Hunton Retail Law Resource

DOJ Merger Investigation Opened a Whole Can of Worms

Retailers and consumers may have been paying out the gills for canned tuna. The Wal-Mart family of stores has alleged a price fixing scheme for canned tuna in Arkansas federal court. Wal-Mart’s complaint casts a wide net, alleging that Bumble Bee Foods, StarKist, Del Monte Foods (former owners of StarKist) and Tri-Union Seafoods (owners of Chicken of the Sea) engaged in large-scale price fixing in violation of Section 1 of the Sherman Act. The defendants allegedly hatched the scheme between 2008 and 2010 and canned it in July of 2015.

October was filled with frights as malfunctioning electronics took center stage. With personal panic devices failing to operate and diving computers posing drowning risks, manufacturers should keep in mind that life-threatening hazards dramatically increase their potential liability.

In a continued effort to implement the policy change announced by President Obama on December 17, 2014, to engage and empower the Cuban people, the Office of Foreign Assets Control (“OFAC”) has announced additional amendments to the Cuban Assets Control Regulations. These amendments, which went into effect on October 17, 2016, constitute the sixth time that the various sets of regulations governing Cuba have been amended.

Much ado about lithium-ion batteries. If you have watched the news, you have seen that certain smartphones have been recalled due to fire and burn hazards posed by the phones’ lithium-ion batteries. While this recall is important, it is not unique. This year alone, at least nine other companies have issued recalls due to problems with lithium-ion batteries. These recalls include video baby monitors, batteries in laptop computers, batteries in flashlights and other battery packs. Not to mention last year’s slew of recalls over the most popular holiday gift – the hoverboard. While there are advantages to lithium-ion batteries, such as their recharge capability and their low memory effect, there are risks to using them in household electronic devices. Manufacturers must assess these risks when rolling products out to the public. Companies could not only face an expensive recall, but also a potential shift in public perception of the quality of its devices that could have repercussions long after the initial recall is over.

On October 3, 2016, Amazon announced that it will eliminate most incentivized reviews – reviews written by customers in exchange for free or discounted products – except those reviews facilitated through the Amazon Vine program. Amazon, which has always banned compensated reviews, previously had allowed businesses to offer free samples to customers in exchange for reviews, as long as customers disclosed the fact of the incentive. In theory, customers receiving free products should have provided unbiased reviews; a recent study, however, showed the average rating for ...

The first blow to the recent expansive application of the New Jersey Truth-in-Consumer Contract, Warranty and Notice Act (“TCCWNA”) was struck by a federal court in California last month. In Candelario v. Rip Curl, Inc., the Central District of California granted a motion to dismiss a complaint alleging a TCCWNA violation of website terms and conditions because the plaintiff lacked Article III standing. The plaintiff has appealed the decision to the Ninth Circuit.

Hunton & Williams LLP focuses on product issues ranging from compliance, recall issues, investigations and products-related litigation in state and federal courts and in various administrative forums. Our lawyers have managed and consulted on recall or potential recall issues for a number of clients requiring involvement with the Consumer Product Safety Commission, the Federal Trade Commission, the Food and Drug Administration, the Bureau of Alcohol, Tobacco, Firearms and Explosives, and the state attorneys general. Our lawyers have conducted broad-based federal and 50-state research to identify applicable regulatory schemes, consulted with clients regarding compliance strategy and litigation risk management issues, and litigated numerous products liability claims (gas controls, valves, water heaters, tires) in state and federal courts.

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

Regulatory Actions

FTC Releases Newly Approved Energy Labeling Rules, Considering Other Changes

The FTC has approved changes to the Energy Labeling Rule, which it says are designed to improve access to energy labels and the labeling for refrigerators, ceiling fans, central air conditioners and water heaters. The labeling is designed to help consumers understand the energy cost of consumer products and make it easier for consumers to compare different product models.

Zara USA, Inc. (“Zara”), the popular European-based fashion retailer which boasts several celebrity clientele, has been targeted in a class action complaint filed in federal court, accused of allegedly carrying out a systematic “bait-and-switch” overpricing scheme. 

Since the U.S. Supreme Court’s 2014 decision in Daimler AG v. Bauman, 134 S.Ct. 746 (2014), numerous courts across the country have applied its holding to narrow the permissible bounds of the exercise of general jurisdiction over companies in jurisdictions without a connection to the specific claims in the case. On August 29, 2016, in Bristol-Myers Squibb v. Superior Court, No. S221038 (Calif. 2016), the California Supreme Court left many wondering what Daimler may mean for the exercise of specific jurisdiction in cases involving nationwide courses of business conduct affecting both resident and nonresident plaintiffs. 

As retailers continue to look for new and innovative ways to maintain communication and “touch points” with their customers, many are looking to technology-infused or “smart” packaging and advertising materials. There are many ways to drive customer interaction and web traffic through smart packaging and advertising materials, including through the use of hyperlinks, quick response (“QR”) codes and near field communication (“NFC”) chips. 

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

Starbucks’ Glass Half Full: Coffee Purveyor Wins Underfilling Dismissal

On August 22, 2016, a U.S. District Court Judge in the Central District of California dismissed with prejudice class plaintiffs’ claims that Starbucks defrauded customers by overfilling its cold beverages with ice and underfilling with the ordered beverage. The Court found that the reasonable customer understands that ice displaces liquid and that some portion of a customers’ iced beverage would, indeed, contain ice. The Court defended Starbucks’ practice, saying that transparent cups plus the lack of advertising that the cold beverages would contain a specific number of ounces of actual liquid precluded class plaintiffs’ claims. Despite the dismissal, Starbucks still faces several similar underfilling class suits nationwide.

In this post-Spokeo world, a defendant facing the all-too-common “no-injury” putative class action might be tempted to seek dismissal of the lawsuit on Article III grounds. But a panel of Ninth Circuit judges recently gave a compelling reason why defendants should strongly consider otherwise. In Polo v. Innoventions Intern. LLC, a Ninth Circuit panel reversed the dismissal of a putative class action based on a lack of jurisdiction, with instructions to remand the case to state court. We previously reported about this possibility following the issuance of Spokeo, into which a Ninth Circuit panel now has breathed life.

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

Federal Guidance

D.C. Federal Judge Vacates Part of FDA Tobacco Guidance

A D.C. federal judge vacated a portion of FDA guidance relating to the labeling of tobacco products. The key issue before the court was whether changing a tobacco product’s label to a distinct new label creates a new tobacco product subject to FDA approval. The court also considered the question of whether changing a product’s quantity resulted in the creation of a new tobacco product subject to the FDA’s “substantial equivalence review process.” The court found that while a change in the existing product’s label did not create a new tobacco product, a change in a product’s quantity did.

The National Advertising Division (“NAD”) was busy this past week. The organization recommended that several companies modify or discontinue claims made for the following consumer products.

NAD Refers Infrared Grill Ads to FTC for Review

The NAD passed along its concerns over certain ads for infrared grills to the FTC. Char-Broil LLC, a competitor of NexGrill Industries, maker of “Evolution Infrared Plus” grill, asked the NAD to investigate NexGrill’s advertising claims. The NAD referred the matter to the FTC after NexGrill failed to fully respond to the NAD’s inquiry.

The National Advertising Division (“NAD”) was busy this past week. The organization recommended that several companies modify or discontinue claims made for the following consumer products.

On July 29, 2016, President Obama signed into law a bill that will establish federal standards for labeling of food products that contain ingredients from genetically modified organisms (“GMOs”). Several consumer advocates opposed the bill, as it preempts more stringent labeling requirements in states like Vermont. However, several advocates on the other side favored the notion of national, uniform standards, as opposed to a patchwork of individualized state labeling laws.

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

Court of Appeals Rules Spokeo Requires Actual Harm

A three-judge appellate panel dismissed the case in Hancock et al. v. Urban Outfitters, a putative class action against two retailers, Urban Outfitters and Anthropologie, who were alleged to have violated District of Columbia consumer protection laws by seeking consumers’ zip code information.

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

Federal Trade Commission

FTC Settlement Casts Shadow Over Online Video Game Reviews

This past week, the FTC settled with Warner Bros. Home Entertainment over online influencer charges. The FTC alleged that Warner Bros. deceived consumers while marketing its video game, Middle Earth: Shadow of Mordor. Warner Bros. paid online “influencers,” like the popular gamer “PewDiePie,” to post positive reviews of the game online through YouTube, Twitter, Facebook and other social media. While Warner Bros. instructed these influencers to disclose the connection, they told them to do so in a description box below the video, not in the video itself, so that the monetary connection was not immediately apparent. The FTC has been particularly focused on cracking down on misleading online reviews in the past few years.

Consumer class actions are on the minds of virtually all consumer product manufacturers and service providers. Class actions based on privacy and consumer protection statutes are increasing at a remarkable rate, and can be a challenge to predict, budget and defend, given the difficulty in valuing consumer privacy rights. In an article, “Second Circuit Reminds Consumer Product Companies That Insurance Options Exist for Big Data Blunders and Privacy Faux Pas,” published in FC&S Legal’s Eye on the Experts column, Hunton lawyers Syed S. Ahmad, Neil K. Gilman and Paul T. Moura ...

President Obama signed the Frank R. Lautenberg Chemical Safety for the 21st Century Act (“Lautenberg Act”) into law in June 2016, amending the core provisions of the Toxic Substances Control Act (“TSCA”) for the first time in nearly 40 years. Last month, Hunton & Williams detailed how the Lautenberg Act considerably broadens the Environmental Protection Agency’s (“EPA’s”) authority to evaluate chemical safety and regulate use of chemicals in all stages of the supply chain, including manufacturing, distribution and retail sale. Within six months, EPA must select at least 10 chemical substances and begin risk evaluations on them. EPA must also classify chemicals – including those currently in the retail supply chain – as “high priority” or “low priority” for review, and begin risk evaluations on 20 high priority chemicals within the next three and a half years.

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

Technology

Volkswagen to Pay an Additional $86 Million to California

On July 6, California Attorney General Kamala Harris announced that Volkswagen (“VW”) will pay the state an additional $86 million in a second partial settlement over VW’s emissions “defeat devices.” This civil penalty sum is the largest amount ever recovered by California from an automaker, and comes on the heels of the recently announced $14.7 billion settlement negotiated by the EPA and the FTC over the German automaker’s emissions-cheating scandal. The $86 million is part of a total $603 million VW has agreed to pay to resolve consumer-protection claims with 46 jurisdictions. As part of the settlement, VW agreed to strict injunctive terms, including prohibitions on false advertising and affirmative disclosure of defeat devices.

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

FTC Announces Substantial Maximum Civil Penalties Increases Due to “Catch-Up” Cost-of-Living Adjustment

Pursuant to the Federal Civil Penalties Inflation Adjustment Act of 2015, the FTC has approved new maximum civil penalties for 16 law provisions governed by the Agency. Many of the maximum penalties had not been adjusted in decades and are increasing substantially under the statutorily mandated “catch up” cost-of-living adjustment.

For many consumers, online reviews play a role in the decision to make any purchase. Before making dinner reservations, choosing a hotel, hiring a service provider or even buying a toaster, consumers often look to online reviews as an assessment of the product, service or experience they want to buy. In a market where a negative online review or rating from a dissatisfied customer can influence countless other potential buyers — not just people the dissatisfied customer knows in real life — companies have a strong incentive to maintain a positive reputation online. However, in a desire to separate themselves from the competition with strong reviews, some companies have taken the race for positive online reviews too far, and the Federal Trade Commission is watching.

A recent change to the U.S. regulations governing the Cuban embargo has expanded the categories of Cuban-origin products that may be imported into the U.S. Additional textiles and textile articles and, for the first time, coffee, have joined the list of Cuban-origin products authorized to be imported into the U.S. Such products, however, must be produced by Cuban entrepreneurs and the U.S. importer must receive satisfactory documentation of such producer’s independence from the Cuban government.

On June 28, 2016, in two related settlements, German auto-manufacturer, Volkswagen AG (“VW”), has agreed to pay $14.7 billion to resolve allegations that the company cheated diesel emissions tests for nearly 500,000 2.0 liter diesel vehicles sold over six years. One settlement partially resolves EPA allegations for alleged violations of the Clean Air Act’s federal emissions standard; the other partially resolves FTC claims that VW violated the FTC Act by deceptively and unfairly advertising its “clean diesel” vehicles. VW also will pay damages to 44 states, Washington, D.C., and Puerto Rico. The announced settlements do not resolve pending civil claims concerning VW’s 3.0 liter diesel vehicles, or potential criminal liability.

On June 21, 2016, the Federal Trade Commission settled claims against the purveyors of the “Doctor Trusted” seal certification program. The FTC’s action was against defendants SmartClick Media LLC, d/b/a Doctor Trusted, and the company’s owner. According to the FTC’s complaint, defendants marketed the “Doctor Trusted” certification and seal to health-related websites claiming that it was “one of the most effective ways to increase sales with the least amount of effort.” Despite representing to consumers that websites carrying the Doctor Trusted seal were “carefully evaluated by an independent medical doctor who reviewed its medical information, claims, products, terms of service, and policies,” the FTC alleged that the certification review was a sham. In fact, the Doctor Trusted review process consisted of two freelance physicians who only gave a cursory review of member websites, with no scientific evaluation of the sites’ health claims.

This week, the following consumer protection actions made headlines:

Litigation

Claims Dismissed in San Francisco Soda Suit

A federal judge dismissed several constitutional claims in a suit against the city of San Francisco over its ban on ads for sugary drinks, because the ordinance has since been repealed. Both San Francisco and the plaintiffs, including the American Beverage Association and other trade groups, asked the judge to dismiss the free speech and due process violation claims from the original complaint. Although the advertising component of the ordinance was repealed in December, the suit continues over a new ordinance, set to take effect on July 25, 2016, that requires ads for soda and other sugary drinks to display a mandatory health warning. The judge previously declined to enjoin the ordinance, saying that it was not likely for the plaintiffs to succeed on their First Amendment claim under the rational basis test for commercial speech.

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

FTC to Host Consumer Disclosure Workshop in September

The Federal Trade Commission has announced that it will be hosting a September 15, 2016 workshop, “Putting Disclosures to the Test,” on the efficacy and costs of consumer disclosures in advertising and in privacy policies. Planned discussion topics include examining disclosures meant to avoid deception in advertising, disclosures designed to inform consumers of data tracking, and industry-specific disclosures for jewelry, environmental and fuel-saving claims. The workshop is open to the public and will take place at the FTC’s Constitution Center offices in Washington, D.C. The FTC currently is soliciting presentation proposals for the workshop; submissions may be sent to disclosuretesting@ftc.gov.

This past week, the National Advertising Division (“NAD”) of the BBB issued a number of opinions and recommendations.

NAD Recommends Clorox Packaging Change

The NAD has issued a recommendation that The Clorox Company modify its packaging and a package insert to ensure consumers understand that Clorox’s zinc pyrithione works to prevent odors on the drawstring of the company’s “Glad Tall Kitchen Drawstring Bags.”

The issue was not whether the product worked as described, but whether the branding and description led consumers to believe that the product protected against food-borne or disease-causing bacteria or germs.

NAD’s conclusion was that “the combined design elements, in the context in which they are found on the product packaging, reasonably conveyed a confusing, if not inaccurate, message as to the specific antimicrobial protection offered...[and] that consumers could reasonably understand ‘antimicrobial protection’ to mean protection from bacteria and germs rather than odor produced by bacteria and germs on the drawstring.”

A world of driverless, or autonomous, cars is much closer than we may think, and it will leave an indelible mark on retail real estate development, according to a GlobeStreet interview with Angelo Carusi, a principal at architecture and design firm Cooper Carry. According to numerous automobile industry experts, driverless cars will be in use and on the roads within the next 10 years.

This past week, the following regulatory and consumer actions made headlines:

Cheez-It Whole Grain Crackers ‘Not Ready,’ lawsuit claims

The Kellogg Company is being sued over its “whole grain” Cheez-It crackers. According to the complaint filed in U.S. District Court for the Eastern District of New York, the claim that these crackers are whole grain is “false and misleading, because the primary ingredient in Cheez-It Whole Grain crackers is enriched white flour.”

While the Cheez-It Whole Grain crackers do contain some whole wheat flour, plaintiffs argue it is almost negligible. A comparison of the Cheez-It Original crackers and the Cheez-It Whole Grain crackers shows identical nutritional values in every category, except fiber. The Original crackers contain “less than 1g,” while the Whole Grain crackers contain 1 gram.

Plaintiffs argue the Cheez-It claims are thus misleading, and have caused consumers to purchase or pay a premium for a product, that they otherwise would not have paid. The Kellogg Company has denied any misconduct, including any alleged impropriety in its labeling.

As we previously reported, Judge Emmet Sullivan of the U.S. District Court of the District of Columbia had granted the FTC’s request for a preliminary injunction blocking the proposed Staples-Office Depot merger. Earlier this week, Judge Sullivan released a public version of the opinion supporting his decision.

On May 16, 2016, the United States Supreme Court rendered its decision in Spokeo, Inc. v. Robins, Case No. 13-1339, a case that businesses and the plaintiffs’ bar have been following closely, due largely to its potential effect on class actions predicated on alleged statutory violations and seeking solely statutory damages. In an opinion authored by Justice Alito, the Court held that a plaintiff must do more than plead a statutory procedural violation to establish standing; to plead an injury in fact, a plaintiff also must allege a harm that is both “concrete” and “particularized.” However, the Court did not apply its holding to the facts, instead remanding for further analysis by the Ninth Circuit. While both plaintiffs’ attorneys and defense attorneys are claiming a “victory,” Spokeo provides some ammunition for businesses that find themselves facing so-called “no-injury” class action lawsuits predicated on consumer protection statutes. 

This week, the following consumer protection actions made headlines:

Mortgage Scammer Under Water After FTC Settlement

On May 9, 2016, the FTC announced that it is returning $1.87 million to 1,630 consumers who lost money in the Expense Management America telemarketing scheme that never provided debt or mortgage relief services after absconding with homeowners’ up-front fees. The repayment to consumers is a capstone on a three and a half year joint effort with the DOJ, FBI and HUD to crack down on mortgage scammers taking advantage of distressed homeowners. Related efforts, underway since 2008, resulted in a new FTC rule providing increased protection to homeowners by prohibiting any collection of fees until the homeowner has an acceptable written offer from their lender. In prosecuting Expense Management America, the FTC worked closely with various enforcement agencies in Canada to track down and prosecute the scammers.

The due date for the next Form SD filing for those public companies required to report to the Securities and Exchange Commission (“SEC”) on the inclusion of conflict minerals in their products is May 31, 2016.

Background

In response to a challenge of the SEC conflict minerals rule by a coalition of trade associations, the Court of Appeals for the D.C. Circuit issued an opinion in April 2014. That opinion upheld parts of the rule, but also effectively struck down on First Amendment grounds the portion of the rule that required companies to describe their products as “DRC Conflict Free,” “DRC conflict undeterminable” or “not found to be ‘DRC Conflict Free,’ ” as the case may be. On rehearing in August 2015, the D.C. Circuit reaffirmed its April 2014 decision. The D.C. Circuit then denied an SEC and NGO’s petition for rehearing en banc the following November. Finally, in March 2016, Attorney General Loretta Lynch notified Congress that the federal government would not petition for a writ of certiorari to the Supreme Court. The deadline to file the petition passed in April. Thus, the appellate process has been exhausted.

On May 2, 2016, the Supreme Court declined to review the D.C. Circuit’s January 2015 ruling upholding a 2013 FTC decision finding that POM Wonderful, LLC (“POM”) misled consumers in advertising that its 100% Pomegranate Juice and POMx supplements could prevent, treat or reduce the risk of prostate cancer, heart disease and erectile dysfunction.

Recently, HoneyBaked Foods, Inc., Wornick Foods and Foster Farms have been in the news because of different kinds of contamination claims. Syed Ahmad and Matthew McLellan, attorneys on Hunton & Williams LLP’s Insurance Coverage Counseling and Litigation team, authored an article entitled A Primer On Insurance Coverage for Food Contamination Losses, which provides an overview of insurance protection for food contamination issues that retailers, wholesalers and manufacturers may encounter. The article describes the insurance coverage available under traditional ...

Mars, Inc. and its M&M’s Minis candy are the latest targets in a wave of “slack-fill” litigation.

Slack-fill is empty space in product packaging – i.e., the difference between the maximum capacity of a product’s container and the actual volume of product inside. Slack-fill litigation has increased in recent years as class plaintiffs allege that companies are deliberately including empty space in their packaging to deceive consumers into paying higher prices for lower product quantities.

This past week, several consumer protection actions made headlines:

FTC to Let the Sun Shine on Consumer Protection Issues in Rooftop Solar Panel Businesses

The FTC announced that it will be holding a workshop focused on competition and consumer protection in the growing industry of consumer-oriented rooftop solar panels. The workshop, which will take place in Washington D.C. on June 21, 2016, is meant to expand the FTC’s understanding and approach to the growing consumer solar panel industry. Planned topics of discussion include: (1) how consumers can get needed information when deciding whether to install rooftop solar panels; (2) how utility regulators currently approach compensating consumers for power generated on their solar panels; and (3) competition in the solar power generation industry.

On April 21, 2016, Hunton & Williams LLP announced the launch of a cross-practice 3D printing team to advise clients as they explore this revolutionary technology. Also known as additive manufacturing, 3D printing is being adopted by manufacturers in many industries, including consumer products, aviation, energy, medical, prosthetic and transportation, and is becoming integrated into the production process.

On April 13, 2016, the Securities and Exchange Commission (“SEC”) published its long-awaited concept release on the reform of Regulation S-K. Regulation S-K is the primary set of rules that establish disclosure requirements for public companies.

For the SEC, a “concept release” is an advance notice of proposed rulemaking under the Administrative Procedure Act. Thus, before taking any further action to amend its rulebook, the SEC will be required to issue a set of proposed rules, elicit further public comment and then adopt final rules in another release.

This past week, the following consumer protection actions made headlines:

FTC Reminds Consumers to Watch for Misleading Sales; Warns Retailers of the Same

In a recent consumer information piece, the FTC sought to warn consumers of misleading “sales.” Of concern to consumers and the FTC are advertisements or in-store tags that suggest a consumer will save on a product, when in reality the consumer will pay full price and the promised discount is applied on a future purchase.

The FTC also published a warning to retailers that offers must be sufficiently transparent for consumers to be able to determine the final price of a product or service.

We previously reported on the U.S. Food and Drug Administration’s (“FDA’s”) request for public comment concerning the use of the term “natural” on food labels, and we noted that businesses should consider seeking a stay of any pending lawsuits challenging their use of the term “natural” on food labels under the primary jurisdiction doctrine. The Ninth Circuit, home of the infamous “Food Court,” has now invoked that doctrine and has ordered the stay of a pending “natural” mislabeling class action in Kane v. Chobani, LLC, No. 14-15670.

On April 12, 2016, the Federal Trade Commission announced a package of four settlements and one lawsuit against the marketers of sunscreen, body lotion and hair care products. Each of these matters was brought in the FTC’s administrative forum and allege a single count: that the products could not be considered all natural because each product contained at least one synthetic ingredient.

This past week, the following regulatory and consumer actions made headlines:

U.S. Supreme Court Rejects Procter & Gamble’s Challenge on “Snake Oil” Claim

Procter & Gamble’s (“P&G’s”) efforts to get the U.S. Supreme Court to review an Ohio federal judge’s class certification finding ended when the high court denied certiorari in The Procter & Gamble Co. v. Dino Rikos, thereby upholding the Sixth Circuit’s 2-1 decision.

This past week, the following consumer protection actions made headlines:

Litigation Halted:

Jury finds Pom Wonderful Failed to Prove Coke Misled Customers

A California federal jury found that Pom Wonderful failed to prove by a preponderance of the evidence its claims under the Lanham Act that Coca-Cola misled customers into thinking that Minute Maid’s “Enhanced Pomegranate Blueberry Flavored 100% Juice Blend” contained more than 50 percent of pomegranate and blueberry juice combined. Pom Wonderful had sought $77.5 million from Coca-Cola, claiming that the company had stolen its business by tricking consumers into buying its juice.

This past week, the following consumer protection actions made headlines:

NAD Actions

Rust-Oleum to Appeal NAD Ruling on “2X” Product Names and Marketing

The National Advertising Division of the Advertising Self-Regulatory Council (“NAD”) has recommended that Rust-Oleum Corp. stop making claims that its “Painter’s Touch Ultra Cover 2X Spray Paint” has double the coverage capacity as competing spray paints. The NAD also has recommended that Rust-Oleum change the product name. Rust-Oleum plans to appeal NAD’s decision to the National Advertising Review Board. NAD also found Rust-Oleum’s in-house testing to be lacking and its marketing claims to be unsupported by testing.

The trend of consumer products brand acquisitions that we identified in Looking Ahead: Retail Antitrust Enforcement in 2016 continued this week with announcements of three separate acquisitions:

Campari to Acquire Maker of Grand Marnier

Gruppo Campari announced that it will acquire Societe des Produits Marnier Lapostolle S.A., the maker of Grand Marnier, for €684 million (approximately $761 million USD). The announced acquisition, if completed, would add Grand Marnier to Gruppo Campari’s spirits and beverages brand portfolio, which includes its eponymous aperitif and other brands, including Skyy vodka and Wild Turkey bourbon.

After a February 2015 proposed rulemaking (the “NPRM”) faced a firestorm of comments, the Federal Aviation Administration (“FAA”) has determined “that further engagement with industry and stakeholders is needed” before any attempt is made to finalize regulations for very small unmanned aircraft systems, also known as “Micro UAS.” In response, the FAA chartered the Micro UAS Aviation Rulemaking Committee (“ARC”) to continue the review process and prepare recommendations to the FAA for future rulemakings. As originally conceived by the NPRM, Micro UAS are drones weighing less than 2 kilograms (4.4 pounds) that are constructed of malleable materials that will break, bend or “yield on impact so as to present a minimal hazard to any person or object.” The Micro UAS ARC was formed amidst pressure from drone manufacturers and commercial users to appropriately balance safety and privacy concerns with wider drone use.

Yesterday, the Federal Trade Commission laid down a clear marker for retailers in announcing a settlement with Lord & Taylor. This is the agency’s first native advertising case since issuing its Enforcement Policy Statement on Deceptively Formatted Advertising and its Native Advertising Business Guidance in December 2015.

This past week, the following consumer protection actions made headlines:

Food Marketing: Consumers Respond to Motion to Dismiss their Claims Against Walmart’s Missing Pork

On March 9, 2016, plaintiffs in a suit against Walmart Stores, Inc. responded to the company’s  motion to dismiss, saying that their complaint sufficiently put the retailer on notice of allegations that Walmart’s Great Value Pork & Beans in Tomato Sauce lacked an important ingredient: pork. The plaintiffs argue that the USDA requires pork and beans products to contain at least 12 percent pork in order to advertise pork on its labels, and that plaintiffs’ testing did not show any traces of pork in the product. Walmart contends in its motion to dismiss that its labels plainly state that the product contains less than 2 percent pork, and that plaintiffs’ claims are preempted by food labeling laws.

On February 29, 2016, News Corporation reached a $244 million settlement with a consumer product manufacturer class to end claims that it monopolized the market for third-party, in-store promotions by entering into long-term, exclusive contracts, and that it overcharged its advertisers by over $674 million in the last seven years. News Corp. acts as an intermediary between retailers and consumer product manufacturers by buying up advertising space on shelves and store floors and then reselling that space to consumer product manufacturers. Plaintiffs alleged that News Corp. used exclusive contracts to tie up nearly 90 percent of the in-store promotions market, and manufacturers, including Dial and Heinz, claimed News Corp. used that monopoly power to extract unfairly high prices.

This past week, the following consumer protection actions made headlines:

Retail Pricing: Class Action Complaint Against Gap Dismissed

A putative class action, alleging that The Gap, Inc.’s deceptive advertising in stores confuses customers as to what products are actually discounted and tricks many into buying products at full price, was tentatively tossed by a California state judge last week. The Court granted Gap’s demurrer in part because the named plaintiff failed to identify particular advertisements relied upon in her purchases and, more importantly, could not allege that she was actually injured by Gap’s alleged practices. In fact, the Court stated that being “psychologically committed” to an item such that the named plaintiff did not return it was not enough to state a claim. The court gave the plaintiff one last chance to allege an injury.

There is general consensus that 3D printing has potentially revolutionary implications for industry and, along with it, for the law. Its consequences for consumers injured by 3D-printed products are potentially just as far-reaching.

Consider this fact pattern: A plumbing parts manufacturer makes CAD files available to plumbing stores so that they may 3D print replacement parts on demand and on-site in response to customer requests. A plumbing store sells such a 3D-printed part to a customer, but the part malfunctions, causing significant damage to the customer’s home.

For the past several years, the industry and the plaintiffs’ bar have been litigating over what is “natural” and what is not when it comes to food products. This issue hit home with retailers with news of multimillion dollar settlements resolving claims concerning use of the term “natural” on food product labels. The issue certainly became blurred when it came to modern processing methods and advances in biotechnology, particularly with respect to ingredients like high fructose corn syrup or genetically modified fruits and vegetables. Late last year, however, in response to four consumer petitions, the U.S. Food and Drug Administration (“FDA”) requested public comments concerning the use of the term “natural” on food labels. Whether and how the FDA ultimately defines the term “natural” will surely impact cases in the long-run. But the FDA’s decision to request comment has more immediate effects. It arms defendants with potential means to bring pending litigation to an immediate halt.

This past week, the following consumer protection actions in federal courts and agencies made headlines:

The Ninth Circuit

The Ninth Circuit was busy addressing consumer protection issues this week. Two proposed class actions brought against Apple, Inc. were decided in favor of the company. In the first action, Hodges v. Apple, Inc., a three-judge panel affirmed a lower court’s dismissal of a putative class action alleging deceptive practices in the advertising and sale of Apple’s MacBook Pro with retina display computers. The plaintiff was dissatisfied with the quality of his retina display screen, but the Ninth Circuit agreed with the lower court that Apple had not misled consumers about the retina displays in its advertising. In the second case, a three-judge panel again upheld a dismissal of a proposed class action against Apple that accused the company of misrepresenting the speech capabilities of its iPhone 4S product. The majority of the appeals court agreed with the lower court’s assessment that the allegations about the capabilities of the Siri speech recognition software were too broad, and did not meet the pleading requirements under the Federal Rules of Civil Procedure.

Finally, a three-judge panel revived a class action that had previously been dismissed by a district judge against Hain Celestial’s Alba Botanica skincare line. Plaintiffs claimed that marketing the products as “natural” misled consumers into buying products that contained synthetic substances at a higher cost.

The National Advertising Division (“NAD”) was busy this past week. The organization recommended that several companies modify or discontinue claims made for the following consumer products:

Disinfecting Wipes

After a challenge by The Clorox Company, NAD recommended that Reckitt Benckiser, Inc., discontinue certain claims made in both print and television ads for Lysol Disinfecting Wipes and Spray products. The claims included statements declaring that Lysol “helps fight the flu before it starts” and kills “45% more types of germs” as compared to other wipes. NAD concluded that these claims were not supported by evidence in the record, and Reckitt Benckiser announced that it plans to appeal NAD’s findings to the National Advertising Review Board. Clorox has been active recently in challenging competitors’ claims–just a few weeks ago, in a challenge brought by Clorox, the NAD recommended that the maker of OxiClean White Revive non-chlorine bleach modify its television ad campaigns.

The recent change in U.S. policy towards Cuba and a “thawing of relations” between the two countries has generated increased interest among U.S. companies in the potential for business in Cuba. Despite this increased interest, companies should proceed cautiously, as recent international investments in Cuba, often in the form of joint ventures, have yielded mixed results and experiences. British-Dutch multinational consumer goods company Unilever plc, for example, formed a 50/50 international economic association with state-owned enterprise Suchel in 1994, but subsequently left the Cuban market in 2012 due to government intrusion and labor issues.

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

Outlet Retailers Sued over Allegedly Deceptive Pricing Practices

Class action lawsuits against several retailers, including Burberry and Dooney & Bourke, allege that outlet discount prices tags that compare the outlet price with purported retail prices deceive consumers into believing they are getting a bargain when, in fact, they are not. Reference pricing rules (e.g., the FTC’s Guides on Deceptive Pricing) prohibit sellers from offering fictitious bargains. In these cases, the plaintiffs allege that the retailers’ practice of offering for sale made-for-outlet goods that never were sold at the referenced price is deceptive.

As we previously reported in Looking Back: Retail Antitrust Enforcement in 2015, last year was a booming year for consumer products mergers (and the antitrust review of those mergers). With a robust market and incentives strongly in favor of further acquisitions, we expect the trend to continue in 2016.

The Securities and Exchange Commission (“SEC”) recently announced it settled charges against the Monsanto Company (“Monsanto”) regarding its accounting practices surrounding the sale of its popular Roundup herbicide. Monsanto “agreed to pay an $80 million penalty and retain an independent compliance consultant to settle charges that it violated accounting rules and misstated company earnings.” Two Monsanto accounting executives and one sales executive also agreed to pay penalties to settle charges that were brought against them. The case underscores for both manufacturers and retailers that financial reporting and disclosures cases continue to be a high priority for the SEC.

This past week, the following regulatory and consumer actions made headlines:

National Advertising Division Weighs in on “Scary Bleach” Claims

After a challenge by The Clorox Company, the National Advertising Division (“NAD”) recommended that Church & Dwight, the maker of OxiClean White Revive non-chlorine bleach, modify its television ad campaign suggesting that chlorine bleach could be “scary.” The commercials in question highlighted garment care labels directing consumers to “use only non-chlorine bleach, when needed,” thus implying that Chlorox’s product was damaging to the kinds of white garments depicted in the ads. The NAD found that Church & Dwight was required to provide a reasonable basis for its use of care labels in its ads, particularly advertising claims that denigrated Chlorox’s product. This decision followed on a 2014 NAD recommendation that Church & Dwight avoid conveying the unsupported message that chlorine bleach is damaging to white garments.

M&A in 2015: Shattering prior records. With the economy in a modest recovery and with cheap financing readily available, M&A activity was at an all-time high in 2015. Surpassing the prior record of $4.3 trillion in deals in 2007, 2015 saw M&A activity of $4.7 trillion worth of transactions, of which approximately half involved U.S. companies. In fact, U.S. deals alone exceeded $2 trillion for the first time ever.

Each week, we will present a summary of key consumer protection developments affecting the retail industry. This past week, the following regulatory and consumer actions made headlines:

FTC Continues Focus on False Weight Loss Claims, Settles with Sale Slash for $43 million

After a nearly year-long litigation, California company Sale Slash LLC has agreed to pay $43 million to settle Federal Trade Commission charges that the company deceptively sold “bogus” weight loss pills, including through unauthorized celebrity endorsements. As part of the settlement, Sale Slash may not represent that its products are endorsed by any specific individual, or claim that its products aid in weight loss or are safe for consumers unless the claims are supported by “competent and reliable scientific evidence.”

Large-scale food safety issues have been hard to miss in the news lately. Chipotle’s multi-state E. Coli outbreak and listeria monocytogenes found in samples of Blue Bell Creamery ice cream products are some of the recent examples. After a product recall, retailers and other companies involved must focus resources on finding out what went wrong, remedying the problem and rectifying the company image. Hunton & Williams Insurance Coverage Counseling and Litigation attorneys recently authored an article, Insureds Find Place to Roost in Foster Poultry Contamination Case

In response to an investigation by the National Advertising Division (“NAD”), Silver Star Brands will discontinue its “JuniorSlim” dietary supplement. JuniorSlim is a weight-loss product marketed toward children. In conjunction with the Council for Responsible Nutrition, which is designed to expand NAD’s review of advertising claims for dietary supplements, NAD requested substantiation for several claims—both explicit and implicit—on Silver Star’s website.

This month, the Retail Industry Leaders Association (“RILA”) submitted comments to the Federal Aviation Administration (“FAA”) opposing a point-of-sale registration requirement for recreational drones. While the trade association generally supports the registration of drones, also known as unmanned aircraft systems, RILA called the point-of-sale registration process “costly, inefficient, and difficult to implement” while warning of potential data privacy concerns for consumers.

Last month, the American Tort Reform Foundation (“ATRF”) released the 2015-2016 edition of its annual “Judicial Hellholes” report. Each year, the report identifies the venues it deems the least favorable for defendants and highlights notable pro-plaintiff rulings and practices in each jurisdiction.

Over the last 18 months, patrons of the nation’s most popular outlet stores have hit well-known retailers, including Gap Outlet, Banana Republic Factory Store and Saks Off 5th, with a flood of class action lawsuits for false and misleading advertising. In early 2014, four members of Congress wrote to the Federal Trade Commission (“FTC”) asking the agency to begin an investigation into the sales practices at outlet stores.

A federal court in New York recently found that litigation concerning damages related to a third party’s product recall required a defense under a commercial general liability policy. Thruway Produce, Inc. v. Mass. Bay Ins. Co., 2015 U.S. Dist. LEXIS 94846 (S.D.N.Y. July 20, 2015). Thruway Produce sold apples to Milnot Holding Company for use in baby food. The parties’ contract required the apples to be free of certain rodenticides (used to kill rats and mice). After discovering that certain apples were contaminated with rodenticide, Milnot was forced to recall its baby food ...

The supply of a medicinal product without a marketing authorisation under national provisional permissions of use does not generally prevent an SPC.

The scope of protection of an SPC for a virus may be broader than the specific virus strain mentioned in the marketing authorization.

Today, the EFTA Court ruled on two important SPC issues that were raised in the Intervet case (E – 16/14). The case concerns, on the one hand, the supply of a veterinary vaccine without a marketing authorisation (‘MA’) under successive national provisional permissions of use in order to fight a ...

On Friday, January 30, 2015, the U.S. Court of Appeals for the D.C. Circuit issued its opinion in POM Wonderful, LLC, et al. v. Federal Trade Commission, affirming the Federal Trade Commission's ruling in 2013 that a series of advertisements for POM’s pomegranate juice and supplements were deceptive and thus violated the FTC Act. However, the court provided some limited, yet important, relief to POM Wonderful and the other petitioners. The D.C. Circuit’s decision provides important guidance to companies advertising consumer products.

Read the full client alert.

The Pennsylvania Supreme Court has rejected a liability insurer’s attempt to overturn a Superior Court decision holding that insurers must defend product liability claims. See Indalex v. National Union Fire Insurance Co. of Pittsburgh, Pa., No. 126 WAL 2014 (Pa. Sept. 18, 2014). The decision confirms that loss arising from a defective product may constitute an “occurrence” triggering general liability insurance coverage under Pennsylvania law.

Read the full client alert.

The Supreme Court during its 2013–14 term decided on six patent cases, the last on June 19, 2014. These cases will have significant consequences for companies as they work to advance their strategy for protecting their intellectual property. The attached client alert provides highlights of each case.

As reported in the Privacy & Information Security Law blog, the Federal Trade Commission announced that it has approved final consent orders with two companies that marketed genetically customized nutrition supplements. In addition to charges that the companies’ claims regarding the effectiveness of their products were not sufficiently substantiated, the settlements also allege that the companies misrepresented their privacy and security practices.

Read the full post.

Most marketers and retailers know that the consumer protection laws require that their advertising claims be substantiated, truthful and not misleading. But the new year is a good time to take stock of advertising campaigns, practices and procedures to make sure they pass muster under the Federal Trade Commission’s (FTC’s) latest guidance. The FTC’s recent enforcement actions provide a starting point.

California’s Safer Consumer Products (SCP) regulations became effective October 1, 2013. These regulations apply to any “product or part of the product that is used, bought, or leased for use by a person for any purposes.” Given this ample language, the regulations have the potential to affect a wide range of industries and parties in a distribution chain, including manufacturers, assemblers, importers, and even retailers.