Stay ADvised: What's New This Week, March 7
In This Issue:
- Coca-Cola "No Artificial Flavors or Preservatives" False Ad Suit Fizzles
- FTC Returns Money to Consumers Who Drank Up Teami Deceptive Ads
- Toxin Free's "Sustainable Salmon" Suit Keeps on Swimming as Court Denies ALDI MTD
- Plaintiff Orders Up Allegations of False MSG-free Claims v. Del Monte at the (N. District of CA) Food Court
Coca-Cola "No Artificial Flavors or Preservatives" False Ad Suit Fizzles
It's the end of a long road for plaintiffs claiming that Coca-Cola deceived them about the lack of artificial flavors and preservatives in Coke.
Plaintiffs voluntarily dismissed their lawsuit with prejudice after the 9th Circuit reversed the lower court's grant of class certification, leaving little way forward. Their lawsuit alleged that in using the slogan "no artificial flavors, no preservatives added, since 1886" Coca-Cola employed false and deceptive labeling practices to mislead consumers into thinking the popular beverage contains no preservatives and is healthy when, in fact it, contains phosphoric acid—an artificial flavor and preservative.
At first, the U.S. District Court for the Northern District of California certified several classes of consumers, finding that plaintiffs had standing to bring the case. But in a succinct decision, the 9th Circuit reversed the grant of class certification.
Both courts rooted their analysis in Davidson v. Kimberly–Clark Corp., 889 F.3d 956, 969 (9th Cir. 2018), which offers two examples of the type of threatened harm sufficient to establish standing for a consumer complaining of false advertising: either that the plaintiff will be "unable to rely on the product's advertising … in the future, so she will not purchase it" or that "she might purchase the product in the future, despite the fact it was once marred by false advertising or labeling, as she may reasonably, but incorrectly, assume the product was improved."
The lower court found that plaintiffs met the first prong of Davidson because they had contended that they would consider purchasing Coca-Cola in the future if it was properly labeled and if phosphoric acid was disclosed as an artificial flavor or preservative. The court took into consideration the fact that plaintiffs appeared not to have a "true understanding of what the statements on the labels mean."
But for the appeals court the issue was far simpler and its analysis far more pointed. The 9th Circuit found that plaintiffs lacked standing to proceed as they failed to demonstrate a sufficient threat of future harm to support their allegations. Namely, plaintiffs had failed to show a real desire to purchase Coke, as advertised, in the future—having merely stated that they'd consider purchasing the product.
As the panel wrote:
None of the plaintiffs in this case allege a desire to purchase Coke as advertised, that is, free from what they believe to be artificial flavors or preservatives, nor do they allege in any other fashion a concrete, imminent injury. Instead, as Plaintiffs explained in their brief, they have 'each stated that if Coke was properly labeled, they would consider purchasing it.' Under governing law, such an abstract interest in compliance with labeling requirements is insufficient, standing alone, to establish Article III standing.
In this rare grant of an appeal of a class certification order, the 9th Circuit distinguished between a consumer's mere consideration of a future purchase and a "desire" to purchase the product. The latter, it said, satisfied the requirement that a plaintiff allege they would purchase the product as advertised.
Merely stating that they would "consider" purchasing it did not satisfy Davidson's example of future harm that the plaintiff "might purchase the product in the future." "Such an abstract interest in compliance with labeling requirements is insufficient," wrote the appeals panel. Though the decision is not meant to be cited as precedent, this is a high bar to meet.
FTC Returns Money to Consumers Who Drank Up Teami Deceptive Ads
The Federal Trade Commission (FTC) announced it is returning over $930,000 to consumers who bought deceptively marketed Teami brand tea.
The funds stem from a payment made by Teami to resolve a March 2020 FTC complaint alleging that Teami and principals Adi Halevy and Yogev Malul made deceptive health and weight loss claims about the teas. In particular, the FTC averred that Teami falsely claimed its teas—which contain herb blends—could treat illnesses from cancer to migraines. The company also promised that consumers who purchased and drank its "Teami 30 Day Detox" could lose substantial amounts of weight.
The Commission devoted the vast majority of its complaint to the company's troublesome celebrity endorsements. Teami allegedly hired celebrities like Kylie Jenner, Demi Lovato, and other influencers to peddle its wares but failed to properly disclose to consumers that it was paying its influencers.
Despite the fact that Teami did put in place a social media policy in 2018 at the FTC's behest, and that Teami's contracts with influencers required that endorsers run posts by the company for approval before publishing, the FTC contends that many of Teami's paid influencers promoting its teas and skincare products did not properly disclose the connection between themselves and Teami. There were posts by rapper Cardi B, one by singer Jordin Sparks, and multiple others by influencers with millions of followers.
For example, the FTC called out the fact that Teami influencers often didn't disclose the financial nature of the relationship with Teami on the actual videos they posted, or in many instances the posts didn't feature disclosures in the first lines of visible text so that consumers would not have to click "more" to read the disclosures.
The complaint alleged violations of the FTC Act, including making false and unsubstantiated claims and deceptive failure to disclose a material connection. The order imposed a $15.2 million judgment which was suspended to $1 million due to defendants' inability to pay. In addition to the monetary component, the settlement required Teami to adequately substantiate any health and weight-loss claims and to ensure that endorsers clearly and conspicuously spell out any remuneration received in exchange for marketing the brand.
As for the FTC's refunds, over 20,000 affected consumers will receive an average of $45 from the Commission as a result of the settlement.
Teami is notable for being the first FTC matter to challenge deceptive social media endorsements and obtain monetary redress from marketers who failed to disclose material connections with influencers posting on behalf of brands. Since then, the FTC's done a considerable amount of work targeting deceptive endorsements and educating brands and endorsers about the dos and don'ts of online endorsements.
Toxin Free's "Sustainable Salmon" Suit Keeps on Swimming as Court Denies ALDI MTD
A lawsuit alleging that supermarket chain Aldi falsely advertises its salmon as "sustainable" will proceed after the District of Columbia Superior Court rejected the company's arguments that its label is not misleading.
In May of last year, Toxin Free USA—a nonprofit that bills itself as a public interest organization dedicated to consumer protection—sued Aldi supermarkets, accusing the company of misleading consumers by labeling its Atlantic salmon on product packaging as "sustainable." Toxin Free USA argued that this language wrongly caused consumers to believe "the salmon was farmed in accordance with high environmental and animal welfare standards." In fact, claimed the nonprofit, the salmon is industrially farmed using unsustainable practices.
Toxin Free USA brought the action under the District of Columbia's Consumer Protection Procedures Act (CPPA), which makes it unlawful to falsely or misleadingly advertise goods or services. Notably, the CPPA allows public-interest organizations to sue on behalf of the consumers in certain circumstances.
In arguing for the dismissal of the lawsuit, Aldi argued first that Toxin Free USA filed under the wrong subsection of the CPPA because the complaint alleged the action was brought on behalf of the "general public," which term is used solely in the subsection of the CPPA permitting a plaintiff that has been injured to bring an action on behalf of the "general public." The specific provision of the CPPA that permits nonprofits to assert actions permits them to bring an action on behalf of the interests of a "consumer" or class of "consumers," not specifically the "general public." The court quickly rejected this argument, noting that from the complaint it was clear that if Toxin Free USA had conflated the terms, it did so on purpose as "a public-interest organization may act on behalf of consumers, i.e., the general public of the District of Columbia."
Second, Aldi claimed that its label is not misleading under the CPPA as a matter of law because the reasonable consumer viewing the word "sustainable" in context together with the "Best Aquaculture Practice Certified" label and seal also on the package label would not be misled since the seal "provides verification" that the producers use best practices. The court disagreed, noting that reasonable consumers might not know how reputable the seal is or what the seal means.
The court further cited a number of instances in the complaint where Toxin Free USA met its burden by arguing that consumers may perceive "sustainable" as used in Aldi's packaging as misleading, including consumer research concluding that they would. Toxin Free USA further cited FTC guidance that a product labeled "sustainable" is likely to convey the message that the product has "specific and far-reaching environmental benefits … and has no environmental impact."
An amicus brief filed by trade group Global Seafood Alliance (GSA) in support of Aldi's motion to dismiss didn't persuade the court either. GSA argued that a reasonable consumer would understand the sustainability claim as denoting "seafood sourced according to industry best practices" because these companies "know best" what reasonable consumers understand to be sustainable seafood. The court was not persuaded given GSA's failure to cite any research in support of its claim that consumers perceive "sustainable" to mean that the "product complies with best practices."
Though standing has been an issue in past CPPA cases, the D.C. Court of Appeals held recently that consumer protection nonprofits may sue corporations for false advertising on behalf of consumers without having to prove standing. This case shows just how far the needle's moved in that direction.
Plaintiff Orders Up Allegations of False MSG-free Claims v. Del Monte at the (N. District of CA) Food Court
A plaintiff has filed a class action lawsuit against Del Monte Foods in the Northern District of California, alleging the food giant falsely advertises that its products have no MSG.
Perhaps best known for canned vegetables and fruits, Del Monte also sells broth under its College Inn brand. According to the plaintiff, Del Monte's labeling of the products as having "NO MSG" is false and deceptive because the product contains yeast extract that contains free glutamates.
As plaintiff explains in the complaint, the glutamates in MSG are "chemically indistinguishable" from free glutamates; "to consumers, the term MSG means any free glutamate." Therefore, a food containing glutamate stating "NO MSG," as Del Monte allegedly does, is false and misleading. According to the complaint, companies label products that do not contain free glutamates with the claim "NO MSG" because the designation matters to consumers for health reasons and these buyers seek out and are willing to pay more for "NO MSG" products.
As further alleged in the complaint, Del Monte's "NO MSG" labeling gave reasonable consumers the impression that the broths do not contain MSG. Reasonable consumers would understand a claim of "NO MSG" to mean that a product contains no free glutamates of any kind. Additionally, as highlighted in the complaint, the FDA has recognized as misleading "NO MSG" labels used in products that contain the free glutamate ingredients that Del Monte uses.
Despite Del Monte's labeling of its chicken broths as "NO MSG," the products contain ingredients such as yeast extract which contain free glutamates, thus rendering Del Monte's representations deceptive and its marketing false, alleges plaintiff. Plaintiff also makes the case that Del Monte's disclosure on a side panel in small letters that "a small amount of glutamate occurs naturally in yeast extract" does not render the company's representations any less deceptive.
First, says plaintiff, most reasonable consumers would not notice the qualifying statement, contained as it is in small font on a side panel. Second, irrespective of whether consumers notice the disclosure or not: "Reasonable consumers expect qualifying language on the side of product packaging to be consistent with, and not directly contrary to, the prominent statement on the front of the packaging that the qualifying statement qualifies."
Consumers coming across such a statement would be confused, not elucidated, argues plaintiff. Further, the reasonable consumer would in fact interpret the disclosure to mean that the product does not contain MSG to make the "qualifier consistent with, rather than contradictory to, the prominent NO MSG statement," said plaintiff, thus concluding "that the naturally occurring glutamates are not 'MSG,' … but a different kind of glutamate that does not have the same wellness concerns."
It is too early to determine how the claims and disclosures in this case will be viewed, but this is another example of plaintiffs' focus on product claims with disclosures they argue contradict the claim made. This is because they have had some success on these arguments in the past given how unfavorably courts view disclosures that actually contradict the claims made on packaging.