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Brand Protection & Advertising

Stay ADvised: What's New This Week, July 20

07.23.20
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In This Issue:

Supplement Maker to "Thrive" No More

The Federal Trade Commission's (FTC) first suit targeting deceptive COVID-19 cures is now drawing to a close, as supplement marketer Whole Leaf Organics and its principal Marc Ching agreed to settle an FTC administrative complaint charging they peddled false cures for the virus and cancer. This follows an earlier stipulated injunction entered against the company and Ching in federal court.

Ching and Whole Leaf's story dates back before the pandemic, to 2018, when the company began selling its supplement Thrive. But it wasn't until March 2020 that Thrive conveniently rebranded as an "anti-viral wellness booster" to prevent, treat, and otherwise reduce the risk of COVID-19. Thrive capsules suddenly became "the perfect way to strengthen your immunity against pathogens like COVID-19, THE CORONAVIRUS," touted the Whole Leaf website. Besides that, Thrive could also improve the flu, colds, "yeast-based issues," and more.

The administrative complaint also alleged that Ching marketed these supplement benefits as clinically and scientifically proven. In fact, there is no known cure for COVID-19 and no scientific (or otherwise) evidence that the ingredients in Thrive—vitamin C and herbal extracts—can treat any symptoms of the virus.

But Ching and Whole Leaf didn't stop at selling COVID-19 cures. The complaint also asserts claims against defendants for their sale of CBD products they promoted to treat and cure cancer. These were capsules and oils containing herbal extracts, CBD, and hemp extracts.

Whole Leaf knew no humility while marketing CBD-EX, CBD-RX, and CBD-MAX, calling the products "the most effective innovation in cancer and immune related proactive supplement support in the past ten years." As with Thrive, the products were falsely promoted as clinically-proven to work, and marketing copy explained in detailed medical-sounding language how the supplements' "formulation is specifically created to combat cancer and demanipulate active cells."

Of course, none of that was true—not the clinically tested claims, nor the efficacy claims, says the FTC. Really, "there's no proof that this product will prevent or treat COVID-19, and no proof that any CBD product will treat cancer," stated Andrew Smith, Director of the FTC's Bureau of Consumer Protection.

The proposed administrative settlement now on the table, and awaiting public comment after a 3-1-1 vote by the FTC, permanently bars defendants from making any unsupported cancer or COVID-19 treatment and prevention claims. It follows a stipulated preliminary order previously entered in federal district court in connection with an FTC lawsuit containing equivalent allegations.

Key Takeaways

Companies should not rely on "flying under the radar," merely receiving a "warning letter" or a quick and easy, narrowly focused, settlement with the FTC. Where health and wellness is concerned, particularly in the time of COVID-19, the FTC is willing to fight and fight hard to stop deceptive marketers in their tracks.

Class Action Claims Kraft "Natural" Cheese Claims Are Baloney

Two California cheese lovers say The Kraft Heinz Company misled consumers when it marketed its multiple and plentiful cheese products as "natural," and they've filed a presumptive class action suit against the company alleging that it falsely advertised its cheese for years.

It all comes down to the use of the artificial recombinant bovine growth hormone (rbGH), an artificial hormone ingredient (also known as rbST) which for a gouda number of years was used on all Kraft cheeses while those cheeses were marketed as natural, allege plaintiffs David Green and Sylvia Koh. The plaintiffs assert that inclusion of rbGH renders Kraft's marketing of its cheese products as "natural" to be "false, deceptive and misleading in that they were made with milk from cows who were given rbST, which is an artificial hormone, and which unnaturally increased the cows' milk production."

The complaint alleges that Kraft has sought to become "grater" than the competition by capitalizing on consumers' hunger for natural cheese products without rbGH by removing the ingredient from many of its cheeses. To that end, the company continues to feature the hormone in some products it still markets as natural, and constitutes a violation of California's False Advertising Law (FAL), Consumer Legal Remedies Act (CLRA), Unfair Competition Law (UCL) and state consumer protection statutes, say plaintiffs.

Plaintiffs assert that they purchased various Kraft mozzarella, parmesan and havarti cheese products in Safeway supermarkets from 2015 to 2020, relying on Kraft's "natural" representations and being willing to pay more for a natural product.

Kraft's "labeling and advertising" of the cheese "has been materially deceptive," allege plaintiffs. What's more, "by deceiving consumers about the nature and quality of the Products, Kraft has sold a greater volume of the Products, charged higher prices for the Products, and taken away market share from competing products, thereby increasing its own sales and profits."

Key Takeaways

Nothing cheesy about it: Cases go every which way when it comes to "natural". But the natural food market is huge and you'd feta believe litigation alleging these types of claims will continue, especially in the absence of an FDA regulation defining the term "natural" for use on food labeling.

Colorado Suit Blasts JUUL's "Devastating" False Advertising Campaign

Joining more than 35 other attorneys general from across the United States who have filed false advertising suits against JUUL or are actively investigating the company over its marketing of vaping products, the state of Colorado this month filed a lawsuit accusing JUUL of engaging in a marketing campaign that misled consumers about the addictive properties of its products.

Harkening back to allegations decades ago that brought about permanent change in the tobacco industry, Colorado's 115-page complaint paints JUUL's marketing as a cynical and deliberate strategy that earned the company major profits while devastating public health in Colorado, which "lead[s] the nation in youth vaping." As the complaint avers, JUUL created a "youth vaping epidemic" via a campaign of false statements and misrepresentations, in violation of the Colorado Consumer Protection Act.

According to the complaint, JUUL marketed its products specifically to underage children and youth—while denying that it ever intended to do so—and flouting tobacco regulations. This strategy was reflected in virtually every aspect of the company's marketing, from the design of the product to look like a USB drive that would evade detection by adults and look "cool" to youth, to the branding of flavors like "Crème Brulee" and "Fruit Medley" that appeal to underage consumers. "[R]ather than heed scientific research, which showed that flavored products attract youth, JUUL sought to discredit it to protect its profits," alleges the Colorado complaint.

To appeal to the youth market, the company also aggressively wooed social media influencers and positioned the brand as the cool party thrower featuring events with young models and celebrities. Back in 2018, JUUL claimed that it was leaving social media altogether ostensibly to protect youth (though more likely due to bad publicity), but the company's aggressive social media efforts were already so welded into the social landscape that its departure had little effect on its influence, notes the complaint:

"While acting publicly concerned about youth prevention and touting its social media takedowns, JUUL's documents show that it deliberately chose not to enforce its trademark on "fan" sites and deliberately allowed use of #juulmoment on Instagram to carry its advertising message, even after this claimed disengagement from social media."

JUUL's marketing of its vaping products as safe was also false, and "helped fuel the vaping epidemic," according to the complaint, which asserts that JUUL actually knew how dangerous its e-cigarettes were, and knew that having nicotine content that was amongst the highest of any vaping brand could only make the product riskier. Still, it even went so far as to market its vaping products as if they were intended for smoking cessation, and this without the required FDA approval, whilst calling its "mission to improve the lives" of smokers around the world.

Key Takeaways

Aside from the multiple suits by attorneys general, JUUL also faces an avalanche of civil lawsuits including class actions over its allegedly false advertising claims and misrepresentations. Given how fact-heavy vaping litigation is, it may prove difficult for JUUL to dismiss many of these claims, while the multi-state investigation may put pressure on the company to eventually settle the government suits leading to broad changes in its marketing programs.

Facebook Announces Ongoing and New Efforts to Curb Hate Speech

Facebook recently announced a series of changes it plans to implement to its civil rights policies, and reiterated its commitment to combatting hate speech on social media. The announcement follows the conclusion of a two year internal civil rights audit, which outlines policies Facebook has had in place as well as changes intended to strengthen civil rights on the social media website.

In addition to banning 250 white supremacist organizations from Facebook and Instagram, the company said it will make changes to its group enforcement policies. Specifically, Facebook will remove groups from the site if it finds "that the group is participating in or encouraging violating behavior or content."

That's in addition to Facebook's regular update of company policies against hate, the company said. "We'll continue to work with civil rights groups and other experts to develop even more tools, technology and policies to continue our fight against hateful content." By using a "pioneering" artificial intelligence technology, the company can remove content that violates its community standards "with greater precision and speed," it added.

Facebook also reminded advertisers that it takes extra precautions not to recommend inappropriate content to consumers, especially to young users. Even if such content doesn't violate Facebook's Community Standards, if it depicts violence "or has been deemed false by independent third-party checkers, Facebook is unlikely to recommend it," the company stated.

And speaking of fact-checking, Facebook emphasized its own initiative, whereby it will limit the reach of false content "so fewer people can see it." It also said it now includes warnings to posts that are rated false.

The company further reinforced that it will work with advertising industry bodies including the Global Alliance for Responsible Media to continue ensuring advertiser safety after complaints about ads running alongside hateful content. Facebook already has several elements in place to protect advertisers, such as an interface for advertisers to review where their ads appear. The company also stated that it refunds advertisers when it runs ads alongside content Facebook deems to violate its policies.

According to reports, Facebook told advertisers that it was "implementing changes to our content policies, including an expanded policy that bans praise, support and representation of white nationalism and white separatism, and a new policy that prohibits content encouraging or calling for the harassment of others."

After completing the audit, Facebook will bring on a civil rights leader in a senior executive role to spearhead civil rights expertise at the company, in conjunction with top Facebook brass. Facebook's announcement of its efforts references the #StopHateForProfit hashtag and addresses directly each of the goals outlined by the movement to curb hate speech in tech.

Key Takeaways

Facebook, like other social media platforms, continues to struggle with the moderation of content and advertising. The mega-platform has introduced new measures aimed at curbing hate speech amid pressure from consumer groups and advertisers, but likely has more work ahead.

Washington AG Nets $900K From Internet Provider in Fight Against False Advertising

Following a lengthy investigation into company pricing practices, the office of Washington Attorney General Bob Ferguson announced earlier this month that in-state internet provider Frontier Communications has agreed to pay almost a million dollars to settle allegations it falsely advertised fees.

Washington State initiated the investigation after AG Ferguson's office received over 600 consumer complaints about pricing practices at Frontier Communications. According to the AG, the 2018 investigation revealed that Frontier falsely advertised many of its fees, omitted surcharges in advertising material and falsely represented the surcharges as government-mandated surcharges, and misrepresented the quality of its internet speed.

While not admitting liability, Frontier has agreed to an extensive and detailed list of requirements by signing the Assurance of Discontinuance, meant to circumscribe its allowed advertising claims. In addition to the $900,000 the company will pay, which will go partially towards restitution of affected customers, the agreement binds Frontier in a number of ways, including:

  • Barring the company from making any false or misleading statements in connection with its services;
  • Requiring it to make a number of disclosures to consumers about the base price of services, estimated taxes and fees, estimated charge for the first invoice, and any other applicable fees;
  • Halting the use of its "Internet Infrastructure Surcharge";
  • Disclosing any fees and surcharges on top of the base service fee conspicuously "in the main text of the advertisement;"
  • Providing clear information for consumers to communicate with the company;
  • Providing clear and conspicuous disclosures about internet fees; and
  • Various other provisions limiting other fees Frontier may charge and committing the company to abiding by its promises to customers.

Because Frontier is subject to a sale agreement as a condition of sale to Northwest Fiber that requires the latter to invest $50 million in Washington infrastructure, any failure to do so imposes an additional 18 requirements on the former.

AG Ferguson emphasized that the settlement was particularly important now as many consumers stuck at home because of COVID-19 rely even more on internet services. "Broadband access is integral to our daily lives," he said. "The current pandemic has only amplified its importance. Knowing the true cost and speed of our internet connection is essential to make an informed decision about a service that connects us to our work and to each other. Companies must be able to deliver what they promise, at the price they advertise," added the AG.

Key Takeaways

Companies providing services critical to remote working during the COVID-19 battle can expect to be scrutinized for harmful acts and practices.

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