United States: AD-ttorneys@law – September 26, 2019

Last Updated: October 4 2019
Article by Alan L. Friel, Linda Goldstein, Amy Ralph Mudge and Randal M. Shaheen

Latest Round of FTC CBD Letter-Writing Campaign Has Anonymous Pen Pals

Three companies get talking-to over CBD health claims

Ambitious!

Three unnamed companies were on the receiving end of firm but undoubtedly polite letters from the Federal Trade Commission warning them to take a long, hard look at their cannabidiol (CBD) advertising.

Using scare quotes designed to make them seem like dangerously unhip parents, the commission announced that the missives were sent to "three companies that sell oils, tinctures, capsules, 'gummies,' and creams containing cannabidiol (CBD), a chemical compound derived from the cannabis plant."

Apparently the anonymous companies have been claiming that their CBD-related products cure or alleviate a variety of conditions, including (take a deep breath) cancer, Alzheimer's disease, arthritis, multiple sclerosis, cigarette addiction, colitis, autism, anorexia, bipolar disorder, post-traumatic stress disorder, schizophrenia, anxiety, depression, autoimmune disorders, heart disease, Lou Gehrig's disease (ALS), stroke, Parkinson's disease, epilepsy, traumatic brain injuries, diabetes, Crohn's disease, psoriasis, multiple sclerosis, fibromyalgia, AIDS, asthma, and, as one company allegedly claimed, "most major degenerative diseases."

The commission asked that the three recipients gather the evidence needed to back up these and other claims, warning of potential action under the FTC Act should they fail to do so.

The Takeaway

These latest letters add just a little more torque to the slowly but steadily turning wheel of federal CBD-related activity we discussed back in April, inaugurated by a statement from then-FDA Commissioner Gottlieb and a joint letter-writing campaign between the Food and Drug Administration and the commission. FDA-sponsored hearings followed, along with yet more letters, but still – no bombshells regarding a comprehensive CBD regulatory stance.

We're keeping our eyes open.

TINA Goes Deep on Givling

Watchdog org raises concerns with popular debt-cancellation app

Play to Pay (Off)

Americans are saddled with astronomical levels of student debt: $1.9 trillion in loans as of 2019. It's a figure that has multiple resonances across the economy (just imagine how this debt load impacts home ownership, for instance).

Promises by Democratic presidential contenders notwithstanding – Sen. Bernie Sanders, for instance, wants to eliminate student debt altogether – the young and no-longer-so-young people who are laboring under student debt loads are trying all sorts of strategies to pay their way out.

The App Giveth ...

Enter Givling, best described as a trivia game app, or the company that runs the app. In either case, Givling takes an unorthodox approach to helping student debtors shed their obligations.

Givling's a bit confusing, so bear with us. The company invites users to crowdfund the payoff of individual student debt through three separate modes: a trivia game, a queue and random drawings. Players can tackle the trivia game, joining randomly selected teammates to win and split cash prizes. Players who invest time in the trivia game are entered in a random drawing for $500 daily prizes or a $10,000 weekly prize.

Then there's the queue – really two queues, but we don't have enough room to go into detail here. Players amass "queue points" to move ahead; queue points can be earned by playing the trivia game, watching advertisements on the app, signing up for Givling's sponsor offers and purchasing merchandise. The top queue winner receives $50,000 to put toward his or her student loan.

Given the debt load carried by former students, it's no surprise that the company made a big splash when it announced that it had distributed $4 million in prize money.

The App Taketh Away?

There's where Truth in Advertising Inc. (TINA) stepped in, with an exposé describing questionable activity by the company.

First, the queue. As we mentioned before, the structure of it is confusing, with two different subqueues providing winners for the same small winner's circle. According to TINA, Givling is less than forthcoming about the nature of the queue even when pressed – indeed, it may have acted to obscure its mechanics.

So far, TINA's accusations would be troubling. But the watchdog raises additional concerns over the amount that entrants wind up spending to climb in the queue. Some players are criticizing the system for charging players to advance in the lists with little chance for payoff: "The quickest way to advance in the queue is to spend money," says the report. "But even if you consistently spend the maximum $2,500 on coins a week, if the people around you in the queue are matching your every move, not only is it possible that you remain in place, you could actually go down in ranking."

One $50,000 winner who spoke with CNBC for a story on the same accusations claims she laid out $42,000 over three years to get to the top of the queue, for an $8,000 net gain.

To make matters worse, TINA says, Givling has included a nondisparagement clause in its terms and conditions that may be silencing winners who wish to criticize the company.

The Takeaway

If these accusations sound like borderline criminal behavior to you, you're not alone. The Minnesota Department of Public Safety investigated the company for similar reasons, concluding that it was an "illegal lottery" (Givling has since come into compliance with the Minnesota statute, according to state officials).

Is there real magic to Givling? Does its activity, on balance, help solve an agonizing problem that plagues indebted students? Or is the company simply a sophisticated multilevel-marketing scheme that relies on competitive urges that might otherwise be worked out in a casino?

We'll see what surfaces next. TINA didn't promise action in its article – the organization framed its report as a warning, rather than a referral – but if the accusations are true, it's easy to imagine that other state and federal authorities will be poking around soon.

Sit 'n Sleep Suit Hits the Sack

Plaintiff settles after court denies class certification

Reductio ad Asleepum

Here's a unique take on the free-offer class action:

Plaintiff Shirley Ambers went to Southern California mattress chain Sit 'n Sleep to purchase a king-sized mattress, drawn in by the company's advertising that offered the mattress for free if another company beat its price on the same mattress.

When she got home with her "Simmons Beautyrest Recharge Robin luxury firm pillow top" – that's a mouthful – she was surprised to find that while the sheets that came with the mattress fit snugly, another king-sized sheet set she purchased elsewhere fell off the mattress.

Ambers enlisted her husband to measure the mattress; he discovered that it was slightly smaller than the advertised size.

And then it hit her.

The Takeaway

Ambers believed that Sit 'n Sleep was engaging in some crafty false advertising. The company, she claimed, purposefully sold mattresses with nonstandard designs to render the "free" mattress offer null and void before the sale ever took place. Should a competitor undercut its prices, Sit 'n Sleep would be able to claim that any rival's lower price was describing a different mattress. In other words, to Ambers, it appeared there is no such thing as a "free" Sit 'n Sleep mattress.

Ambers launched a class action complaint in 2017, in which she also accused the company of falsely advertising the size of the mattress, a far more quotidian set of charges. But in either case, the suit went nowhere.

In January, the Los Angeles Superior Court denied class certification for the suit; early in September, the case settled, with the terms remaining private.

It's a shame; we would have loved to see how this particular argument played out.

FDA Schools JUUL

E-cig company runs afoul of two administration no-no

Feeling Sorry?

Poor JUUL.

JUUL is the e-cigarette company with the highest public profile, but its undeniable success has been leavened by almost constant scrutiny from public advocates and regulators alike.

The feds began regulating e-cigarettes as one tobacco product among many three years ago. Since then, JUUL's been on the radar of regulators and watchdog groups, despite some gestures it made to limit advertising.

There was a state attorney general investigation. And the FDA's public scientific workshop, which aimed tobacco cessation efforts straight at e-cigarette use. And the open letter from the Campaign for Tobacco-Free Kids and the American Cancer Society Cancer Action Network (among others) urging the administration to investigate the company.

And now, earlier this month, the FDA hit the company with not one, but two strongly worded letters (there must be a chief correspondent position at these big government agencies).

Can JUUL ever catch a break?

Curriculum

The first letter shakes its finger at the company for "marketing unauthorized modified risk tobacco products by engaging in labeling, advertising, and/or other activities directed to consumers." According to the letter, these activities included a school presentation where the company made claims that its products were "modified risk tobacco products" – products that claim to reduce the harm or risk of tobacco-related disease associated with conventional tobacco products. The FDA maintains that a JUUL spokesperson, presenting to children in a school, made statements to the effect that JUUL "was much safer than cigarettes" and that "FDA would approve it any day."

The FDA gave the company 15 days to straighten out the marketing.

The second letter expresses concern "about several issues raised in a recent Congressional hearing regarding JUUL's outreach and marketing practices, including those targeted at students, [Native American] tribes, health insurers and employers." Here, the administration is scrutinizing several marketing statements made by the company as part of its "make the switch" campaign, including that its products were "The alternative for adult smokers" that promised to "Improve the lives of the world's one billion adult smokers."

The Takeaway

The executive summary of the letters calls them "the latest development in the FDA's ongoing investigation related to JUUL." If you want to know what the rest of the investigation looks like, the administration is happy to brag on it.

"The agency previously requested documents from JUUL Labs in April 2018 to examine the reportedly high rates of youth use and the youth appeal of JUUL products," the summary claims. "The FDA has also conducted an unannounced inspection of JUUL's corporate headquarters" and "inspections of several of JUUL's contract manufacturing facilities to determine compliance with all applicable FDA laws and regulatory requirements."

There doesn't seem to be any letup. Which raises the question: How will JUUL adapt when its main selling point – the difference between conventional cigarettes and its own products – seems to be constantly blurred by regulators? Not to mention the FDA's planned ban on flavored e-cigarettes (at the president's urging), various state- and citywide measures to address recent deaths relating to vaping, and a recent ban on e-cigarette advertising announced by three large media companies ...

Will Class Action Charges Stick to Pan Manufacturer?

Plaintiffs claim that pots and pans boil down to defective

Law and Order: Saucepan Unit

Illinois resident Marshall Slutsky and his co-plaintiff from Pennsylvania, Glenn Greaves, are steaming over their alleged mistreatment at the hands of Tristar Products, a cookware manufacturer.

Both men purchased Tristar-branded products over the past two years, and both men expressed the same dissatisfaction: Despite the company's advertising and packaging claims that its Copper Chef Signature and Copper Chef Diamond cookware was stick-free, food was sticking to the pans "like glue" after only limited use.

Gross.

Moreover, the pair claim to have been disarmed by Tristar's "lifetime guarantee."

Slutsky and Greaves – with names like these, a cop buddy show seems inevitable – claim to have been taken in by Tristar's "ubiquitous" television and internet ads. They must have been good ads, too – the duo's class action complaint, filed in September 2019 in the Northern District of Illinois, claims that Tristar enjoys tens of millions of dollars in sales.

But, as in anything having to do with television advertisements, there's more.

The Takeaway

When Slutsky called Tristar customer service for support under his warranty, he was allegedly told that the cookware failed because he had neglected to season it properly. (For those who prefer takeout or have their personal chef cook for them, seasoning is a process where cookware is slathered with oil or lard and cured in an oven prior to its first use). According to the complaint, however, none of Tristar's advertising mentions the need for seasoning at all.

In addition, the plaintiffs allege that Tristar's 60-day return policy undershoots the typical period by which the cookware fails, rendering the policy meaningless. According to the complaint, consumers who call in for a refund are often pressured into receiving replacement products.

Slutsky and Greaves seek redress for violations of the Magnuson-Moss Warranty Act, breach of express and implied warranty, unjust enrichment, and various violations of Illinois and Pennsylvania state law.

We'll see how their action pans out.

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AB-1790 Seeks to Add Transparency to the Marketplace/Marketplace Seller Relationship

Seeking to increase transparency and, consequently, fairness in the marketplace/marketplace seller commercial relationship, the California State Senate approved AB-1790 Marketplaces: marketplace seller on Sept. 12, 2019. AB-1790 aims to achieve this transparency by imposing certain obligations on a marketplace. These obligations will in turn provide a marketplace seller with more insight into the terms and conditions of its commercial relationship with that marketplace. Learn more here.

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