The FTC and Nestle have come to an agreement: Nestle will stop making health claims about its BOOST probiotic product, and the FTC won’t fine the company for false advertising.

Nestle had previously claimed in its BOOST advertising, that the nutrition drink would boost children’s immune systems, prevent illness, and even speed up the recovery of certain symptoms, like diarrhea. The website, and advertising material now states, “Many countries worldwide have a tradition of introducing live active cultures (bacteria) to infants and children early in life, in fermented foods, such as yogurt. In adequate amounts [probiotics] provide specific health benefits to the host.”

This case marks the FTC’s first foray into health claims based upon probiotics and suggests this is a new area of concern for the regulatory agency.

Practice Note: While the US has only recently been looking at probiotic food claims, the European Food Safety Authority has been heavily regulating the industry for the better part of a year. According to published reports, the EFSA has rejected 80% of the advertising claims involving probiotics. Attorneys should advise clients to be careful about health benefit claims under the current administration.

The FTC issued a release last week, suggesting confidence games against unemployed students are back in vogue, in the form of “secret shopper” scams. Sites, similar to this Mystery Shopper site, entice students by touting an hourly wage in excess of $20.00/hour, “just for shopping and dining out” and writing reviews (the foregoing site has not been targeted by the FTC and the author makes no claims as to the legitimacy or illegitimacy of the site; this site serves as example only).

Here’s the catch: in order to start collecting money, students have to either pay a membership fee, or deposit a bogus check sent to them (as “advance”). In the former case, the membership fee is collected, but no money is forthcoming (“No one wants your review. Sorry.”). In the latter scenario, the company’s check bounces, and gets returned with the depositer’s account information on it, and money is removed from the account. The FTC found that Independent Marketing Exchange, Inc. engaged in such fraudulent business practices.

Working as a bone fide “secret shopper” is a legitimate undertaking and some companies are actively seeking — and paying — shoppers for real reviews. The money, however, is typically not of the sort that will net anyone a full time income. Moreover, according to the FTC, legitimate “secret shopper” companies do not ask for money up front and do not ask members to deposit checks prior to conducting any work. While not dispositive of a bogus company seeking to defraud people, these “red flags” should be heeded by those looking into this line of work.

Practice Note: Advise clients who run such a business to steer clear of deceptive business practices such as charging membership for a secret shopper program, even if the business is a legitimate one. Such practices may subject a business to FTC investigation and complaints.

They’re cute, they make noise, they might even get your kid to eat his breakfast, but boost immunity? The FTC says not so much.

For the second time in a year, Kellogg’s has been put on the hot seat for its cereal related health claims. This time, Kellogg’s claimed that because Rice Crispies contains “25 percent Daily Value of Antioxidants and Nutrients — VItamins A, B, C, and E,” eating a bowl would boost a child’s immunity. While it may be true that consumptions of these vitamins can help with boosting a child’s immunity, there’s no scientific proof that those vitamins, as contained in Rice Crispies, boost immunity.

This claim comes on the heels of Kellogg’s being shredded over claims it made in April that its Frosted Mini-Wheats were clinically shown to improve children’s attentiveness by nearly 20 perfect. In fact, only half the children in the clinical study had improved attentiveness and of them, only 1 in 9 showed a 20 percent improvement.

Despite Kellogg’s official statement about its “long history of responsible advertising,” it has fallen off the the clinical studies wagon in the past. 3 years ago, the company was also cited for advertising that eating two bowls of Kellogg’s Special K was clinically shown to help you lose weight. In fact, the clinical studies were related to the consumption of milk, not cereal, and thus, the better way to achieve the weight loss results advertised was simply to drink the milk.

Oh Kellogg’s, nice try, but honestly, it’s cereal, snap out of it!

Practice Note: Companies often try to make claims using scientific data from third party sources. While such claims are not illegal to make, clients should be counseled that the overall impression conveyed by the ad must be substantially the same as the scientific results revealed. In many cases, therefore, disclosures must be made in the ad to assure its truthfulness.

Or “Cher,” or even “Carrot Top.” Either The Cobalt lawyers are not up on just how cool Lindsay Lohan is, or she needs to check back into rehab for delusional thoughts.

According to the Wall Street Journal Law Blog, Ms. Lohan has sued E-trade in New York Supreme Court for misappropriation of her name and characterization for one of its “baby” commercials in which a girl baby refers to another girl baby as “that milkaholic lindsay.” According to Lohan’s attorney, such a reference clearly is an attempt to trade off the good name of Lindsay Lohan.

A couple of things her attorney might want to think about: First, all roads do not lead to your client simply because her name is Lindsay. Second, publicly giving the defendants a defense by saying the commercial is a “parody” is probably not a good way to really drive home your own case. Finally, Lindsay may have a hard time establishing that she’s known only by her first name given the fact that she’s never advertised or marketed herself solely as Lindsay, there are over 300,000 women in the country with the name Lindsay. Besides, she was never and abuser of — oh wait, she’s got one strong piece of evidence.

We’re betting this case gets the New York Heave Ho.

SFB thought it would be a good idea – and not a violation of its agreement with Sara Lee (predecessor in interest to the original party) – to market a new bread under the name SYCAMORE FAMILY BAKERY, with SYCAMORE as the dominant feature of the mark. For good measure, it added the tagline “The Original Granny Bread” and incorporated a “heart” logo (hearts are also incorporated into the GRANDMA SYCAMORE bread logo sold to Sara Lee).

Sara Lee sued for trademark infringement and for creating a false impression and the court agreed. In Sara Lee Corp. v. Sycamore Family Bakery, the court ruled that he dominant feature of the mark was highly distinctive, and found SFB had clearly taken pains to highlight the SYCAMORE component of the mark while subjugating the other terms. Second, by calling attention to its origin, SFB was deliberately trying to increase the likelihood consumers would get the very false impression the Sycamore Family products were related to and under the control of the trademark now owned by Sara Lee.

In granting the preliminary injunction, the court paid particular attention to the “intentional copying” element of the likelihood of confusion test, suggesting that SFB and “intimate knowledge” of the GRANDMA SYCAMORE family of trademarks made clear it was deliberately trying to trade off the goodwill of the marks. Moreover, the court cited employee “joking about cease and desist letters” from Sara Lee as clear disregard for Sara Lee’s rights.

Practice Pointer: Selling trademarks and then attempting to re-use them is never a good idea. Though obvious enough, clients often believe they have an inalienable right to use their own names, even after entering into a deal with another party to sell them. Attorneys will want to make sure clients understand the full magnitude of what they are selling before they sell it.

Moreover, clients often believe that once a buyer is no longer a going concern, any agreement made with that buyer dissolves. This is rarely the case, since most agreements contain a provision expressly allowing the obligations under the agreement to be transferred.

Low-profits differ from for-profits in that they have a maximum financial return on investment. The potential rate of financial return on a standard for-profit company is generally 5% or greater, while fully tax-exempt companies are identified as having a 0% return. A low-profit company is both financial and mission-related, and strives for a financial return on investment of not more than 5%. An L3C can also receive philanthropic investment, so long as the investment provides a low rate of return. Vermont is also an L3 state, as is Montana, with legislation pending in Georgia, Michigan, and North Carolina.

If you don’t have anything nice to say, it’s not OK to lie.

Increasingly, the FTC is going digital-rambo against false advertisers, and the states are following (law)suit. Lifestyle Lift, a cosmetics company has just settled with New York Attorney General Andrew Cuomo for publishing fake reviews about its cosmetic facelift process.

According to documents filed by the attorney general, Lifestyle Lift got employees to post anonymous product and service reviews on websites owned by third parties, making it appear that the reviews were made by genuine product users.

In addition to violating Section 5 of the FTC Act, which proscribes the use of deceptive advertising tactics to sell products to consumers, such conduct also violates many state laws on unfair business practices and false advertising. Cuomo, in a press conference, called the activity “cynical, manipulative, and illegal.” Cuomo would be right.

In fact, reviews are identical in every legal measure to testimonials, where the law is clear: any positive testimonial provided by consumers must be (1) truthful; (2) authorized by the manufacturer of the product; and (3) and must reflect the “typical” experience of a product user. Thus, even if a consumer is telling the truth about a product, if that truth either is not supported by scientific studies, or does not reflect the average customer experience (and therefore distorts the product’s worthiness), such a review is considered false advertising.

As many following the advertising world know, back in April, the FTC announced it will be going after companies who pay others to create viral and influential websites about the benefits of the companies’ products if information on those sites is not truthful.

PBM Products, LLC, which makes infant formula for big box stores like Kroger, WalMart, Sam’s Club, and Target, sued Mead Johnson, claiming the Enfamil maker made false statements regarding its ENFAMIL baby formula.

Mead Johnson’s new direct mail campaign states ”Enfamil LIPIL’s unique formulation is not available in any store brand.” Worse, the suit claims, defendants display a picture of a blurry rubber ducky, implying that customers who give their babies anything other than Enfamil may endanger their child’s vision and brain development. In fact, PBM claims its product is identical to the defendant’s product, according to the lawsuit, which can be downloaded here.

Mead Johnson has been entangled with PBM in the past (and lost), both in litigation, and through challenges at the National Advertising Division (“NAD”). Mead Johnson has also been before the FTC after failing to comply with the NAD decision. Paul Manning, PBM’s CEO, claims that Mead Johnson has twice before made similar false claims, and in both instances, the court banned the company from making more false advertising claims about its products and forced Mead Johnson to make corrections to its advertising.

This lawsuit seems to be ruffling feathers throughout the regulatory world. NAD, the self-regulatory agency which works with advertisers to correct advertising problems without litigation, made the following statement: “NAD is incredulous that after two compliance proceedings, with the second compliance proceeding making explicit that any noncompliant advertising would result in a referral to the appropriate government agency, that the advertiser would disseminate advertising that clearly does not comply with NAD’s decision.” Might we be headed for a three strikes law for marketing?

Practice Pointer: Marketers must be kept “in check” to make sure they are not going beyond ‘puffing’ to sell a product. Over time, a brand (and worse, a company) will lose credibility in the consumer world if no one believes the claims being made. Moreover, if companies would rather avail themselves of the less expensive and less public venue of self-regulatory proceedings believe self-regulatory decisions will be ignored, they are likely to move towards the state and federal court systems to quiet bad actors. When reviewing advertising, always request evidence for the claims being made. While lawyers cannot dictate what their clients will ultimately do, they can help guide companies toward being good corporate citizens.

One last point. This case underscores the importance of looking at an advertiser’s claims from many perspectives. PBM’s suit is focused on the claim that Mead Johnson is the only formula company with an essential formula. The FTC and NAD appear to be more focused on the issue of whether the formula – whatever it is – actually improves brain development.

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On the heels of releasing its new advertising guidelines, the FTC is wasting no time in going after individuals and companies it believes have crossed the line in their advertising practices.

Long a thorn in the side of the FTC, the weight loss market is taking the first hit. Last month, the FTC sought injunctive relief against Stella labs, Neutraceuticals International, and their principles (“Defendants”) for false advertising claims related to products it sold containing – or purporting to contain – the ingredient “Hoodia.”

Hoodia is a succulent plant found in parts of Africa, including South Africa, Botswana, and Namibia. No scientific data suggests it is an appetite supplement, but it is colloquially rumored to suppress the appetite of those who chew it. Hoodia is considered endangered by The Convention of International Trade in Endangered Species of Wild Fauna and Flora and thus its import to the U.S. is heavily regulated. According to the complaint, the only country allowed to export authentic Hoodia is South Africa.

The complaint alleges the Defendants supplied their trade customers with advertising documentation stating or implying their products contained authentic Hoodia, further representing that Hoodia caused substantial weight loss, and claiming Hoodia was an effective treatment for obesity. Based upon these representations, trade customers bought the product and resold it to consumers. None of those claims, says the FTC, had been substantiated at the time the statements were made; moreover, all of the claims, now tested, are false.

Notwithstanding the FTC’s issuing of new advertising guidelines, this complaint does not invoke the higher scrutiny contemplated by the new guidelines. These claims fall squarely into the category of false statements. Unless the Defendants can prove either the truth of their representations, or that at the time the representations were made they were true, the court will make quick work of this matter.

Practice Note: We see it all the time: a client tells us its product is scientifically proven to lose weight. It may even show us the proof. When we probe further, we discover that in fact, the evidence is not about its product, but a single ingredient in the product that has been shown to help lose weight, in certain amounts, and under certain circumstances. In fact, the product has not been proven to lose weight at all. Notwithstanding third party evidence supporting weight loss for an ingredient, a company may not glom on to those results when it sells its own product.

Although we believe it’s unlikely, under the new guidelines yet to be enforced, the FTC might well be able to pursue claims against resellers of the product too, particularly if they are paid through an incentive program. While we have seen no cases on this, the rationale is to hold third parties responsible for reselling products using the same false claims without conducting sufficient due diligence to determine whether the claims are accurate. We believe if the FTC did begin to enforce against resellers, the enforcement would begin with claims the reseller clearly knew or should have known were false.

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We had a good time and covered lots of topics. At the end of the day, we hit upon a few important take-away pieces of information:

1. The Social Networking/Social Media (“SM”) boom is not going away. People are going to find more ways to communicate digitally, and as the world’s psychographic changes (younger people start coming into adulthood), vendors who don’t assimilate SM into their plans are going to be left behind.
2. Currently, the legal issues are the same ones we’ve been addressing for the past few years with regard to blogging, domain hosting and user-generated content (third party trademark use; defamatory statements, hijacking of profiles, etc.).
3. In the long run, current law is going to require some tweaks, and we’re beginning to see them (be patient):
— The FTC has already come out with new “affiliate marketing/testimonial” guidelines (clear response to “fake” social networking sites).
– Likely change in SM sites will be clear disclosure of company-sponsored social sites (right now, if you get “busted” for fabricating a site, you’ve just got egg on your face). Legislation likely coming relating to origin.
– Affiliate SM sites likely to have to disclose that they have been paid for their testimonials. This is consistent with existing law regarding testimonials, but not currently enforced.
4. As technology advances, a greater burden will be placed on ISPs to protect against access by children; on the flip-side, parents are going to have to take more responsibility for what their kids are doing online.
The sky is not falling (see my last slide of “babies-booze-betamax”):
– People still (generally) make babies the same way, so online social networking will not replace direct communication.
– Young people will quickly learn how to interact, and in a difficult job market, interpersonal skills will separate out those who don’t have them.
– When new technologies are brought forth, some folks imbibe to excess. Much like the steep rise in alcoholism after prohibition, social mores and legislation over time made most folks use alcohol sensibly; the same thing is true for technology.
– Lawyers out there: relax and take a philosophical view: the fear that everything as we know it will change is unfounded (remember, we thought that the BetaMax would make real-time TV and advertising obsolete). Things will change slowly and over time, but companies will be able to get out their message.

Social Media 1

The FTC has, since the 1980’s, been actively involved in regulating endorsement and testimonial advertising that is designed to entice consumers into choosing products based upon “real life” experience (or the promise of success from a reputable source). Its guidelines help define the scope of testimonial and endorsement advertising. They point out, generally, if a single user’s experience is not typical of the average consumer, then a company may not imply that potential buyers of the product will get the same result. Now, the FTC has determined its rules about testimonials and extreme results need to be updated.

In an attempt to keep up with consumer complaints about dishonest advertising, online social networking and other internet venues that reach consumers, according to the Financial Times, the FTC is proposing legislation that could make companies liable for testimonials written by bloggers and parties who receive free samples or other incentives to try products and subsequently write good reviews.

According to Richard Cleland at the FTC, these new updated guidelines are designed to curb the use of terms like “Results Not Typical,” to justify putting up extreme and untested consumer outcomes for products and services. The new guidelines are also designed to hold companies responsible both for encouraging third party testimonial information it knows to be false, or for using spokespersons who have achieved extreme results for products, knowing the results are outrageous.

If the new guidelines are adopted, companies will not only have to consider how they use spokespersons and social networking sites, but also how they develop their “influencer” programs. Influencer programs are those programs designed specifically to attract a certain target market by paying (or giving free samples to) loyal product users in exchange for spreading the word about their personal experience through social networking (both online and offline) groups. At the very least, it’s likely that contracts between companies and third party influencers will see some changes.

Notwithstanding the spotlight that has hit the FTC proposal and the resultant uproar from many companies and marketing associations, there have been other attempts to regulate third party claims about products and services. Law professor and prolific blogger (and Twitter®er), Eric Goldman, has cited to other attempts at third party testimonial regulation.

For instance, points out Goldman, the Florida State Bar treats consumer reviews of attorneys as regulated testimonials. Goldman even remarks on his Technology and Marketing Blog that the SEC’s recent proposed hyperlinking guidelines may contravene 47 U.S.C. 230 which immunizes websites from liability for third party content.

Regardless of what happens in the short term, issues of agency will be important if the FTC truly wishes to hold companies and bloggers liable for third party content. It is impractical (and likely impossible) for companies to police what third parties write about their products. In all likelihood, therefore, the FTC would limit liability to cases where the company links to or endorses information on a third party site, or where the influencer is retained without a contract provision about outlandish statements.

The biggest challenge, depending on how the guidelines are written, may ultimately be to advertisers who use spokespersons with unusual outcomes, who have until this point, gotten by with a disclaimer of “Results Not Typical,” or “Your Results May Vary.” The long running commercials involving Jared, who claims to have lost hundreds of pounds by eating Subway sandwiches, may have seen their last days.

Practice Note: Despite the current feeling about the proposed guideline changes, the sky is not falling. Advertisers have weathered advertising regulation in the past, and at the end of the day, we still manage to get a fair number of commercials (and testimonials) out there. In truth, and regardless of whether there will ever be another Jared to enable Subway to point to a pattern of weight loss, he won’t go away, and the FTC is not going to find liability with companies or bloggers that are generally engaged in appropriate disclosure practice.

The new logo (shown above next to the old one) is representative of the phone company’s radically new “so very Verizon” campaign.

Further images of the clever campaign are available here.

No word yet on whether the old CAN YOU HEAR ME NOW? tagline will be replaced by the VERY awesome: IS IT HOT IN HERE?

Practice Notes: Rebranding efforts can be effective for companies to update their image and gain new consumers (although they can sometimes backfire, as Tropicana learned recently). Clients should involve their trademark counsel in the rebranding and marketing efforts, so as to assess potential risks (such as likelihood of confusion with existing marks, say, in this case, the SKYPE logo) and protect the new marks, including new trade dress, if applicable.

Tsan’s Comment: Naturally, rebranding efforts that take place on April Fool’s Day and are gone the next day should be suspect (unless you’re introducing New Coke).

Experience Hendrix and Authentic Hendrix, which owns and licenses Hendrix’s likeness and music won a $3.2 million judgment against Craig Dieffenbach and his Electric Hendrix Spirits. Electric Hendrix Spirits had described the liquor as inspired “by the innovative spirit of legendary musician Jimi Hendrix.”

A legal purple haze has surrounded the deceased guitarist for years. In this case, Hendrix’s sister Janie Hendrix, CEO of Experience Hendrix LLC, alleged trademark infringement and false advertising for its “tasteless promotion” of Hendrix Electric Vodka, sold in purple-tinted bottle. Plaintiffs further alleged that Hendrix’s name and likeness were used without permission. Janie Hendrix, however, isn’t the only Hendrix in this fight. Leon Hendrix, Jimi’s biological brother, who has been engaged in a long-running legal dispute with Janie Hendrix over Jimi’s assets, is a partner in defendants’ venture. Indeed, Mr. Dieffenbach, has helped Leon Hendrix finance his court fight over Jimi’s estate. Here’s a story about the lawsuit and the Hendrix family’s squabbles over who has the right to make money off the late rock star.

In its February 12, 2009 order, the District Court ordered the company to cease using Hendrix products for commercial purposes and ordered the vodka and any related advertising be withdrawn. And the beat goes on . . . .

Michael Scott wants to sell paper. Borrowing an idea from the Roald Dahl book, Charlie and the Chocolate Factory, he decides to put 5 Golden Tickets in pallets of paper to be randomly shipped to existing clients. The tickets allow a company getting the ticket to receive 10% off its paper order. Problem is, Michael decides to seed them himself and all the tickets end up with the same company. Worse, there are no restrictions: no limit to the number of tickets one company can have; no time restrictions; no restriction on the number of orders to which the ticket applies; no limitation on minimum or maximum orders. There go the Dunder-Mifflin profits (and Jim’s commission).

Like a Curious George book, it all works out in the end, but in difficult economic times, clients often make rookie errors when rolling out a promotion that can be easily dispensed with by first “role playing” the promotion, and then, spending a little time with an attorney, who may know about various state and local laws that could affect the outcome. At a minimum, the client should ask itself these questions before proceeding:

– Does this promotion attract the right clientele?
– If I where the target, would I care?
– Is it impossible to “game” the promotion (take advantage of a loophole)?
– Will this have an overall positive impact on the bottom line?

If a client can answer the foregoing questions affirmatively, it’s taken the first step to a promising promotion.

Plastwood SRL v. Rose Art Industries (Case No. c07-0458LJR, W.D. Wash. Dec. 5, 2008).

District Court Judge James Robart granted the Motion for Summary Judgment filed by Rose Art, finding that its packaging did not contain literally false statements.

At issue in this case was Rose Art’s line of MAGNEXT toys, plastic and magnetic construction sets that compete directly with Plaintiff Plastwood’s SUPERMAG construction sets. In its complaint, Plaintiff alleged false advertising under Section 43(a) of the Lanham Act for claims made on the packaging. In particular, Plaintiff contended that while Defendant’s packaging makes the claim that “500 designs” can be made from the contents in the box, many of the structures described collapse under their own weight and/or cannot be made by kids.

During discovery, Defendant provided an adult expert who was able to construct all of the structures claimed on the box. Plaintiff complained that even if the expert was able to construct each of the structures, the toy was intended for children, not expert toy builders. Accordingly, the advertising was literally false as to its intended audience. In dismissing Plaintiff’s contention, the court noted that Defendant’s box had an age range of 3 to 100. Thus the court, while acknowledging that the question of whether a statement is false is a question of fact to be decided by a jury, found that Plaintiff had failed to “establish any genuine issue of material fact in support of its assertion that the structures cannot be built,” and further noted that Plaintiff provided no evidence that consumers were actually misled. According to the decision, in fact Plaintiff did show that at least three of the structures could not be built and that many more could be built, but not in the manner shown by the instructions. Nevertheless, the court found that there was no material issue of fact with regard to the truth of Defedant’s statement and granted its motion.

Comment: The decision is an interesting one. Plaintiff brought its case on a theory literal falsity of Defendant’s statements. Under the Lanham Act, if a statement is “literally false,” then a Plaintiff does not have to provide evidence that consumers were actually deceived; rather, if a statement is found to be literally false, the court must assume consumers were misled (Rosco, Inc. v. Saks Fifth Ave., 284 F.3d 302, 311 (1st Cir. 2002) ). Thus, it seems in part, the court may have been using the test for whether a statement, though true, is false by necessary implication, to find for Defendant.

Had the Plaintiff alleged implied false advertising or, in the alternative, “false by necessary implication” (literally true, but misleading), it would have had to provide evidence that consumers were misled. On the other hand, by bringing such a claim, Plaintiff could have made a credible showing that the box indication of “ages 3-100” does not really reflect the toy’s intended audience. Evidence of where the toy was sold (and who bought the toy) could have narrowed the range and survey evidence might have shown that in fact, parents who bought the toy assumed the product designs could be constructed by their child.

Practice Pointer: Appropriate disclaimers should be included on a box (or, if online, at the point of purchase) to notify the purchaser of product limitations. In this case, a claim that the box’s contents make 500 different structures might have been followed by a simple statement that “expert skill may be required to make some structures.” Such a statement would have been unlikely to change the buying habits of a parent interested in the toy, and would likely have alleviated the need to defend against the claim brought.

Winter 2009. Reebok, in conjunction with the National Hockey League, is hoping consumer recognition of its brand will translate to money in the bank. Reebok will run a “Find the Lost Logo” promotion during the NHL Winter Classic, where it will ask fans to find the hockey player who is not displaying the Reebok logo on his jersey.

Entrants can play by watching the Classic on television and submitting their answer via text message or online; or attendees of the game can submit their answers via text message. All answers submitted will have an opportunity to win four tickets to the Stanley Cup final game. The winner will be announced at the 3rd period.

Practice Pointers:

1. The law is still not clear regarding whether a proper alternate method of entry for a text-messaging sweepstakes can be an online entry. Currently, the matter is being litigated in California courts.
2. This sort of promotion is categorized as a “treasure hunt” and is generally considered a sweepstakes, not a contest.

On December 5, 2008, The Children’s Advertising Review Unit (”CARU,”) a division of the Better Business Bureau, issue a press release admonishing advertisers to make clear disclosure about the need for adult supervision with certain toys, particularly when those toys are advertised directly to children.

CARU highlighted a new product from Wham-O, called the Slip ‘N’ Slide Mega Shark, a water toy for children’s play. The toy was advertised on Nickelodeon during a time when children are the primary viewing audience.

CARU questioned whether a small graphic disclosure on the screen was sufficient to inform children that no one over 5’ tall or weighing over 110 pounds should use the toy. Moreover, CARU expressed concern that because the disclosure was not properly made, the toy might be misused by children.

The lack of adequate disclosure was only one of the concerns CARU expressed. CARU also worried that the commercial should have shown adequate adult supervision, noting there was only a brief showing of a woman watching the children play on the slide. Overall, CARU found, the commercial did not meet CARU’s voluntary requirements.

Case law supports CARU’s contention that more precautions should be taken. In particular, with water sliding devices, the weight and height requirement is important, as spinal cord injuries, rendering users unable to walk, have been reported, and numerous law suits have dealt with this issue.

Practice Note: In an era of childhood obesity, it is not unusual for children to weight over 110 pounds. Clients CARU is self-regulatory and speaks softly, but carries a big stick. In cases where an advertiser refuses to alter its ad campaign, CARU can (and will) refer matters directly to the Federal Trade Commission for prosecution. Moreover, CARU can alert the CPSC if it believes the product or its advertising present a problem.

Gerber, “one of the most trusted names in baby food and baby care,” marketed its Fruit Juice Snacks product (“Snacks”) in a package featuring images of fruit such as oranges, peaches, strawberries and cherries. The side panel of the packaging described the product as made “with real fruit juice and other all natural ingredients.” In addition, another side panel contained a statement announcing Snacks was, “one of a variety of nutritious Gerber Graduates foods and juices.”

Thinking they purchased healthy snacks for their kids, Plaintiffs sued Gerber under, among other things, California state tort law for misrepresentation and breach of warranty, as well as claims under California’s Unfair Competition law (Bus. & Prof. Code § 17200, et seq.) and California’s Consumer Legal Remedies Act (Civil Code § 1750, et seq.). Plaintiffs’ deception claims were based, in part, upon the following allegations: (1) The product contained no fruit juice from any of the fruits pictured on the packaging; (2) The only juice contained in the product was white grape juice from concentrate; and (3) The two most prominent ingredients in the product were corn syrup and sugar.

Gerber filed a motion to dismiss and the District Court granted Gerber’s motion fining the package statements were not likely to deceive a reasonable consumer. The Court of Appeals disagreed. In reversing the District Court’s order, the Court recognized that “whether a business practice is deceptive will usually be a question of fact not appropriate for decision on demurrer.” It further found a number of Gerber’s packaging features could likely deceive a reasonable consumer. “The product is called ‘fruit juice snacks’ and the packaging pictures a number of different fruits, potentially suggesting (falsely) that those fruits are contained in the product,” stated Judge Pregerson in the Opinion of the Court. Further, the Court found the statement that the product “was made with ‘fruit juice and other all natural ingredients’ could easily be interpreted by consumers as a claim that all ingredients in the product were natural, which appears to be false.” Disagreeing with the District Court, the Court found, “reasonable consumers should [not] be expected to look beyond misleading representations on the front of the box to discover the truth from the ingredient list in small print on the side of the box.”

Finally, in a statement sure to make consumer products manufacturer’s take note (especially those marketing products for infant or toddler use), the Court added, “We do not . . . think that a busy parent walking through the aisles of a grocery store should expect to verify that the representations on the front of the box are confirmed in the ingredient list. Instead reasonable consumers expect that the ingredient list contains more detailed information about the product that confirms other representations on the packaging. We do not think the FDA requires an ingredient list so that manufacturers can mislead consumers and then rely on the ingredient list to correct those misrepresentations and provide a shield for liability for the deception.”

Practice Note: In reading the full opinion, this commentator is of the opinion the Court of Appeals, while correct on the application of the law, held Defendant Gerber to a higher standard than that of an ordinary manufacturer of consumer products. Gerber, in its own words, is “one of the most trusted names in baby food and baby care.” The Court likely took note of this when crafting its opinion. One wonders if the same standard would have been applied to a beer manufacturer or a coffee beverage manufacturer, i.e. products marketed to and primarily intended for adults.

The Federal Trade Commission yesterday announced that it has ordered Membership Services Direct, Inc. (also known by other names) to pay $28.2 million to the FTC. The amount represents the net profits made by the company after engaging in a telemarketing scheme designed to bilk consumers of their money. Dubbed the Wal-Mart Shopping Spree Scam, the order also bars several of the company’s principles from engaging in deceptive practices in the future.

The original complaint, filed in federal court by the FTC in 2007, alleged that MSD made cold calls to consumers, falsely promising them shopping sprees at retail department stores like Wal-Mart and Macy’s. They also promised discount coupons, gas vouchers, and free movie tickets, if consumers joined a discount club. The ruse was designed to get unsuspecting customers to reveal their private bank account information, which MSD later used to directly debit the consumers accounts.

Practice Note: Consumers should be advised never to release their social security number or their bank account information over the phone. No reputable organization will ever ask for that information from a consumer. The FTC has a special mailing address for consumers to use if they have had money debited from their account by MSD or any of the other defendants in this Wal-Mart case. Consumers can send a letter to Faye Chen Barnouw or Jennifer Brennan, 10677 Wilshire Boulevard, Suite 700, Los Angeles, CA 90024. Consumers should identify which entity took the money, and supply supporting documentation.

Blockbuster may not be able to rely on the what I learned in Kindergarten defense when it answers charges it illegally shared a plaintiff’s movie preferences with third parties. In a suit filed in Texas earlier this month, Cathryn Harris sued Blockbuster for sharing her rental history on Facebook.

The suit, which is currently seeking class action status, claims Blockbuster’s actions of feeding renters video choices to a news feed violate the Videotape Privacy Protection Act, (“VPPA”) which states in relevant part that a video tape service provider is liable under the VPPA if that provider knowingly discloses personally identifiable information without the renter’s “informed, written consent.” Harris contends the online “opt out” options she was given did not constitute her informed written consent as intended by the VPPA.

The sharing comes as a result of Blockbuster’s participation in the Beacon advertising program, which has received considerable attention and criticism from consumer activist groups and corporations over the past 18 months. Beacon is a form of “social advertising” that allows Facebook friends to see your purchases (as well as other transactions you make) through news feeds. After considerable controversy, Facebook changed the “opt out” provision to an “opt in” provision, so that users would not inadvertently share their personal information simply by accepting the use agreement. Even so, last year, Coca-Cola announced it would not be participating in the program, as did Overstock.com and several other companies, citing privacy concerns. For instance, research showed that participating companies were sending information to Facebook even for buyers who were not Facebook members. Although Facebook claims it deletes such information if and when it is received, many partner sites determined the program contained too many privacy problems for them to feel comfortable participating.

The VPPA was enacted in 1987. It is rarely cited and was clearly not created with the sort of digital transmission of private information in mind that happens today. In fact, the VPPA was enacted after Robert Bork’s video rental history was published during his Supreme Court nomination hearings.

Practice Note: Privacy policies are tricky things. Clients should be advised to create policies that they can follow. Any updates to a privacy policy, particularly ones that will change the way a user’s information is shared, should be highlighted in bold.