This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.
Japan-based auto parts maker Tokai Rika Co. Ltd., has agreed to plead guilty and to pay a $17.7 million criminal fine for its role in a conspiracy to fix prices of heater control panels (HCPs) installed in cars sold in the United States and elsewhere, the Department of Justice announced on October 30. HCPs are located in the center console of an automobile and control the temperature of the interior environment of a vehicle.
Tokai Rika has also agreed to plead guilty to a charge of obstruction of justice related to the investigation of the antitrust violation. A two-count felony charge was filed in the federal district court in Detroit.
Including Tokai Rika, nine companies and 11 executives have pleaded guilty or agreed to plead guilty in the Justice Department’s ongoing investigation into price fixing and bid rigging in the auto parts industry, according to the announcement.
Tokai Rika and its co-conspirators carried out the conspiracy from at least as early as September 2003 until at least February 2010, the government alleged. The company admitted to fixing prices of HCPs sold to Toyota in the United States and elsewhere, on a model-by-model basis.
The company also admitted to obstructing the government’s investigation. After learning that the FBI had executed a search warrant on Tokai Rika’s U.S. subsidiary, a company executive directed employees to delete electronic data and destroy paper documents likely to contain evidence of antitrust crimes in the United States and elsewhere, according to the Justice Department.
“The conspirators used code names and chose meeting places and times to avoid detection,” said Scott D. Hammond, Deputy Assistant Attorney General in charge of the Department of Justice Antitrust Division’s criminal enforcement program. “They knew their actions would harm American consumers, and attempted to cover it up when caught. The division will continue to hold accountable companies who engage in anticompetitive conduct and who obstruct law enforcement.”
Wednesday, October 31, 2012
Monday, October 29, 2012
LexisNexis Filing Fees Might Be Unconscionable Under Texas Deceptive Trade Practices Law
This posting was written by Jody Coultas, Editor of CCH State Unfair Trade Practices Law.
A civil litigant stated a Texas Deceptive Trade Practices—Consumer Protection Act (DTPA) claim for unconscionable conduct against LexisNexis based on its mandatory electronic filing fees charged to litigants in Texas state courts in Montgomery and Jefferson counties, according to the federal district court in Houston.
The litigant initiated this suit after LexisNexis charged her for electronically filing in Montgomery County, which was mandatory. The fees were allegedly unconscionably high and neither Montgomery County nor LexisNexis provides litigants with a list of charges levied or the nature of those charges. LexisNexis also allegedly impliedly represented that it was a government actor.
False or Misleading Acts
Because the litigant failed to allege any specific concealment by LexisNexis that she relied upon to e-file, the court dismissed the DTPA claims for false, misleading, or deceptive acts. The DTPA makes it unlawful to engage in false, misleading, or deceptive acts or practices in the conduct of any trade or commerce. A party asserting such claims must show that the acts or practices in question caused a cognizable injury.
The litigant had knowledge of the alternatives to e-filing before choosing to e-file and did not believe the charge was a filing fee. Any concealment by LexisNexis of the fees did not cause the litigant to pay the e-filing fee and failure to disclose the fees was not a DTPA violation. Also, the litigant failed to allege that she would have used an alternative method if she had known of the cost of e-filing.
Unconscionability
However, the litigant stated DTPA claims based on the unconscionability of the filing fees, according to the court. An unconscionable action is an act or practice which takes advantage of the lack of knowledge, ability, experience, or capacity of a person to a grossly unfair degree, or results in a gross disparity between the value received and consideration paid, in a transaction involving transfer of consideration.
In Montgomery County and Jefferson County, those seeking to file lawsuits had little alternative to paying the high e-filing fee charged by LexisNexis. As the sole provider of e-filing in those counties, LexisNexis was able to take advantage of litigants by setting whatever fee it wanted. The availability of any alternatives was not sufficient to defeat a claim of unconscionability because those choices were not meaningful ones.
The decision is McPeters v. LexisNexis, CCH State Unfair Trade Practices Act ¶32,555.
A civil litigant stated a Texas Deceptive Trade Practices—Consumer Protection Act (DTPA) claim for unconscionable conduct against LexisNexis based on its mandatory electronic filing fees charged to litigants in Texas state courts in Montgomery and Jefferson counties, according to the federal district court in Houston.
The litigant initiated this suit after LexisNexis charged her for electronically filing in Montgomery County, which was mandatory. The fees were allegedly unconscionably high and neither Montgomery County nor LexisNexis provides litigants with a list of charges levied or the nature of those charges. LexisNexis also allegedly impliedly represented that it was a government actor.
False or Misleading Acts
Because the litigant failed to allege any specific concealment by LexisNexis that she relied upon to e-file, the court dismissed the DTPA claims for false, misleading, or deceptive acts. The DTPA makes it unlawful to engage in false, misleading, or deceptive acts or practices in the conduct of any trade or commerce. A party asserting such claims must show that the acts or practices in question caused a cognizable injury.
The litigant had knowledge of the alternatives to e-filing before choosing to e-file and did not believe the charge was a filing fee. Any concealment by LexisNexis of the fees did not cause the litigant to pay the e-filing fee and failure to disclose the fees was not a DTPA violation. Also, the litigant failed to allege that she would have used an alternative method if she had known of the cost of e-filing.
Unconscionability
However, the litigant stated DTPA claims based on the unconscionability of the filing fees, according to the court. An unconscionable action is an act or practice which takes advantage of the lack of knowledge, ability, experience, or capacity of a person to a grossly unfair degree, or results in a gross disparity between the value received and consideration paid, in a transaction involving transfer of consideration.
In Montgomery County and Jefferson County, those seeking to file lawsuits had little alternative to paying the high e-filing fee charged by LexisNexis. As the sole provider of e-filing in those counties, LexisNexis was able to take advantage of litigants by setting whatever fee it wanted. The availability of any alternatives was not sufficient to defeat a claim of unconscionability because those choices were not meaningful ones.
The decision is McPeters v. LexisNexis, CCH State Unfair Trade Practices Act ¶32,555.
Friday, October 26, 2012
Maine Franchisee Could Not Bring “Little FTC Act” Claim
This posting was written by Pete Reap, Editor of CCH Business Franchise Guide.
A commercial franchisee governed by the Maine Franchise Act was not entitled to bring a claim against a franchisor under the private remedies section of the Maine "little FTC Act", the federal district court in Portland, Maine, has ruled. Thus, a heavy machinery business franchisor’s motion for judgment on the pleadings on a franchisee’s claim under the Maine "little FTC Act" was granted.
In 1993, Maine’s Legislature made significant changes to the MFA, including the enactment of a penalty provision which stated: "Violation of this chapter constitutes an unfair trade practice under the Maine Unfair Trade Practices Act, Title 5, chapter 10" (the MFA penalty section). Under the private remedies section of the "little FTC Act", a person who purchased goods, services, or property primarily for personal, family, or household use was afforded a private right of action.
The franchisee contended that the addition of the MFA penalty section signaled the legislature’s intent to open the "little FTC Act’s" private remedies to franchisees. However, the plain meaning of MFA’s Penalty Section makes a violation of the MFA a violation of "little FTC Act", but the section was silent as to whether the MFA was meant to incorporate all of "little FTC Act’s" provisions. Moreover, the statutory history accompanying the 1993 MFA amendments contained no suggestion that the MFA was meant to alter the "little FTC Act’s" clear limitation to goods purchased "primarily for personal, family or household purposes" in the case of franchisees.
When it enacted the MFA’s penalty section, the legislature was presumed to have been aware that the private remedies section of the "little FTC Act" was limited to consumer actions, yet it made no changes to that statutory section to accommodate "little FTC Act" suits by commercial franchisees.
In the face of that failure, the court was constrained to assume that the "little FTC Act" continued by its plain terms to apply only to consumers. This conclusion was reinforced by other general canons of statutory construction, the court explained.
The decision is Oliver Stores v. JCB, Inc., CCH Business Franchise Guide ¶14,913.
A commercial franchisee governed by the Maine Franchise Act was not entitled to bring a claim against a franchisor under the private remedies section of the Maine "little FTC Act", the federal district court in Portland, Maine, has ruled. Thus, a heavy machinery business franchisor’s motion for judgment on the pleadings on a franchisee’s claim under the Maine "little FTC Act" was granted.
In 1993, Maine’s Legislature made significant changes to the MFA, including the enactment of a penalty provision which stated: "Violation of this chapter constitutes an unfair trade practice under the Maine Unfair Trade Practices Act, Title 5, chapter 10" (the MFA penalty section). Under the private remedies section of the "little FTC Act", a person who purchased goods, services, or property primarily for personal, family, or household use was afforded a private right of action.
The franchisee contended that the addition of the MFA penalty section signaled the legislature’s intent to open the "little FTC Act’s" private remedies to franchisees. However, the plain meaning of MFA’s Penalty Section makes a violation of the MFA a violation of "little FTC Act", but the section was silent as to whether the MFA was meant to incorporate all of "little FTC Act’s" provisions. Moreover, the statutory history accompanying the 1993 MFA amendments contained no suggestion that the MFA was meant to alter the "little FTC Act’s" clear limitation to goods purchased "primarily for personal, family or household purposes" in the case of franchisees.
When it enacted the MFA’s penalty section, the legislature was presumed to have been aware that the private remedies section of the "little FTC Act" was limited to consumer actions, yet it made no changes to that statutory section to accommodate "little FTC Act" suits by commercial franchisees.
In the face of that failure, the court was constrained to assume that the "little FTC Act" continued by its plain terms to apply only to consumers. This conclusion was reinforced by other general canons of statutory construction, the court explained.
The decision is Oliver Stores v. JCB, Inc., CCH Business Franchise Guide ¶14,913.
Thursday, October 25, 2012
Court Sets Hearing on Preliminary Review of Credit Card Swipe Fee Litigation Settlement
This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.
The federal district court in Brooklyn, New York, has agreed to hear oral argument on a motion for preliminary approval of a proposed settlement that would resolve antitrust claims brought on behalf of approximately seven million merchants against Visa, MasterCard, and other major U.S. financial institutions over credit card swipe fees (In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, October 24, 2012, Gleeson, J.).
The settlement would provide an estimated $7.25 billion to the merchants who accepted Visa and MasterCard credit cards and debit cards in the United States since 2004. It would resolve the merchants’ claims that the payment card networks violated federal antitrust law by artificially inflating the interchange fees that the merchants paid on payment card transactions. The settlement before the court is considered to be the largest ever in a private antitrust case.
Noting that he did not ordinarily schedule oral argument of preliminary approval motions, Judge John Gleeson said that there was "an expectation among some interested parties that the preliminary approval process should be more involved in this case than in the usual class action." The court said, however, that the settlement agreement "at first blush . . . appears to satisfy the threshold requirements for preliminary approval."
The court is moving swiftly in its initial review of the settlement in the seven-year-old case. Oral argument has been scheduled for November 9.
The court denied requests from a large group of retailers and merchants for the formation of an objectors’ committee or to arrange for additional discovery. "The parties seeking that relief have a great deal of sophistication and familiarity with both the terms of the Settlement Agreement and the course of the negotiations that culminated in that agreement," the court said.
In addition, the court refused to establish procedures for absent class members to intervene at this juncture. They would have ample rights to be heard before final approval of the settlement was considered, the court explained.
The National Retail Federation is among the vocal opponents of the settlement. The trade group has said that the settlement is “unfair” and "does virtually nothing” to protect customers and address retailers’ concerns about credit card swipe fees charged by Visa and MasterCard.
The federal district court in Brooklyn, New York, has agreed to hear oral argument on a motion for preliminary approval of a proposed settlement that would resolve antitrust claims brought on behalf of approximately seven million merchants against Visa, MasterCard, and other major U.S. financial institutions over credit card swipe fees (In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, October 24, 2012, Gleeson, J.).
The settlement would provide an estimated $7.25 billion to the merchants who accepted Visa and MasterCard credit cards and debit cards in the United States since 2004. It would resolve the merchants’ claims that the payment card networks violated federal antitrust law by artificially inflating the interchange fees that the merchants paid on payment card transactions. The settlement before the court is considered to be the largest ever in a private antitrust case.
Noting that he did not ordinarily schedule oral argument of preliminary approval motions, Judge John Gleeson said that there was "an expectation among some interested parties that the preliminary approval process should be more involved in this case than in the usual class action." The court said, however, that the settlement agreement "at first blush . . . appears to satisfy the threshold requirements for preliminary approval."
The court is moving swiftly in its initial review of the settlement in the seven-year-old case. Oral argument has been scheduled for November 9.
The court denied requests from a large group of retailers and merchants for the formation of an objectors’ committee or to arrange for additional discovery. "The parties seeking that relief have a great deal of sophistication and familiarity with both the terms of the Settlement Agreement and the course of the negotiations that culminated in that agreement," the court said.
In addition, the court refused to establish procedures for absent class members to intervene at this juncture. They would have ample rights to be heard before final approval of the settlement was considered, the court explained.
The National Retail Federation is among the vocal opponents of the settlement. The trade group has said that the settlement is “unfair” and "does virtually nothing” to protect customers and address retailers’ concerns about credit card swipe fees charged by Visa and MasterCard.
Wednesday, October 24, 2012
New Franchise Rule FAQ Clarifies “Exclusive Territory”
This posting was written by Pete Reap, Editor of CCH Busines Franchise Guide.
The Federal Trade Commission Staff, on October 16, answered an additional frequently asked question (FAQ) regarding the 2007 amendments to its franchise disclosure rule.
The most recently answered question FAQ 37 is:
The Federal Trade Commission Staff, on October 16, answered an additional frequently asked question (FAQ) regarding the 2007 amendments to its franchise disclosure rule.
The most recently answered question FAQ 37 is:
"May a franchisor state in Item 12 that it grants an "exclusive territory" if it reserves the right to open franchised or company outlets in so-called "non-traditional venues" like airports, arenas, hospitals, hotels, malls, military installations, national parks, schools, stadiums and theme parks?"The FTC Staff replied:
"No. Pursuant to FAQ 25, a franchisor may state in Item 12 that it grants an "exclusive territory" only if the franchisor contractually "promises not to establish either a company-owned or franchised outlet selling the same or similar goods or services under the same or similar trademarks or service marks" within the geographic area or territory granted to a franchisee. A reservation of rights to open outlets selling the same goods or services under the same trademarks or service marks within a franchisee’s territory negates any such commitment and triggers the Item 12 requirement to include a disclaimer stating that franchisees will not receive an exclusive territory."The entire series of questions and answers is reproduced at CCH Business Franchise Guide ¶6090 and here on the FTC website.
Friday, October 19, 2012
FTC Conditions Watson’s Proposed Acquisition of Actavis on Divestitures
This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.
The FTC announced on October 15 that it has approved Watson Pharmaceuticals, Inc.'s proposed $5.9 billion acquisition of Actavis Inc., subject to the parties' agreement to divest the rights and assets to 18 drugs and to relinquish the manufacturing and marketing rights to three others. When the parties announced the proposed combination in April, they said that the transaction would make Watson the third largest global generics company.
According to the parties, all regulatory approvals required to close the transaction have been received. As a result, the parties anticipate consummating the acquisition in late October or early November. The European Commission cleared U.S.-based Watson's acquisition of the Swiss-based Actavis on October 5.
According to the FTC's complaint, the acquisition, if consummated as proposed, would have lessened current and/or future competition in U.S. markets for 21 generic pharmaceutical products. These products are used to treat a wide range of conditions, including hypertension, high blood pressure, diabetes, anxiety, schizophrenia, nausea, chronic and acute pain, and attention deficit hyperactivity disorder. Seven of the relevant generic drug markets involve generic drugs that are currently sold, and eight of the relevant generic drug markets involve generic drug products that either one or both of the companies currently sell or have in the pipeline. In the remaining six markets, generic drugs are not currently on the market; however, Watson and Actavis are among a limited number of likely potential suppliers of these drugs.
Under the terms of a proposed consent order, Watson and Actavis would be required to divest either Watson’s or Actavis’s rights and assets related to 18 of the 21 products. The majority of the assets in these 18 markets would be divested to Par Pharmaceutical, Inc. Par is a New Jersey-based generic pharmaceutical company selling over 60 prescription drug product families and has an active product development pipeline. Assets related to four of the markets would be divested to Sandoz International GmbH, a subsidiary of Novartis AG. Sandoz is based in Germany and has approximately 200 generic product families in the United States and an active product development pipeline.
According to the FTC, with their experience in generic markets, Par and Sandoz are expected to replicate the competition that would otherwise be lost with the proposed acquisition. If the Commission were to determine that Par and/or Sandoz were not acceptable acquirers of the divestiture assets, it could require the parties to unwind the sales. The parties are required to maintain the viability, marketability, and competitiveness of the divestiture products.
To remedy the FTC's concerns with respect to the three remaining product markets, the combined entity would be required to amend an existing development and manufacturing agreement between Actavis and Pfizer, Inc. and transfer the manufacturing rights back to Pfizer. For two other drugs, Watson and Actavis would be required to relinquish the marketing rights to another firm.
The case is Watson Pharmaceuticals, Inc., FTC Dkt. C-4373, FTC File No. 121-0132.
The FTC announced on October 15 that it has approved Watson Pharmaceuticals, Inc.'s proposed $5.9 billion acquisition of Actavis Inc., subject to the parties' agreement to divest the rights and assets to 18 drugs and to relinquish the manufacturing and marketing rights to three others. When the parties announced the proposed combination in April, they said that the transaction would make Watson the third largest global generics company.
According to the parties, all regulatory approvals required to close the transaction have been received. As a result, the parties anticipate consummating the acquisition in late October or early November. The European Commission cleared U.S.-based Watson's acquisition of the Swiss-based Actavis on October 5.
According to the FTC's complaint, the acquisition, if consummated as proposed, would have lessened current and/or future competition in U.S. markets for 21 generic pharmaceutical products. These products are used to treat a wide range of conditions, including hypertension, high blood pressure, diabetes, anxiety, schizophrenia, nausea, chronic and acute pain, and attention deficit hyperactivity disorder. Seven of the relevant generic drug markets involve generic drugs that are currently sold, and eight of the relevant generic drug markets involve generic drug products that either one or both of the companies currently sell or have in the pipeline. In the remaining six markets, generic drugs are not currently on the market; however, Watson and Actavis are among a limited number of likely potential suppliers of these drugs.
Under the terms of a proposed consent order, Watson and Actavis would be required to divest either Watson’s or Actavis’s rights and assets related to 18 of the 21 products. The majority of the assets in these 18 markets would be divested to Par Pharmaceutical, Inc. Par is a New Jersey-based generic pharmaceutical company selling over 60 prescription drug product families and has an active product development pipeline. Assets related to four of the markets would be divested to Sandoz International GmbH, a subsidiary of Novartis AG. Sandoz is based in Germany and has approximately 200 generic product families in the United States and an active product development pipeline.
According to the FTC, with their experience in generic markets, Par and Sandoz are expected to replicate the competition that would otherwise be lost with the proposed acquisition. If the Commission were to determine that Par and/or Sandoz were not acceptable acquirers of the divestiture assets, it could require the parties to unwind the sales. The parties are required to maintain the viability, marketability, and competitiveness of the divestiture products.
To remedy the FTC's concerns with respect to the three remaining product markets, the combined entity would be required to amend an existing development and manufacturing agreement between Actavis and Pfizer, Inc. and transfer the manufacturing rights back to Pfizer. For two other drugs, Watson and Actavis would be required to relinquish the marketing rights to another firm.
The case is Watson Pharmaceuticals, Inc., FTC Dkt. C-4373, FTC File No. 121-0132.
Thursday, October 18, 2012
Indirect Purchasers’ State Law Antitrust Claims Against Foreign Air Carriers Preempted
This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.
The Federal Aviation Act expressly preempted price fixing claims brought under state antitrust laws by indirect purchasers of air freight shipping services against numerous foreign airlines, the U.S. Court of Appeals in New York City ruled.
The indirect purchasers alleged that foreign air carriers conspired to fix prices by levying a number of surcharges, including a fuel surcharge, a war-risk-insurance surcharge, a security surcharge, and a U.S. customs surcharge. In fact, many of the foreign air carriers had pleaded guilty to federal criminal charges in the United States in connection with the alleged conspiracy.
The Federal Aviation Act preempts state-law claims “related to a price, route, or service of an air carrier.” The claims undoubtedly arose under state law and were related to price, the court noted. Thus, the issue was whether the term “air carrier” in this context applied to foreign air carriers or only to domestic air carriers.
Generally, where a statute includes explicit definitions, such as air carrier and foreign air carrier, the statutory definition controls. The Federal Aviation Act defined both terms. However, Congress’s use of the term “air carrier” in the preemption provision was ambiguous, according to the court.
The term was used generically to reference air carriers, both domestic and foreign. Since the Act used the statutory definition in some places, and in other places used the normal, everyday meaning, the statutory definitions did not have compulsory application.
As a result, the court considered the various amendments to the Federal Aviation Act and the legislative history and purpose of Act. The legislative history and purpose of the preemption provision confirmed that state-law antitrust suits against foreign, as well as domestic, air carriers were preempted. The court also reasoned that the indirect purchasers’ reading of the preemption provision, which would preempt only state regulation of domestic air carriers, would allow states to regulate the routes, prices, and services of foreign air carriers that operate all over the world.
Such a result would risk subjecting foreign air carriers and their customers to “a confusing patchwork” of state-by-state regulation, such as different rules for purchase of otherwise identical international flights if one ticket is from an American air carrier and the other is from a foreign carrier.
The case is In re Air Cargo Shipping Services Antitrust Litigation, 2012-2 Trade Cases ¶78,083.
The Federal Aviation Act expressly preempted price fixing claims brought under state antitrust laws by indirect purchasers of air freight shipping services against numerous foreign airlines, the U.S. Court of Appeals in New York City ruled.
The indirect purchasers alleged that foreign air carriers conspired to fix prices by levying a number of surcharges, including a fuel surcharge, a war-risk-insurance surcharge, a security surcharge, and a U.S. customs surcharge. In fact, many of the foreign air carriers had pleaded guilty to federal criminal charges in the United States in connection with the alleged conspiracy.
The Federal Aviation Act preempts state-law claims “related to a price, route, or service of an air carrier.” The claims undoubtedly arose under state law and were related to price, the court noted. Thus, the issue was whether the term “air carrier” in this context applied to foreign air carriers or only to domestic air carriers.
Generally, where a statute includes explicit definitions, such as air carrier and foreign air carrier, the statutory definition controls. The Federal Aviation Act defined both terms. However, Congress’s use of the term “air carrier” in the preemption provision was ambiguous, according to the court.
The term was used generically to reference air carriers, both domestic and foreign. Since the Act used the statutory definition in some places, and in other places used the normal, everyday meaning, the statutory definitions did not have compulsory application.
As a result, the court considered the various amendments to the Federal Aviation Act and the legislative history and purpose of Act. The legislative history and purpose of the preemption provision confirmed that state-law antitrust suits against foreign, as well as domestic, air carriers were preempted. The court also reasoned that the indirect purchasers’ reading of the preemption provision, which would preempt only state regulation of domestic air carriers, would allow states to regulate the routes, prices, and services of foreign air carriers that operate all over the world.
Such a result would risk subjecting foreign air carriers and their customers to “a confusing patchwork” of state-by-state regulation, such as different rules for purchase of otherwise identical international flights if one ticket is from an American air carrier and the other is from a foreign carrier.
The case is In re Air Cargo Shipping Services Antitrust Litigation, 2012-2 Trade Cases ¶78,083.
Thursday, October 11, 2012
Nutritional Ingredient Manufacturer Held Liable for False Advertising
This posting was written by William Zale, Editor of CCH Advertising Law Guide.
Gnosis, a manufacturer of raw ingredients for nutritional companies, falsely advertised its Extrafolate product in violation of the Lanham Act by using the chemical name, abbreviation, chemical formula, and Chemical Abstracts Services registry number reserved for Merck Eprova’s purer folate ingredients, the federal district court in New York City has ruled.
Merck was entitled to an enhanced award of Gnosis’s profits, a permanent injunction including provisions for corrective advertising, and an award of attorney’s fees. The court held that Merck lacked standing under the New York deceptive practices and false advertising laws.
Folate is the B vitamin that helps the body make new healthy cells. All living beings require folates, and they are particularly useful to promote prenatal health for expectant mothers and their fetuses and to lessen the risks of some cancers and cardiovascular diseases.
Gnosis’s folate product was a mixture of the “active” S-isomer and the “inactive “R-isomer. Although Gnosis’s product was admittedly a mixture of these two isomers, Gnosis used terms and the chemical formula for the pure S-isomer product in describing its product.
Merck had standing to sue under the Lanham Act because it was injured when its competitor falsely advertised its chemically distinct product as identical to Merck’s product. In an organized advertising campaign Gnosis widely distributed materials that were literally false and that materially misrepresented the nature of what Gnosis was selling, the court determined. Gnosis also distributed brochures with literally true descriptions of a pure 6S Isomer Product that were impliedly false and intended to mislead customers in connection with Extrafolate, which was not a pure 6S isomer, the court found.
Gnosis was liable, not only for direct false advertising, but also for contributory false advertising because its false use of the common chemical name caused its distributors to advertise falsely, the court decided.
Enhanced Profits Award
The award of Gnosis’s profits was held necessary to prevent it from falsely advertising in the future. Gnosis’s conduct during its advertising campaign and litigation revealed its disdain for the law and the court. It deliberately and willfully engaged in false advertising as part of a strategy designed to gain its market share in the lucrative vitamin and nutritional supplement industry through deception, according to the court.
Though the plain language of the Lanham Act permits trebling of only of damages, an award of profits may be enhanced without identified limit to “such sum as the court shall find to be just if “the amount of the recovery based on profits is . . . inadequate, under 15 U.S.C. § 1117(a). Gnosis’s profits during the applicable period were $175,664.71. This amount was increased to $526,994.13 in order to compensate Merck for the improved market position Gnosis enjoyed solely as a result of its false advertising, the court found.
Injunctive Relief
Injunctive relief was appropriate because Merck suffered irreparable harm and the damages award, based only on sales up to March 2009, did not fully compensate Merck. Gnosis was to be (1) permanently enjoined from advertising its 6R,S Mixture Product with the names 6S-5-methyltetrahydrofolate, L-5 methyltetrahydrofolate, L-S-MTHF, or any synonyms thereof and (2) ordered to engage in a campaign of corrective advertising to be approved by the court with input from Merck.
Attorney’s Fees
An award of attorney’s fees was appropriate. Gnosis’s false advertising was willful and done in bad faith and because its litigation strategy was conducted in bad faith with senior officers, including its CEO, frustrating the litigation process at every turn, the court found.
New York Law
Merck lacked standing under the New York deceptive practices and false advertising laws. Corporate competitors have standing under the New York law if the gravamen of the complaint is consumer injury or harm to the public interest. Although Merck’s experts posited that there may be some negative health consequences associated with the R-isomer, Merck had not definitively established that these negative health consequences were also associated with the Gnosis’s 6R,S mixture product, the court determined. Instead, Merck’s allegations focused almost entirely on losses suffered by Merck itself, not the eventual—and theoretical— harm suffered by the public at large.
The opinion in Merck Eprova AG v. Gnosis S.p.A. will be reported at CCH Advertising Law Guide ¶64,835.
Gnosis, a manufacturer of raw ingredients for nutritional companies, falsely advertised its Extrafolate product in violation of the Lanham Act by using the chemical name, abbreviation, chemical formula, and Chemical Abstracts Services registry number reserved for Merck Eprova’s purer folate ingredients, the federal district court in New York City has ruled.
Merck was entitled to an enhanced award of Gnosis’s profits, a permanent injunction including provisions for corrective advertising, and an award of attorney’s fees. The court held that Merck lacked standing under the New York deceptive practices and false advertising laws.
Folate is the B vitamin that helps the body make new healthy cells. All living beings require folates, and they are particularly useful to promote prenatal health for expectant mothers and their fetuses and to lessen the risks of some cancers and cardiovascular diseases.
Gnosis’s folate product was a mixture of the “active” S-isomer and the “inactive “R-isomer. Although Gnosis’s product was admittedly a mixture of these two isomers, Gnosis used terms and the chemical formula for the pure S-isomer product in describing its product.
Merck had standing to sue under the Lanham Act because it was injured when its competitor falsely advertised its chemically distinct product as identical to Merck’s product. In an organized advertising campaign Gnosis widely distributed materials that were literally false and that materially misrepresented the nature of what Gnosis was selling, the court determined. Gnosis also distributed brochures with literally true descriptions of a pure 6S Isomer Product that were impliedly false and intended to mislead customers in connection with Extrafolate, which was not a pure 6S isomer, the court found.
Gnosis was liable, not only for direct false advertising, but also for contributory false advertising because its false use of the common chemical name caused its distributors to advertise falsely, the court decided.
Enhanced Profits Award
The award of Gnosis’s profits was held necessary to prevent it from falsely advertising in the future. Gnosis’s conduct during its advertising campaign and litigation revealed its disdain for the law and the court. It deliberately and willfully engaged in false advertising as part of a strategy designed to gain its market share in the lucrative vitamin and nutritional supplement industry through deception, according to the court.
Though the plain language of the Lanham Act permits trebling of only of damages, an award of profits may be enhanced without identified limit to “such sum as the court shall find to be just if “the amount of the recovery based on profits is . . . inadequate, under 15 U.S.C. § 1117(a). Gnosis’s profits during the applicable period were $175,664.71. This amount was increased to $526,994.13 in order to compensate Merck for the improved market position Gnosis enjoyed solely as a result of its false advertising, the court found.
Injunctive Relief
Injunctive relief was appropriate because Merck suffered irreparable harm and the damages award, based only on sales up to March 2009, did not fully compensate Merck. Gnosis was to be (1) permanently enjoined from advertising its 6R,S Mixture Product with the names 6S-5-methyltetrahydrofolate, L-5 methyltetrahydrofolate, L-S-MTHF, or any synonyms thereof and (2) ordered to engage in a campaign of corrective advertising to be approved by the court with input from Merck.
Attorney’s Fees
An award of attorney’s fees was appropriate. Gnosis’s false advertising was willful and done in bad faith and because its litigation strategy was conducted in bad faith with senior officers, including its CEO, frustrating the litigation process at every turn, the court found.
New York Law
Merck lacked standing under the New York deceptive practices and false advertising laws. Corporate competitors have standing under the New York law if the gravamen of the complaint is consumer injury or harm to the public interest. Although Merck’s experts posited that there may be some negative health consequences associated with the R-isomer, Merck had not definitively established that these negative health consequences were also associated with the Gnosis’s 6R,S mixture product, the court determined. Instead, Merck’s allegations focused almost entirely on losses suffered by Merck itself, not the eventual—and theoretical— harm suffered by the public at large.
The opinion in Merck Eprova AG v. Gnosis S.p.A. will be reported at CCH Advertising Law Guide ¶64,835.
Wednesday, October 10, 2012
ABA Forum on Franchising at 35: “Getting Better and Better”
The posting was written by John W. Arden.
During his “State of the Forum” speech at the ABA Forum on Franchising’s annual meeting last week in Los Angeles, Forum Chair Joseph J. Fittante reported that, in its 35th year, the Forum was “getting better and better.”
While other legal conferences are seeing a fall off in attendance, the Forum’s annual meeting boasted a near-record of 829 registered attendees. The Forum continues to have one of the highest participation rates of any ABA group.
The quality of the Forum’s presentations, written materials, and publications continue to be of the highest level, according to Fittante, a shareholder of Larkin Hoffman Daly & Lindgren in Minneapolis. The success of the Forum is attributable to the participation of the membership and the efforts of the governing committee and senior leadership, he said.
That leadership took time out of the general business meeting to thank former ABA Forum coordinator Kelly Rodenberg for nearly 15 years of working with the group. Rodenberg recently left her position with the ABA, but was in attendance at the meeting. She was recognized for guiding the group through earthquakes, snowstorms, hurricanes, and labor strikes.
Past chair Susan Gruenberg related how the group was able to hold a planned annual meeting just weeks after the 9/11 attacks because of Rodenberg’s efforts to renegotiate contracts and process many cancellations from members who were not willing to travel.
Leadership Election
During the annual business meeting of the three-day forum, the group elected Deborah S. Coldwell of Hayes and Boone, LLP in Dallas to serve a two-year term as Forum Chair, commencing in August 2013. The Forum membership also elected four members to serve three-year terms on the Governing Committee, commencing in August 2013.
The new at-large members of the Governing Committee are Christopher P. Bussert of Kilpatrick Townsend & Stockton LLP in Atlanta; Leslie Curran of Plave Koch PLC in Reston, Virginia; Andrew Loewinger of Nixon Peabody LLP in Washington, DC; and David W. Oppenheim of Kaufmann Gildin Robbins & Oppenheim LLP in New York City. Diane Green-Kelly of Reed Smith in Chicago was elected to a two-year term on the Governing Committee, to fulfill the remainder of Deborah Coldwell's unexpired term.
Highlights of the annual meeting included a plenary session on time management skills for lawyers and the Annual Franchise and Distribution Law Developments program, presented by James Goniea and Peter Silverman. Program co-chairs for the 2012 Forum on Franchising were Leslie D. Curran and Michael D. Joblove.
The 2013 annual meeting is scheduled for October 16 - 18, 2013 at the Rosen Shingle Creek Resort in Orlando, Florida.
During his “State of the Forum” speech at the ABA Forum on Franchising’s annual meeting last week in Los Angeles, Forum Chair Joseph J. Fittante reported that, in its 35th year, the Forum was “getting better and better.”
While other legal conferences are seeing a fall off in attendance, the Forum’s annual meeting boasted a near-record of 829 registered attendees. The Forum continues to have one of the highest participation rates of any ABA group.
The quality of the Forum’s presentations, written materials, and publications continue to be of the highest level, according to Fittante, a shareholder of Larkin Hoffman Daly & Lindgren in Minneapolis. The success of the Forum is attributable to the participation of the membership and the efforts of the governing committee and senior leadership, he said.
That leadership took time out of the general business meeting to thank former ABA Forum coordinator Kelly Rodenberg for nearly 15 years of working with the group. Rodenberg recently left her position with the ABA, but was in attendance at the meeting. She was recognized for guiding the group through earthquakes, snowstorms, hurricanes, and labor strikes.
Past chair Susan Gruenberg related how the group was able to hold a planned annual meeting just weeks after the 9/11 attacks because of Rodenberg’s efforts to renegotiate contracts and process many cancellations from members who were not willing to travel.
Leadership Election
During the annual business meeting of the three-day forum, the group elected Deborah S. Coldwell of Hayes and Boone, LLP in Dallas to serve a two-year term as Forum Chair, commencing in August 2013. The Forum membership also elected four members to serve three-year terms on the Governing Committee, commencing in August 2013.
The new at-large members of the Governing Committee are Christopher P. Bussert of Kilpatrick Townsend & Stockton LLP in Atlanta; Leslie Curran of Plave Koch PLC in Reston, Virginia; Andrew Loewinger of Nixon Peabody LLP in Washington, DC; and David W. Oppenheim of Kaufmann Gildin Robbins & Oppenheim LLP in New York City. Diane Green-Kelly of Reed Smith in Chicago was elected to a two-year term on the Governing Committee, to fulfill the remainder of Deborah Coldwell's unexpired term.
Highlights of the annual meeting included a plenary session on time management skills for lawyers and the Annual Franchise and Distribution Law Developments program, presented by James Goniea and Peter Silverman. Program co-chairs for the 2012 Forum on Franchising were Leslie D. Curran and Michael D. Joblove.
The 2013 annual meeting is scheduled for October 16 - 18, 2013 at the Rosen Shingle Creek Resort in Orlando, Florida.
Friday, October 05, 2012
High Court to Rule on Exception to Driver's Privacy Law
This posting was written by Thomas A. Long, Editor of CCH Privacy Law in Marketing.
The U.S. Supreme Court on September 25 agreed to hear a case that could clarify what uses of personal information obtained from driver's license and vehicle registration databases are "permissible" under the federal Driver's Privacy Protection Act ("DPPA"), 18 U.S.C. §§2721-2725. The DPPA regulates the disclosure of personal information contained in the records of state motor vehicle departments. The DPPA permits the disclosure of protected personal information for several "permissible uses" listed in §2721(b).
The Court granted a petition for certiorari filed by individuals asking the Court to review a decision of the U.S. Court of Appeals in Richmond (CCH Privacy Law in Marketing ¶60,751), holding that four attorneys who obtained motor vehicle records of South Carolina vehicle buyers for the purpose of engaging in mass solicitation without consent-a purpose prohibited by the DPPA-could not be liable for violating the DPPA, as a matter of law. According to the appellate court, the attorneys made permissible use of the buyers' personal information protected by the DPPA, specifically, use in connection with litigation, including investigation in anticipation of litigation, and the solicitation was conducted in the course of that permissible use.
The attorneys had sent several FOIA requests to the South Carolina Department of Motor Vehicles seeking information regarding individuals who purchased automobiles during specific periods of time, including the name, address, and telephone number of the buyer; the dealership where the automobile was purchased; the type of vehicle purchased; and the date of the purchase. The attorneys then mailed a letter to the individuals whose information was obtained, offering a free consultation and inviting the individuals to hire the attorneys to represent them in a lawsuit against certain dealerships. The letter included the label "ADVERTISING MATERIAL."
The DPPA provides that a state DMV may disclose personal information for use in connection with an investigation in anticipation of litigation. It was a matter of settled state law and practice that solicitation was an accepted, expected, and inextricably intertwined element of conduct satisfying the litigation exception under the DPPA, the Fourth Circuit said. Accordingly, such solicitation was not actionable by the buyers. Dismissal of the buyers' DPPA claims by the federal district court in Greenville, South Carolina, was affirmed.
The petition is Maracich v. Spears, 12-25.
The U.S. Supreme Court on September 25 agreed to hear a case that could clarify what uses of personal information obtained from driver's license and vehicle registration databases are "permissible" under the federal Driver's Privacy Protection Act ("DPPA"), 18 U.S.C. §§2721-2725. The DPPA regulates the disclosure of personal information contained in the records of state motor vehicle departments. The DPPA permits the disclosure of protected personal information for several "permissible uses" listed in §2721(b).
The Court granted a petition for certiorari filed by individuals asking the Court to review a decision of the U.S. Court of Appeals in Richmond (CCH Privacy Law in Marketing ¶60,751), holding that four attorneys who obtained motor vehicle records of South Carolina vehicle buyers for the purpose of engaging in mass solicitation without consent-a purpose prohibited by the DPPA-could not be liable for violating the DPPA, as a matter of law. According to the appellate court, the attorneys made permissible use of the buyers' personal information protected by the DPPA, specifically, use in connection with litigation, including investigation in anticipation of litigation, and the solicitation was conducted in the course of that permissible use.
The attorneys had sent several FOIA requests to the South Carolina Department of Motor Vehicles seeking information regarding individuals who purchased automobiles during specific periods of time, including the name, address, and telephone number of the buyer; the dealership where the automobile was purchased; the type of vehicle purchased; and the date of the purchase. The attorneys then mailed a letter to the individuals whose information was obtained, offering a free consultation and inviting the individuals to hire the attorneys to represent them in a lawsuit against certain dealerships. The letter included the label "ADVERTISING MATERIAL."
The DPPA provides that a state DMV may disclose personal information for use in connection with an investigation in anticipation of litigation. It was a matter of settled state law and practice that solicitation was an accepted, expected, and inextricably intertwined element of conduct satisfying the litigation exception under the DPPA, the Fourth Circuit said. Accordingly, such solicitation was not actionable by the buyers. Dismissal of the buyers' DPPA claims by the federal district court in Greenville, South Carolina, was affirmed.
The petition is Maracich v. Spears, 12-25.
Thursday, October 04, 2012
ABA Forum on Franchising Presents Rudnick Award to Judith Bailey
This posting was written by John W. Arden.
Phoenix franchise attorney Judith Bailey is the 2012 recipient of the Lewis G. Rudnick Award, the ABA Forum on Franchising’s “lifetime achievement award” for franchise attorneys. The award was presented today during the group’s 35th annual meeting in Los Angeles.
Besides having a long and distinguished career as a franchise lawyer, Bailey served the Forum in many capacities for many years. She was the first woman to serve on the group’s governing committee and was instrumental in the formation of the women’s caucus. Today, women make up 50 percent of the governing committee, and members of the women’s caucus represent one-third of the entire membership of the Forum, according to Joseph Fittante, Chair of the Forum on Franchising.
Bailey attended every annual meeting from 1979 through her retirement in 2005 and helped create the Fundamentals of Franchising mini-program, which has become a “core curriculum” of the Forum, Fittante said.
The Rudnick Award was created in 2009 in remembrance of Lewis Rudnick, a founding member of the Forum and its second chair, who died in January 2009. He helped establish the Franchise Law Journal, the Forum’s quarterly publication. As senior partner of Rudnick & Wolfe (currently DLA Piper), he trained several generations of some of America’s leading franchise lawyers.
The Award is intended to honor those who have made substantial contributions to the Forum and to franchise law as a discipline, while comporting themselves in accordance with Lew Rudnick’s high standards of professionalism.
Previous Rudnick Awards were presented to John R.F. Baer of Greensfelder, Hemker & Gale, P.C.; Rupert M. Barkoff of Kilpatrick Townsend; and Andrew C. Selden of Briggs & Morgan.
The Forum on Franchising also conferred its Young Leadership Award on Alexander Tuneski of Kilpatrick Townsend in Atlanta for his work with the Newcomer’s/Young Lawyer’s Division events, the Forum service projects, and Franchise Law Journal.
Phoenix franchise attorney Judith Bailey is the 2012 recipient of the Lewis G. Rudnick Award, the ABA Forum on Franchising’s “lifetime achievement award” for franchise attorneys. The award was presented today during the group’s 35th annual meeting in Los Angeles.
Besides having a long and distinguished career as a franchise lawyer, Bailey served the Forum in many capacities for many years. She was the first woman to serve on the group’s governing committee and was instrumental in the formation of the women’s caucus. Today, women make up 50 percent of the governing committee, and members of the women’s caucus represent one-third of the entire membership of the Forum, according to Joseph Fittante, Chair of the Forum on Franchising.
Bailey attended every annual meeting from 1979 through her retirement in 2005 and helped create the Fundamentals of Franchising mini-program, which has become a “core curriculum” of the Forum, Fittante said.
The Rudnick Award was created in 2009 in remembrance of Lewis Rudnick, a founding member of the Forum and its second chair, who died in January 2009. He helped establish the Franchise Law Journal, the Forum’s quarterly publication. As senior partner of Rudnick & Wolfe (currently DLA Piper), he trained several generations of some of America’s leading franchise lawyers.
The Award is intended to honor those who have made substantial contributions to the Forum and to franchise law as a discipline, while comporting themselves in accordance with Lew Rudnick’s high standards of professionalism.
Previous Rudnick Awards were presented to John R.F. Baer of Greensfelder, Hemker & Gale, P.C.; Rupert M. Barkoff of Kilpatrick Townsend; and Andrew C. Selden of Briggs & Morgan.
The Forum on Franchising also conferred its Young Leadership Award on Alexander Tuneski of Kilpatrick Townsend in Atlanta for his work with the Newcomer’s/Young Lawyer’s Division events, the Forum service projects, and Franchise Law Journal.
Wednesday, October 03, 2012
Motion to Intervene in Government’s E-Book Case to Appeal Partial Settlement Rejected
This posting was written by Jeffrey May. Editor of CCH Trade Regulation Reporter.
The federal district court in New York City yesterday denied a “consumer’s” motion to intervene in the Justice Department’s action against Apple, Inc. and five publishers for allegedly conspiring to fix prices for electronic books or “e-books.” The motion was filed by Bob Kohn for the purpose of appealing from a September 6 final judgment ((CCH) 2012-2 Trade Cases ¶78,042), resolving the government’s antitrust allegations against three of the five publishers.
Kohn describes himself as a “consumer of digital goods, author of a treatise on copyright, and founder and CEO of technology companies directly involved in the digital distribution of music and e-books,” the court explained. He gained a great deal of attention recently when he submitted an amicus filing concerning the proposed final judgment in comic form. Kohn also filed a 55-page Tunney Act comment regarding the final judgment.
In finding the final judgment with defendants Hachette Book Group, Inc., HarperCollins Publishers L.L.C., and Simon & Schuster, Inc. to be in the public interest ((CCH) 2012-2 Trade Cases ¶78,041), the court considered Kohn’s arguments and rejected them. In its opposition to Kohn’s motion to intervene, the government argued that Kohn was merely restating concerns already rejected by the court.
The court agreed. “Through these two avenues, [Kohn] was given a full opportunity to express his personal views on the Government’s theory of the case and the state of competition in the e-books market.”
In its opposition to Kohn’s motion to intervene, the government also questioned whether “Kohn’s amicus filing was a frolic meant more for his own amusement than to assist the Court in its Tunney Act analysis.”
The court concluded that it was not necessary for Kohn to intervene in the case. Kohn’s expressed interest in the action was as a “consumer of e-books and e-book systems” who fears that the final judgment may result in consumers paying less “efficient” prices for e-books or that it may stifle competition in what Kohn terms the e-books systems market. He suggested that the settlement could allow e-book retailer Amazon to use its monopoly power to raise e-book prices in the future.
The court was satisfied that the defendants in the case–all represented by sophisticated counsel–were “fully capable of framing their own defenses.” In fact, Apple had represented that it would appeal the final judgment, and Kohn could apply to the appellate court to appear as amicus in that forum.
The October 2, 2012, decision in U.S. v. Apple, Inc., 12 Civ. 2826 (DLC), will appear at (CCH) 2012-2 Trade Cases ¶78,074.
This article originally appeared on AntitrustConnect.com.
The federal district court in New York City yesterday denied a “consumer’s” motion to intervene in the Justice Department’s action against Apple, Inc. and five publishers for allegedly conspiring to fix prices for electronic books or “e-books.” The motion was filed by Bob Kohn for the purpose of appealing from a September 6 final judgment ((CCH) 2012-2 Trade Cases ¶78,042), resolving the government’s antitrust allegations against three of the five publishers.
Kohn describes himself as a “consumer of digital goods, author of a treatise on copyright, and founder and CEO of technology companies directly involved in the digital distribution of music and e-books,” the court explained. He gained a great deal of attention recently when he submitted an amicus filing concerning the proposed final judgment in comic form. Kohn also filed a 55-page Tunney Act comment regarding the final judgment.
In finding the final judgment with defendants Hachette Book Group, Inc., HarperCollins Publishers L.L.C., and Simon & Schuster, Inc. to be in the public interest ((CCH) 2012-2 Trade Cases ¶78,041), the court considered Kohn’s arguments and rejected them. In its opposition to Kohn’s motion to intervene, the government argued that Kohn was merely restating concerns already rejected by the court.
The court agreed. “Through these two avenues, [Kohn] was given a full opportunity to express his personal views on the Government’s theory of the case and the state of competition in the e-books market.”
In its opposition to Kohn’s motion to intervene, the government also questioned whether “Kohn’s amicus filing was a frolic meant more for his own amusement than to assist the Court in its Tunney Act analysis.”
The court concluded that it was not necessary for Kohn to intervene in the case. Kohn’s expressed interest in the action was as a “consumer of e-books and e-book systems” who fears that the final judgment may result in consumers paying less “efficient” prices for e-books or that it may stifle competition in what Kohn terms the e-books systems market. He suggested that the settlement could allow e-book retailer Amazon to use its monopoly power to raise e-book prices in the future.
The court was satisfied that the defendants in the case–all represented by sophisticated counsel–were “fully capable of framing their own defenses.” In fact, Apple had represented that it would appeal the final judgment, and Kohn could apply to the appellate court to appear as amicus in that forum.
The October 2, 2012, decision in U.S. v. Apple, Inc., 12 Civ. 2826 (DLC), will appear at (CCH) 2012-2 Trade Cases ¶78,074.
This article originally appeared on AntitrustConnect.com.
Tuesday, October 02, 2012
FTC Revises “Green Guides” for Environmental Marketing Claims
This posting was written by Jeffrey May. Editor of CCH Trade Regulation Reporter.
Marketers should not make broad, unqualified environmental claims, such as "green" or "eco-friendly," for their products, according to the FTC’s recently revised "Green Guides." The agency’s guides for environmental marketing claims, among other things, encourage marketers to qualify general environmental benefit claims, limiting such claims to a specific benefit or benefits.
The agency released the revised guidance on October 1, nearly two years after the proposed changes were published for public comment. The revised guides take into account nearly 340 unique comments and more than 5,000 total comments received, according to the agency.
The revised guides have a new section devoted to the use of certifications and seals of approval to communicate environmental claims. The agency emphasizes that certifications and seals may be considered endorsements that are covered by the FTC’s Endorsement Guides (CCH Trade Regulation Reporter ¶39,038), and includes examples that illustrate how marketers could disclose a “material connection” that might affect the weight or credibility of an endorsement.
In addition, the Green Guides caution marketers not to use environmental certifications or seals that don’t clearly convey the basis for the certification, because such seals or certifications are likely to convey general environmental benefits.
In addition, there is new guidance on "renewable energy" claims, "renewable materials" claims, "non-toxic" claims, "free-of" claims, and "carbon offset" claims. Marketers are expected to have competent and reliable scientific evidence to support such claims. Moreover, claims should be qualified as necessary to avoid confusion. For instance, marketers should qualify renewable materials claims unless an item is made entirely with renewable materials.
The agency also provides some clarification to existing provisions addressing claims related to compostability, degradability, recyclability, and recycled content. For instance, the agency suggests that marketers qualify recyclable claims when recycling facilities are not available to at least 60 percent of the consumers or communities where a product is sold.
“The introduction of environmentally friendly products into the marketplace is a win for consumers who want to purchase greener products and for producers who want to sell them,” said FTC Chairman Jon Leibowitz, announcing the guides. “But this win-win can only occur if marketers’ claims are truthful and substantiated. The FTC’s changes to the Green Guides will level the playing field for honest business people and it is one reason why we had such broad support.”
Marketers should not make broad, unqualified environmental claims, such as "green" or "eco-friendly," for their products, according to the FTC’s recently revised "Green Guides." The agency’s guides for environmental marketing claims, among other things, encourage marketers to qualify general environmental benefit claims, limiting such claims to a specific benefit or benefits.
The agency released the revised guidance on October 1, nearly two years after the proposed changes were published for public comment. The revised guides take into account nearly 340 unique comments and more than 5,000 total comments received, according to the agency.
The revised guides have a new section devoted to the use of certifications and seals of approval to communicate environmental claims. The agency emphasizes that certifications and seals may be considered endorsements that are covered by the FTC’s Endorsement Guides (CCH Trade Regulation Reporter ¶39,038), and includes examples that illustrate how marketers could disclose a “material connection” that might affect the weight or credibility of an endorsement.
In addition, the Green Guides caution marketers not to use environmental certifications or seals that don’t clearly convey the basis for the certification, because such seals or certifications are likely to convey general environmental benefits.
In addition, there is new guidance on "renewable energy" claims, "renewable materials" claims, "non-toxic" claims, "free-of" claims, and "carbon offset" claims. Marketers are expected to have competent and reliable scientific evidence to support such claims. Moreover, claims should be qualified as necessary to avoid confusion. For instance, marketers should qualify renewable materials claims unless an item is made entirely with renewable materials.
The agency also provides some clarification to existing provisions addressing claims related to compostability, degradability, recyclability, and recycled content. For instance, the agency suggests that marketers qualify recyclable claims when recycling facilities are not available to at least 60 percent of the consumers or communities where a product is sold.
“The introduction of environmentally friendly products into the marketplace is a win for consumers who want to purchase greener products and for producers who want to sell them,” said FTC Chairman Jon Leibowitz, announcing the guides. “But this win-win can only occur if marketers’ claims are truthful and substantiated. The FTC’s changes to the Green Guides will level the playing field for honest business people and it is one reason why we had such broad support.”
Subscribe to:
Posts (Atom)
