In case you missed it, last week (on November 30), the National Telecommunications and Information Administration (NTIA) announced that it would convene a series of virtual listening sessions on privacy, equity, and civil rights. According to NTIA, the sessions (scheduled for December 14, 15, and 16) will provide data for a report on “the ways in which commercial data flows of personal information can lead to disparate impact and outcomes for marginalized or disadvantaged communities.”

NTIA cites the following examples to illustrate how data collection, “even for legitimate purposes,” leads to disparate impacts:

  • Digital advertising offers content and opportunities based on proxy indicators of race, gender, disability and other characteristics, perpetuating historical patterns of discrimination.
  • Insurance companies use information such as neighborhood, safety, bankruptcy, and gun ownership to infer who will need expensive health care, warranting higher premiums.
  • Universities predict which students will struggle academically based on factors that include race.

Why is this News?   

As our readers may have noticed, NTIA is hardly the first agency or constituency to draw the link between data collection and discrimination. In 2013, Harvard Professor Latanya Sweeney published a groundbreaking study showing racial discrimination and stereotyping in online search and ad delivery. In 2014, FTC hosted a workshop, followed by a report (Big Data: A Tool for Inclusion or Exclusion?) detailing the problem and making recommendations for companies and researchers. In recent years, scores of studies and conferences have examined the discriminatory assumptions embedded in algorithms and artificial intelligence (AI). And civil rights groups have raised concerns for years and, in 2019, obtained an historic settlement with Facebook to stop discrimination on its online advertising platform.

NTIA’s announcement is nevertheless significant for two reasons. First, by its own description, NTIA is the President’s principal advisor on information policy issues, responsible for evaluating the impact of technology on privacy and the sufficiency of existing privacy laws. Further, its announcement states that the listening sessions are designed to “build the factual record for further policy development in this area.” For these reasons, the notice has been heralded as the Administration’s “first move” on privacy and a possible attempt to revive stalled efforts in Congress to enact a federal privacy law.

Second, in case there was any doubt, NTIA’s announcement affirms that the link between privacy and civil rights is now a widely accepted policy position, and will remain front-and-center in any debate about whether to enact a comprehensive federal privacy law. Whereas once there were questions about whether civil rights provisions should be “added” to a privacy law, now they’re essential building blocks.

This is true not only among Democrats, but among Republicans too. For example, provisions related to discrimination and/or algorithmic decision-making appear in recent privacy legislative proposals from, not just Representative Eshoo and Senator Cantwell, but also Senator Wicker and the Republican members of the House Energy and Commerce (E&C) Committee. The Republican E&C bill is especially notable for how much it leans into the issue – prohibiting data practices that “discriminate against or make an economic opportunity unavailable on the basis of race, color, religion, national origin, sex, age, political ideology, or disability or class of persons.”

But What Does this Mean for Companies Today?

You may be wondering – what does this mean for companies now, with Congress still (endlessly) debating whether to pass federal privacy legislation? It means that:

  • Data discrimination is on everyone’s radar, regardless of whether Congress finally decides to pass a federal privacy law.
  • Companies should expect more enforcement – even now, under existing laws – challenging data practices that lead to discriminatory outcomes. Such laws include the FTC Act (recently used to challenge racial profiling by an auto dealer), state UDAP laws, the Fair Credit Reporting Act, the Equal Credit Opportunity Act, and (of course) the civil rights laws.
  • To steer clear of discrimination (and any allegations of discrimination), companies should test their data systems and use of algorithms and AI for accuracy and fairness before using them in the real world.

We will continue to monitor developments on this issue and post updates as they occur.

NTIA’S LISTENING SESSIONS ON PRIVACY AND CIVIL RIGHTS: WHAT’S THE SIGNIFICANCE?

In a post last week, we looked at NAD’s review of Everlane’s green claims relating to the company’s use of recycled plastic in its products and its aspirational goals to remove virgin plastic from its entire supply chain by 2021. In this post, we’ll look at what NAD had to say about Everlane’s “Safer For The Environment” claim.

Everlane advertised some of its apparel as “Safer For The Environment: This product is dyed with bluesign®-approved dyes, which are safer for dyehouse workers and better for the environment.” Bluesign is a third-party certification that assesses chemical safety standards in the textile industry and evaluates their impact on human health and the environment. Product certification requires auditing and verification that the manufacturing process complies with Bluesign’s rules and chemical safety standards at each step of the supply chain. Everlane relied on its bluesign certification where 12% of its mills and 10% of its factories are bluesign-certified and noted its goal of fully adopting Bluesign certification by 2025.

When reviewing this claim, NAD considered the reference to the Bluesign third-party certification as a qualification for the general environmental benefit claim. NAD determined that while the Everlane claim is qualified as it pertains to why the product is safer (use of bluesign®-approved dyes), there was no immediate reference to Bluesign as an independent certification on the specific product page where the “safer for the environment” claim appears. We interpret that to mean that NAD thought referencing the certification was similar to a general environmental benefit claim without explaining more about the certification. Thus, NAD recommended that Everlane explain that Bluesign is an independent third-party certification designed to remove harmful chemicals from the environment.

NAD also evaluated whether or not the certification provides a reasonable basis for the claim. While NAD found Bluesign to be a reliable and effective third-party certification body for assessing chemical safety, it noted that Bluesign assesses only one out of five areas in which a material’s environmental impact is typically assessed. For example, a widely recognized material assessment tool in the fashion industry, the Higg Material Sustainability Index (“MSI”), evaluates the environmental impacts of a material in five areas, and chemical composition is just one of those areas. In addition, NAD concluded that consumers may not recognize the nascent state of Everlane’s adoption of Bluesign certification. Based on this assessment, NAD recommended that Everlane qualify the claim to clearly convey that Bluesign has a more limited environmental impact on environmental practices and Everlane’s nascent incorporation of the certification.

This serves as a reminder for fashion companies wanting to demonstrate their efforts and commitment to the environment to consider whether any claim they want to make needs language to explain the claim or otherwise clarify any limitations.

Katrina Hatahet, a law clerk with Kelley Drye & Warren, assisted in the drafting of this post.

As advertisers wait to see what the FTC will do after sending 700 warning letters related to influencers and incentivized reviews, the NAD has been resolving disputes on similar issues. Yesterday, NAD announced a new decision involving incentivized reviews. Although the decision is consistent with previous cases in this area, there are some nuances worth exploring.

Use of General Disclosures

Byte, a company that sells teeth aligner products, featured various customer reviews on its website. While some of those reviews were written by independent customers, others were written by customers who had received an incentive in exchange for the review. As our readers know, companies must disclose when reviews are incentivized. Here’s how Byte did it:

“We’ve asked our reviewers to share the good, the bad, and the ugly with us. These reviews may include ones where known purchasers were given free product in exchange for their honest opinions.”

Byte argued that this general disclosure was sufficient and that it was both impractical and unnecessary to individually flag each incentivized review. Although it may have been impractical to do so, NAD found that it was necessary. Readers should know specifically which reviews were incentivized.

Consumer Reviews on a Third-Party Site

NAD also considered whether customers reviews on BestCompany.com included the necessary disclosures. Byte argued that it should not be responsible for reviews on a third-party site that it does not control. Although that may be the correct analysis in many cases, the situation in this case was a little different.

NAD noted that Byte pays Best Company to solicit reviews and that it has a relationship with Best Company to promote its products. When “Best Company promotes Byte’s products as a result of this relationship, it is advertising for Byte.” Accordingly, “Byte has ultimate responsibility for advertising claims run by Best Company on its behalf” and Byte should have ensured the each incentive review included the necessary disclosures.

Ranking Claims

Best Company ranks various invisible braces on its site, and Byte took the top place in several areas. When a site has a connection to the companies it is reviewing, that must be disclosed. Best Company did that through a link at the top of the site labelled “Income Disclosure.” Consumers who clicked on that link would find a disclosure which stated, in part, that Best Company attempts to “partner with all the companies that we review, and may get compensated when you click or call them from our site.”

NAD found the disclosure wasn’t sufficient, for a number of reasons. Consumers would not see the disclosure, unless they clicked the link, and there was nothing about the link to suggest that consumers should click on it to understand Best Company’s relationship with the companies they reviewed. Moreover, even if consumers were to click on the link, they wouldn’t be able to tell which companies provided compensation. As above, a general disclosure is not enough.

Lessons

This decision makes clear that advertisers need to clearly disclose when a reviewer – whether a customer or a review site – has a connection to the advertiser. That disclosure needs to be clear and specific, even if it difficult to make that happen. The decision also highlights the principle that if an advertiser engages another company to promote its products or services, the advertiser will likely be held responsible for the other company’s activities.

Subscription services and other automatic renewals continue to be a hot topic, at both the federal and state levels. The FTC recently announced that it was going to increase its enforcement against companies that don’t comply with the law, while various states have been updating or passing new laws. Next up are new laws in Colorado and Delaware.

The key requirements are largely consistent with the ones highlighted by the FTC (and which are also reflected in other state statutes):

  • Disclosure:  Marketers must clearly and conspicuously disclose key terms, such as that the contract will automatically renew unless a consumer cancels, the length of the term, the amount of the charges, and the cancellation policy.
  • Consent:  Marketers must get consent to the autorenewal terms.
  • Reminders:  Marketers must send reminders before a contract renews within a specified timeline. The reminders must generally inform consumers that the subscription will renew unless cancelled, and provide cancellation instructions.
  • Cancellation:  Marketers must establish an easy-to-use cancellation mechanism. For example, if consumers sign up online, they should generally be able to cancel online.

It’s important to note that although automatic renewal laws have similar requirements, they can differ in important ways. For example, although theRenewal Button Colorado law applies to most subscription plans, the Delaware law only applies to subscriptions that involve “merchandise” though that term is still defined pretty broadly. And although the Colorado law can only be enforced by the state AG or DAs, the Delaware law also includes a limited private right of action.

Both laws will take effect on January 1, 2022. As our colleagues wrote in a recent post, this is an area where we expect to see more aggressive AG enforcement.

Welcome back from the annual food coma known as Thanksgiving dinner.  If you’re still dreaming of cranberries, stuffing, and pumpkin pie, continue the gastronomic journey with our monthly wrap up of what’s been going on in the food court, NAD’s opining on use of emojis to convey advertising claims , and highlights from FDA’s recent summit on foods sold in e-commerce.

October Food Filings…More of the Same

As we have seen throughout the year, October brought a number of new class actions, mostly filed in various federal courts in Illinois, challenging representations that plaintiffs believe suggest the use of a specific ingredient in the product, as opposed to describing the product’s flavor.  These suits include challenges to:

  • Bud Light’s Platinum Hard Seltzer use of agave syrup, as opposed to the more desirable agave spirit (N.D. Illinois);
  • Ore Ida pizza bagels’ use of a “cheese blend” despite the label’s suggestion that the product contained mozzarella, cheddar and Monterey Jack cheese (N.D. Illinois);
  • The Kroger Company’s use of artificial smoke flavor in its smoked gouda cheese rather than subjecting the cheese to a smoking process (E.D. Wisconsin);
  • Kellogg’s inclusion of fruits other than strawberries in its strawberry Pop Tarts product (S.D. New York);
  • Trader Joe’s use of combined strawberry and apple filling in its strawberry flavored “Frosted Toaster Pastries” (N.D. Illinois);
  • Lorna Doone’s use of oils and baking soda instead of butter in its shortbread cookies (S. D. Illinois); and
  • Whole Foods’ use of chocolate substitutes and vegetable oil as opposed to cacao ingredients in its vanilla ice cream bars marketed as being “dipped in organic chocolate” (N.D. Illinois).

We also observed a number of new “natural” filings against the food industry, including multiple suits challenging the use of artificial preservatives and flavorings such as citric acid, ascorbic acid, and malic acid in products marketed as “natural.”

There were also a number of health related claims filed in October.  Two such suits were filed challenging various kombucha drinks marketed in a way that suggests they can aid health when, in fact, they contain high amounts of sugar (N.D. California) or the benefits will only be observed by a small portion of the population with certain vitamin deficiencies (N.D. Illinois).  Another alleges that Stop & Shop’s “High Potency Fish Oil” fails to provide promised health benefits because it has been deprived of its omega-3 fatty acids through a chemical process called transesterification (S.D. New York).  And a fourth suit alleges that Bowmar Nutrition LLC’s whey protein-fortified nut spreads, powders, bars and frostings sold as dietary supplements and food replacements contain substantially less protein than represented on the products’ labels and website (S.D. Iowa).

And Some Victories In The Courts

Despite the number of filings, the courts issued a handful of victories for the food industry in October.  In Amin v. Subway Restaurants, the Northern District of California dismissed a putative class action alleging that Subway misrepresented that its products were manufactured with 100% sustainably caught skipjack and yellowfin tuna.  More specifically, the plaintiffs alleged that the tuna was not sourced from sustainably farmed fisheries, and did not even consist of 100% tuna.  The Court dismissed the complaint, finding that it failed to identify the specific representations being challenged, but granted plaintiffs leave to amend.

In Chong v. Nestlé Water North America Inc., the Ninth Circuit affirmed the dismissal of claims that Nestlé’s Arrowhead Water was sourced exclusively from Arrowhead Mountain.  The Court found that this was one of the “rare” cases where it could conclude that no reasonable consumer would be misled based on the pleadings and product labels alone.  The product label specifically noted that the water was collected from various mountain springs, and not from one specific mountain, and the Court ruled that the mountain and lake images on the label would not cause reasonable consumers to think otherwise.

In Vizcarra v. Unilever United States, Inc., the Northern District of California denied class certification in a suit alleging that Breyers’ Natural Vanilla Ice Cream contained only natural vanilla.  In so ruling, the Court found flaws in the plaintiff’s consumer perception survey, namely that the survey did not test the effect of the vanilla representations and instead tested the entire package which contains other statements and elements that were not being challenged in the suit.  With no other evidence suggesting class-wide deception, the Court found that the central question in the case could not be resolved with common proof and therefore class treatment was inappropriate.

Finally, in Iglesia v. Tootsie Roll Industries, LLC, the District of New Jersey dismissed a slack fill case filed against Tootsie Roll Industries, alleging that the company dramatically underfilled boxes of Junior Mints and Sugar Babies.  First, the court ruled that the plaintiff did not have standing to assert his claims regarding Sugar Babies, as he only alleges to have purchased Junior Mints, and the two products have different sizes and volumes, and contain different net weights.  As to the products that Plaintiff did purchase, the Court ruled that the product’s disclosure that it was sold by weight, and not volume, would not confuse a reasonable consumer and that the product’s statement of net weight was obviously displayed on the front panel of the product’s packaging.  Finally, the Court ruled that the plaintiff’s conclusory allegation that he was “shortchanged” was insufficient to establish damages, and that he should have specifically alleged how much he paid for the product and/or facts relating to the price of the product more generally.

NAD

The “Nauseated Face Emoji”  (and others) Can Convey Claims

In a SWIFT challenge between sports drink titans Stokely Van-Camp, maker of Gatorade, and BA Sports Nutrition, maker of BodyArmor sports drink, NAD determined that emojis can convey claims.  The case involved social media posts by Cleveland Browns quarterback Baker Mayfield, who is also a BodyArmor endorse.  As described in the decision, “The short video at issue begins with the caption “BLIND BODYARMOR TASTE TEST WITH BAKER MAYFIELD [eyes emoji].”  Standing on a practice football field dressed in  workout  attire,  Mr.  Mayfield  engages  in  a  blind “taste  test”, attempting to identify which of BodyArmor’s various flavors he has been handed by an individual who is off-screen. As Mr. Mayfield correctly verbally identifies the first three BodyArmor SuperDrink and BodyArmor Lyte flavors he samples, a green checkmark appears on the screen after each correct answer.  He is then handed what is clearly a bottle of Gatorade’s Orange Thirst Quencher drink.  After taking a sip, a green emoji depicting a face holding back vomit is displayed on the screen (the “Nauseated Face Emoji”), alongside the popular yellow laughing “Face with Tears of Joy Emoji.” Mr. Mayfield spits the Gatorade out on to the ground, and says to the camera, “Yo, that is not cool. That’s awful,” while removing his blindfold and shaking his head.  Mr. Mayfield’s accounts caption the video with, “I’m not sure I’ll ever forgive you for this.” As shared by BodyArmor, the video is captioned “C’mon @BakerMayfield, please return our calls! We’re very sorry!!! [3 Face with Tears of Joy emojis] #TeamBODYARMOR.”

In addition to contending that the video disparaged Gatorade, the challenger requested NAD’s review of four express claims:  (1) Gatorade is “awful”; (2) having to drink Gatorade is “not cool”; (3) Gatorade is nauseating (as depicted via nauseated emoji); and (4) people spit Gatorade  out  after  drinking  it.  The advertiser asserted that the video was a “social media joke” and that the emojis were subjective expressions open to different interpretations.  The advertiser also claimed that the video was puffery and did not convey objectively provable claims.

NAD focused on the “unmistakable negative” references to Gatorade in Mayfield’s express statements, e.g., Gatorade is “not cool”.  Further, Mayfield spit out the Gatorade, an action timed with use of the “Nauseated Face Emoji” showing on-screen.  In finding the video disparaging, NAD characterized it as a “harshly negative” statement about a specific BodyArmor competitor.  The disparaging nature of the message also negated BodyArmor’s argument that the video constituted puffery.  The decision highlights several recent NAD cases on point but ultimately concludes that “[e]xaggerated images and humor can be used to emphasize a message provided, however, that the underlying message is truthful.  Here the advertising makes an expressly  disparaging statement that Gatorade  is  “awful,” nauseating, or undrinkable. Because the Advertiser did not have any support for the messages about Gatorade, NAD recommended that the Advertiser discontinue the express claims made in the video.”

FDA

FDA hosted a three-day virtual summit to explore the safety of foods sold in e-commerce.  Key themes included the following:

  • The Last Mile – Even pre-pandemic, FDA was concerned about food delivery and, specifically, how to ensure food safety in the final stages before it reaches the end consumer.  As food delivery and takeout options proliferated during the pandemic, the safety concerns did as well.  Specifically, traceability poses a particular obstacle as delivery drivers may pick up food at multiple restaurants or stores for delivery to multiple different consumers.  These drivers may use varying measures to ensure food safety, such as insulated bags or coolers, or take no safety measures whatsoever.  This variability in practices, training, and even awareness of the potential problem, along with willingness on the part of industry to address the issue, emerged as key issues.
  • Cross-Contamination and Traceability – With the rise of subscription and e-commerce-only food options such as regional offerings for nationwide delivery, gift baskets, and meal kits, participants noted that labeling compliance – particularly use of lot codes and other traceability indicators – may not be sufficient to adequately identify adulterated or mislabeled products if needed.  Further, given the single serving and convenience-sized packaging commonly used in meal kits, there is potential for cross-contamination particularly if an unpackaged but contaminated item is included in the kit.  This very concern may have manifested in the form of the ongoing onion recalls due to presence of salmonella, which impacted meal kit services including HelloFresh and Everyplate.
  • New Models – As food delivery evolved and customers trended toward at-home dining, the restaurant industry has evolved as well to incorporate “ghost kitchens”.  “Ghost kitchens” are restaurant kitchens used only for preparation without any in-person dining areas.  For example, these kitchens may prepare orders only for delivery such that the ultimate customer never knows if their food was prepared in a traditional sit-down restaurant or a “ghost kitchen” functioning either out of standalone or, potentially, central kitchen-type location shared with similar services.  On the food retail side, a similar concept called “dark stores” have cropped up, in which the stores function only as fulfillment operations without any in-person shopping available.  Given the limited visibility into these operations, the concern is that it may be difficult for consumers – much less regulators – to identify food safety concerns.

FDA accepted comments through November 20, 2021 at docket no. FDA-2021-N-0929.  While the comment period has ended, stakeholders should view this as an ongoing conversation with the agency and continue to maintain the dialogue to the extent they have useful perspectives to share.

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For decades, the FTC has explained that the omission of information can lead to liability.  It is also a canon of statutory construction that an amendment helps reveal legislative intent. And of course, your mother put it simply: words that you say (and take back) have meaning.

Earlier this month, the Commission released its draft Strategic Plan for 2022 to 2026, which included a glaring revision to the FTC’s Mission Statement.  See for yourself:

  • Strategic Plan for Fiscal Years 2018 to 2022: Protecting consumers and competition by preventing anticompetitive, deceptive, and unfair business practices through law enforcement, advocacy, and education without unduly burdening legitimate business activity (emphasis added).
  • Draft Strategic Plan for Fiscal Years 2022 to 2026: Protecting the public from deceptive and unfair business practices and policing unfair competition through law enforcement, advocacy, research, and education.

Pretty bold retraction, eh?  Especially given the heat directed to Chair Lina Khan from Members of Congress and others regarding her perceived attitude toward U.S. businesses. Just last week, the U.S. Chamber of Commerce issued a blistering statement, accusing Chair Khan of caving to “undue influence” from the Biden White House, “misusing her authority” by issuing dusty notices of penalty offenses, and relying on so-called “zombie votes” from  former Commissioner Rohit Chopra.  According to the Chamber:

American companies are facing historic challenges with inflation, strained supply chains and worker shortages, while the FTC is going rogue and engaging in regulatory overreach that is accelerating uncertainty and threatening our fragile economic recovery.

With enemies taking aim and allies taking cover, what is to be gained by eliminating the express commitment to avoid unduly burdensome regulation of legitimate business activity, especially when leadership at the Agency complains about a shortage of resources and a surfeit of illegitimate business practices?

Well, it is just a Mission Statement, you might say, and it has little practical effect.  But a Mission Statement is an explanation of an organization’s purpose and overall intention.  And with that in mind, how are we supposed to interpret this edit by the drafters of the FTC Strategic Plan:  without unduly burdening legitimate business activity.

It is no small thing.  This language has appeared in the FTC’s Mission Statement for decades, through both Democratic and Republican administrations.  It proclaims that the FTC will tailor its allegations, prohibitions, and remedies to illegal conduct, and will preserve the legitimate business functions that provide products and services to consumers in a vibrant, competitive economy.

In fact, this balance is built into the policies that have long governed the Agency.  For example:

  • “Unfairness” is defined as a practice that “causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition”;
  • The FTC’s Deception Statement requires that a statement (or omission) be material and likely to mislead a reasonable consumer, reflecting a balance between avoiding deceptive practices and the burden in anticipating every possible consumer interpretation;
  • The Commission’s Substantiation Policy Statement considers factors relevant to the benefits and costs of substantiating a particular claim; and
  • Section 5 competition analysis distinguishes between illegitimate practices that burden competition and legitimate business practices that further competition.

In this context, the suggested revision to the Mission Statement would be a head-scratcher standing alone, but this is merely the latest in series of announcements that focus on pursuing policy goals through an aggressive reinterpretation of FTC authority, without regard for the costs to consumers or the economy.

In recent months, we have seen (1) repeated references to accepted forms of online behavioral advertising as “surveillance,” (2) an objective to impose more “substantive limits rather than procedural protections” on business practices through Magnuson-Moss rulemaking and FTC orders; (3) the rescission of the FTC’s 2015 Competition Policy Statement because its focus on cost-benefit analysis and competitive markets is considered by this Agency to be too narrow; and (4) the imposition of prior approval requirements for mergers, including “before closing any future transaction affecting each relevant market for which a violation was alleged.”

Is it any wonder that the Chamber is fired up?  And how did the FTC respond?  By stating it was merely “ramping up efforts to combat corporate crime” and by characterizing the Chamber as “corporate lobbyists,” who will not deter FTC efforts to “stand up for consumers, honest businesses, workers, and entrepreneurs who deserve a fair marketplace.”  But there is no lobby for corporate criminals and surely one way to stand up” for honest businesses” and “entrepreneurs” would be to refrain from unduly burdening them.

Words matter, and the deliberate deletion of “legitimate business activity” from the FTC’s draft Mission Statement is material and meaningful.  This move is likely to trigger another hostile response, creating an unnecessary distraction of the Agency’s own making.  Fortunately, the FTC has solicited comments on its proposed draft (KDW’s comment can be found here), allowing room to ditch the proposed amendment to the Mission Statement and ensure that the Agency’s purpose and overall intention will maintain its historic balance.

As fashion companies begin to make more claims about what they are doing to help the environment, they need to make sure they’re in good position to support those claims with strong evidence. We previously posted about a pending lawsuit against Allbirds involving its carbon emission claims. In this post, we’ll start to look at what NAD had to say about certain product content claims and aspirational claims made by Everlane.

Product Content Claims

Everlane made claims about the number of recycled bottles that had been used in certain products, such as a parka (“60 plastic bottles renewed”) and a sweatshirt (“15 plastic bottles renewed”). To substantiate the claims, the company provided evidence that it works with plastic pellet producers to calculate the amount of plastic needed to produce a fixed amount of yarns, figures out how much yarn is used in a product, and uses an average bottle size to calculate the number of bottles that were renewed.

Everlane used the same type of data to support a broader claim that, to date, the company had “recycled over nine million plastic bottles.” Everlane provided evidence of the number of garments it had produced using recycled plastic since 2018 and, using the same math, calculated the number of bottles that had been recycled since then. NAD determined that the math checked out in both cases and that Everlane had a reasonable basis to make both claims.

Aspirational Claims

In addition to claims about current practices, Everlane advertised that it intended to remove virgin plastic from its entire supply chain by 2021. As we’ve mentioned in recent posts, aspirational claims can be tricky to substantiate because you can’t prove what hasn’t happened. But that doesn’t mean that you can just rest on good intentions. NAD has held that “an advertiser must be able to demonstrate that its goals and aspirations are not merely illusory and to provide evidence of the steps it is taking to reach its stated goal.”

In this case, Everlane relied heavily on its Global Recycled Standard (or “GRS”) certification. GRS is an international standard that relies on well-established international and regulatory guidance (including the FTC’s Green Guides) for what constitutes recycled content. GRS also has stringent rules for third-party certification of chain of custody of recycled materials, content claims, social and environmental production practices, and chemical restrictions across manufacturing processes.

Everlane explained that it does not source GRS-certified materials containing any virgin polymers and only uses recycled polyester and recycled nylon content for its yarns. Also, in accordance with GRS standards, each stage of production is certified by an independent third-party. On its website, Everlane explains how it had achieved 90% completion of its goal and what it is doing to achieve the last 10%. Based on this evidence, NAD found the advertiser has a reasonable basis for its aspirational claim.

Safer for the Environment

Stay tuned for another post, where we’ll look at how NAD analyzed “Safer For The Environment” claim and provide other tips for substantiating green claims.

November has been an active month in the years-long litigation of opioid manufacturers — and it hasn’t been good for the theories put forth by Attorneys General and local governments.  On November 1, Orange County Judge Peter Wilson, in litigation brought by Orange, Santa Clara, and Los Angeles Counties, along with the City of Oakland, ruled completely in favor of the defendants, several opioid manufacturers.  And then on November 9, the Oklahoma Supreme Court overturned the $475 million verdict against opioid manufacturer Johnson & Johnson.  Does this signal a weakening of state and local government authority to pursue these actions?  Not likely.

It’s important to take a step back and look at the underlying theories of these cases.  While the thousands of governmental actions have been brought to address a public health crisis, at their core the actions against opioid manufacturers are largely based on theories that are marketing/advertising claims.  In essence, these cases focus on alleged misrepresentations made by pharmaceutical companies in the marketing of their opioids to doctors, including the addictiveness of the products, appropriate and safe utilization, and the need for increased dosages.  These misrepresentations were then allegedly coupled with aggressive sales tactics that included significant payments to doctors for their prescribing practices.  At their core, these cases are really no different than the plethora of cases brought by State Attorneys General in all sorts of industries.

So why the recent losses?  Both Oklahoma and the California Counties focused their cases on a public nuisance theory – essentially arguing that defendants’ deceptive and misleading conduct caused the marketplace to be flooded by unnecessary opioids, which caused harm to the public health and safety of their citizens.  Both courts rejected the expansion of public nuisance into opioid harms.  While they each came about this conclusion in slightly different ways, both did focus on the fact that the underlying products at issue were not only lawful products, but were heavily regulated by the federal government.  The Oklahoma court noted that expanding public nuisance to lawful products would, “create unlimited and unprincipled liability for product manufacturers.”

Both cases also alleged standard Unfair and Deceptive Trade Practice violations under their respective state laws, but the focus was clearly on nuisance.  For Oklahoma, their UDAP allegations were dismissed very early in the litigation because of a broad state exemption for products that are regulated.  In California, the UDAP claims all also lost for a variety of reasons, including plaintiffs’ failure to show the deceptive comments were actually made publicly (as opposed to just in training material), and plaintiffs’ attempt to claim that certain representations that tracked FDA approved material was deceptive.

In the broader landscape of opioid manufacturer litigation, these cases may drive a desire, especially for the State Attorneys General, to focus more attention on their bread and butter UDAP allegations to avoid the pitfalls of the California case.  Most states don’t have the broad exemption that Oklahoma has for regulated products, and the Oklahoma court didn’t seem to take issue with the fact that the underlying conduct was shown to be deceptive.  A similar approach may not however be available for all of the thousands of cities and counties litigating.  In Texas for example, counties do not have authority to seek penalties under the Texas Deceptive Trade Practices Act; rather that power is reserved solely for the Attorney General.

The lesson to take away here is that States have widely varied authority when it comes to their oversight of marketing conduct, and the varied nature of their UDAP laws in particular means that a loss by one state in their jurisdiction won’t impact other states alleging the same case.  It is crucial to both understand and fully appreciate the varied, and incredibly powerful, authority the State Attorneys General wield as we enter 2022.

Opioids: State Attorney General Marketing Enforcement Under Attack?

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On November 17, the Senate Commerce Committee held its eagerly-awaited hearing on the nomination of Alvaro Bedoya, a data privacy academic from Georgetown Law, to be FTC Commissioner. Bedoya is slated to replace Rohit Chopra, who departed the agency last month to become Director of the CFPB, and Bedoya’s appointment would once again give the Democrats a voting majority. In the run-up to his hearing, some have wondered – Can we expect Bedoya to provide Chair Khan with a reliable third vote for her agenda, or will he bring a more bipartisan approach to the agency? From his answers and demeanor at the hearing, the answer is probably…both.

First, a little table-setting: Bedoya’s nomination was considered along with three others – Jessica Rosenworcel for FCC Chair and two nominees for the Department of Commerce. The hearing was well-attended by Committee members, who directed the majority of their questions to Rosenworcel. (Yes, net neutrality, broadband access, and the “homework gap” all got more attention than privacy.) All four current FTC Commissioners attended the hearing in person, in a bipartisan show of support for Bedoya, though Bedoya attended remotely due to a recent exposure to COVID.

Here are some takeaways from Bedoya’s portion of the hearing.

  • He appears likely to be confirmed, even if largely along party lines. Although Senator Wicker made a reference to Bedoya’s “strident” views and Senators Lee, Cruz, and Sullivan slammed his “extremist” tweets (see below), most of the questions (from 18 Senators!) related to Bedoya’s area of expertise (privacy), where there is more alignment between the parties than in other areas. He handled the questions well, and repeatedly expressed support for collaboration and bipartisanship (e.g., specifically mentioning that he wants to work closely with Commissioner Wilson on privacy). Democrats have the votes (in the Committee and on the Senate floor), even if they ultimately have to call in V.P. Harris to break a tie.
  • He spoke about his nomination and the issues in personal and emotional terms. Bedoya highlighted that he and his family were welcomed into this country 34 years ago. He talked about his experience as a Senate staffer, learning about the terror and harm caused by stalking apps from a shelter for battered women. He realized then and believes now that “privacy is not just about data, it’s about people.” His goal as a Commissioner would be to make sure the FTC protects people, and to help both consumers and businesses manage the multiple crises facing the country – a COVID crisis, a privacy crisis, and a small business crisis.
  • He appears likely to vote with the majority on many (or most) issues. No big surprise here, but when asked his views about various issues, he consistently supported positions that Khan, Slaughter, and (his predecessor) Chopra have supported – federal privacy legislation, Magnuson-Moss privacy rulemaking if Congress doesn’t act, pushing back against the “unprecedented consolidation” that is forcing small businesses to close, streamlining the FTC’s rulemaking and subpoena processes, reducing the power of the platforms, and reining in tracking technologies like facial recognition. As to the latter, he said he would not support banning facial recognition technologies altogether, since some applications assist with benefits like public safety and healthcare. However, he would support banning facial recognition technologies that are hidden, that lack consent, or that collect, use, and share data without limits.
  • He’s a real-live privacy expert. He clearly has the credentials, starting with his work as a Senate staffer and continuing through his years at Georgetown Law as a professor and head of a privacy think tank. But he also quickly and confidently answered all questions related to privacy – from the need for privacy legislation generally, to his views on Senator Schatz’s “duty of loyalty” and Senator Markey’s proposal to amend COPPA, to the lines he would draw on facial recognition (see above).
  • He wrote some controversial tweets, and a number of Republicans seem poised to vote “no” on his confirmation. Senator Sullivan cited a tweet from Bedoya calling the 2016 Republican convention a “White Supremacist rally.” Cruz cited tweets about ICE as a “domestic surveillance agency” and a retweet involving critical race theory and white supremacy. He also called Bedoya a “left wing activist, bomb thrower, extremist, and provocateur.” Lee ran through a series of supposedly “yes or no” questions in rapid succession, and accused Bedoya of being evasive when he tried to qualify his responses. And Wicker referred to Bedoya’s “strident” views, as noted above. As to the tweets, Bedoya apologized, saying that it was “rhetoric” and that he would put aside any partisan views if he became Commissioner. However, these Senators (and perhaps other Republicans) seem poised to vote “no” on Bedoya’s confirmation, and some have said they plan to place a “hold” on the process, which could slow it down.
  • If confirmed, he could help reduce tensions at the Commission. With acrimony among the Commissioners currently at unprecedented levels (see our recent post here), adding Bedoya to the mix could help reduce the tensions (despite the tweets). He’s known to be collegial, he worked across the aisle as a Senate staffer, he repeatedly invoked bipartisanship at the hearing, and all of the sitting Commissioners (Democrats and Republicans) showed up at the hearing to support him. That augurs well for the dynamics at the Commission, even if the votes remain split along party lines.

We will continue to monitor progress on Bedoya’s nomination and post updates as they occur.

Some fireworks at Bedoya’s Senate confirmation hearing, but confirmation still seems likely

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Last week. FTC Commissioner Christine Wilson delivered a speech with a title that made clear she intended to speak her mind: The Neo-Brandeisian Revolution: Unforced Errors and the Dimunition of the FTC.  

Predicting that the new FTC Leadership will fall far short of achieving its objectives — most of which she opposes — Commissioner Wilson promised that “their failure won’t keep me up at night.” She then went on to identify four key mistakes, but not before lamenting the halcyon days of a Commission characterized by comity between the architects of modern competition and consumer protection policy. The FTC’s Mount Rushmore of cooperation and non-partisanship: Steiger, Pitofsky, Muris, Leibowitz, Ramirez.

The four mistakes identified by Commission Wilson:

  • Embracing the Mistakes of the Past (We’ve been down the over-regulation and rulemaking road before; it does not end well);
  • Going it Alone (We should pay attention to what Congress and the Judiciary have to say about the boundaries of our statutory authority);
  • Shunning the Agency’s Actual Experts (The FTC Staff are NOT the enemy, they are the answer); and
  • Fostering Confusion and Maximizing Discretion (In place of transparency, predictability, and accountability — chaos).

There is not enough room in this blogpost to dig deeper into Commissioner Wilson’s principal points, each forcefully made, some even supported by biblical citation, as well as nearly 100 footnotes laden with pointed parentheticals. Followers of the Agency should do that for themselves and form their own opinion about where this is all headed.

But if she is right, we will look back on this activist Commission like we do the era of the National Nanny, when the Commission was besieged and defunded for trying to micromanage marketing and restructure markets. It survived only after promising a return to sensible policies, which of course was followed by a form of Pax Romana — 50 years of relative peace and stability on Pennsylvania Avenue.

And if she is right, most of what is now being done can be undone: the vertical merger guidelines and the Section 5 policy statement can be reinstated; the great fog of uncertainty that has passed over HSR enforcement can be lifted; the preapproval clauses in consents can be removed or waived; and rules can be repealed.

But what can’t be undone is the damage among the ranks of the FTC’s professional staff. According to Commissioner Wilson, they have been muzzled, sidelined, insulted, scapegoated, dismissed, and ignored, in part, because of what certain critics perceive as “cultural capture”, where staff’s interests “are more closely aligned with the entities that they regulate, rather than the interests of the public.”

Well, we are all entitled to our perspectives, and as a Firm whose lawyers have sat across from FTC staff at negotiating and courtroom tables on many of the most significant cases over the past five decades, we are more than qualified to say that the notion that the FTC staff is “captured” is entirely uninformed. And the many hotly-contested consent and litigated orders are all the proof that is needed.

By highlighting FTC staff flight, Commissioner Wilson identified the one harm that could be irreparable. Critics might point to departing staff’s move to private practice as evidence of this “cultural capture,” but that focuses on the effect as opposed to the cause. And, as we’ve stated here previously, it is incredibly unfair to condemn former colleagues who have served in government and remain within the only legal discipline they’ve known, albeit on the opposite side of the “v.” But if that is what this FTC intends to do, more will leave, and it will take future FTC Leadership years to repair the harm.

Commissioner Christine Wilson Excoriates The FTC Chair’s Agenda in ABA Fall Forum Speech

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