Hunton Retail Law Resource

This past week, several consumer protection and regulatory actions made headlines:

Once You Pop, the Suit Can’t Stop: 7-Eleven Chip Labeling Suit Begins Again

On June 7, 2016, the Ninth Circuit reversed the district court’s dismissal of a proposed class action alleging that plaintiffs were misled by 7-Eleven’s potato chip bags, claiming they had no trans-fat or cholesterol. The lead plaintiff in the case claimed that he relied on the front-of-package labeling and would not have purchased the chips had the front also included the FDA-mandated, “See nutrition information for fat content,” disclosure. Importantly, the Ninth Circuit’s holding clarified that California’s consumer protection statute makes misleading statements actionable, even if they are not “technically false.” Plaintiffs allege that 7-Eleven’s attempts to gain a market advantage by a half-truth claim misled customers nationwide.

If You Don’t Like Piña Coladas: Costco Must Face Misleading Coconut Oil Suit

On June 7, 2016, Judge Carter of the Central District of California held that Costco cannot escape a proposed class action claiming that it misled consumers into thinking that its Kirkland-brand coconut oil was “healthful and delicious.” Plaintiffs allege Costco’s claims that coconut oil had “health benefits” were misleading and that, as a result of those claims, a class of customers overpaid for a product that turned out to be little more than pure fat. Judge Carter rejected Costco’s arguments that plaintiffs unreasonably read the health benefits as applying to nutrition, when they also described the oil’s skin moisturizing benefits. Instead, Judge Carter found that the plaintiffs’ claims sufficiently alleged that a reasonable consumer could have relied on the labels and been misled by Costco’s healthy statements.

NAD Recommendation Turns Up Heat on Cellulose Insulation Manufacturer

On June 13, 2016, the National Advertising Division (“NAD”) recommended that Applegate Insulation discontinue claims that cellulose insulation was more effective than fiberglass insulation in reducing energy bills, that added boron in the cellulose insulation was a lower cancer risk and possibly a healthy benefit, and that the fire-retardant additives Applegate uses are non-toxic. NAD determined that the claims were unsupported by scientific and economic studies. NAD permitted Applegate to continue making claims about the insulation’s safety and thermal resistance, but could not categorically say its products were “non-toxic.”

One Week More: Potential VW Settlement

On June 15, 2016, Judge Breyer of the Northern District of California extended by a week the deadline for Volkswagen to reach diesel emissions settlements with car owners, the Department of Justice and the FTC, owing to the “highly technical nature” of the settlements and the complexity of the litigation. The government’s Clean Air Act suit came on the heels of a September admission by the company that it had installed emissions-cheating software in over 11 million vehicles worldwide, including about 600,000 in the United States. In late April, Volkswagen and the plaintiffs announced a tentative settlement requiring VW to buy back or fix about 482,000 vehicles to remove so-called “defeat devices” that reported false emissions data to allow increased emissions after passing federal and state testing laboratories. The parties have until June 28, 2016, to finalize the settlement.

FTC Helps Coffee Weight-Loss Supplement Customers See Green

On June 14, 2016, the FTC announced it was mailing over $9 million in checks to consumers who bought Pure Health or Genesis Today green coffee weight-loss supplements. Launched by appearances on The Dr. Oz Show and The View, Pure Health capitalized on the “Oz Effect” and made tens of millions in sales in the first several months on the market. At the center of the agency’s complaint was allegations that Pure Health deceptively stated that a clinical study supported the claims that its green coffee supplements would cause consumers to lose at least 16 percent body fat in three months without diet or exercise. The settlement bars Pure Health and its owner, Lindsey Duncan, from making deceptive weight-loss claims and unsubstantiated claims about health benefits of any dietary supplement or drug.