Ad Law Access : Washington D.C. Advertising Lawyer & Attorney : Kelley Drye & Warren Law Firm : New York, Chicago, Connecticut, New Jersey, Brussels

Yesterday the U.S. Consumer Product Safety Commission (“CPSC”) announced that Spin Master, Inc., agreed to pay a civil penalty of $1.3 million for selling and failing to report that Aqua Dots, a product Spin Master distributed, contained a substance that metabolizes into the “date rape drug” when ingested. Aqua Dots was a craft kit that consisted of multi-colored beads that stuck together when sprayed with water, allowing children to create various shapes and designs.

Spin Master allegedly received reports in mid-October 2007 of children becoming ill, receiving emergency medical attention, and falling into comas after swallowing Aqua Dots and that Aqua Dots contained 1,4-butylene glycol (“TMG”), which, upon ingestion, metabolizes into gamma hydroxybutyrate (“GHB”), also known as the “date rape drug.” The CPSC also alleges that the company received reports of children becoming ill after ingesting a similar product made by the same overseas factory using the same ingredients list. The company did not file a Section 15(b) Report with the CPSC at that time. After receiving two reports of children ingesting the product and becoming ill, on November 5, 2007, the CPSC notified Spin Master, and two days later the parties announced a voluntary recall of 4.2 million units.

The CPSC claims that Spin Master violated the Consumer Product Safety Act by failing to report in a timely manner and the Federal Hazardous Substances Act by importing and selling a banned hazardous substance. In an unusually detailed response to the Commission’s allegations, Spin Master denies all allegations that they knowingly violated the law. For example, Spin Master states that the product underwent all legally-required testing and that the company engaged an outside testing company to evaluate the toxicity of the product. A board-certified toxicologist conducted a Toxicological Risk Assessment stating that none of the ingredients was banned or restricted for use.

The recall has also triggered product liability lawsuits against Spin Master, including some class action litigation. In August, however, the Seventh Circuit affirmed the lower court’s denial of class certification in one of the cases.

Companies should take note that the CPSC continues aggressive enforcement its civil penalty authority. Even if a company does not participate in the design or manufacture of a product, it must ensure that the product meets applicable safety standards and is safe for use by the intended audience during reasonably foreseeable use and misuse. In addition, when evaluating whether a product presents a substantial product hazard or unreasonable risk of serious injury or death reportable to the CPSC, a company should consider potential product liability exposure.

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As we’ve noted in previous posts and a recent webinar, the way companies collect information through mobile apps has been the focus of several FTC actions, Congressional hearings, proposed legislation, and at least ten class action lawsuits. In response to the confusion over how app developers should deal with privacy issues, the Mobile Marketing Association recently released guidance in the form of a proposed annotated privacy policy.

The proposed policy addresses several key areas, including: (a) what information is collected, and how it’s used; (b) whether the app collects location-based information; (c) whether third parties have access to any information; (d) whether the app works with third parties to deliver targeted ads; (e) whether consumers can opt-out of information collection or sharing; (f) how long information is retained; and (g) how that information is safeguarded. The MMA notes that additional provisions will be required if an app is directed to children under 13. Notably, the MMA does not discuss how the privacy policy should be disclosed.

The MMA states that the guidance is intended to provide a starting point for companies that develop apps, but that it should not be considered an ending point. Given the number of variables in this area, companies are strongly encouraged to consult an attorney before developing an app or drafting a privacy policy. The MMA is seeking public comment on the guidance until November 18, 2011. 

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Yesterday, the Federal Trade Commission (“FTC”) approved a final settlement with marketers of the “Acne Pwner” and “AcneApp” mobile applications (“apps”). This is the first FTC settlement targeting health claims by mobile app developers/marketers, but one of several FTC mobile app enforcement actions.

In the AcneApp case, the defendants claimed that their apps could treat acne with colored lights emitted from a mobile device. To support the claim, the AcneApp marketers relied on a study published by the British Journal of Dermatology, claiming that the study showed blue and red light treatments eliminated p-bacteria (a major cause of acne) and reduced skin blemishes. The FTC determined that AcneApp falsely claimed that the British Journal of Dermatology study proves that red and blue light therapy is an effective acne treatment.

The FTC order prohibits Acne Pwner and AcneApp “from making acne-treatment claims about their mobile apps and other medical devices” without at least two adequate and well controlled human clinical studies. The requirement for two clinical studies is the same standard that the FTC applied in recent settlements with a dietary supplement manufacturer over weight loss claims for its dietary supplements, and with a food marketer over its claims that one of its products reduced the duration of acute diarrhea and reduced school absences. In another recent settlement, FTC ordered Reebok to provide one clinical study to substantiate fitness claims for its toning shoes.

The marketers of Acne Pwner and AcneApp were also ordered to pay the FTC $1,700 and $14,294, respectively.

This blog post was written by Bridget Richardson, Alysa Hutnik and Sarah Roller.
 

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Today, the Food and Drug Administration (“FDA”) released a guidance document for industry titled “What You Need to Know About Administrative Detention of Foods.” The guidance comes just a week after the FDA announced its first administrative detention under the expanded authority granted by Congress in the Food Safety Modernization Act. The FDA will issue an administrative detention order when it has reason to believe that an article of food is adulterated or misbranded, and the adulterated or misbranded food is found during an inspection, examination or investigation under the FD&C Act.

This blog post was written by Sarah Roller and Bridget Richardson.
 

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On October 20, 2011, the Institutes of Medicine (“IOM”) issued Phase II of a two-part report regarding front-of-package nutrition labeling systems and symbols. The report, created by an IOM Committee convened in response to a 2009 Congressional request, provides recommendations regarding implementation of a front-of-package nutrition rating system designed to “encourage healthier choices and purchase behaviors.” Key recommendations include the following:

• Federal agencies should use the IOM Committee’s recommendations to develop a single, simple front-of-package nutrition rating system with symbols that graphically convey calorie information and a “point” value showing whether nutrients of concern (i.e., saturated and trans fat, sodium, and added sugars) are below threshold levels (as established by the Food and Drug Administration (“FDA”) and other federal agencies); and
• The front-of-package system developed by federal agencies should apply to all food and beverage products and replace any other symbol currently being used on the front of packaging.

According to the Committee, a front-of-package system should be modeled off of current government front-of-package ratings programs, like the Environmental Protection Agency’s Energy Star program, which has been “highly successful in changing consumer purchase patterns for household appliance and electronics.” The Committee’s recommendations are intended to serve as the starting point for federal agencies to “develop, test, and implement a single, standard front-of-package system to appear on all products.” As federal agencies review the IOM Committee’s report and determine how a front-of-packaging system should be implemented, food and beverage manufacturers, food retailers, and other entities in the food industry should monitor the agencies' progress and be prepared to provide comments and other information as necessary.

More information regarding the IOM Committee’s report can be found in Kelley Drye and Warren’s October 24, 2011 Client Advisory.  

This blog post was written by Sarah Roller and Megan Olsen. 
 

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On October 19, 2011, the Food and Drug Administration (“FDA”) published a final rule amending its bottled water quality standard regulations by establishing an allowable level of di (2-ethylhexyl)phthalate (“DEHP”). The new DEHP limit and related requirements will take effect on April 16, 2012.
Under Section 410 of the Food, Drug, and Cosmetic Act (“FDCA”), the FDA is required to promulgate bottled water regulations whenever the Environmental Protection Agency (“EPA”) creates or revises its standards for drinking water. The FDA’s final rule, which will be codified at 21 C.F.R. 165.110(b)(4)(iii)(C), is designed to ensure that bottled water meets the same DEHP limits as those set by the EPA for drinking water. The FDA’s final rule also is consistent with the standards set by the International Bottled Water Association for its members. Specifically, the FDA’s new rule includes the following:

• Bottled water may not contain more than 0.006 milligrams/liter (mg/L) of DEHP or the product will be deemed misbranded under Section 403(h)(1) of the FDCA;
• In accordance with FDA current good manufacturing practice (“CGMP”), bottled water manufacturers will be required to monitor their source water for DEHP as often as necessary, but at least once a year, unless they meet the criteria for exemptions under 21 C.F.R. § 129.35.
• Manufacturers will also be required to monitor finished products for DEHP at least once a year; and
• The FDA will determine compliance with the new rule by using the EPA’s analytical methods for measuring DEHP in bottled water.

This blog post was written by Sarah Roller, Bridget Richardson, and Megan Olsen.

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House Commerce, Manufacturing and Trade subcommittee chairman, Mary Bono Mack (R-CA), said yesterday that safe data legislation is her number one priority for the committee. She did acknowledge though that movement on such a bill is unlikely until Energy and Commerce Chairman Fred Upton (R-MI) completes his work on the Joint Select Committee on Deficit Reduction (the Super Committee).

Dissatisfied with current efforts by industry, and concerned that government may do too much, the Chair sought input from industry, advertising, and consumer representatives yesterday at a hearing titled "Understanding Consumer Attitudes Toward Privacy." Committee staff continue to meet with stakeholders on HR 2577, the SAFE Data Act, seeking to develop a national data breach/notification law that would protect consumers, but is no broader than necessary in regulating industry.

With the Super Committee due to present its recommendations in late November and Congress to vote on them before year's end, we anticipate that data breach legislation will be more likely to move in the House next year. Data breach/notification legislation was also mentioned as a priority of the House Republican Cyber Security Legislative Strategy released last week by Rep. Mac Thornberry (R-TX). House Republican leadership has proposed tackling cyber security in small bites, rather than the comprehensive approach of the Senate, making it possible that a data breach bill could move through the House early next year. Stay tuned for further developments.

This post was written by Margaret E. Hardon and Alysa Z. Hutnik.

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The Food and Drug Administration (“FDA”) has released a question and answer guide to its implementation of the fee provisions of the Food Safety Modernization Act of 2011. The purpose of the fee provisions is to allow the FDA to recover reinspection, recall noncompliance, and importer program related costs from domestic and foreign facilities and importers.

Persons responsible for facilities subject to the fees should review the guidance and note that although the FDA began assessing fees for reinspection of domestic and foreign facilities and for failure to comply with a recall order on October 1, 2011, the fees for import reinspection will not be assessed until the FDA has resolved the issues raised in comments on the fee schedule released in the August 1, 2011 Federal Register.
 

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On October 11, 2011, the FTC announced a settlement with Frostwire LLC, a peer-to-peer (“P2P”) file-sharing application (“app”) developer, and its Principal, over charges that the company publicly exposed its app users’ personal information without the users’ authorization, and misled users about the extent to which downloaded files would be shared with a P2P file-sharing network. The FTC claimed that Frostwire’s alleged actions were unfair and deceptive and violated the FTC Act. The 20-year settlement bars Frostwire and its Principal from making material misrepresentations about the file-sharing features of its apps, and from configuring its apps to cause inadvertent public sharing of users’ files. The settlement also requires that Frostwire provide users with clear and prominent disclosures that include information on how to disable the apps’ file-sharing features. Going forward, a violation of the settlement could expose the company and its Principal to up to $16,000 per violation.

Frostwire offers two free P2P file-sharing applications, including Frostwire Desktop for desktop and laptop computers, and Frostwire for Android for mobile devices that use Google’s Android operating system. Both apps enable users to share files ― including photos, videos, documents, and music ― with other users of the Gnutella P2P file-sharing network. According to the FTC Complaint, Frostwire configured the default settings on its Frostwire for the Android app so that, immediately upon installation, the app would publicly share personal files that were stored on the app users’ mobile device. The Commission also alleged that consumers who installed certain versions of the Frostwire Desktop app onto their computer were led to believe that files downloaded from the Gnutella network would not be shared unknowingly with other users of the P2P network.

This case marks the FTC’s third action against a mobile app developer in the past 60 days. In August 2011, the FTC announced a settlement with W3 Innovations over alleged violations of the Children’s Online Privacy Protection Act (“COPPA”), and, in September, the FTC announced a settlement with a marketer that claimed its mobile apps treated acne. These settlements reinforce statements made by the FTC earlier this year concerning its scrutiny of marketing and privacy practices associated with mobile apps. This latest settlement also further underscores that the FTC will hold app developers accountable when the app does not incorporate “privacy-by-design” features, and instead uses default settings that enable the app to share personal data with third parties without the consumer’s informed consent.

Matthew P. Sullivan contributed to this post.

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The Food and Drug Administration (“FDA”) recently completed an evaluation of the legal basis for federal preemption policy statements the agency has issued under the Federal Food, Drug & Cosmetic Act (“FDCA”) during the past 10 years. FDA initiated the review in response to a memorandum issued by President Obama in May 2009 which directed federal agencies to undertake a review of their policy statements concerning federal preemption to ensure that such statements have “a sufficient legal basis.”

In follow-up to the agency’s review, on September 28, 2011, FDA issued a notice that is intended to clarify past FDA federal preemption policy statements. Such statements characterize the scope of implied and express federal preemption that applies to FDA regulations implementing particular FDCA provisions that concern prescription drug and biological product labeling, nonprescription drug products, food standards of identity, and food and dietary supplement product labeling. For more information on the specific policy statements affected by the FDA notice, read the Kelley Drye client advisory.

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The U.S. Environmental Protection Agency (EPA) continues to emphasize enforcement against companies that market or sell products with unregistered claims of protection against disease-causing bacteria and other microbes. In a settlement announced September 28, 2011, EPA levied a fine of $261,000 against computer keyboard and mouse manufacturer, Logitech Inc., for making "unsubstantiated public health claims" about its products in violation of the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA).

Logitech incorporated into its products a widely-used silver-based additive manufactured by AgION Technologies Inc. that is registered with EPA as a product preservative. Products that incorporate such additives are allowed to claim protection against bacteria, mold and mildew that cause odors, staining, or deterioration of the product. Such products are not allowed to claim explicitly or to imply that the product offers protection to consumers against bacteria or other microbes.

In product labeling and marketing materials, Logitech had stated that the silver-based compound provided "protection to prevent the growth of a broad range of bacteria, mold and mildew" and "guards against growth of a broad range of bacteria." EPA policy contends that unqualified claims of antibacterial efficacy are potentially misleading to consumers if

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