottle. Its campaigns claim that it is "committed to getting every bottle back" by reducing plastic waste. Other ads tout sustainability practices. "Through this advertising approach . . . Coca-Cola portrays itself as committed to the principles of a circular economy and taking personal responsibility for the plastic waste it produces," alleges Earth Island.
Although Coca-Cola represents that it is working to reduce plastic waste and encourage recycling, Earth Island alleges the company's efforts actually do little to reverse its impact, making any promotion of sustainable practices bogus. That, according to the group, is because Coca-Cola does not run a sustainable business: it produces more plastic than recycling could ever properly process as "recycling is not an unqualified solution to" plastic pollution and—according to company documents—has no intention of moving away from plastic products.
Earth Island claims it "has a strong interest in truth-in-advertising regarding environmental concerns" and invokes the CPPA in an attempt to enjoin Coca-Cola's allegedly false advertisement in its "World Without Waste Campaign" and a declaration that the company is in violation of that law. The CPPA is generally enforced by D.C.'s attorney general but also provides for a private right of action, including providing standing for public-interest organizations on behalf of consumers and the public for relief from conduct unlawful under the statute. Standing has been an issue for plaintiffs in other similar lawsuits.
Earth Island has previously filed a heap of suits against major manufacturers, including Coca-Cola, charging their plastic packaging is polluting waterways, coasts and oceans.
Environmentally responsible and sustainable practices have become a hallmark of corporate image advertising seeking to woo the environmentally and socially conscious customer. Aspirational or false advertising? What must plaintiffs allege to ensure standing? These and other questions will be answered as these type of cases progress. We will watch what happens here with the Earth Island Institute suit.
It's Refund Time for Consumers Misled by Rent-To-Own Co.
The Federal Trade Commission (FTC) announced it has begun handing out $174 million in refunds to consumers affected by an overcharging scheme conducted by Progressive Leasing, a rent-to-own outfit that settled with the FTC last year over allegations it misled consumers about its prices.
The FTC complaint alleged that Progressive deliberately misrepresented its financing terms, "leading consumers to believe that they would not be charged more than an item's sticker price," when in fact Progressive charged far more.
Through in-person advertisements and pitches, Progressive marketed "same as cash" offers that were tailored to obfuscate the true cost of the financing to make it appear as if no interest would be assessed, even if consumers had a negative credit score. One such claim was that the company offered "90 days same as cash" financing. Associates were also instructed to dodge questions about interest rates, according to the FTC.
Contrary to these representations, the FTC complaint asserted Progressive customers "always end up paying more than the retail price to purchase merchandise through Progressive—often substantially more." Progressive purportedly charged hundreds of dollars more than the price advertised to consumers, even to those who paid off the cost within the 90 days. Progressive was no stranger to complaints regarding the mismatch between its marketing claims and its actual business practices.
During the course of a single year, it received more than 15,000 complaints from some consumers who claimed they paid more than double what they were initially promised, and from others who were sold on a plan without interest and then had to pay significant interest. Indeed at least one retailer complained that Progressive was making it look like "shady sales people," according to the FTC.
The settlement, whose monetary component is now about to be distributed, also enjoined Progressive from continuing to misrepresent the costs and nature of its product.
The refunds total approximately $85 dollars per consumer which for many will not cover the cost of the excess funds they paid but may at least provide some measure of consolation. Clearly dissatisfied with the level of remuneration, Commissioner Rebecca Kelly Slaughter dissented to the original settlement because in her view it did not provide sufficient monetary relief and noted the complaint should have contained a Restore Online Shoppers' Confidence Act (ROSCA) claim.