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

The Federal Food Safety Working Group (“FSWG”) yesterday released a progress report highlighting the groups accomplishments over the last two years and outlining priorities for the future. Established by President Obama in 2009, the FSWG is responsible for building a modern food safety system. Secretary for Health and Human Services Kathleen Sebelius noted in a conference call that until recently, the federal government had been “monitoring a 21st century food system with 20th century tools.” The purpose of the FSWG is to correct that deficiency.

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Last week, plaintiffs filed a class action lawsuit against McDonald's and two of its agencies, arguing that the companies violated the Illinois Prizes and Gifts Act in the context of the "2011 Monopoly Game at McDonald's."

Among other things, the Prizes and Gifts Act requires sweepstakes sponsors to make a list of up to nine disclosures in any "written promotional prize offer," a term that is not defined. The plaintiffs argue that the small Game Stamps consumers collect as part of the Game constitute written promotional prize offers, and that McDonald's failure to make all of the relevant disclosures on the Game Stamps constitutes a violation of the Act. As a result, the plaintiffs claim that they suffered a loss and are entitled to damages.

Although McDonald's did not include the disclosures on the Game Stamps, Game materials referred consumers to the Game's Official Rules for details, and the Official Rules included the required disclosures. This suit challenges a practice that is common in the industry, so companies that offer these types of instant win games should pay attention as they case develops. 

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The Missouri Attorney General recently filed a suit against Gridiron Fantasy Sports and its owner for allegedly defrauding consumers by failing to award prizes to the winners of fantasy sports leagues.

Participants in the fantasy football and baseball leagues were required to pay entry fees for a chance to win prizes. At the end of the 2010 season, the company notified winners and told them how much they had won. During the investigation, however, the AG discovered that the company failed to pay out at least $151,261 of the promised prizes. The suit alleges, in part, that the company used the fantasy baseball entry fees to pay the fantasy football winners and the football entry fees to pay the baseball winners. Because the amount of money available would depend on the number of participants, the company could not guarantee the prizes.

The AG is asking the court to issue injunctions prohibiting further violations of the law, to require the defendants to provide full restitution to victims and pay all court and investigative costs, and to require the defendant to pay the state a civil penalty and an amount equal to 10 percent of total restitution ordered. 

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The FDA has published an interim final rule amending definitions related to required notifications regarding drug shortages. 21 C.F.R. 314.81(b)(3)(iii) requires an applicant who is the sole manufacturer certain approved drug products to notify FDA in writing at least 6 months prior to discontinuing manufacture of the drug product. 21 C.F.R. 314.81(b)(3)(iii) now refers to “discontinuance of manufacture” rather than “discontinuing manufacture,” and defines “discontinuance” as “any interruption in manufacturing of a drug product described in paragraph (b)(3)(iii)(a) of this section for sale in the United States that could lead to a potential disruption in supply of the drug product, whether the interruption is intended to be temporary or permanent” and “sole manufacturer” as “an applicant that is the only entity currently manufacturing a drug product of a specific strength, dosage form, or route of administration for sale in the United States, whether the product is manufactured by the applicant under contract with one or more different entities.”

These changes broaden the scope of reporting required under § 314.81(b)(3) and are intended to help FDA provide better information to physicians and patient organizations and to work with stakeholders to respond to potential drug shortages. Under § 314.81(b)(3)(iii)(a), the reporting requirements apply to drug products that are “life supporting, life sustaining, or intended for use in the prevention of a serious disease or condition” and “w[ere] not originally derived from human tissue and replaced by a recombinant product.” All drug manufacturers should review the revised regulation to determine if their products now fall within the scope of § 314.81(b)(3).

The interim final rule is effective January 18, 2012, and comments are due by February 17, 2012.
 

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As we've noted in previous posts, if a company provides incentives to a consumer in order to encourage the consumer to promote the company's products, the consumer is required to disclose those incentives. It's not just the consumer's problem, though. The FTC has stated that a company can be held liable for a consumer's failure to make the disclosure. Fortunately, though, there are easy steps that a company can take to protect itself in case consumers don’t comply.

The FTC recently investigated a promotion conducted by one of Hyundai’s advertising agencies in which bloggers were given gift certificates as an incentive to include links to Hyundai videos in their posts or to comment on Hyundai’s upcoming Super Bowl ads. Many of the consumers did not disclose that they had received the gift certificates. After reviewing the promotion, however, the FTC decided not to pursue the case for a few reasons.

First, the FTC determined that Hyundai did not know about the incentives, that a small number of bloggers were involved, and that some of them did disclose they had received an incentive. Second, although advertisers can be held responsible for the actions of their agents, the actions in this case ran counter to both Hyundai’s and the agency’s social media policies. Moreover, the agency promptly took action after it learned that some bloggers hadn’t made the appropriate disclosures.

This case serves as a reminder that companies who engage in social media should have a policy that provides endorsers with guidelines about what they can, can’t, and must do. It’s not just enough to have the policy in place, however. Companies must also monitor to ensure endorsers comply with the policy, and take action against those who don’t. 

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The Presidential Commission for the Study of Bioethical Issues has released its report “Moral Science: Protecting Participants in Human Subjects Research.” The report was requested by President Obama to determine if current regulations adequately protect human subjects in federally funded research. The Commission determined that current regulations “generally appear” to protect participants from harm or unethical treatment, “as far as is feasible given limited resources,” but that it cannot say if current regulations are optimal for protecting against avoidable harm and unethical treatment because some agencies have limited ability to identify basic information about all human subject research.

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Yesterday the Consumer Product Safety Commission ("CPSC" or "Commission") announced provisional acceptance of a $600,000 civil penalty settlement with Build-a-Bear Workshop, Inc. The agreement resolves CPSC staff allegations that the company failed to report potential safety issues to the Commission in a timely manner pursuant to Section 15(b) of the Consumer Product Safety Act (“CPSA”). In addition to agreeing to pay the civil penalty, in a very unusual provision, Build-a-Bear agreed not to seek or accept indemnification, reimbursement, insurance, or any other form of compensation from any manufacturer, importer, or retail store in connection with the civil penalty payment.

Specifically, the staff alleged that, from March 2001 to October 2008, Build-a-Bear imported and sold approximately 260,000 folding wooden frame toy beach chairs through its website and stores and that those chairs were defective and presented a substantial product hazard or an unreasonable risk of serious injury or death to consumers. The chairs allegedly had sharp edges that could pinch, lacerate, or amputate a child’s fingertip. The company received its first report of injury in July 2007, then in October 2008 stopped sale and issued a notice to its stores to return all stores in inventory. The company allegedly learned of ten other injury reports between July 2007 and January 2009, but did not report to the CPSC until March 20, 2009. The CPSC claims that the company had obtained sufficient information to reasonably support the conclusion that a report under Section 15(b) of the CPSA was required, but failed to report immediately. Consistent with other civil penalty settlements, the staff’s allegations do not identify exactly when the company should have reported.

This settlement serves as a reminder that companies should continuously monitor consumer complaints from all sources and make determinations about their potential safety implications. Although some companies may not think that eleven injury reports indicate a pattern, the Commission in this case thought they did. Publicly-available information does not reveal why the Commission would have demanded that the company forego any indemnification or other payment from third parties, but we will watch future settlements to see if this is new boilerplate language.
 

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On December 14, 2011, the Inspector General of the Department of Health and Human Services issued a report finding that the Food and Drug Administration (FDA) failed to properly oversee food facility inspections conducted by states because FDA had not ensured the requisite number of inspections and failed to follow-up appropriately when inspections occurred. The report was issued in response to a request from Rep. Rosa L. DeLauro (D-CT), Ranking Member on the Labor, Health and Human Services Appropriations Subcommittee of the House Committee on Appropriations, following a salmonella outbreak attributed to a Georgia peanut processing plant in 2009.

FDA enters into contracts with state agencies where FDA pays the state to conduct inspections of its food facilities. FDA relied on states for a total of 59 percent of the agency’s food inspections in FY 2009, as opposed to only 42 percent in FY 2004, and spent over $8 million on such inspections.

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On December 13, 2011, FDA announced the availability of a draft report entitled “Quantitative Summary of the Benefits and Risks of Prescription Drugs: A Literature Review” for public comment. The literature review was conducted pursuant to section 3507(a) of the Patient Protection and Affordable Care Act (Affordable Care Act) which required the Secretary of Health and Human Services (HHS), acting through the Commissioner of Food and Drugs, to determine whether the addition of quantitative summaries of the benefits and risks of prescription drugs in standardized format (e.g., similar to the “Drug Facts” on over-the-counter-products) to the promotional labeling or print advertising of such drugs would “improve health care decision-making by clinicians and patients and consumers.”

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On December 8, 2011, the Federal Trade Commission (FTC) sponsored a workshop in Washington, D.C. to discuss the privacy implications of facial recognition technology. The web cast is available here.  Facial recognition technology has been integrated in a wide range of products and services, including online social networks, digital billboards and mobile apps, which raise a host of privacy and security concerns, the FTC said.

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Responding to a letter from eight trade associations asking for more time to prepare for compliance, the Food Safety and Inspection Service (FSIS), an agency within the Department of Agriculture, has decided to delay the effective date of final regulations requiring nutrition labeling for major cuts of single-ingredient raw meat and poultry from January 1, 2012 until March 1, 2012. The regulation also mandates that ground or chopped products bearing a “lean percentage statement” include a statement of fat percentage if they do not meet the criteria to be considered “low fat.”

In its preamble to the final rule, FSIS indicated its intention to conduct meetings and webinars on the final rule in advance of its effective date to facilitate compliance. Specifically, FSIS stated that it would provide examples of notices to be used at the point-of-purchase (POP) which would satisfy the labeling mandates for single-ingredient raw meats and also include examples of acceptable labels for ground or chopped products. The agency noted that it had provided such guidance, and additionally held numerous public meetings to answer questions about the rule’s requirements.

However, in their August 12, 2011 letter to the FSIS, eight trade associations cited the agency’s delay of one or two months in making such information available as the basis for their request that FSIS exercise enforcement discretion for a six month period following January 1, 2012, the rule’s initial effective date. While FSIS conceded some delay, it noted that postponing the regulation’s effective date two months would provide ample time for industry to ready for compliance. FSIS indicated that it could provide approval of any labels submitted prior to January 1, 2012 before the regulations became effective. Additionally, the agency explained that it would continue to conduct education and outreach activities to assist in compliance in advance of the new March 1, 2012 effective date.

The notice was published in the Federal Register on December 9, 2011 and is available here.

This post was written by Sarah Roller and Donnelly McDowell.

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On December 9, 2011, the Food & Drug Administration (FDA) issued a notice announcing that a proposal to collect information for a “Experimental Study of Comparative Direct-to-Consumer Advertising” had been submitted to the Office of Management and Budget (OMB). FDA is required to submit the proposal to OMB for review and clearance under the Paperwork Reduction Act of 1995. FDA’s submission reveals its intent to study direct-to-consumer marketing of FDA-regulated products, with a focus on prescription drug advertising.

According to FDA, research findings on the effects of comparative versus noncomparative ads on purchase intentions indicate that comparative ads result in greater purchase intentions than noncomparative ads. Given the prevalence of comparative advertising, "FDA is embarking on the proposed research to ensure that it has adequate information to assess whether prescription drug comparative DTC ads provide truthful and nonmisleading information to consumers."

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On November 30, 2011, the Food and Drug Administration (FDA) held a public meeting to consider the need to amend pre-existing guidelines or adopt new ones addressing microbiological safety in cosmetics. The FDA presented the meeting as an opportunity for industry and other stakeholders to provide input on whether current guidelines sufficed to address cosmetic microbiological safety.

The FDA and industry members have long acknowledged the capacity for microorganisms to grow and reproduce in cosmetics if certain precautions are not taken. This growth can cause chemical changes to the products, which may adversely affect the consumer. In explaining the impetus behind the meeting, FDA representatives noted that current FDA guidelines on microbiological safety have not been revised in some time. These guidelines include the Cosmetic Good Manufacturing Practice (GMP) Guidelines/Inspection Checklist (2008) and the Bacteriological Analytical Manual (BAM), Chapter 23 “Microbiological Methods for Cosmetics” (2001). FDA representatives stated that they were in the process of revising these guidelines and also considering issuing entirely new guidelines on microbiological safety.

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Social media has revolutionized the way companies run sweepstakes, contests, and other promotions. Not only does social media make it possible to do things that weren’t done a few years ago, it also makes it easier. Maybe too easy. Because of that, some companies forget that these promotions are subject to various laws, special requirements, and unique risks. Click here for an article that gives an overview of what you need to know before you run a social media promotion.

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Responding to a request from Representatives Henry Waxman (D-CA), Frank Pallone (D-NJ), and John Dingell (D-MI), on October 24, 2011, the United States Government Accountability Office (GAO) issued a report which examines how the Food & Drug Administration (FDA) has addressed “economic adulteration” affecting the products it regulates and makes recommendations for strengthening regulatory and enforcement policies.

For purposes of the GAO evaluation and report, the GAO defined economic adulteration as “the fraudulent, intentional substitution or addition of a substance in a product for the purpose of increasing the apparent value of the product or reducing the cost of its production, i.e. economic gain.” The GAO study highlighted two specific cases of economic adulteration as indicators of the need for stronger policies to prevent economic adulteration of FDA regulated products. First, in 2007, vegetable protein products were found to contain melamine and cyanuric acid, industrial chemicals, in order to give the products an appearance of a higher protein content. The protein products were subsequently used in pet food and caused an unknown number of illnesses and deaths to dogs and cats. Notably, the melamine contamination case helped to inspire a number of food safety policy reforms, including the enactment of the Food Safety Modernization Act on January 4, 2011, which includes mandatory HACCP-type preventive controls and establishes new safeguards to prevent intentional adulteration of food products. The second case occurred in 2008, and involved the blood thinner known as heparin, which was found to contain oversulfated chondroitin sulfate, a toxic contaminant which was later linked to multiple human illnesses and deaths.

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