One of the few areas of EPA policy continuity between the Biden and Trump eras is the aggressive enforcement attention being paid to products that claim to fight the SARS-CoV-2 coronavirus.

While EPA has long prioritized enforcement of the rules governing antimicrobial products (disinfectants and the like), the current pandemic has elevated that focus substantially, particularly against products that claim or suggest effectiveness in fighting coronavirus and other microbes. Some of the more high-profile actions over the last year have targeted on-line sales of products (often imports) that are not registered with EPA to make antimicrobial claims, as required by the Federal Insecticide Fungicide and Rodenticide Act (FIFRA).

In a January 2021 update to a COVID-related compliance advisory first issued in May 2020, EPA reiterated its aggressive enforcement stance, with an emphasis on internet product sales:

“EPA is receiving a steady stream of tips/complaints concerning potentially false or misleading claims, including efficacy claims, associated with pesticides and devices. These tips and complaints are being actively reviewed and efforts are being made to identify violative products. EPA intends to pursue enforcement against products making false and misleading claims regarding their efficacy against the coronavirus. EPA is particularly concerned with pesticide and pesticide device products sold online on e-commerce platforms that are fraudulent, counterfeit, and/or otherwise ineffective. EPA is also coordinating with the U.S. Department of Justice, U.S. Customs and Border Protection, and other federal partners to bring the full force of the law against those selling or otherwise distributing violative products.”

The updated EPA advisory also highlights agency concerns with products improperly claiming long-lasting anti-viral effects (so-called “residual claims” that a product “provides an ongoing antimicrobial effect beyond the initial time of application, ranging from days to weeks to months”). Such claims only are allowed if approved by EPA and “supported by acceptable studies demonstrating satisfactory residual efficacy,” consistent with agency guidance issued in October 2020.

EPA’s updated advisory also expands on, and somewhat shifts, the agency’s discussion of pesticide “devices” (e.g., UV lights, ozone generators, and other instruments that use physical or mechanical means to control pests, including viruses and other germs) that claim to kill the coronavirus. Unlike chemical pesticides, devices are not required to be registered by EPA and, therefore, are not scrutinized by the agency to ensure they are safe to use or work as intended. [Note that devices must meet other EPA requirements, including being labeled with an “EPA Establishment Number” to identify the facility at which the device was produced, and not being marketed with “false or misleading” claims.] While EPA does not review efficacy data for these products, manufacturers must have on file adequate substantiation for the claims they make. Interestingly, the May 2020 advisory noted that “devices may not be able to make claims against coronavirus where devices have not been tested for efficacy or safety for use against the virus causing COVID-19 or harder-to-kill viruses.” This language has been replaced in the January 2021 advisory with a more general reminder that

“[M]aking false or misleading labeling claims about the safety or efficacy of a pesticidal devices is prohibited and could result in the issuance of a Stop Sale, Use, or Removal Order and penalties ….”

In addition, on the litigation front, EPA continues to fight two novel challenges to the scope of the agency’s enforcement authority. In the first case (Zuru LLC v. EPA), filed in September, the company is challenging EPA’s determination that its cleaning wipes are an unregistered pesticide, and blocking its importation, because the wipes contain an active ingredient found in a number of other EPA-registered disinfectants; of website statements made by third party resellers that the wipes are “disinfectants” and “kill germs”; and the product name “‘Bactive’ implies bacterial fighting properties.”

The second case, Tzumi Innovations v. EPA, filed in December, similarly involves objections to EPA’s designation of the company’s hand wipes (typically for use on the human body and an FDA-regulated product) as an unregistered pesticide and a threatened Stop Sale, Use, Or Removal Order (SSURO). EPA filed a new brief in that case on February 3 asserting that the matter is not ripe for review and, substantively, that the wipes are properly considered pesticides because they are being marketed for use on surfaces.

Both challenges provide a reminder of the extensive scope of EPA’s FIFRA authority, including over products that do not explicitly make antimicrobial claims, but imply such effectiveness through other statements or based on the presence of certain active ingredients. For a more detailed discussion, see my prior blog post.

A copy of EPA’s updated COVID Compliance Advisory “What You Need to Know Regarding Products Making Claims to Kill the Coronavirus Causing COVID-19″ is available here.

We’ve posted about how the FTC, FDA, and EPA have each targeted companies for making unsubstantiated claims about how their products can treat or cure the coronavirus. Now, we’ll add another acronym to the list – NAD.

NAD recently issued a decision involving a video by the owners Your Superfoods, promoting the company’s Immunity Bundle. But the claims in this video are a little different than the ones recently targeted by the federal agencies. Here’s the relevant part of the video:

With all that’s going on, with the coronavirus there is [sic] a lot of things you cannot control. However, there Superfoods Screen Shotis a piece that we can control, and that is our own health and building our immune system because its depends on what we eat…. It’s super important to have a lot of micronutrients now, so Superfoods can help. We have this amazing immunity bundle – Super Greens to up your green, Mellow Yellow which really reduces your stress because stress actually reduces your immunity, and then we also have immunity boosting mushrooms in our Magic Mushroom mix.

Notice that the owners don’t actually say their products can treat or cure the coronavirus. (Not even their magical mushrooms.) Instead, the only reference to the coronavirus is the true statement in the first sentence. Here, NAD was likely concerned that following that sentence with other sentences about how the products can help consumers build immune systems could lead viewers to believe that the immunity extended to the coronavirus, itself.

Whether you are talking about health or something more mundane, this case should serve as a reminder that ads can be deemed misleading, even if the individual claims in the ads are literally true. What matters is how reasonable consumers will interpret the claims in context. Make sure you view your ads through their eyes and that you can substantiate all likely interpretations.

Amid the flurry of products making coronavirus-related claims, some without legal approval or scientific support, one class of products raises unique questions:  so-called “pesticide devices,” like ozone generators and ultraviolet (UV) lights, which are instruments that claim to control pests — including viruses and other germs — through physical or mechanical means.  Unlike chemical pesticides, such devices are not required to be registered by EPA and, therefore, are not scrutinized by the agency to ensure they are safe to use or work as intended.

Accordingly, EPA recently issued an advisory that cautions:

Please note that ozone generators, UV lights and other pesticide devices may not be able to make claims against coronavirus where devices have not been tested for efficacy or safety for use against the virus causing COVID-19 or harder-to-kill viruses.

Pesticide devices, unlike some existing surface disinfectant products that have data on file with EPA showing effectiveness against similar viruses, are not eligible under the agency’s Emerging Pathogens Policy to make claims related to the coronavirus/SARS-CoV-2 or for inclusion on EPA’s “List N” of products deemed to be effective against the virus.

Pesticide devices, though not subject to registration, are subject to other EPA requirements.  For example, while devices will not have an “EPA Registration Number,” they are required to be labeled with an “EPA Establishment Number” to identify the facility at which the device was produced.  In particular, any claims made for devices may not be false or misleading, and, therefore, manufacturers should have data on file to substantiate any claims.  It is possible, therefore, that a device could be effective against coronavirus, and legally could make such claims, though companies should be prepared to defend the statements.  To do so, companies should look carefully at the criteria for claim approval in EPA’s Emerging Pathogens Policy.

EPA is actively pursuing enforcement in regard to illegal coronavirus claims, further information on which can be found at https://www.epa.gov/enforcement/covid-19-enforcement-and-compliance-resources.

Advertising LawEPA issued another in a series of recent advisories aiming to clarify for consumers and companies what they need to know about disinfectant products claiming to kill the coronavirus.  EPA is actively investigating the numerous tips and complaints it continues to receive concerning products marketed with possibly false and misleading coronavirus/COVID-19 related claims.

For some of these products, those claims have not been reviewed or accepted by EPA and, therefore, may present a risk to consumers, and healthcare providers in particular.

Products that claim to disinfect and kill or otherwise inhibit viruses, bacteria and other germs must be registered with EPA before they can be sold.  A disinfectant cannot make legal claims of effectiveness against a particular pathogen, such as SARS-CoV-2, unless EPA has specifically approved the claim as part of the registration process. Registration requires that any claim be supported by valid test data and an EPA determination that the product works as intended and is safe to use.

Earlier this year, EPA issued a list of disinfectants (“List N”) that meet the agency’s criteria for use against the coronavirus (SARS-CoV-2, the strain of coronavirus that causes COVID-19).  While the surface disinfectant products on List N have not been tested specifically against SARS-CoV-2, they are expected to work against the virus because they demonstrate efficacy against other viruses that are deemed harder-to-kill or another similar strain of coronavirus.

Please note that just because the product label states that it kills “99.5% of viruses,” this does not necessarily mean that it will kill coronavirus.

Consumers are reminded to follow the label directions for approved disinfectants — particularly regarding the amount of time the product must remain wet on the surface — to ensure effectiveness in killing the virus.  Use of a disinfectant in a manner inconsistent with label directions can pose safety risks, both from contact with the pesticide and from a false belief that the surface has been cleaned of the pathogen.

See my prior post on EPA enforcement activity in this area, as well as a more detailed description of EPA’s approval policy for products deemed effective against SARS-CoV-2.

EPA’s advisory is available here.  List N can be found at:  www.epa.gov/ListN.

Companies continue to reel from business disruptions caused by the spread of coronavirus, and in many cases have struggled to navigate the swiftly changing landscape in which they are required to operate (or not operate).  At the end of the first full month of the crisis, as infections appear to plateau in epicenters like New York City, class actions seeking to remedy consumers’ losses during the pandemic are spreading rapidly.

As of April 30, 2020, more than 150 class actions have been filed directly relating to or stemming from the pandemic. Tens of millions of individuals have filed for unemployment, and the plaintiffs’ bar is eager to “help.”   No amount of social distancing, and no impending treatment or vaccine, can insulate companies from the threat of class litigation.

While the specific factual circumstances underlying these claims are novel, the types of claims being asserted – and the jurisdictions where such actions are being filed – are not.  Companies should stay on top of the following pandemic-related class action trends and, wherever possible, get ahead of or try to prevent the additional strain of a class action during these already difficult times.

Pandemic-Related Refunds

Millions of people throughout the United States hope to receive refunds for events and services that have been cancelled or postponed as a result of coronavirus-related bans on large gatherings, stay-at-home orders and travel restrictions.  The strength of these cases will ultimately turn upon the specific cancellation, force majeure and limitation of liability clauses in the relevant contracts, with courts turning to common law doctrines of impossibility and impracticability where the contracts do not address these specific issues.

Rapid and widespread event cancellations have understandably tested companies’ abilities to fulfill their obligations.  For many companies that act as intermediate platforms for transactions—such as tickets to events and rental of vacation properties—handling refunds on such a scale is not manageable or even possible given that money consumers pay is often forwarded to venues, festival promoters and other clients, who often control potential rescheduling.  These circumstances have led to a series of class action lawsuits against ticket sellers, educational institutions, subscription fitness, sport, and health companies, and ski areas and theme parks who offer season ticket memberships.

Getting there can be difficult too.  While air travel has not been suspended entirely, cancellations and postponements, and general advisories against “non-essential” travel, have stretched airlines’ cancellation policies.  There has been a surge of litigation against nearly every major airline concerning refund policies during the pandemic.

Companies not only must navigate how to deal with existing liability, but how to reopen their business and charge their customers who return balancing compliance with written policies, supporting their customers and maintaining a good public image, and remaining financially solvent.  Examination of potential ways to maintain cash-flow, through government incentives, customer credits against future transactions, and other means, is an important first step.

Negligence in Addressing the Threat of Coronavirus

Class actions have also been filed alleging negligence and inaction to respond to and prevent harm arising from the coronavirus pandemic.  Thus far, these actions have largely been focused on cruise lines, alleging that the ships maintained business as usual despite increasing knowledge of the danger posed to passengers and crew, but it is easy to imagine additional lawsuits against companies that continued operations as the coronavirus spread (or were forced to continue throughout the shutdown).  It is also expected that similar allegations will arise as the economy reopens and people resume their normal activities.  Companies must design and implement a careful plan to minimize risk when they resume operations—by not opening too soon, providing adequate protective equipment and training to staff, and effectively warning customers of ongoing risks despite the business reopening.

False Advertising of Health Benefits

With consumers anxiously seeking products that can help them protect themselves during this public health crisis, it is important that companies are mindful of claims that may potentially overstate the effectiveness of a given product in treating or preventing the virus.  A number of companies have already seen warning letters from federal agencies or class action lawsuits concerning the alleged lack of evidence that hand sanitizers can effectively prevent the spread of disease, including coronavirus.  These lawsuits, asserting claims for consumer warranty and unfair competition, will likely spread from hand sanitizers to other products.  It is unclear how courts will evaluate the objective “reasonable consumer” under present circumstances.  Thus, companies should closely examine their existing advertising claims (both express and implied) to ensure they are not misleading in light of the “new normal.”

Price Gouging

Another area where class actions have been slow to file, but are expected to increase, is price gouging.  The pandemic has caused sharp spikes in demand for disinfecting products, basic necessities, and essential food staples and empty shelves—both in brick and mortar stores as well as online shops—have increased consumer’ willingness to pay a premium for these types of products.  While there is no federal law with strict guidelines for price gouging, more than half of the states have laws the prohibit charging excessive prices on certain products after a triggering event, such as a declaration of a state of emergency.  Companies should closely monitor the prices they charge, both during the crisis and after it resolves, to ensure that any increases to their prices comply with applicable law.  And while third party sellers like Amazon may be able to pass liability through to the ultimate seller in certain circumstances, it may be wise to actively monitor the pricing activities of their sellers and try to curb price gouging activity before getting hit with litigation.

Privacy

To alleviate the pains of social distancing, companies, schools, and families have turned to video conference apps to stay connected.  As usual, with increased popularity comes increased scrutiny and, unfortunately, increased litigation.

Popular videoconferencing apps Zoom and Houseparty have already been hit with several class actions challenging their privacy practices.  Not surprisingly, these actions have been filed in California, where the California Consumer Privacy Act (“CCPA”) went into effect earlier this year.  While the CCPA only provides for a private right of action under limited circumstances, these actions demonstrate consumers’ ability—or at least attempt—to use other provisions of the CCPA as underlying statutory violations to support other California consumer protection claims, such as California’s Unfair Competition Law.

Technology companies whose platforms have seen a surge in popularity during the pandemic should closely monitor potential vulnerabilities and reexamine privacy protections that may no longer be adequate in this new virtual economy.

Securities Class Actions

Shareholder class actions have also been filed challenging both affirmative representations and omissions relating to the pandemic.  These include actions against cruise lines that allegedly downplayed the risk of coronavirus to investors, pharmaceutical companies that allegedly overstated their ability to develop a treatment or vaccine, and technology companies that allegedly withheld privacy concerns that have come to light with increased use.  These early cases illustrate why publicly traded companies must exercise great care when discussing their products and business both to the public and to their investors.  It remains to be seen how defenses deflecting blame for decreases in stock prices to the pandemic (similar to those asserted in the wake of the mortgage crisis) will play out.

Conclusion

With court closures and delays throughout the country, the evolution of class action litigation relating to the coronavirus may take some time to come into focus.  We expect the above described categories of cases to proliferate, and expand in scope as different issues arise from the reopening of the economy.  We will continue to monitor these cases and provide regular updates as to the types of claims being asserted and any decisions that come out. For a more in-depth treatment of these cases and for a comprehensive collection of case citations, click here.

Advertising and Privacy Law Resource Center

Data is helping governments, researchers, and companies across the world track the spread of the novel coronavirus, monitor cases and outcomes of COVID-19, and devise ways to halt the virus’s spread.  As part of these efforts, raw data, software tools, data visualizations, and other efforts are providing the public and policymakers with insights into the growth of the pandemic.

Personal information — some of which may be highly sensitive — is key to many of these efforts.  Although some regulators in the U.S. and abroad have made it clear that privacy laws and the exercise of enforcement discretion provide leeway to process personal information in connection with COVID-19, they have also made it clear that privacy laws continue to apply.  Federal Trade Commission (FTC) Chairman Joe Simons advises that the FTC will take companies’ “good faith efforts” to provide needed goods and services into account in its enforcement decisions but will not tolerate “deceiving consumers, using tactics that violate well-established consumer protections, or taking unfair advantage of these uniquely challenging times.”  And, with many eyes on the California Attorney General’s Office in light of recent requests to delay enforcement of the California Consumer Privacy Act (CCPA), an advisor to Attorney General Xavier Becerra was quoted as stating: “We’re all mindful of the new reality created by COVID-19 and the heightened value of protecting consumers’ privacy online that comes with it. We encourage businesses to be particularly mindful of data security in this time of emergency.”

Devoting some thought to privacy issues at the front end of COVID-19 projects will help to provide appropriate protections for individuals and address complications that could arise further down the road.  This post identifies some of the key privacy considerations for contributors to and users of COVID-19 resources.

1. Is Personal Information Involved?

Definitions of “personal information” and “personal data” under privacy laws such as the CCPA and the EU’s General Data Protection Regulation (GDPR) are broad.  Under the CCPA, for example, any information that is “reasonably capable of being associate with, or could reasonably be linked” with an individual, device, or household is “personal information.”  This definition specifically includes “geolocation data.”  Although some data sources provide COVID-19-related information at coarse levels of granularity, e.g., county, state, or national level, the broad definition of “personal information” under the CCPA, GDPR, and other privacy laws makes it worth taking a close look at geographic and other types of information to determine whether the data at issue in fact reasonably qualifies as “personal information,” or if it is sufficiently anonymized to meet privacy definitions of de-identified and/or aggregate data.  CCPA, HIPAA, and other privacy laws provide examples of what safeguards are expected to reasonably treat data as anonymized, and employing such standards can help avoid unnecessary privacy mishaps despite well-intentioned efforts.

2. What Level(s) of Transparency Are Appropriate About the Data Practices?

Although some COVID-19 tools may be exempt from statutory requirements to publish a privacy policy (e.g., the provider of the tool is not a “business” under the CCPA), there are still reasons for providers to explain what data they collect and how they plan to use and disclose the data:

  • Disclosures help individuals to reach informed decisions about whether they want to provide their data, e.g., by downloading an app and allowing it to collect their location and other information. If business practices and consumer expectations are not reasonably aligned around the data practices, the failure to provide an appropriate privacy notice could be deemed an unfair or deceptive practice, inviting the scrutiny of the FTC or State Attorneys General.
  • Developing a privacy policy (or other disclosure) can help provide internal clarification on what types of personal information (or not) an app or service needs and collects. A granular understanding of such data practices can help providers to identify and mitigate privacy and data security risks associated with such data practices.
  • Developing a disclosure about a provider’s data collection and usage can help clarify the decision-making structure among multiple stakeholders so that the group is better equipped to handle data governance decisions over the lifecycle of a project.

3. How to Address Government Requests/Demands for Personal Information?

Although much remains to be seen in how federal, state, and local governments will use personal information (if at all) to develop and implement strategies to slow the spread of coronavirus, it is not unreasonable to expect that government agencies will seek information from providers of COVID-19-related tools.  The extent to which a provider can voluntarily provide information to the government — as well as the procedures that the government must follow to compel the production of information (and maintain the confidentiality of it in personally identifiable form) — depends on several factors, including what kind of information is at issue and how it was collected.  Becoming familiar with the rules that apply to voluntary and compelled disclosures, and safeguards to help prevent such data from being subject to broad freedom of information laws,  before a request arrives can help save valuable time down the road.  In many of these scenarios, for example, aggregate or pseudonymous data may be sufficient.

4. What Considerations Are There for Licensing COVID-19-Related Personal Information?

Finally, any licensing of personal information in connection with COVID-19 tools deserves careful consideration, particularly if the CCPA applies.  The CCPA imposes notice and opt-out requirements on entities that “sell” personal information. “Sell” is defined to include disseminating, disclosing, or otherwise “making available” personal information to for-profit third parties in exchange for “monetary or other valuable consideration.”  Several types of open source licenses require users to accept certain restrictions on their use and/or redistribution of licensed data or software.  For example, the Creative Commons Attribution-NonCommercial 4.0 International license requires licensees to agree (among other conditions) not to use licensed content for commercial purposes.  Obtaining this promise in exchange for personal information could constitute “valuable consideration” and give rise to a “sale” under the CCPA.   In addition, while not a “sale,” sharing personal information with a government authority would qualify as a disclosure under CCPA and would need to be accurately disclosed in the privacy policy.

Neither the California Attorney General nor the courts have interpreted the CCPA in the context of open source licenses.  Until more authoritative guidance becomes available, it makes sense to think through the potential obligations and other consequences of applying and accepting specific license terms to COVID-19-related personal information.

Bottom line:  Personal information has a key role to play in shaping responses to the novel coronavirus.  Privacy laws remain applicable to this information.  Applying privacy considerations to COVID-19 related practices involving data collection, sharing, and analysis will help mitigate unnecessary harms to consumers, aside from those presented by the virus itself.

For other helpful information during this pandemic, visit our COVID-19 Resource Center.

This post updates an earlier post relating to marketing around the coronavirus.

We noted a couple news items this week that help add context to the pervasiveness of and risks related to price gouging enforcement.  In this story, the New York Times reported on a merchant who was selling hand sanitizer and related protective gear on Amazon, at profit levels that corresponded with the growing public concern. Amazon removed his listing along with hundreds of thousands of others and suspended thousands of sellers’ accounts for price gouging.  He’s now left with 17,700 bottles of hand sanitizer.

The California, Washington, and New York attorneys general offices are investigating price gouging complaints.  The New York AG issued multiple cease and desist letters last week relating to exorbitant prices on hand sanitizer and disinfectant spray.  The California AG issued a consumer alert regarding price gouging following announcement of a state of emergency.  The Washington AG issued a similar alert calling on consumers to report price gouging and scam products.

On the advertising claims front, the New York AG announced enforcement against Alex Jones, who operates the InfoWars website. TheCoronavirus Advertising-Related Enforcement Ongoing AG alleged that Jones was marketing and selling toothpaste, dietary supplements, and creams as treatments to prevent and cure the coronavirus.  The NY AG also issued cease and desist letters to Dr. Sherill Sellman, who was selling colloidal silver as a coronavirus cure, and to disgraced televangelist, Jim Bakker, for featuring claims that Sellman’s colloidal silver product could “eliminate [coronavirus] within 12 hours.”  The State of Missouri has also brought enforcement action against Mr. Bakker.

So, what’s the lesson?  In our prior coronavirus marketing post, the lessons were to know and understand the pricing laws and to avoid overstating the benefits of any product.  The follow-on issue is one of ethics and brand management:  We’re in a public health crisis.  Brands and platforms that demonstrate that they are working to comply with the law and take proactive consumer protection measures may forego short term profits, but they stand to gain long term consumer trust and maybe even generate some goodwill with regulators.

In addition to retail platforms, advertising and social media platforms may want to take note.  CDA Section 230 is alive and well but does any platform want to go to bat for advertising allegedly scam products?  The Washington AGs office stated that they will use their consumer protection laws to sue platforms or sellers even if they aren’t in Washington, as long as they were trying to sell to Washington residents.  Every other state AG undoubtedly agrees with this approach.

And finally for some comic relief…for some insightful advice from John Oliver, check out this link at the 17-minute mark.

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Join us for our next webinar, covering influencer issues, on March 24 by signing up here.

 

Advertising and Privacy Law Resource Center

Before You Market Around CoronavirusUntil recently, most consumers likely associated anything starting with “Corona” with a sunny beach and a lime wedge.

Not anymore.

The public is rightly concerned about coronavirus and how to avoid catching it.  And where the public has questions, marketers will have answers.  Here are a couple things to think about before rushing that next campaign out the door.

State and Local Laws Prohibit Price Gouging

As hand sanitizer has become scarce, some who have it have sought to capitalize on consumer demand and no small amount of fear.  We noticed this story about Amazon cracking down on third-party merchants selling coronavirus products at inflated prices.

Many states have laws governing price gouging.  New York’s law prohibits merchants from taking unfair advantage of consumers by selling goods or services that are “vital to the health, safety or welfare of consumers” for an “unconscionably excessive price” during an abnormal disruption of the market place or state of emergency.

New York’s price gouging law does not specifically define what constitutes an “unconscionably excessive price.”  However, per the NY AG, the statute provides that a price may be “unconscionably excessive” if:  the amount charged represents a “gross disparity” from the price such goods or services were sold or offered for sale immediately prior to the onset of the abnormal disruption of the market.  Merchants may provide evidence that justifies their higher prices were justified by increased costs beyond their control.

California’s law is more prescriptive.  California’s anti-price gouging statute, Penal Code Section 396, prohibits raising the price of many consumer goods and services by more than 10% after an emergency has been declared.  There may also be local laws that prohibit price gouging.

State attorneys general and CA district attorneys have reported receiving price gouging complaints.  Companies that fail to comply will risk being enforcement targets.

Be Careful Not To Oversell

The FTC and FDA issued warning letters to seven companies allegedly selling unapproved products that may violate federal law by making deceptive or scientifically unsupported claims about their ability to treat coronavirus.  Both agencies issued statements indicating that they are prepared to take further enforcement action to prevent the public from being misled.

An equally concerning scenario is the marketer who sees an opportunity to market around coronavirus with a product that has value but not to the degree that it would be an effective prevention tool.  For example, dust masks are not the same as N95 face masks.  Hand wipes without alcohol will not kill the same germs as those with alcohol.  Tito’s Handmade Vodka is not hand sanitizer.  It would be potentially misleading and deceptive to market dust masks, hand wipes without an effective sanitizer, or even Tito’s Handmade Vodka hand sanitizer as effective coronavirus prevention tools.  It’s also a waste of good vodka.  But, we digress.

The lesson is this:  The rush to meet consumer demand should not overcome the legal clearance process or common sense.  Rules still apply even in – and maybe especially in – times of public health emergency.

Stay tuned.  We’ll update this post as the situation evolves.

 

Advertising and Privacy Law Resource Center

Welcome to our monthly digest of litigation and regulatory highlights impacting the personal care product and dietary supplement industry.  April saw a re-emphasis on restriction of COVID-related claims in advertisements for supplements and therapies, developments in various class action cases, including a win for consumers challenging hand sanitizer’s claims of killing 99.99% of germs and a slew of new “natural” class actions, and finally a roller coaster ride for the FTC involving major blows and power moves.

Let’s take a look….

NAD

NAD determined that certain advertising claims made by Zarbee’s, Inc. for its cough products sufficiently identify that honey is the source of the cough soothing benefit and would not reasonably mislead consumers as to the reason for the product’s cough soothing efficacy. However, NAD found that other claims, which could reasonably suggest that the cough soothing benefit was attributable to multiple ingredients, and recommended modification to clarify that the cough soothing benefit is attributable to the honey and not the combination of main ingredients.  The efficacy of honey to soothe coughs was not at issue.

Supplement maker First Day Life, Inc., voluntarily discontinued a number of claims relating to its Daily Enrichment Vitamin, which were challenged by the Council for Responsible Nutrition.  The challenged claims focused on nutritional deficiencies as the cause of a broad range of childhood behavior, including picky eating, distraction, tantrums, and hyperactivity.  In addition to being a good reminder of the health claims substantiation requirements, i.e., competent and reliable scientific evidence, this case is notable because several of the claimed benefits were also tied to specific timeframes, e.g., improvement in 30 days or 45 days, which also requires substantiation.

Side-stepping from products used on the body to consumer health products used in the home, NAD examined claims made by NuWave, LLC, relative to its OxyPure Air Purifier product.  Claims included:

  • The claim on the advertiser’s website, “Remove airborne coronavirus by 99.999%*” with a bottom-of-the page disclaimer stating “*The University of Minnesota tested the OxyPure’s removal of the porcine respiratory coronavirus, a surrogate for SARS-CoV-2, the coronavirus that causes COVID-19”; and
  • A YouTube video advertisement which touts the product as removing “virtually all indoor air pollutants” and notes, in relevant part, that “[a]sthma and allergies are at an all-time high. Sleeping problems are epidemic and carry their own health risks. Airborne pathogens, viruses, bacteria and mold are not far behind” (simultaneously showing a map of the world with the words “AIRBORNE VIRUSES” and lines originating from China to various cities around the world showing the spread of “airborne viruses”).

NAD was “concerned that consumers who viewed the advertiser’s website would reasonably take away the message that OxyPure Air Purifier is effective in killing 99.999% of COVID-19 without seeing the disclosure that testing of the product was on a coronavirus surrogate. NAD was similarly concerned that the challenged YouTube video communicates that the OxyPure Air Purifier is effective in removing airborne pathogens and viruses, and that the visual of the world map conveys the implied claim that the product is effective against COVID-19.”

The advertiser agreed to modify its website advertising to state: “OxyPure is Calculated to Remove 99.999% of Coronavirus Surrogate from the Air in Areas up to 1,200 Square Feet in 6 Hours!* which is qualified by a clear and conspicuous disclosure directly underneath the claim, stating that “SARS-COV-2 was not used in the study conducted by the University of Minnesota for the efficacy of NuWave OxyPure.”  The advertiser also agreed to reach out to its affiliate to modify the YouTube video to remove the frame that features the aforementioned map and the onscreen and audio reference to “airborne viruses” to avoid conveying the unsupported message that OxyPure Air Purifier is effective in killing 99.999% of COVID-19.

Also of interest was NAD’s challenge against New York Presbyterian Hospital relative to the Hospital’s pre-COVID advertising campaign.  NAD challenged claims such as “Best survival rates of any U.S. hospital” and the use of testimonials that NAD was concerned conveyed that patients facing a serious prognosis will achieve a better outcome at New York Presbyterian than at other hospitals.  The Hospital modified the campaign in response to the challenge and NAD ultimately administratively closed the matter given the pandemic-related extenuating circumstances.  The case serves as an important reminder about the unique relationship between healthcare providers and patients and the power that such claims may have in the market, particularly in the context of a pandemic.

FTC

April was a very busy and gut-wrenching month for the FTC.

In a stunning blow to the FTC’s enforcement authority, the Supreme Court unanimously ruled in AMG Capital Management v. FTC that Section 13(b) of the FTC Act does not allow for the recovery of restitution, disgorgement, or any form of equitable monetary relief.  Despite decades of final orders awarding, and settlements in which defendants agreed to pay, substantial monetary relief, Justice Breyer explained that the statute’s emphasis on whether a defendant “is violating, or is about to violate, any provision of law enforced by the” FTC reflects a focus on “relief that is prospective, not retrospective.” Accordingly, the Court found that Section 13(b) was designed to “stop[] seemingly unfair practices from taking place while the Commission determines their lawfulness,” not to compensate consumers for alleged economic harm.  Courts and litigants across the country quickly reacted to the decision, with the Ninth Circuit vacating a preliminary injunction that had previously been entered to preserve the defendant’s assets to satisfy a potential award of monetary relief and defendants filings motions for judgment on the pleadings to dismiss the FTC’s claims for monetary relief.  AMG is not the final word on the issue, though, and a number of legislative efforts are underway to restore the agency’s enforcement authority.  While there appears to be support for legislative action on both sides of the aisle, Republicans are advocating for a more  measured statute that would restore the FTC’s ability to obtain monetary relief while ensuring the due process rights of those affected, including the imposition of a statute of limitations and a specific direction that the statute only be applied to cases filed after its enactment instead of being applied retroactively to past and pending cases.  We will continue to report on the judicial and legislative developments resulting from the AMG decision.

Despite all the turmoil, the FTC did take some action in other areas in April.  As we reported earlier this month, the FTC filed its first case under the COVID-19 Consumer Protection Act, which gives the agency authority to seek civil penalties for deceptive COVID-related acts and practices.  The new complaint alleges that, despite prior receipt of a letter warning of unsubstantiated COVID-19 efficacy claims, chiropractor Eric Anthony Nepute and his company Quickwork LLC deceptively marketed vitamin D and zinc products under the “Wellness Warrior” brand for the treatment, prevention, and cure of COVID-19.

The FTC also sent out 30 warning letters to companies regarding concerns about their COVID-related advertising claims. These letters were sent after the effective date of the COVID-19 Consumer Protection Act, and thus warn advertisers that anyone who makes deceptive claims about the treatment, cure, prevention or mitigation of COVID-19 is subject to civil penalties of up to $43,792 per violation. In response to these letters, it appears that all 30 companies have removed the claims that were identified as questionable. It is also important to note than in these letters a number of platforms including Facebook and Youtube were mentioned in the cc: field, indicating that some of the recipients’ deceptive claims had run on these platforms at some point. Despite the fact that these letters were sent to 30 companies directly, all advertisers should take note of this loud and clear warning from the FTC.

Shifting gears from COVID-related matters, the FTC’s settlement with BASF and DIEM Labs suggests that the FTC is holding firm to its position that post hoc analysis of clinical studies is not sufficient claim substantiation.  The settlement concerns Hepaxa and Hepaxa PD, fish oil products marketed to treat Non-Alcoholic Fatty Liver Disease (NAFLD). The FTC alleged that BASF, the maker of the Hepaxa products; DIEM Labs, the exclusive US distributor of the products; and two DIEM Labs executives claimed without substantiation that Hepaxa reduces liver fat.

In general, advertisers must possess competent and reliable scientific evidence to substantiate health claims. With respect to Hepaxa, the FTC did not dispute that the defendants had conducted a “randomized, double-blind human clinical trial designed to evaluate whether Hepaxa . . .  reduces liver fat in adults with NAFLD” or that they based their claims on results from the trial. The problem, according to the FTC, was that the clinical trial as constructed was unsuccessful. During the trial, 81 participants took Hepaxa and another 86 took an olive oil placebo. At the trial’s end, MRI data did not show a statistically significant reduction in liver fat for Hepaxa patients as compared to placebo patients. The FTC alleged that the defendants then engaged in a post hoc analysis to salvage the trial by identifying a subset of participants with some type of positive result. Ultimately, the defendants moved away from MRIs, grouped participants based on their Fatty Liver Index scores, and identified a statistically significant effect among participants with scores above 40—a subset containing five Hepaxa patients.

Because this case resulted in a settlement, it does not modify or create law. However, settlements are important markers of the FTC’s thinking, and the FTC’s four commissioners all voted to approve this settlement. It is notable, then, that the complaint contains the categorical assertion that results from post hoc analyses are “exploratory, at best” – an assertion that is notably absent from the FTC’s own Advertising Guide for the Dietary Supplement Industry.  As this statement shows, the FTC expects claims based on trial results to reflect the scope and design of the study as initially planned as opposed to statistically significant data identified after the trial has ended.

Finally, while the FTC’s desire to hold individuals accountable for corporate violations of the FTC Act is no longer news, the allegations included in a complaint shed light on what conduct the FTC believes supports liability—and whom it is willing to hold liable. Here, the FTC sued DIEM Labs’ co-owner/CEO, but it also sued DIEM Labs’ Director of Sales, alleging that he was directly involved in identifying alternative analyses of the clinical trial, helped create advertising for Hepaxa, and claimed at conferences that Hepaxa successfully treats NAFLD. Individual liability can rest on control or authority to control corporate acts, as is commonly seen in allegations against owners or CEOs. But it can also rest on direct participation, and this settlement demonstrates the FTC’s willingness to sue key actors—not just CEOs or owners—for corporate violations of the FTC Act.

Class Action Decisions and Settlements

A class of California consumers alleging that CVS brand hand sanitizer failed to live up to its promise of killing 99.99% of germs was certified by a judge in the Central District of California.  The plaintiff’s motion referenced the deposition of a purported microbial expert, who testified that the sanitizer does not kill 99.99% of the germs, and a purported marketing expert, who testified that consumer would find the claim material when deciding whether to purchase the product.  The Court found that all of the requirements of Rule 23 had been met, and that the survey proposed by plaintiff’s damages expert was adequate for purposes of class certificationSee Mier v. CVS Health.  Ironically, this decision came nearly two months after a judge in the Southern District of California dismissed a similar complaint in Moreno v. Vi-Jon, Inc., which alleged that Vi-Jon’s hand sanitizer products did not kill 99.99% of germs.

A proposed settlement we reported on last month involving Bayer Healthcare and Beiersdorf’s Coppertone “mineral based” sunscreen products was denied preliminary approval by a judge in the Northern District of California.  The Court found that the settlement, which provided for a $2.50 refund per unit purchased and injunctive relief, contained a number of flaws.  First, the Court was concerned about the scope of the release provision.  Contrary to Ninth Circuit precedent, which requires releases in a class action settlement to be limited to claims based on the identical factual predicate of the litigation, the proposed release extended to all claims that “were or could have been asserted in the Litigation.”  The Court also found that the settlement inappropriately released unnamed subsidiaries, successors, and other parties that class members would not be able to identify.  Second, the Court wanted to know more about the parties’ relationship with the cy pres beneficiary, Look Good Feel Better, and asked them to explain why there was no collusion or conflict of interest.  Third, the Court questioned the parties’ request for $530,000 in class administration expenses and the plaintiffs’ request for attorneys’ fees in an amount equaling one-third of the total settlement fund.  The Court required that any subsequent motion for preliminary approval explain why the Court should depart from the Ninth’s Circuit’s 25% benchmark for attorneys’ fees.  Finally, the Court found that the proposed class notice and claim form were insufficient insofar as they failed to comply with the Northern District’s class action settlement guidelines.  The Court denied the motion for preliminary approval without prejudice, and set a case management conference for the end of May.

New Class Action Filings/Trends

We saw a number of new “natural” filings in April.  One such complaint was filed in the Western District of Pennsylvania alleging that JM Brands LLC’s Purezero “natural” shampoo products contained a number of components derived from synthetic means (such as emulsifiers and fragrances).  The other complaints were all filed in New York State Court and include allegations that: (1) Raw Elements USA’s “natural” sunscreen and moisturizing products contain synthetic ingredients (including zinc oxide, tocopheryl acetate and sodium chloride); (2) Force Factor, LLC’s Somnapure Natural Sleep Aid contains non-natural synthetic ingredients; (3) Plant Health Inc.’s Highland Farms “natural” or “all natural” CBD gummies, moringa capsules and bath bombs contain synthetic ingredients (including citric acid, sodium citrate, potassium citrate, and sodium bicarbonate); and (4) The Country Butcher and Jones Natural Chews (dog snacks and bones) contain synthetic ingredients.

Following up on last month’s trends, there were two new cases filed against The Proctor and Gamble Company in April challenging “activated charcoal” and “gum repair” claims with respect to its toothpaste products, and  seven new complaints involving Elanco Animal Health Inc.’s Seresto flea and tick products.

See you next month

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Welcome to our monthly roundup of regulatory and litigation highlights impacting the dietary supplement and personal care products industries.  Sit back, relax, and enjoy the read.  February was a short month, with a lot going on.

NAD

Health claim substantiation was front and center before NAD in a monitoring case involving Pendulum Therapeutics and a “medical probiotic” product featuring claims such as “The only medical probiotic clinically shown to lower A1C & blood glucose spikes for the dietary management of T2D*” (*Consult your physician as part of your total diabetes management plan.  Results may vary from person to person.”)

The advertiser submitted a 12-week multi-center, randomized, double-blind, placebo-controlled study (the “Perraudeau Study”) to assess Pendulum Glucose Control’s safety and effectiveness in improving glycemic control in Type 2 diabetics and, ultimately, their dietary management of the disease – specifically, the role of certain probiotic strains found in prior research to be associated with the promotion of a healthy gut microbiome through the production of short-chain fatty acids (SCFAs).

The advertiser also provided clinical studies and research articles demonstrating the roles of A1C, fasting glucose and postprandial glucose levels in managing Type 2 diabetes. The advertiser also referred to the FDA’s Guidance document (Diabetes Mellitus: Developing Drugs and Therapeutic Biologics for Treatment and Prevention) to demonstrate what level of reduction in HbA1c was clinically meaningful.

While NAD expressed some concerns about the evidence, ultimately, NAD determined that the Perraudeau Study was a good fit for the challenged claim “The only medical probiotic clinically shown to lower A1C & blood glucose spikes for the dietary management of T2D*” (*Consult your physician as part of your total diabetes management plan. Results may vary from person to person.”) but recommended the following modifications: (1) limiting the claim to individuals who are taking metformin; (2) modifying the claim to clarify that the product can be used as part of the dietary management of type 2 diabetes; and (3) removing the references to percent reductions in blood glucose spikes in the absence of evidence in the record demonstrating that the reductions were clinically relevant.

This decision is a helpful discussion of the competent and reliable scientific evidence standard.  Anyone seeking to understand health claims substantiation better should check it out. Continue Reading Dietary Supplement and Personal Care Products Regulatory Highlights – February 2021