Deepfake technology has significantly improved over the past few years, allowing for mainstream commercial uses. Deepfake technology is the use of synthetic image, video, or audio. While there are good uses such as protecting the identities of whistleblowers or victims and bad uses such as non-consensual pornography and elder fraud, the advertising industry is already demonstrating how synthetic media has great potential as a tool for advertisers.

From celebrities licensing their likeness to brands personalizing online shopping experiences, there are some really innovative use cases. The legal framework around the use of deepfake technology is still forming. While there are several state laws—California, Virginia, and Texas—that protect against certain uses of deepfake technology (mostly in non-consensual pornography and election interference), there are other state laws pending. As the legal and regulatory framework continues to develop, we ought to be proactive in setting the standard for how this technology is used.

Law360 published the article “Deepfake Best Practices Amid Developing Legal Practices,” co-authored by partner John Villafranco and associate Rod Ghaemmaghami. The article provides an analysis of deepfake use cases, describes legal tools available to protect against harmful uses of the technology, and suggests some best practices for responsible use of deepfake technology.

To read the article, please click here.

The FTC flexed its new-found civil penalty muscle last week by filing the first case pursuant to the COVID-19 Consumer Protection Act, which gives the FTC authority to seek civil penalties for deceptive COVID-related acts and practices.  ICYMI, see our blog post about the civil penalty authority here.

Ordinarily, the FTC is only authorized to seek penalties for violating a prior Court or Commission order, cease and desist order or trade regulation.  This new power extends “[f]or the duration of a public health emergency,” and permits the FTC to seek penalties for deceptive acts or practices in or affecting commerce that is associated with (1) the treatment, cure, prevention, mitigation, or diagnosis of COVID-19, or (2) a government benefit related to COVID-19.

The FTC’s first action under the COVID-19 Consumer Protection Act, U.S. v. Quickwork LLC and Eric Anthony Nepute, is filed in the United States District Court for the Eastern District of Missouri.  The complaint alleges that, despite prior receipt of a letter warning or unsubstantiated COVID-19 efficacy claims, Nepute (a chiropractor) and his company Quickwork deceptively marketed vitamin D and zinc products under the “Wellness Warrior” brand for the treatment, prevention, and cure of COVID-19.  The Complaint contains excerpts from the defendants’ advertisements, marketing

emails, videos, and social media posts suggesting that use of Wellness Warrior products will, among other things, (1) treat or prevent COVID-19; (2) decrease the chance of contracting COVID-19; and (3) decrease the chance of death upon diagnosis with COVID-19. The Complaint also references advertisements stating that the Wellness Warrior products provide equal or better protection than currently available COVID-19 vaccines and that the defendants’ various representations relating to the efficacy of Wellness Warrior products are scientifically proven. Despite these representations, the Complaint alleges that there are no published studies, or other competent and reliable scientific evidence, supporting the efficacy of vitamin D3, zinc, or the Wellness Warrior products in treating or preventing COVID-19.

The Complaint asserts ten causes of action for violations of the FTC Act and the COVID-19 Consumer Protection Act, and seeks preliminary and permanent injunctive relief, rescission or reformation of contracts, the refund of monies paid, restitution, the disgorgement of ill-gotten gains, civil penalties and costs.  With respect to civil penalties, the Complaint alleges that each dissemination of an allegedly-deceptive advertisement constitutes a separate violation for purposes of calculating monetary civil penalties,” and that the Court is authorized to award penalties up to $43,792 for each such violation.

In addition to the remedies sought under the COVID-19 Consumer Protection Act, the FTC is also seeking refunds, restitution and disgorgement under the FTC Act despite the current uncertainty regarding whether the FTC can pursue monetary remedies at all as part of a request for injunctive (equitable) relief.  The Supreme Court is poised to rule on that issue very shortly in AMG Capital Management, LLC v. Federal Trade Commission, No. 19-508 (U.S.).

Regardless, the FTC’s authority to seek civil penalties for allegedly deceptive COVID-19 advertising is clear and we should expect that this will not be the only instance in which the agency seeks to use its new authority.

Welcome to our selected regulatory and litigation highlights impacting the food and beverage industry in March 2021.  The food court saw its own brand of March Madness with disputes over food delivery fees kicking off this month’s update.

Litigation Developments

Hidden Delivery Fees

A number of suits were filed in March regarding undisclosed delivery fees.  These suits are framed in a couple of different ways.  One such suit filed against Chipotle (Dundon v. Chipotle Mexican Grill, Inc., N.D.N.Y.) alleges that Chipotle has offered “free” or “$1” delivery, but charges more for delivery orders than for in-person purchases or pick-up orders of the same items.  According to the complaint, Chipotle adds a 10% “service charge” to delivery orders that is not charged to pick-up orders or in-person purchases.  The complaint also alleges that Chipotle charged more for individual food items when ordered for delivery as compared to the prices charged for the same items purchased in person or ordered for pick-up.  Similar class action suits were filed against Chipotle in Florida federal court (Hopkins v. Chipotle Mexican Grill, Inc.) and against Chick-Fil-A in California state court (Ortega v. Chick-Fil-A Inc.). 

Natural Flavoring and Ingredient Claims 

Four new natural flavoring and ingredient class actions were filed in March.  One action (Kinman v. The Kroger Co., N.D. Illinois) alleges that Kroger’s smoked gouda products get their smoke flavor from artificial flavoring as opposed to the natural smoking process.  Another (Romaine v. Globus Food Products LLC, Missouri state court) alleges that Globus Food Products’ “all natural” pizza products actually contained a synthetic ingredient called powdered cellulose.  The third (Vanlaningham v. Sara Lee Bakery LLC, Illinois state court) alleges that Sara Lee’s waffle products are all natural when they contain citric acid, an artificial preservative.  And finally, adding to the dozens of vanilla-related cases that have been filed of late, the fourth action (Annmarie St. John v. The Price Chopper Inc., New York state court) alleges that The Price Chopper’s PICS almond milk was represented as containing natural vanilla when it, in fact, contained artificial flavors.

Health Claims

In McMorrow v. Mondelez International, Inc., the Southern District of California certified a nationwide and New York class in an action alleging that Mondelez’s belVita breakfast products are deceptively advertised as providing “nutritious steady energy all morning” and are “part of a balanced breakfast,” when, in fact, they contain high levels of added sugar.  The court blessed the plaintiffs’ damages model (at least for purposes of class certification), which proposed to conduct a survey isolating any price premium associated with the term “nutritious” as used in Mondelez’s marketing of its belVita breakfast products.  Mondelez filed a petition with the Ninth Circuit for interlocutory review of the certification order, which is currently pending.  For more discussion, see our blog post here.

In Hadley et al. v. Kellogg Sales Co., the parties submitted a third motion for preliminary settlement approval of a class action alleging that Kellogg falsely advertised various cereal products as “heart healthy” and/or “lightly sweetened” despite what the plaintiffs characterized as high percentages of added sugar.  This version of the settlement (1) eliminated a voucher component that was in prior versions of the settlement; (2) increased the amount of the cash payment to $13 million; (3) expanded the previously-agreed to injunctive relief; and (4) narrowed the scope of the release to claims based on the identical factual predicate as alleged in the complaint, including the specific products that were part of the previous class certification order.

Finally, in Rand v. Kilwins Quality Confections, Inc. (N.D. Ill.), the plaintiff alleges that various caramel and chocolate product labels materially misstated both the number of servings and the number of calories per serving.  The plaintiff is asserting thirty causes of action, including claims for violation of a variety of state consumer protection statutes, as well as for breach of contract and unjust enrichment, and seeks to represent both a nationwide class as well as a number of state-specific classes.

Origin Claims

In Corker et al. v. Costco Wholesale Corp. et al., coffee farmers in the Kona region of Hawaii alleged that defendants (a number of suppliers and retailers) misleadingly labeled and sold coffee not from the Kona region as “Kona” coffee.  The parties sought approval of a settlement with three suppliers/retailers that included substantial injunctive relief in the form of labeling changes and, in the case of one settlement, a payment of $6.1 million to the class.

(links from Law360, subsc. req’d.)

**

National Advertising Division

Grocer Aldi agreed to permanently discontinue several price advertising claims, including the following:

  • “The Lowest Prices Everyday”
  • “Lowest Possible Prices on Groceries”
  • “It’s Official. We Have the Lowest Prices on Long Island”
  • “ALDI has the Lowest Prices on Long Island”

The decision followed a challenge by competing grocer Lidl via NAD’s SWIFT process.

Chobani LLC also permanently discontinued challenged express claims that its Chobani Complete 5.3-ounce yogurt cup contains 25 grams of protein.

**

FDA

FDA released its Foods Safety and Nutrition Survey.  Key findings include:

  • Most consumers are familiar with the Nutrition Facts label
  • Most consumers have seen menu labeling at restaurants
  • Consumers are familiar with front of package claims
  • Hand washing practices vary depending on the occasion
  • The majority of consumers own a food thermometer, but usage varies depending on what is being cooked

FDA also announced that it is further extending the time allowed to obtain a unique facility identifier for food facilities to December 31, 2022.

***

Thanks for joining us again this month.  See you in May!

Welcome to our curated selection of highlights of regulatory and litigation developments in the dietary supplement and personal care product industries for March 2021.  In case you were wondering what pain relief, teeth whitening, and CBD have in common (and, who wasn’t?) it seems that one year into the pandemic, these are the advertising battles being fought in multiple forums. Read on…

National Advertising Division

NAD addressed some unique superiority and comparative claims in the OTC drug space in finding that Hisamitsu America, Inc., supported its duration claims that Salonpas Pain Relief Patch Large “works for up to 12 hours” and “provides relief for up to 12 hours.” However, NAD found that comparative claims such as “All OTC pain relievers, including Voltaren, have one thing in common. None are proven stronger or more effective against pain than Salonpas Pain Relief Patch Large” and “only pain reliever labeled to relieve mild to tougher, moderate pain” and “the strongest labeled OTC topical pain reliever” were not substantiated and recommended that they be discontinued.   This is an interesting discussion of comparative advertising for two products approved by FDA where the claims at issue were outside of the FDA approvals.  Anyone looking to understand how NAD navigates that jurisdictional issue will want to check out this decision.

NAD extended its already robust body of precedent involving teeth whitening claims with a decision finding that Colgate-Palmolive Company supported advertising claims that its Optic White Renewal Toothpaste has “unprecedented whitening power,” “contains 3% hydrogen peroxide,” and has “the most hydrogen peroxide in a whitening toothpaste.” However, NAD recommended that Colgate discontinue the claim that its product “removes 10 years of yellow stains.” Colgate is appealing that recommendation.

Colgate’s ad campaign for Optic White Renewal Toothpaste cleverly highlights several dubious fads from the last decade (jeggings and shake weights, anyone?).   However, NAD’s concerns about Colgate’s substantiation for the “removes 10 years of yellow stains” claims included that Colgate failed to consider the results of the negative control as to two studies that NAD agreed were otherwise reliable. As to a third study, NAD expressed concern about its reliability relative to converting to a years of yellow staining calculation. Many companies in the beauty and personal care space are interested in making claims relating to years of impact for their products.  This case provides insights on what to consider for those types of claims.

On the dietary supplement front, NAD revisited the issue of energy claims relative to Vitamin B12 in recommending that Goli Nutrition modify its “Vitamin B12 to help support energy production” claim to make it clear that Goli is referring to cellular energy and to avoid conveying the impression that consumers taking its apple cider vinegar gummies will feel a noticeable increase in energy or become more energetic.”  NAD also recommended that Goli discontinue claims that folic acid supports skin health as unsubstantiated.

FDA

FDA announced two warning letters issued to makers of topical CBD products labeled as OTC drugs.  Amidst a backdrop of facility inspections that revealed significant good manufacturing compliance concerns, the most important takeaways in this round of CBD enforcement are as follows:  FDA does not think that CBD is an appropriate inactive ingredient in OTC drugs, a position that we do not believe the agency has previously articulated publicly.  In addition, reaffirming a position that the agency has previously asserted, FDA really frowns on companies using terms such as “FDA registered” to implicitly suggest agency approval.  Check out our blog post on these warning letters.

Litigation Developments

Staying with CBD, another CBD class action was stayed pending FDA action.  This complaint in Dasilva v. Infinite Product Co. LLC (C.D. Cal.) alleges that the FDA had previously sent a letter to the defendant advising that a variety of its CBD products were “unapproved new drugs” and “misbranded drugs” in violation of the Food, Drug, and Cosmetics Act, and that consumers would not have purchased the defendant’s products if they were aware of the misleading labeling.  The court joined a number of previous courts in granting the defendant’s motion to stay pursuant to the primary jurisdiction doctrine, finding that the FDA and Congress have separately expressed interest in regulating CBD and that it was unclear how the court could adjudicate the plaintiffs’ claims given the lack of clarity as to whether the products are drugs, dietary supplements or food products.  Specifically, the court noted that any forthcoming legislation or regulation may apply retroactively and inform the court’s consideration of the merits of the dispute.

A judge in the Eastern District of New York granted in part and denied in part a motion to dismiss claims asserted against Bactolac Pharmaceutical, which manufactures the “All Day Energy Greens” supplement marketed and sold by co-defendant NaturMed, Inc.  The complaint alleges that the supplement was not safe for human consumption because Bactolac failed to follow NaturMed’s contractual instructions by adding inferior ingredients.  The court dismissed six breach of warranty and consumer protection claims, but ruled that the 15 remaining claims must proceed into discovery.  The court also denied Bactolac’s motion to strike the plaintiffs’ request for punitive damages

Class Action Settlements

Reckitt Bensicker LLC agreed to settle two parallel class actions (one in California and one in Illinois) alleging that that it falsely advertised joint health benefits of its glucosamine dietary supplement “Move Free Advanced.”  After four years of litigation, including a grant of class certification in June 2019 and denial of the defendant’s motion for summary judgment in March 2020, the defendant agreed to pay $53 million to a nationwide class of purchasers, which the plaintiffs characterized as “the largest dietary supplement class action settlement ever reached.”  The settlement provides for a cash refund for up to three purchases for a total of $66 ($22 per purchase) or for up to $225 worth of a variety of consumer products of the class member’s choosing ($75 per purchase).  Any funds that remain after all claims are processed will be distributed to the Orthopaedic Research Society in accordance with the cy pres doctrine.  The settlement further provides that the named plaintiffs will receive up to $7,500 for their participation and that the defendant would not oppose class counsel’s application for attorneys’ fees so long as the application did not exceed $12.5 million.  The plaintiffs’ motion for preliminary approval is pending.

 

Bayer Healthcare and Beiersdorf agreed to pay $2.25 million to settle a federal California class action alleging that their Coppertone “mineral based” sunscreen products deceived consumers into believing that the products contained only mineral active ingredients when, in fact, they contained chemical active ingredients.  Class members who submit proof of purchase may receive $2.50 per unit purchased with no limitations.  Consumers who do not submit proof of purchase may receive $2.50 per unit purchased up to a maximum of four units per household.  The settlement further provides that the named plaintiffs can apply for service awards up to $5,000 each to be paid out of the settlement fund, that class counsel can apply for an award of attorneys’ fees not to exceed one-third of the total fund, and that the cost of notice and administration will also be paid from the fund at a maximum of $530,000 plus postage.  Any remaining funds will be disbursed cy pres to the charitable organization Look Good Feel Better.  The defendants also agreed to discontinue the “mineral based” labeling and other injunctive relief.  A preliminary approval hearing is scheduled for April 21, 2020.

New Class Action Filings/Trends

One new putative class action was filed in California state court challenging “oil free” claims made with respect to various Smashbox cosmetics products.  This filing follows a series of similar cases.

A number of new class actions were filed in the Southern District of New York against Tom’s of Maine and Colgate Palmolive involving their charcoal activating toothpaste products.  The complaints allege that defendants’ products are marketed as contributing to “healthy gums” and providing “enamel safe whitening” and “gentle cleaning” when, in fact, they are abrasive to enamel and the gums, and pose other safety hazards.  A similar action was also filed against Proctor & Gamble in Missouri state court.

Five new class actions were filed in the Northern District of California alleging that “Max Strength” or “Maximum Strength” Lidocaine products contained 4% lidocaine when, in fact, most similar prescription patches contain 5% lidocaine.  Three actions were filed against Sanofi-Aventis US LCC and two were filed against Hisamitsu America Inc.

There was also an uptick in pet product class action filings in March.  Three actions were filed in California against Elanco Animal Health Inc. alleging that its Seresto flea and tick product contained pesticides and other ingredients that cause seizures, thyroid gland damage, and death to the dogs and cats for which the products were marketed, as well as other harm to humans.  These filings followed a March report discussing the EPA’s failure to issue warnings about the Seresto products.

(some links from Law360, subscr. req’d.)

*******

Thanks for joining us again this month.  See you in May!

In recent years, plaintiffs’ attorneys have found that filing website accessibility cases can be a lucrative business model. By doing a quick scan of a website and then copying and pasting from other complaints, these attorneys can file a complaint with minimal effort. Because the legal requirements in this area are murky and settling is cheaper than litigating, these attorneys can often get a quick settlement. As a result, there have been thousands of these lawsuits, many of which have been filed in Florida.

Florida has been attractive venue for website accessibility cases since a 2017 decision held that Winn Dixie’s website violated the ADA because the website was not easily accessible to blind visitors. The key issue in that case (and other website accessibility cases) is whether websites are places of public accommodation under the ADA. In Winn-Dixie, the court held that the ADA applied because Winn-Dixie’s website was heavily integrated with its physical stores (which are places of public accommodation under the ADA) and the website operated as a gateway for its physical stores.

On April 7, 2021, a split Eleventh Circuit panel reversed that decision. The majority noted that the ADA specifically describesADA Keyboard 12 tangible and physical types of locations that fall within the definition of a public accommodation. It opined that “[n]o intangible places or spaces, such as websites, are listed” In the statute. The majority  concluded that “pursuant to the plain language of Title III of the ADA, public accommodations are limited to actual, physical places.” Thus, “websites are not a place of public accommodation under Title III of the ADA.”

Although the majority recognized that a website that is not accessible could pose a significant inconvenience to a blind consumer, it noted that addressing this problem is “a project best left to Congress.” Congress may already be working on that project. In an effort to add some clarity to this area and to slow the tide of frivolous lawsuits in this area, two representatives introduced the Online Accessibility Act last year. Although the bill wasn’t passed, it has now been reintroduced in the 117th Congress.

The Act would specifically bring websites under the scope of the ADA and require “substantial compliance” with the Web Content Accessibility Guidelines 2.0 Level A and Level AA standards that have been incorporated in many settlements. What constitutes “substantial compliance” would be the subject of further regulations. These regulations would be critical, as there is currently no clear standard as to what constitutes compliance – something that has worked to the advantage of plaintiff’s attorneys.

The Act would also impose various requirements on potential plaintiffs. They would not be permitted to file a lawsuit unless: they first provide a notice to the website owner of alleged non-compliance, wait 90 days to allow the owner to remediate the site, and then file a complaint with the DOJ. A plaintiff could only file a lawsuit if the Attorney General declined to bring a civil enforcement action.

It’s too early to say whether the Online Accessibility Act will pass or whether other courts will take the Eleventh Circuit’s lead on this issue. But these developments may at least hold some hope for companies that have been plagued by these lawsuits, even after investing significant time and effort to make their websites easier for blind consumers to use.

Shortly after the state of California filed a lawsuit against Amazon alleging deceptive prices, Amazon agreed to pay $2 million in penalties and restitution.

Under the stipulated judgment, Amazon is restrained from using an advertised reference price based on a formula, algorithm, or other method that produces misleading or false results until April 1, 2024. Amazon cannot advertise a reference price unless it provides:

(1) a clear and conspicuous hyperlink to a clear and exact definition of the term; and,

(2) the definition includes a statement that the reference price may not be the prevailing market price or regular retail price.

Amazon is required to pay $100,00 in cy pres restitution, $1,700,000 in civil penalties, and $200,000 to the Riverside County District Attorney’s Office. Amazon’s settlement is a good indication for what state enforcers are interested in when it comes to reference prices. Under California law, reference prices must reflect the prevailing market price as defined within three months of the advertised prices.

*                      *                      *

Subscribe here to Kelley Drye’s Ad Law Access blog and here for our Ad Law News and Views newsletter. Visit the Advertising and Privacy Law Resource Center for update information on key legal topics relevant to advertising and marketing, privacy, data security, and consumer product safety and labeling.

Kelley Drye's Ad Law Access Blog

On April 1, 2021, in a unanimous decision, the Supreme Court ruled that the definition of an automatic telephone dialing system (“ATDS”) under the TCPA is limited by the plain grammar of the statute itself.  The Court, in a decision authored by Justice Sotomayor, held that a device must have the capacity to use a random or sequential number generator in either storing or producing a telephone number, to qualify as an ATDS under the TCPA.  Facebook, Inc. v. Duguid et al., Case No. 19-511 (2021).

Our preview of the Supreme Court’s consideration of Duguid can be found here and our analysis of the oral argument can be found here.  The Court’s decision is discussed below, and its opinion can be found here.

Background

Plaintiff Noah Duguid alleged that defendant Facebook had used an ATDS without the requisite consent to contact him via text message when its systems used an automated response protocol to alert a customer-provided number of an access attempt. Mr. Duguid alleged that he did not have a Facebook account and never provided consent for Facebook to send him text messages.  In 2018, the Northern District of California dismissed Duguid’s TCPA claim against Facebook because it held that he had failed to properly allege the use of an ATDS where the complaint’s allegations “strongly suggested direct targeting rather than random or sequential dialing.”  In 2019, the Ninth Circuit reversed the lower court’s decision.  It reasoned that Duguid had sufficiently pled the use of an ATDS by alleging Facebook’s equipment “had the capacity to store numbers to be called and to dial such numbers automatically.”  The Ninth Circuit thus held that any device or system that could store telephone numbers was an ATDS restricted by the TCPA.  Facebook appealed this decision to the Supreme Court.

The TCPA defines an ATDS as equipment that has the capacity “(A) to store or produce telephone numbers to be called, using a random sequential number generator; and (B) to dial such numbers.”   The Supreme Court took up the following question: “Whether the definition of ATDS in the TCPA encompasses any device that can ‘store’ and ‘automatically dial’” telephone numbers, even if the device does not ‘us[e] a random or sequential generator?’”

Although the Supreme Court’s Duguid decision stemmed out of a challenge to the Ninth Circuit’s ATDS definition, five other federal circuit courts of appeals had weighed in on that issue, creating a deep circuit split. The Second, Sixth, and Ninth Circuits had held that any predictive dialer or system that dials from a stored list should be considered an ATDS under the TCPA. On the other hand, the Third, Seventh, and Eleventh Circuits held that an ATDS must have the capacity to generate random or sequential telephone numbers to be subject to the restrictions of 47 U.S.C. § 227(b).

SCOTUS’s Decision: Supreme Court Reverses the Ninth Circuit

In an opinion authored by Justice Sotomayor, a unanimous Supreme Court held that to qualify as an ATDS subject to Section 227(b)’s restrictions, a device or system must use a random or sequential number generator in storing or in producing a telephone number.  The Court found that because “the equipment in question must use a random or sequential number generator” to be an ATDS, “[t]his definition excludes equipment like Facebook’s login notification system, which does not use such technology.”

The Court started by confirming that a proper reading of the statutory text confirmed the narrower standard.  The Court reasoned that under clear rules of grammar, the modifying phrase “using a random or sequential number generator” modifies both antecedent verbs: “store” and “produce.”  Additionally, the Court reasoned that because the modifying phrase immediately follows the cohesive clause “store or produce telephone numbers to be called” it would be odd to apply the modifier to one part of the cohesive clause.  Thus, the Supreme Court cut through the grammatical roadblock that had led some circuit courts into opining that equipment that could simply “store” telephone numbers could be considered to be a restricted ATDS.

Justice Sotomayor’s opinion also relied on the statutory context of the TCPA to support the Court’s holding.  The Court noted that the TCPA’s ATDS restrictions “target a unique type of telemarketing equipment that risks dialing emergency lines randomly or tying up all the sequentially numbered lines at a single entity.”  Congress intended to address a very nuanced problem; therefore, expanding the definition of an ATDS to encompass any equipment that merely stores telephone numbers would go beyond the intent of Congress, and “take a chainsaw to these nuanced problems when Congress meant to use a scalpel.”  Additionally, the Court noted that such an expansive definition would encompass virtually all modern cellphones and expose ordinary cell phone owners to TCPA liability when they engage in speed dialing or send automated text message responses, which could not have been Congress’s intent.

As to public policy concerns, the Court refused to impose “broad privacy-protection goals” onto the statute’s narrow definition of ATDS, noting: “[t]hat Congress was broadly concerned about intrusive telemarketing practices, however, does not mean it adopted a broad autodialer definition.”  The Court noted that the TCPA would continue to restrict artificial and prerecorded voice calls, regardless of the narrow reading of ATDS, and that fears of a “torrent” of “robocalls” are thus overstated.  In the end, as Judge Sotomayor explained, “Duguid’s quarrel is with Congress, which did not define an autodialer as malleably as he would have liked.”

In a short concurrence, Justice Alito agreed with the Court’s ruling, but wrote separately to take issue with the main opinion’s reliance on a “set” grammar rule.  He advised that the canons of statutory interpretation are meant to be used as tools to help identify the way in which “a reasonable reader” would have understood the text of a statute at the time it was issued.  The other justices dealt with Justice Alito’s concurrence in a footnote, and reminded lower courts to be methodical when interpreting statutory text.

Impact

There are hundreds of litigations and arbitrations pending around the country dealing with claims of illegal use of an ATDS, and dozens of high-profile class action cases have been stayed pending the Supreme Court’s decision in Duguid.  The Court’s decision will alter the course of current and future cases as courts and litigants now have a uniform definition of an ATDS when assessing ATDS-based claims brought under Section 227(b) of the TCPA.  Additionally, Duguid has provided guidance for companies that wish to directly reach out to current and prospective customers, by settling the question of what types of devices and systems will be considered an ATDS so as to require specific prior consents for their use.  The decision has already prompted calls for a legislative response to the Court’s more narrow interpretation of ATDS from lawmakers who want to “amend the [TCPA], fix the Court’s error, and protect consumers.”

The Court’s decision also moots much of the ATDS question remanded to the FCC in 2018 in ACA International v. FCC.  Given that the Court has now interpreted the ATDS definition, the FCC will not be required to provide its own interpretation of the term.  In addition, the Court undermines alternative formulations of the ATDS definition occasionally advanced by the FCC that inquire as to the ability to initiate a high volume of calls or texts in a short period of time.  The Court’s statement that it does not “interpret the TCPA as requiring such a difficult line-drawing exercise around how much automation is enough” likely moots that line of inquiry.  Finally, several pending petitions ask the FCC to create or modify exceptions to the ATDS restriction.  Many of those petitions will have less practical impact going forward.

Prerecorded/artificial voice call claims and Do Not Call violation claims under the TCPA, however, were not the focus of the Court’s decision.  Callers should remain vigilant about their communications practices and ensure that they have procedures in place to remain fully compliant with the TCPA.

If you have any questions, please contact our experienced TCPA team:

Lauri A. Mazzuchetti
(973) 503-5910
lmazzuchetti@kelleydrye.com

Steven A. Augustino
(202) 342-8612
saugustino@kelleydrye.com

Alysa Z. Hutnik
(202) 342-8603
ahutnik@kelleydrye.com

Ad Law Access PodcastMany states are considering comprehensive privacy legislation in the absence of a federal law. On another much anticipated episode of the Ad Law Access podcast, Alysa Hutnik and Aaron Burstein discuss pending state privacy legislation, how we got here, and some expected future legislation. Find the episode here or wherever you get your podcasts.

Contact:

Alysa Z. Hutnik
ahutnik@kelleydrye.com

Aaron Burstein
aburstein@kelleydrye.com

For additional information, please visit:

As many retailers and manufacturers that sell directly to their customers know well, sale and similar promotional pricing practices have been the targets for regulators and class action plaintiffs for several years, and Amazon is back in that spotlight, this time in a lawsuit filed by the state of California. There has been a wide range of results with these  “reference price” cases. While courts have dismissed some, such as the “Compare At” case against Ross Stores,  a California court issued a $6.82 million civil penalty against Overstock.com for deceptive comparative price advertising, and many companies have settled for significant monetary payments to avoid the costs of litigation.

While Amazon has been named in several class actions in the last few years alleging deceptive reference prices, the most recent complaint was filed by the state of California. Notably, the six-page complaint states that the parties agreed to a tolling agreement that has been effective since August 30, 2018 which indicates the focus may be on Amazon’s prior practices. The Complaint filed last week contains the following allegations:

  • Since 2014, Amazon uses a “Was” or “List” price when advertising a product that suggests that the product’s price is regularly sold by another seller at a higher price.
  • A “material number” of these reference prices were misleading or had the capacity to mislead consumers.
  • There were “insufficient temporal constraints” and/or “number of sales” to support the advertised reference price.
  • In some instances, Amazon “insufficiently disclosed that the reference price was not necessarily the prevailing market price or regular retail price.”

The state alleges Amazon’s actions violated California’s False Advertising Law and Unfair Competition Law, seeking injunctive relief, restitution, and legal costs, similar to what several California District Attorneys sought in the Overstock.com case. In 2017, in response to a complaint filed by a consumer advocacy group, the FTC reportedly was reviewing Amazon’s reference pricing practices as part of the review of Amazon’s agreement to buy Whole Foods, but the FTC did not confirm the existence of any investigation.

As retailers think about the frequency, duration, and nomenclature used for reference pricing, they should continue to keep in mind the myriad of state statutes governing these practices and the consequences of a misstep. We will continue to monitor the progress of this case and other important reference price matters.

When it comes to the legal side of working with influencers, smart companies focus on ensuring that influencers clearly disclose that they are working with the company. After all, that’s where regulators have focused most of their attention in recent years. But that’s not where a company’s obligations stop – companies also need to take steps to ensure that influencers comply with other laws.

In 2015, we noted that the FDA took issue with a social media post in which Kim Kardashian praised a morning sickness drug. Although Kim did disclose that she was working with the drug company, the FDA alleged she failed to comply with prescription drug advertising requirements because she didn’t disclose the “consequences that may result from the use of the drug as recommended.”

This month, the FDA expressed similar concerns about a video in which Khloe Kardashian touted Biohaven’s Nurtec ODTKhloe Kardashian Post migraine treatment. In an untitled letter to Biohaven, the FDA writes that Khloe’s appearance on “The View” in July 2020 features misleading claims about the drug’s efficacy. Although Khloe claims that Nurtec ODT provided her relief in as little as 15-to 30 minutes, FDA asserts that that claim isn’t supported by the clinical trials and Khloe’s “personal experience does not adequately support the suggestion that the drug will” provide relief for others in the same time frame.

The FDA also expressed concerns about how required disclosures about the risks associated with the drug were made. Prescription drug advertising requires “fair balance” between the claims relating to the product benefits and disclosure of the risks. Although the interview segment contains prominent claims about the benefits of the drug in the audio portion, the required disclosures are “presented in a text-only format and small font. Moreover, the risk information only appears briefly for four seconds at the end of the video, after the close of [Khloe’s] presentation, where it is unlikely to draw the viewer’s attention.”  Put another way, instead of the usual laundry list of unspeakable side effects being rattled off, the segment ends with Whoopi Goldberg asking Kardashian to repeat the name of the drug and then saying “We’ll be right back.”

So, what’s the takeaway? If you’re an advertiser that is working with influencers, their posts are likely subject to the same legal requirements as your ads. In addition to making sure that influencers disclose that they are working with you, you need to take steps to ensure influencers comply with legal requirements specific to the product being advertised. In some cases – particularly if you work in a regulated industry – that may require providing guidance and training to influencers or reviewing their posts before they go live.