L’Oréal Gets Pancaked by False Origin Suit
Famous beauty products made in ... Arkansas?
I Love Paris
The fashion stylings of the Island Cowgirl Boutique. The fine French cuisine of Smokin’ Taters BBQ. And the delicate artwork on display at the Logan County “Old Jail” Museum.
We, of course, are talking about Paris, Arkansas.
We beg forgiveness from our friends in its European eponym, but our preference is for the Paris closer to home. However …
A recent lawsuit filed in the Southern District of New York demonstrates the existence of a conspiracy—an ongoing, outrageous pro-French bias that dominates a major economic sector.
And yes, this ties back into Arkansas, we promise.
Le Parfum, C’est Nous
L’Oréal is one of those happy brands that require no introduction, having sold its various products—hair coloring, makeup, perfume, and other beauty and self-care offerings—for more than a century.
Its history is bound up with the other Paris—L’Oréal was founded in Paris and remains headquartered there. The identification is so basic that many L’Oréal products are labeled “L’Oréal Paris,” a convention that seems almost unquestionable—an état naturel.
Not so fast, says Orange County-based plaintiff Veronica Eshelby.
“The truth,” says Eshelby in her complaint, “is that Defendant’s Products are not made in Paris or in France.” Instead, she claims, “the Products are made (and even designed) for the US market by L’Oréal USA (based in New York) and manufactured in its factory in Arkansas, or elsewhere in the US or Canada. None of the Products are made in Paris.”
This is a problem, she maintains, because “[t]he American market, in particular, associates French-made beauty products with luxury and prestige.” And if a product is labeled “Paris,” consumers will “reasonably believe that it is from France and pay a premium for it.”
This is the core of her suit, which alleges violations of the state consumer protection acts of multiple states, violations of California’s Unfair Competition and False Advertising laws, breach of warranty, negligent misrepresentation, and unjust enrichment. She seeks damages and an injunction against the origin claim.
A case like this is just part of the rising tide of false-origin claims. We suspect that L’Oréal, which has not responded to the complaint yet, will protest that the use of “Paris” is part of a recognizable brand and its heritage and not a manufacturing claim at all. It is ironic that the plaintiff would protest that she was injured because the products were made in the U.S., when so many of the origin cases take issue with products made outside America. Seems L’Oréal can’t win for trying with the litigious class action bar. It will be interesting to see if the court gives some deference here to the fact that the alleged origin claim appears in the long-standing trademark. At least the National Advertising Division (NAD) gives more deference to trade names and will not recommend that they be discontinued in most cases, absent consumer survey evidence showing confusion.
If that should fail, doesn’t “L’Oréal Arkansas” have a certain ring to it?
California’s attorney general warns consumers to research before opening their wallets
For obvious reasons, an adlaw blog regularly covers reprehensible behavior. Scams against veterans, the aged, immigrants ... we’ve seen it all.
But the speed with which scammers exploit the latest tragic headlines is truly astounding. We never get used to it.
The latest example deals with the excruciating tragedy unfolding in Ukraine. While most of the world seeks to help in some way, large or small, others look to profit.
Those who smell an opportunity to make a dollar on the misery of a country and its people don’t take breaks. California Attorney General Rob Bonta is sounding the alarm on their Ukraine-related activity in a recent press release.
While urging Californians to do their research, Bonta outlines several tactics used by scammers, such as the use of social network fundraising accounts or organization names that are designed to closely imitate legitimate charities. And, of course, the ubiquitous requests for personal data such as bank account and Social Security numbers.
It all seems awful, of course, but there’s a little bit of light in his warnings. “Well-intentioned or otherwise,” he writes, “the charities formed overnight as a response to this crisis may lack the experience, contacts, and staff needed to respond to a disaster.” So some of the activity he’s calling out may just be mistakes made by people of goodwill inexpertly trying to help others through a terrible situation.
Nonetheless, the same tactics that consumers can use to ward off fake charities apply in both cases. First and foremost, they should check in with Bonta; California’s Registry of Charitable Trusts lists legitimate charities and shares their financial reports (given the size and heft of the California market, this registry will probably be helpful for residents of the rest of the United States as well). And, of course, they should hang up the phone the moment a charity’s representative engages in pressure tactics.
These tactics should keep consumers safe and allow them to focus on helping those in dire need.
Marketers keep putting the survey cart before the tagline horse
We love a good acronym, and by our high standards (see here, here, here, here, here and here), the acronym “BaSICS” is only distinctive in one way: It’s sorta, well, raw.
You see, BaSICS stands for “Baby Skin Integrity Comparison Survey.”
The author of the BaSICS study is a company called WaterWipes, purveyor of “the world’s purest baby wipes”—wipes that are purportedly made of “99.9% water,” which is an interesting claim itself, but it isn’t the center of the dispute we’re discussing here.
The dispute we’re tracking: WaterWipes invoked BaSICS when it was brought before the NAD this month by Kimberly-Clark Corp., a maker of competing baby wipe products.
Big Foam Finger?
The claims reviewed by NAD, made on WaterWipes’ website, centered on establishment claims—“WaterWipes is the ‘#1 wipe against the causes of diaper rash’” and two variants on that idea, including that the #1 claim was “clinically proven.”
But NAD felt that the survey fell short of the rigor required to back up both the “#1” and “clinically proven” claims.
The study, it maintained, “was too narrow to support the broad #1 claims” and failed to “provide adequate substantiation for the broad superiority claims or the establishment claim at issue in this challenge.” The clinical claim, especially, required “reliable and well-controlled clinical testing on the advertised product.”
What was wrong with the BaSICS?
The survey seems somewhat … unconventional. It consists of “parental observations of the incidence of diaper rash in infants from birth to eight weeks of age,” which injects a certain amount of subjectivity into the results.
In addition to being “too narrow,” the study failed to eliminate the effects of the parents using other products, like skin creams and lotions, that might have affected the rashes. Moreover, the study didn’t conceal the brand names and other marketing messages, which might produce bias in their responses.
After some grousing, WaterWipes agreed to change the claims. The lesson: Get your backup together and make sure it stands up to your claims. Many of the mistakes we see do not involve lack of substantiation but rather an imperfect fit between the support and the claim.
But with limited fines, what chicanery will they embrace next?
Imagine that an official-sounding gentleman calls you one fine afternoon, claiming to be from “credit card services.”
If you’re in the wrong frame of mind—let’s say you’ve recently been dealing with fraudulent activity on one of your credit cards, and you are waiting for a callback from your bank—you might slip into a conversation with the caller, assuming that “credit card services” is the credit department at your bank.
You might reveal your credit card number to the caller, even if the bank should, by definition, already know what your number is and not have to ask you for it.
Now, imagine that you’re not just in the wrong frame of mind—let’s say that you’re under immense financial pressure. Perhaps you’re dealing with unmanageable medical bills, you’ve just lost your job or you lost your small business in the pandemic. You’re desperate. And the caller did his research; he knows who you are. And he knows that you’re eager to believe he’s from your bank and eager to hear his pitch.
And it’s a great pitch—one anyone with serious debt would welcome.
“How would you like to substantially reduce the interest rate on your card and pay it off quickly? Sounds good? Great. Just pay us a fee upfront, and we’ll lower the rate. And no, don’t worry, it’s a one-time fee—only $995. Or $4,995. Or a figure somewhere in between, based on what we think we can steal from you.”
If the scammer takes any action at all after taking the fee, they might transfer your balance to a new, lower-interest rate card—a process that generates further fees, but what do they care? They might not do anything at all, of course. But in either case, you’ve lost far more money than you would have if you never had picked up the phone.
In an instant, your financial situation becomes even worse.
The good folks at the Federal Trade Commission just slapped three individuals—Gino de Paz, Grace de Paz and Shabana Khublal—and related companies with a $5.3 million monetary judgment and a lifetime ban from the debt relief industry for conducting just such a scam. The commission claims that the trio has reaped unspecified millions from “financially distressed” and “older” victims who were specifically targeted as vulnerable.
Of course, the judgment comes with a by-now-familiar proviso. The judgments “will be partially suspended once the de Pazes pay $225,000 and Kublal pays $200,000,” the commission wrote. “The full judgment would become due immediately if any of the defendants are found to have misrepresented their financial status.”
What’s the takeaway for you, dear reader? Don’t deceive the old, the infirm, the financially distressed? You know you shouldn’t do that in the first place, or you wouldn’t be reading this missive.
But consider that scammers like the defendants named in this case are not in short supply. These scams never go away. If they’re effective, like the present scheme seems to have been, the perpetrators might earn millions of dollars in ill-gotten lucre and only pay a fraction of the required judgments because their “financial status” means they can’t pay up. Who knows how much of their loot they spent or successfully stashed away?
So our takeaway is a question: What sort of teeth would regulators need to deter this sort of behavior in the first place or properly punish it?
Industry certification doesn’t defend against deceptive act, false ad action
Henhouse of Horror?
We’ve covered egg-related marketing disputes before. To be specific, egg-related marketing disputes involving Pete and Gerry’s, a nationwide egg distributor.
The first case, filed in 2019 in the Southern District of New York, was a class action that accused the company of fraudulent misrepresentation and false and misleading claims regarding the packaging of one of their brands—Nellie’s Free Range Eggs. In addition to vibrant, cutesy packaging, Nellie’s made certain claims about the treatment of the hens, including that they “enjoyed lives free from unnecessary pain and distress, had access to green fields, space to spread their wings and engage in natural behaviors, and the opportunity to thrive in functional social groupings.”
Plaintiffs alleged that these claims were wildly incongruous with the actual conditions in which the company’s hens were kept. “Nellie’s crams and stuffs hens—sensitive, intelligent animals, who feel pain acutely ... into sheds up to 20,000 at a time,” they wrote. “Such confinement leads to stress and trauma that in turn causes them further pain in the form of fighting, feather pecking, and self-mutilation.”
The Southern District axed some of the claims but kept others, based mainly on the factual nature of some of the packaging tags, “namely, that Defendant’s hens have better lives than other hens because they have more access to the outdoors – upon which a reasonable consumer could rely.”
A Second Crack
We don’t know why or on what terms this first case was settled, but it folded up in May 2020. Did Pete and Gerry’s breathe a sigh of relief once the case was behind them? Perhaps, but their newfound peace lasted only a short while—another suit based on similar allegations was filed in June of last year.
Constance Mogull, a consumer from Mamaroneck, New York, also filed her suit in the Southern District. She purchased the Nellie’s product after “carefully [viewing] and [reading] the Eggs’ labeling, including the representations that the Eggs are ‘Free Range,’ that ‘Most hens don’t have it as good as Nellie’s … . Our hens can peck, perch, and play on plenty of green grass’, and that the Eggs are from ‘Outdoor Forage, 100% Vegetarian Feed’ hens, and the accompanying photographs and imagery.”
Mogull’s amended complaint weaponized Nellie’s own website advertising against the company. She presented the very ad copy and photography that Nellie’s was using to pooh-pooh “cage free” hen farms as inferior to “free range” farms like its own. With Nellie’s anti-overcrowding stance established, Mogull then lowered the boom, providing pictures that allegedly show Nellie’s own suppliers keeping hens in the same poor conditions as do cage-free farms.
Consumers buy free-range eggs because they assume the hens that produce them are treated better, she argues—and they’re willing to pay a premium to ensure that treatment.
The case survived a motion to dismiss filed by Pete and Gerry’s shortly after the complaint was laid.
Not surprisingly, the court concluded that the “free range” claim was not nonactionable puffery.
Then, according to the court order, “Nellie’s argues the challenged statements are true because its farming practices meet the ‘Certified Humane Free-Range’ qualifications.” (“Certified Humane” is an industry standard maintained by an animal-welfare group.) However, throughout the packaging, the “Certified Humane” tag only appears once before “free range,” whereas “free range” appears by itself multiple times. “Accordingly, it is plausible a reasonable consumer would not understand ‘free-range eggs’ to convey that Nellie’s eggs meet the ‘Certified Humane’ standard.” In other words, because “free-range” was used many times without the Certified Humane qualification, reasonable consumers may have taken away a broader message from the claim.
Fraud accusations also survived the motion, because the allegations support that Pete and Gerry’s is a top distributor of eggs and knows or should have known the practices of its suppliers well. “The Court cannot conclude at this early stage,” the order states, “when all reasonable inferences must be drawn in plaintiffs’ favor, that the FAC fails to allege facts giving rise to a strong inference of fraudulent intent.”
The lesson? Qualifying claims with use of an industry standard or seal require consistency and likely explanation of the standards employed.
No Time to Weight and Watch for Children’s Data Compliance
The Federal Trade Commission (FTC) recently settled with Weight Watchers (WW) and its subsidiary Kurbo for alleged violations of the Children’s Online Privacy Protection Act(COPPA). COPPA requires websites, apps and other online services to obtain express parental consent prior to collecting, using or disclosing personal information of children under 13. It is a complex rule, but generally, to be subject to this rule, websites must either (1) be directed to children or (2) have actual knowledge of the collection of data from children under 13. This case involved a product directed to children, actual knowledge and multiple violations of COPPA.
What is a PFAS, and Why Should I Care?
We are bombarded with countless abbreviations every day – CPPA, GLBA, MSRP, SARS and BPA, to name just a few. Time to add one more to the list. Per- and polyfluoroalkyl substances, colloquially known as PFAS, are a class of more than 4,700 chemical compounds, the components of which break down very slowly over time. PFAS are prevalent in products that are grease-, oil- or water-resistant – e.g., cosmetics, food packaging, textiles, furniture, nonstick cookware, carpets, etc. Because of their widespread use and their persistence in the environment, current testing may detect PFAS in water supplies, food products and even our bloodstreams. Given the ubiquity of PFAS, their potential health risks have already caught the attention of environmentalists, scientists, lawmakers and – particularly relevant for this article – the plaintiffs’ bar.
You Do Have Time for This – the New Wave of FTC Rulemaking
The wave of Federal Trade Commission (FTC or the Commission) rulemaking has begun, and it raises many questions: Most notably, how big is this wave going to be, why is the FTC doing this and do I have time for this? Although there has been a great deal of concern raised about whether and why to engage in broad rulemaking, the two rulemakings that have commenced in the past two months did get voted out unanimously. Now, to be clear, Commissioners Noah Phillips and Christine Wilson have expressed very strong objections to a broad regulatory agenda, with Commissioner Wilson noting her “general aversion to rulemaking … rooted in historical experience” and Commissioner Phillips stating that it would “recast the FTC as a mini-Congress, without any of the accountability that comes with it.” Nevertheless, two rulemakings have kicked off – impersonation fraud and moneymaking claims.
Leveling Up: Advertising to Children Through Video Games
Video games have come a long way from the days of Atari’s Pong; today’s games can contain fully immersive worlds complete with brand partnerships. Video game platforms, such as Roblox, which boasts over 100 million active users in its virtual world, can reach swaths of potential brand loyalists. For many companies and brands, video game marketing and partnerships are untapped areas that can be incredibly successful. However, there are special considerations that need to be assessed before you grab the controller.
FTC and the States — Everything You Wanted to Know but Were Afraid to Ask
A lot has been written about the impact of the Supreme Court’s AMG decision on the Federal Trade Commission’s (FTC) future law enforcement approaches and strategies. One option is more administrative litigation, but that process can take many years and requires the FTC to demonstrate that the challenged practices were “dishonest or fraudulent.” Another option is to allege a violation of a rule that allows for civil penalties and possibly redress pursuant to Section 19 of the FTC Act. But a lot of conduct that the FTC wants to challenge is not covered by current rules, and there is a knowledge requirement that the FTC would also have to meet. A third option, which we will explore today, is the FTC teaming up with a state or multiple states to bring either a joint action or contemporaneous but separate actions.
Look Back, Look Ahead: State Attorneys General Enforcement – Part Two
Last month, as part of BakerHostetler’s “Look Back, Look Ahead: Advertising and Marketing Law in 2021 & 2022” webinar series, partners Craig A. Hoffman and Victoria Weatherford presented on recent trends and predictions on state attorney general enforcement. The following summarizes our 10 predictions for state attorneys general enforcement in 2022.
Look Back, Look Ahead: State Attorneys General Enforcement – Part One
Last month, as part of BakerHostetler’s “Look Back, Look Ahead: Advertising and Marketing Law in 2021 & 2022” webinar series, partners Craig A. Hoffman and Victoria Weatherford presented on recent trends and predictions on state attorney general enforcement. The following summarizes our 10 key takeaways from 2021.
A Return to Substance: The 8th Public Commission Meeting Kicks Off Yet Another Mag-Moss Rulemaking
Having recovered from the exceedingly lackluster seventh Federal Trade Commission (FTC) meeting, the two-hour eighth meeting had actual votes and a bit of drama. But be careful what you ask for. We highlighted the lack of consumer turnout at the last meeting, and that was certainly not the case this month – even members of Congress attended. So how did things roll out at the meeting? On a scale of 1-10, with 1 being hyperpartisan and hostile and 10 being calm and copacetic, this one gets a solid 4.