FDA Cracks Down on Company's Facebook "Likes"

Social media has become a critical component of a company’s product marketing and promotion. However, based on FDA’s increased enforcement action around social media activity, it is a risk to be carefully considered.

The Food and Drug Administration (FDA) recently published a December 11, 2012 warning letter on its website that cited a dietary supplement company for its improper social media activity, among other things. Specifically, the warning letter explained that the supplement company’s “liking” of a consumer testimonial posted to its product Facebook page was a violative claim in that it established the product as a drug intended to cure, mitigate, treat, or prevent a disease. The FDA noted in its warning letter that the liking of the following March 10, 2011 Facebook post by the company constituted an impermissible disease claim:

“[Product]has done wonders for me. I take it intravenously 2x a week and it has helped me tremendously. It enabled me to keep cancer at bay without the use of chemo and radiation.”

The company has since removed this content from its Facebook page.

This is not the first time that FDA has scrutinized a company’s use of social media. In the past two years, over a dozen companies have been cited by FDA for making improper claims on the company or product Facebook page or Twitter account. However, this is the first time FDA has interpreted that a “like” implies endorsement of an unapproved claim.

There is some speculation that a crackdown on similar social media activities, such as “retweeting” a post on Twitter or “+1” on Google+, might be next on FDA’s agenda. In light of this regulatory risk, companies should ensure consider drafting formal social media policies and thoroughly vetting all social media marketing strategies to avoid enforcement action.

Denial of Insurance for Consumer Fraud/Lanham Act Claims: Blaming the Product, Not the Advertising?

UPDATE: For those interested in reviewing the Axis policy discussed in the motion, it can be linked here. 

I'm often asked in my practice about the availability of insurance coverage for claims by consumers or competitors that products are deceptively labeled, marketed or advertised. Those interested in the topic should follow the litigation between Welch Foods, Inc. and its insurers regarding coverage for the putative consumer fraud and the Lanham Act claims asserted against Welch’s over the marketing of its pomegranate-containing juice products.

No rulings have been issued as of yet. But one of Welch's insurers, AXIS Surplus Insurance Company, has taken the interesting position that the "Media Wrongful Act" coverage in its policy provides no coverage. According to Axis's Motion for Summary Judgment, "[i]n a covered Media Wrongful Act claim, the Loss arises from, and is actionable based on, the creation or dissemination of the advertising."

Axis argues that the underlying claims that Welch's marketing of its product created "confusion, deception and mistake in the pomegranate juice market" are not covered under the Media Wrongful Act coverage because "the POM Complaint does not allege that Welch’s liability results from a media liability — i.e., a harm created by the creation or dissemination of Welch’s advertising — but from a liability resulting from the sale of juice which does not live up to such advertising." Axis explains further that "if the product conformed to the standards set forth in the advertisements, the putative class would not have a claim against Welch’s."

How is Axis's reasoning not circular? Can't Welch's argue the reverse in an equally compelling way: That had the putative class or competition believed that the advertising conformed to the product, there would be no claims against Welch's?

Indeed, isn't the counter to Axis's "blame the product argument" more compelling because claims against the labeling of the product itself are subject to federal preemption, and, therefore, they could not be brought by the putative class or the competition? The putative class and competition can ONLY bring claims related to the advertising and marketing.

FTC Announces Intent to Issue Compulsory Process Orders Regarding Marketing of Food and Beverages

In a May 25, 2010, Federal Register Notice, the Federal Trade Commission (the “FTC”) announced its intention to issue compulsory process orders to 48 food and beverage manufacturers, distributors, marketers, and quick service restaurant companies. The proposed orders seek information concerning the companies’ marketing expenditures targeted toward children and adolescents, and nutritional information about the companies’ food and beverage products marketed to children and adolescents.

The proposed orders, issued under Section 6(b) of the Federal Trade Commission Act, 15 U.S.C. § 46(b), will seek information in six categories, including:

• The categories of foods marketed to children (ages 2-11 years) and adolescents (ages 12-17 years);

• The types of measured and unmeasured media techniques used to market food products
to children and adolescents;

• The amount spent to communicate marketing messages about food products to children and adolescents;

• The nature of the marketing activities used to market food products to children and adolescents;

• Marketing to children and adolescents of a specific gender, race, ethnicity, or income level; and

• Marketing policies, initiatives, or research in effect or undertaken relating to the marketing of food and beverage products to children and adolescents.

By procuring this information, the FTC will be able to evaluate the impact of self-regulatory efforts on the nutritional profiles of foods marketed to children and adolescents. In addition, the FTC seeks to determine and analyze how companies allocate their promotional activities and expenditures among various media and for different food products. Interested parties may submit comments on or before June 24, 2010.

This FTC action is a follow-up to its July 2008 report entitled, Marketing Food to Children and Adolescents: A Review of Industry Expenditures, Activities, and Self-Regulation. That report represented the findings of a 2006 FTC study of promotional activities related to food and food products targeted toward children and adolescents. It found that, while room for improvement existed, the food and beverage industries had made significant progress on this front since the FTC and the Department of Health and Human Services co-sponsored a Workshop on Marketing, Self-Regulation & Childhood Obesity in 2005. As everyone from the First Lady to the World Health Organization is focused on the impact of marketing on childhood obesity, the results of this FTC action will bear monitoring.

Difficult Week for the Food Industry (Good Week for the Plaintiffs' Bar): HVP Salmonella and FDA Warning Letters

The week of March 1 saw a double whammy hit food manufacturers.

I. Open Letter to Industry on Marketing Claims

First, on March 3, FDA sent warning letters to 16 food manufacturers concerning their labeling practices. FDA also issued an Open Letter to Industry warning against certain practices. For example, FDA warned that:

o Nutrient content claims that FDA has authorized for use on foods for adults are not permitted on foods for children under two. Such claims are highly inappropriate when they appear on food for infants and toddlers because it is well known that the nutritional needs of the very young are different than those of adults.
o Claims that a product is free of trans fats, which imply that the product is a better choice than products without the claim, can be misleading when a product is high in saturated fat, and especially so when the claim is not accompanied by the required statement referring consumers to the more complete information on the Nutrition Facts panel.
o Products that claim to treat or mitigate disease are considered to be drugs and must meet the regulatory requirements for drugs, including the requirement to prove that the product is safe and effective for its intended use.
o Misleading “healthy” claims continue to appear on foods that do not meet the long- and well-established definition for use of that term.
o Juice products that mislead consumers into believing they consist entirely of a single juice are still on the market. Despite numerous admonitions from FDA over the years, we continue to see juice blends being inaccurately labeled as single-juice products.

II. HVP Recall

A day later, on March 4, FDA announced a recall of hydrolyzed vegetable protein (HVP). As of noon on March 4, 56 products containing HVP have been recalled. Some have suggested that HVP is the "Next Peanut Butter.”

III. What Food Companies Can Do in the Wake of FDA's Warning Letters and HVP Recall

What do last week's FDA warning letters and HVP recall have in common? The answer is, of course, litigation and exposure of brand value.

The first thing any affected food seller should do is engage its crisis management team. While lawyers and public relations staff are critical in crisis response, management of the crisis should not be left solely in the hands of either. Decisions should be made holistically, examining legal, public relations, business, financial and public health implications.

As discussed previously in this blog, companies faced with putative class claims filed as a result of the FDA warning letters on labeling should develop strategies to challenge the merits of the claims and class certification at the earliest possible stage. The end game for the plaintiffs' class action law firms is to obtain class certification and use that "litigation blackmail" to enter into a settlement with a handsome payout of attorneys’ fees.

For those companies with products that include recalled HVP, the good news is that there are few, if any, reported illnesses. The bad news is that recalls are very expensive and, for some companies without recall coverage or sufficient resources, financially devastating. Many food manufacturers were driven out of business in 2009 after being overwhelmed with the expenses of recalling products that included ingredients manufactured by Peanut Corporation of America (PCA).

For those affected companies with recall coverage or financial means, proactive measures can pay dividends. For example, offering refunds to consumers mitigates against putative class claims. Setting up consumer hotlines and payment of medical expenses for persons with illnesses linked to recalled products mitigates against personal injury suits.

 

Hurdles Faced By Plaintiffs In Class Action Lawsuit for Sale and Marketing of Cold and Flu Medications Containing Vitamin C

By Guest Blogger Tyler Anderson

On November 2, we blogged about the FDA warning letter issued to Procter and Gamble for its unlawful marketing of Vicks cold and flu medications containing Vitamin C. On November 4, 2009, a putative class action lawsuit was filed against Procter and Gamble in the U.S. District Court for the Southern District of Ohio (Sixth Circuit) alleging Procter and Gamble violated federal and state consumer protection laws through false and misleading advertising practices regarding the two Vicks products mentioned in the FDA warning letter.

Regardless of the merits of their case, the plaintiffs in this action may have a hard time obtaining their desired relief. In Count 1 of the complaint, the plaintiffs allege Proctor and Gamble violated the consumer protection laws of 43 separate states. The Seventh Circuit’s holding in its Bridgestone/Firestone decision (J. Easterbrook) and its progeny, suggests that under FRCP 23(b)(3), such a class action is unmanageable. Courts point to the impracticability of one court applying the divergent laws of differing jurisdictions in circumstances such as those at bar.

“Plausibility” pleading standards (see recent discussion of Wright v. General Mills) present additional hurdles. Applying Twombly as the court did in the Wright case, to survive a motion to dismiss the plaintiffs would need to make plausible, non-conclusory allegations that the plaintiffs purchased the Vicks products because they contained Vitamin C and the cost of the product with the Vitamin C was greater than it would have been without. No such allegations exist here, so applying the holdings of Twombly and Wright to this claim indicates that it may be subject to dismissal.

“Reliance” may be yet another avenue to dismiss the action (at least in part). Many state consumer fraud statutes require reliance. This means that the plaintiffs would be required to show that each plaintiff in the action bought the product in reliance on the purported fraudulent statement. Because purchasing decisions are individual decisions, proving reliance on a class-wide basis would be an individual inquiry that would predominate over issues of fact common to the class, which would negate class treatment.

Marketing Missive: FDA Issues Warning Letter to Procter and Gamble for Unlawfully Marketing Cold and Flu Medications Containing Vitamin C

By Guest Blogger Tyler Anderson

On October 29, 2009, the FDA issued a warning letter to Procter and Gamble notifying the company that its “Vicks DayQuil Plus Vitamin C” and “Vicks NyQuil Plus Vitamin C” are illegally marketed combinations of drug ingredients and a dietary ingredient. Both of the over-the-counter (OTC) medicines, which contain Vitamin C in addition to several drug ingredients, are marketed as treatments for cold and flu symptoms. The FDA issued the warning letter (1) to clarify that these single dosage form combinations of drug ingredients and dietary ingredients cannot legally be marketed because they have not been proven safe and effective, and (2) because the agency has previously determined that there is not sufficient data to show that Vitamin C is safe and effective in preventing or treating the common cold.

Under its OTC monograph system, the FDA allows some OTC drugs to be marketed without agency approval. The FDA found the two Vicks products did not comply with the applicable FDA monograph, and therefore the products must first be evaluated and approved under the agency’s new drug approval process before they can be legally marketed.