The FTC announced that it has reached a settlement with the makers of Tropicana Orange juice (Pepsi) for unsubstantiated claims about the ability of Tropicana Healthy Heart juice to decrease the likelihood of stroke and heart disease.

The juicy details: From 2002 until early 2004, Tropicana ran commercials on television and in magazines for its Healthy Heart orange juice. The ads claimed that by drinking 2 to 3 glasses a day, consumers could lower their systolic blood pressure by 10 points and increase their HDL cholesterol (the good one) by over 20%, all of which would lead to a decrease in likelihood of stroke. According to the FTC, Tropicana had no scientific evidence that the claims it was making were actually true. In peeling back the skin on Tropicana’s claims, the FTC charged that the studies pointing to these dramatic results did not actually prove Tropicana’s assertions.

Under the pithy terms of the settlement, Tropicana can no longer make claims relating to its orange juice increasing HDL cholesteral, lowering blood pressure, or contribution to a reduction in stroke unless it can scientifically substantiate its claims.

Practice Pointer Clients should be advised that all claims that do not amount to mere puffery must be substantiated with methods that may be easily replicated. Two independent scientific studies is considered good evidence of a claim.

The National Advertising Division, a self-regulatory agency that review and sometimes mediates disputes between competitors has referred a complaint to the FTC, after Federal Express refused to cooperate.

At issue is a commercial, aired by FedEx during the SuperBowl (and immensely popular), in which the company spoofs ad tactics used to get people to remember television advertising. In the commercial, the company lists Burt Reynolds, groin kicks, dancing bears, and 7 other things that research shows get people’s attention.

Evidently, it worked, because it caught the attention of Fedex competitor, UPS. UPS filed a complaint with NAD saying that the tagline at the end of the commercial, The Most Reliable Way To Send Your Package, constituted false advertising. But when NAD requested that FedEx participate in the inquiry and hand over documentation to substantiate the company’s claim, FedEx refused. NAD had no choice but to turn over the complaint for investigation by the FTC, which has the power to secure the necessary documentation needed to review the claim. The FTC, however, does not have to take the case, so UPS may have no choice but to bring a claim under Section 5 of the FTC Act for false advertising. Ouch… that really could hurt.

Practice Pointer: While each set of facts is different and there may be sound reasons for not participating in certain regulatory activities, clients should be counseled to participate in informal self-regulatory processes. Not only does it reduce the cost of resolving the matter, but it keeps Congress from interfering and enacting legislation that could impose even stricter requirements on advertisers.

Legal Side Note: In light of the recent decision holding that the ad claim, “AMERICA’S FAVORITE” was mere puffery, is “most reliable” on its way to being used by everyone?

In the wake of growing concerns over the expanding waistlines of children and adults across the country, McDonald’s has agreed to cut the fat, or at least the trans fat, from its cooking oil.

As part of a settlement with a number of plaintiffs, including consumer watch group called Ban Trans Fats, McDonald’s has agreed to pay plaintiffs $1.8 Million in damages (that’s 2.3 million hamburgers, for those keeping score), plus attorneys fees. In addition, McDonald’s has agreed to transition to oils with less transfat (which it has evidently already done). Finally, McDonald’s will give a $7 Million donation the American Heart Association, and spend a Million-plus on public notices about the status of the trans-fat situation at McDonald’s.

Ban Trans Fat has also been successful in encouraging Kraft to make health-conscious changes to its offerings, including increasing the size of nutrition labels and reducing the fat content in certain “junk foods.”

As consumer awareness grows regarding the growing health problem in the U.S. and Congress continues to pressure watchdog groups and regulatory agencies to crack down on food manufacturers, we can expect to see food companies making changes to their formulas, all of which will be reflected in advertising (how else is the word going to get out). This may translate into tougher analysis — from competitors and regulatory agencies — when it comes to claims made in advertising. Look out, consumers, truth in advertising is coming back.

The Telephone Consumer Protection Act (TCPA) prohibits telemarketers from calling homes that have been registered on the do-not-call list, maintained by the FCC. the TCPA does not protect businesses from those pesky phone calls. But what if your business is in your home? Currently, there is no provision in the TCPA to address this possibility. The FCC recently stated that it will not exempt telemarketers from liability should they make a call to a home-based business that is listed on the do-not-call list. Instead, it will review those calls to see if the call was made to a residential number or a business line. Watch out, Publisher’s Clearing House: if granny is raking in the dough selling potholders on eBay, you may be in trouble.

The FTC announced in February that it would not be proposing any new rules regarding product placement on television shows, despite its widespread use by advertisers to showcase products.

Commercial Alert, a consumer watchdog organization, has asked the FTC to investigate the practice of placing products such as household items, toys and other consumer goods in television shows. The watchdog group suggested that an on-screen disclosure be made each time a specially placed product was shown.

The FTC, after its own investigation, found that mere product placement did not violate Section 5 of the FTC Act, which prevents unfair and deceptive advertising practices. It reasoned that most product placements do not actively sell the product nor do they contain objective claims about the product. In cases where such claims were made, the FTC noted that the current regulations would suffice.

Recently, Kraft foods was asked to substantiate a claim that its grated parmesan and romano cheese products were 100% cheese and contained no fillers when in fact, the little yellow fluff in the green foil canister actually contains cellulose powder, an anti-caking agent, and sorbate or sodium benzoate, both of which are preservatives. The NAD determined, pursuant to a response submitted from Kraft, that its use of these agents is consistent with FDA regulations. Accordingly, Kraft may continue to use the 100% cheese proclamation.

Pursuant to 21 CFR 133.146 and 133.183, the addition of “safe and suitable” ingredients may be added to grated cheese products without compromising the claim that the product is 100% cheese. Moreover, the term fillers, Kraft explains, is designed to distinguish those cheese-like products that use non-dairy extenders.

On November 2, 2004 California voters amended Section 17200 et seq of the California Business and Professions code. Prior to the amendment, plaintiffs’ attorneys could sue for unfair competition on behalf of the general public. Proposition 64 modified the law such that an attorney may only sue on behalf of a client who has suffered a monetary or property loss as the result of advertising claims.

The amendment does not lower standards imposed upon advertisers to deliver consumer messages that are accurate and not misleading, but may make it easier for advertising to push the envelope for certain claims. That noted, the amendment does not apply to state actors, such as district attorneys, county counsels, or the state Attorney General. For any cases that are brought against an advertiser, the amended law provides that resultant penalties be used to enforce consumer protection laws.

Don’t hoard those gift certificates in your top drawer too long, or you may get a surprise when you try to redeem them. Many states have enacted escheatment laws regarding how many years you have to use up your gift certificates and if you snooze, you lose.

The concept of “escheatment” rarely rears its ugly head these days, and is most often seen in law school classrooms and crossword puzzles. It has its roots in English Feudal law, where land that had no more inheritants (heirs) would “revert” back to the lord of the province or the crown on England. Over time, the term has been loosely associated with the concept of “reversion of personal and real property to the state.”

All states have escheatment laws, but many do not have them as they related to gift certificates. And while one wonders exactly what the state is going to do with your massage at Nordstrom’s Spa, some states have determined that they have the right to confiscate your coupon if you’re not going to use it.

As a general rule, most states that have gift certificate escheatment allow the gift certificate owner 5 years in which to use the gift certificate (though some are seven years). Currently, the following states have these laws on the books: Alaska, Arkansas, Kansas, Louisiana, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Oregon, Pennsylvania, South Carolina, South Dakota, Tennessee, Vermont, Virginia, Washington, Montana, Connecticut, Delaware, D.C., Georgia, Hawaii, Nevada, New Mexico, New York, North Dakota, Ohio and Wisconsin.

Some states have laws on the books that allow for gift certificate escheatment in special cases, like if the certificate is redeemable in cash. Finally, there are some states that do not have any such laws on the books. Those enlightened states in which gift certificates are exempted from escheatment include Arizona, Arkansas, California, Maryland, and Florida.