Wednesday, April 23, 2014

eCigarette advertising: past is prologue

Smithsonian National Museum of American History

Dr. Robert Jackler, “Freedom to Vape”: Unregulated Exuberance in Electronic Cigarette Advertising (Dr. Jackler is talking to FDA and to Congress about the same issues on his trip to the East Coast)

Note: I’m just going to stuff Dr. Jackler’s images into this post until Blogger rebels, because they are amazing.

Study of advertising looked at outrageous ads (doctors recommending) as well as tobacco ads targeting women and African-Americans; Ebony has 3-4 tobacco ads/month and no antismoking/ “talk to your kids” content.

Vape ads faithfully reproduce all the excesses of the past century—seem to have been using historical ads to inform their own claims.  Stanford Research into the Impact of Tobacco Advertising: many high-resolution scans online.  Themes and subthemes, all annotated with metadata and theme descriptors; fully searchable. Stanford’s collection, shared with Smithsonian’s collection, is over 20,000 original ads. Also an antismoking ad compendium, largely far less sophisticated—someone in a county is given a budget with no idea what to do.  Also have comparisons: then and now.  Many videos, including many from 40s-60s that were broadcast.  Also videos done in 2014 for electronic cigarettes. 

E-cigarettes becoming very prominent: 2x on front page of NYT in last few weeks. (Also a new store just opened near my home, so I’m quite interested.)  Almost all e-cigarette ads are online. Invented in 2004 in China; entered American market in 2007.  Varieties: look like cigarettes, Vape PENS (often used for marijuana), and e-hookahs; e-cigars and ePipes. Even inhalers (look like asthma inhalers) have been repurposed—for social acceptability?

Two forms: emulate cigarettes and distinctive design in some way. Some disposable w/fixed battery, and some rechargeable. They come as systems; can even get a USB charger to charge one from your smartphone.  Battery; atomizer; cartridge filled with vapor.  Suck on it = lights up and produces a mist.  E-liquid/e-juice.  Unlike tobacco, the vapor is much more extensive.  In Mad Men, when they smoke, it’s not tobacco but clove—but that big plume is part of the glamor of smoking of that time.  Ads tout the thickness of the vapor.

How bad is this stuff?  Much less cancer causing bad stuff than combustible tobacco. 

Marketplace is a gold rush. Over 250 brands, many startups, in US alone. Lorillard just bought a couple.  Altria/Philip Morris is buying them up; RJ Reynolds too.  Selling both ends of the market: owning both the problem and the solution.

Where made? China. Handful of Chinese mfgrs.  Look at boxes: different brands, same boxes with different printing.  You can have your own e-cigarette company by buying off the shelf.

¾ of adults who use are committed tobacco smokers who aspire to quit. Unlike patches and gums, e-cigarettes have advantage of recapitulating social glamor of smoking; sucking, primordial human urge.  Smoking is also a social identity, given the ostracization.  E-cigarettes allow you to participate in that social identity.

Teens are very different. Teens aren’t motivated by desire to quit.  Many haven’t chosen to smoke conventional tobacco at all. Expressing individuality by conforming to “coolness.”  Percentage of teens smoking doubled in a year. Many are “tobacco na├»ve.”  Smoking is only started by young people, not by adults.  If you get them started with nicotine addiction at an early age, you have them.

Museum ads: themes of freedom.  E-cigarette ads use freedom to show: freedom to break the rules, to smoke anywhere, freedom from stigma, etc. Ad shows woman giving smoking ban the finger.  “Inhale the freedom.”  “Liberty Vapor.” “Smoke Revolt.” “Take back your freedom.” Compare classic Philip Morris ad: “Freedom from throat irritation.”

“Welcome Back.”  Shows diner: welcome back to being allowed to be in a restaurant; welcome back to the glamor of the 60s; welcome back to the Greensboro diner, where the sit-ins were—an image that appears in every history textbook.  Discontinuity of nicotine in bloodstream from bans on airplanes and restaurants and work—that helps people quit.  Risk with e-cigarettes: people dual-use and keep nicotine levels high.

“Rewrite the Rules.”  Woman fueling up at gas station (with retro car). Though e-cigarettes do explode; they have lithium ion batteries in them.

Now we are seeing more explicit health claims—lots of images of doctors; image of caduceus to connote health. “eHealth Cigarette.”  (Also claim “Marlboro flavor.)  Label says “Smoking is bad for your health. e-cigarette is good for your health.”) Safer is likely true; safe is likely untrue.  “I plan to be a grandfather; therefore I smoke e-cigarettes.”  Compare historical claims for specific tobacco brands promoting health.  Claims that esmoking is the smart/logical choice.  “Pure”—compare purity claims in historical ads.  “True Cigarettes” were supposedly safer; now you have “Tru e-cigarettes.”  “Lung Buddy.” “Breathe Freely.”

What’s changed is that online you don’t only have ads; you have blogs, forums, Twitter.  Website: “Women and COPD: Reducing the Risk”—looks scientific.  “No smokers cough”—like old tobacco promises. 6 different e-cigarette companies put out breast cancer-themed e-cigarettes.   ProSmoke uses American Cancer Society logo and donation promise to advertise.  (Hmm…wonder what TM counsel thinks about that.)

Health claims: “Vitamin Smokes.”  “iSlim,” “NutriCigs” to make you slim.  “Inhale Flavors. Curb Cravings. Lose Weight.”  This is “Reach for a Lucky instead of a sweet” revisited.

Energy claims: similar to energy drinks.  “Energy Surge.”

Targeting teens: They claim not to target teens.  They have sham age certifications—you click and go in.  The ads have 20-something models doing things that 15 year olds could do. Very youth-oriented. Cartoons are forbidden to tobacco under master agreement, but e-cigarettes use them.  Then they blog about parents secretly buying teens e-cigarettes.  Sampling is illegal for tobacco, but they’re doing it.  Online games that result in coupons for e-cigarettes.

Cheapness as lure: youth are notably price sensitive.  “Student discount” for cigarettes.

Sex sells: XXX e-cigarettes.  Sex Stimulant, Tiger E cigarette.  Party with Playmates at Playboy’s Top Party Schools—2 Playmates hand out e-cigarettes; Playboy even has its own brand. Subliminal sex signals too.

Teen flavors: primary way of attracting teens is sweetness, which was also true in tobacco; 2009 FDA banned tobacco flavors, but flavored mini-cigars escaped the FDA ban.  Vapor companies produce flavors like bubble gum, gummi bears, candy corn, cotton candy, peppermint patty, honey, chocolate, caramel, banana split, Fruit Loops, Lucky’s Charms; Trix (again, TM counsel pay attention); cakes, colas, coffees; alcohol flavors—beer, champagne, amaretto, gin & tonic; pepperoni pizza; popcorn; kosher; bacon.  If you want to create your own, you can buy an e-liquid kit online and mix your own.  Dangerous! 

Teens crave social acceptability, and one of the ways they advertise is the avoidance of trash, yellowed teeth, stinky hair/clothes. You can vape around your loved ones. “Save humanity. Start vaping.”

Second hand vapor does contain nicotine, but not combustion products of leaf. Probably considerably safer than secondhand smoke.  Many ads show people in love smoking. Touted as good Mother’s Day gifts (as tobacco historically was).  Ads show smoking in groups; organized meetups for people who smoke the same brand; sponsor festivals.  Social media: Your Blu cigarette pack can be turned on so that it identifies nearby Blu smokers, stores, or other relevant locations. “Friends don’t let friends smoke.”  Indeed, if he knew a smoker he’d want them to switch; he’s not saying that vaping is bad but that the combination of nicotine, flavor (and marketing) is bad.  Bringing back the era of glamorous smoking.

Even mking them as luxury items—Louis Vuitton e-cigarettes (query whether authorized); one Russian oligarch ordered one covered in diamonds. Women’s brands; started to segment women, though not African Americans yet—recapitulation of history of tobacco. Dozens of pink e-cigarettes. 

Celebrity endorsements—Courtney Love. (Wow, that’s quite an ad.) Jenny McCarthy (hates vaccines, loves e-cigarettes).  Steven Dorff (actor who has emphysema).   E-cigarettes are at Oscars in the grab bags, and advertise heavily around that. Golden Globes—Julia Louis-Dreyfuss smoked on camera. Websites show celebrity vapers like Jack Nicholson (and they photoshop John Lennon and Marilyn Monroe in).  (Intermediate conclusion: these small players don’t actually care about any advertising rules.)

Nicotine fix: advertised as giving big dose. Deaths in children from toxic liquid. Doses even in small bottle will kill a kid. Industry is trying to normalize nicotine addiction, as with caffeine.  Some brands even have “no nicotine” e-cigs.

What of the argument that it helps you quit? That’s not a good business model.  Look at data: most-cited study is that an adult smoker with counseling has 5.8% chance of quitting on patches, 7.3% chance on e-cigarettes. Another recent study showed no assistance of e-cigarettes.  If marketed as cessation aid, FDA can regulate as drug—so they say something like “smoking alternative,” or “kiss tobacco goodbye” or “it works” (without saying works for what).  Deniability.  FDA needs consumer perception studies because tobacco industry has cleverest people money can buy; banning some words aren’t enough.  “Why quit? Switch to Blu” as reverse psychology: consumers perceive as “quit” message.

Consumer testimonials include disallowed claims, and companies post those on their websites and try to disclaim responsibility. (Again, these people just don’t care to conform their conduct to the law.)

Additive free, organic, and natural in tobacco—same gimmick in e-cigarettes.  Young people also like tech, and they emphasize the technological aspects. Apps track your vape consumption and plot your “life expectancy increase” v. tobacco.

Also of course used heavily for cannabis. You can get cannabis flavored e-cigarettes.

Sponsorships: forbidden to tobacco, now coming to e-cigarettes. Big investment in car racing; showed an Olympic ad that I can’t imagine was authorized.

NJOY ran a Super Bowl ad; but most ads are on websites and elsewhere online.  Blogs, wikis, chats—claims that FDA would regulate as drug claims made on social media.  Many “independent” sites are highly laudatory of particular brands—he suspects that they are actually marketing arms.  There are road shows with free samples; discounts; contasts with iPad giveaways; stores all over America.  Sophisticated point of sale displays, not required to be behind the counter like tobacco.  Vapor bars: you can fill your cigarette at the bar.  Estimated 250,000 retail outlets like 7-11s are markets for e-cigarettes, and the business trajectory is sharply upward. Prediction that they may overtake tobacco cigarettes in 10 years.

Business model is like printer cartridges: they want you to buy the liquid, and they want to stop you from buying from other makers. 

Right now FDA is in a process called “deeming.”  Land rush for market share. But when they deem it to be a tobacco product, e-cigarettes will have the same regulation, which will take away flavoring, health claims, cessation claims, medicinal roles, celebrity endorsements, and sponsorships; will leave channels intact (except TV & radio that they don’t use anyway).  Backdoor online channels are a challenge.  (Is the FTC talking to the FDA about this? The endorsement guidelines would seem very relevant.)

Jurisdictional issues: nicotine free e-cigarettes; nicotine can be extracted from tomatoes, though that’s not economical now—if becomes possible, then it will escape FDA authority. Local ordinances are everywhere.

Unless youth adoption can be stemmed, public health gain will be offset by youth initiation and dual-use smoking where vaping is used to support tobacco.

His end game strategy: replace combustible tobacco with vapor.  He supports e-cigarettes, but not the Wild West.  E-cigarettes could be used to provide glamor/social benefits.  If they have no nicotine: low tax, flavors allowed; youth drawn to it. Nicotine: high tax, flavors forbidden, for experienced smokers.

Q (from RT): is FDA talking to FTC?  FTC has useful guidelines for the online advertising with which you are so justly concerned, especially the undisclosed advertising.

A: there’s inertia there.  Big players want regulation—that will put all the riffraff out of business; want expensive burdens for testing/purity to get rid of the competition.  That’s their endgame.  His hope is they’ll have deeming, but what we’ve learned from history of ad regulation is that they figure a way around any regulation.  In Europe etc. they can be much more effective, but the First Amendment restrictions (that killed graphic warnings on packs) is a barrier here.

Q: what of the impact on throat and mouth cancer?

A: seems unlikely to be as bad as combustible tobacco, given the carcinogens in the partially burnt hydrocarbons in combustible tobacco. We’re seeing a big explosion in cancer from HPV, but we hope vaccinations of young women—and men—will produce herd immunity.

Q: what are the materials—plastic?  Leaching?

A: Some of the stuff, they’ve detected cadmium/nickel in; not much known about the polymers. Stuff is being deeply inhaled in the lungs that you wouldn’t normally inhale, and especially extended use is an unknown.  A few reports of pneumonia, reactive airway disease. The additives are also an issue. Not meant to be in the lungs! Your nose is usually a filter.  We should see what’s growing in these liquids—the compounders are not necessarily trustworthy.  But it’s here to stay, and probably will replace combustible tobacco.

Q: what is the vapor?

A: People are starting to study. Mostly water/propylene glycol, which is well known.  Really key thing: right now, smoking is declasse; it’s a deprecated social signal and was growing over time. That’s changing—reglamorizes/renormalizes smoking. He is a realist about this.  Genie won’t go back in bottle.

Tuesday, April 22, 2014

A bit more on Pom

I wonder whether this was the first Supreme Court brief featuring a color picture?  Also, I should probably add a tag for Pom, same as I have for Google.  Feels a bit like giving in, though.

Anyway: Transcript of oral argument, for those who prefer not to read secondhand postmortems.

Supreme Court post-argument discussion at AU's Washington College of Law: Pom Wonderful v. Coca-Cola (webcast available)

Moderated by Prof. Christine Farley, American University Washington College of Law

Rebecca Tushnet, Professor, Georgetown Law School

How we got here: excellent work on the cert petition by Pom, because while it was hard to call what was going on in the lower courts a split, it was certainly an unholy mess.

Brian Boynton, Partner, Wilmer Hale (Pom Wonderful)

“Pomegranate Blueberry” with “flavored blend of five juices” is the product; 99.4% apple and grape juice, only .3/.2% pomegranate and blueberry. Pom thought it was losing business from this and sued.  Coca Cola internally acknowledged that the product posed a risk from a misleadingness perspective but accepted the risk.

DCt dismissed on the ground that the FDA juice regulations precluded this claim. Wasn’t clear what the 9th Circuit’s rationale was; we thought there was a tangible split and the US agreed there was tension.

Farley: Coca-Cola’s argument?

RT: Disclaimer that while I am not always on Pom’s side I think it had the better argument here. That said, Coke relied on the detailed nature of FDA regulations and need for national uniformity; problem is that sounds like field preemption, which isn’t part of the FDCA.

Samuel Gedge, Associate, Wiley Rein LLP (Chamber of Commerce)

Need for national uniformity is an interest of the Chamber.

Boynton: noted US brief—Pom shouldn’t be able to challenge the full name “Pomegranate Blueberry Flavored Blend of 5 Juices” since that choice was specifically authorized, but should be able to challenge other aspects of label including how that name is presented (large typeface for PB, small for everything else) as well as coloring of juice to be darker.

Farley: any other avenues for challenge?

Boynton: Cal. UCL claim; FDA does not provide administrative route for challenges of this sort.

Farley: what’s preempted?

RT: nonidentical state laws—you can’t enforce the FDCA but you can enforce state laws identical to those of the FDCA. 

Farley: Congress thought hard about this, it seems, but didn’t say anything about the Lanham Act.  What about a nonidentical Lanham Act claim: is it in limbo? Pom says no preclusion; Coke says yes.

Boynton: preemption provision mentions only state law.

Farley: the argument is that Congress intended to preempt this kind of claim; broad preemption (preclusion) is desirable.

Gedge: national uniformity is a significant concern of Congress and has been for a while. If a consumer can’t bring a state law claim that they were misled, why should a competitor be able to bring a derivative claim?

Farley: what is the worst case scenario?  That Pom wins and the labeling is enjoined?  What’s disruptive of uniformity?

Gedge: we aren’t dealing with just one jury.  Juries across the nation can come to drastically different conclusions. Juries don’t say what the label should be, just that the Lanham Act was violated. Same need for uniformity/certainty.

RT: not exactly; Lanham Act is a uniform federal law. Juries enforce FDCA too in various circuits. There’s no uniform single jury for FDCA claims.  Moreover, the fact that the jury doesn’t say what the label should be is a reason this isn’t a uniformity/preclusion problem; the jury just says a particular version is or isn’t misleading, which is a burden borne by all manufacturers.  The FDA regulations do not specify what juices must be named, the way they specify how fat content must be disclosed on the nutrition panel.

Farley: what about that email from Coke suggesting the risk of misleadingness and going with regulatory compliance?  What is Coke saying its compliance is?

Boynton: we don’t know yet, but we think that it’s compliance with the very specific regulation about what names for blended juices are offlimits as misbranding. Not as specific with respect to other aspects of the label, such as the fruit vignette.

Gedge: there are different levels of specificity with regard to different parts. The requirement for usual/common name is more specific than the relative type sizes.  US government’s position tried to split the baby—specific enough = precluded. Court didn’t seem particularly persuaded.  But regardless of whether there are FDCA juries, but Congress had that information before it and nonetheless implemented preemption, because other regimes would cause damage. 

Farley: why not mention Lanham Act?

Gedge: never been a requirement for Congress to scour federal statutes for conflicts; courts should reconcile competing regimes.

Farley: any difference between federal and state claims?

Gedge: Same concerns were juries under different standards, making determinations that Congress vested in the FDA. Presumption against preemption at state level, not applicable here. Separation of powers: courts determining which statutes to give effect to. In the end, there’s tension that needs to be reconciled.

Farley: turn to the oral argument.

Boynton: Pom got to make the arguments it wanted to make, as did Coca-Cola.  All the issues were hashed out.

Gedge: Kennedy was open about the fact that the container misled him.  Court seemed to be taking a view that Coke was advocating field preemption, and that’s understandable because there was confusion about what the 9th Circuit actually held. We aren’t saying everything is off limits, just that there should be mirror of state preemption.

RT: I couldn’t distinguish Coke’s position from the 9th Circuit’s.  Mini field preemption? But you can comply with both.

Boynton: if we took Coke’s position that the existence of a state preemption provision automatically created a federal preclusion provision, we’d have a very different world. Congress carefully considered which laws to displace, and only displaced (certain) state law. No reason to think it was an oversight. Hearing testimony included availablility of Lanham Act claims against misleading food labels.

Farley: difference of opinion about Congress’s intent.

We’ve seen Lanham Act claims supplementing other types of claims—patent, copyright. Limits of the Lanham Act.

RT: Many thoughts about this!

(1)   Amicus participation: INTA and AIPLA despite the absence of any TM interest—the other half of the Lanham Act has arrived!

(2)   Role of Dastar—nice argument by Coke about how SCt interpreted Lanham Act restrictively in Dastar in order to preserve the scope of the Copyright Act.  I think it’s a bigger stretch here: “origin means physical origin” is easier than “false or misleading means false or misleading unless heavily regulated by the FDA.” But still worth thinking about.

(3)   Court’s skepticism about FDA’s capacity to understand what consumers are thinking—Justice Kennedy was very clear that he didn’t trust the FDA to figure out what’s deceptive—helps Pom in this case, but has bad implications for FDA authority when its regulations are challenged on First Amendment grounds.

(4)   Limiting the Lanham Act only when consumers are deceived by non-IP issues seems like a bad limit.

Farley: how does the FDA know what’s misleading?

RT: historically anecdotal evidence/reasoning sufficed, though this may be changing as the evidentiary burden on adminstrative agencies increases.

Gedge: Even if the FDA didn’t have resources, vesting private actors as roving AGs isn’t necessarily the solution.  FDA is competent, and hears from stakeholders on all sides.

Farley: can’t Lanham Act cases provide really specific evidence that’s useful?

Boynton: FDA’s limited resources were discussed in the briefing.

RT: in defense of the other side: surveys suck and cases can be brought for anticompetitive reasons.  One way to look at this: Pom sold a very expensive juice that was more expensive because of health claims that the FTC has found to be misleading.  It’s not clear how customers are harmed by drinking apple juice instead.  (I think the harm is to their autonomy and that ought to be enough, but I recognize the issue.)

Farley: read the tea leaves.

Gedge: Kennedy seemed convinced of misleadingness.  Arguments on both sides.  Don’t let competitors cloak themselves in consumer’s mantle but not let consumers sue.

Farley: of course that’s what TM does.

RT: The Court likes corporations a lot better than consumers!  Pom seemed to have a pretty good day.  No one was obviously on Coca Cola’s side.

Farley: we rely a lot on private actions to check misleadingness—TM is about private regulation of the markets.  Is the best case superregulation by an all encompassing agency?

Boynton: express preemption provision here excludes the provision of the FDCA that makes misleading claims actionable, so misleadingness claims should be allowed anyway (I don’t think this is true).

Gedge: Coca-Cola’s position is that this blanket ban is just a summary/statement of comprehensiveness, not an independent authorization of state misleadingness claims.

Q: will customers’ sophistication grow over time?

Boynton: that will be picked up in surveys.  There was some discussion today about whether a discerning consumer understood what “flavored” meant in terms of small amount of juice.

RT: No, it won’t.  We’re cognitive misers; we will always have gaps in our ability to process information. We will be sophisticated about some things and not others.  Even if the market were static there’d still be predictable gaps in our information processing.

Q: posted calorie content in NYC restaurants. 

RT: doesn’t work that well; if it works, would decrease other information, which is certainly a valid policy choice but it can’t make our brains take in more information. Regulation usually changes the behavior of retailers/manufacturers more than understanding of consumers.

Q: how much is this case about authenticity?

Boynton: Pom’s view is that you should provide consumers accurate information and then they can decide.

Gedge: fundamental disagreement between parties about what consumers want to know; FDA considered that in the rulemaking. Pom says people are buying juice for pom’s benefits; Coca Cola says people buy it for the taste, so we can provide them the same with that label.

Boynton: if you took the same label and simply disclosed .3% pom and .2% blueberry, Coca Cola could still convey its view that it has the same flavor.  Don’t have to deceive someone.

Gedge: trenches on trade secrets.

Q: if Coca Cola wins, would that effectively be a limit on the scope of the Lanham Act? Would it continue to other regulatory bodies?

Boynton: we say yes.  Nothing that stops this rationale at juice labeling.  Some lower courts have extended it beyond FDA to USDA regulated cosmetics.  FTC regulation could have preclusive effect.

Gedge: depends on what argument the Court decides on.  Anchor would be express preemption clause.

RT: many statutes do have them: FIFRA, USDA’s organic regulations, etc.

Q: taste is so subjective—is there a way to prove it’s pomegranate flavored?

Boynton: no record in this case.  We don’t think it’s likely that .3% could provide the flavor; in the gov’ts view this should get litigated.

RT: Your brain will fool you: pink ice cream flavored vanilla will be judged to taste like strawberries, so it’s hard to figure out what the appropriate testing would be to judge what the flavor is.

Farley: what should this product be called?

Gedge: its current name.

Boynton: many alternatives: could call it Pom-Blueberry Flavored Apple & Grape Juice, or Apple & Grape Juice w/Pom-Blueberry Flavor, or disclose percentages.

Reading list: consumer protection

Reading list: Dee Pridgen, Wrecking Ball Disguised as Law Reform: ALEC's Model Act on Private Enforcement of Consumer Protection Statutes, 39 New York University Review of Law & Social Change (2015). Abstract:

The consumer protection statutes of every state are currently under attack by a proposed model law that would effectively eliminate the critical private enforcement provisions that give these laws their power.  The American Legislative Exchange Council (ALEC) has produced a purported law reform vehicle that is actually a wrecking ball to destroy one of the building blocks of consumer protection, namely the private enforcement of state unfair and deceptive practices acts. It does this by systematically weakening each and every provision of these laws, such as lower burdens of proof, special damages, and attorney’s fees, that were designed to provide consumers with access to justice for small economic wrongs. This article examines the history and goals of the state consumer protection statutes, with their private enforcement mechanisms, and then demonstrates how the ALEC model act would undermine these goals. The article also critically examines certain research studies that claim to demonstrate abuses of the current laws.  The article concludes that while the statutes in question could perhaps benefit from some limited reforms, the ALEC proposal is an ill-conceived attempt to effectively repeal the private enforcement of state consumer protection statutes.

I'm interviewed about Aereo

In which I give my take on Aereo, albeit briefly and for a general audience. My pet theory is that the best way for the Court to rule for the broadcasters without screwing too much up would be to distinguish between avoidance of the cable retransmission rules and evasion, like the distinction between tax avoidance and tax evasion.  I doubt that will happen, though.

Monday, April 21, 2014

Pom Wonderful post-argument

I'll be speaking at this AU Washington College of Law event, which will be webcast (follow the link).

  • Brian Boynton, Partner, Wilmer Hale
  • Rebecca Tushnet, Professor, Georgetown Law School
  • Samuel Gedge, Associate, Wiley Rein LLP
Moderated by Prof. Christine Farley, American University Washington College of Law
Slight spoilers: after I read the briefs, I worried that this had become too unholy a mess; the deep dive into the intricacies of FDA regulations seemed counterproductive to Pom's theory of the case.  After the oral argument, it seems at least probable that Pom will prevail on a fairly straightforward theory that the FDA regulations provide a floor and not a ceiling.  No Justice was obviously sympathetic to Coca-Cola, though Pom also faced some tough questions.
I remain puzzled by Coca-Cola's theory that, because there's an explicit preemption provision preempting non-identical state laws, Lanham Act claims must also be precluded.  I was gratified that the Justices who spoke seemed equally puzzled.

Thursday, April 17, 2014

Adam Levitin responds to General Mills

By permitting, allowing, or suffering me to purchase any of your products or services, whether directly from you or indirectly through dealers, vendors, agents, or other third-parties, you agree to irrevocably surrender all rights to compel me to arbitration or to waive my rights to proceed against you as a member of a class action.  In order to make this provision effective and allow effective vindication of my rights, you also agree to irrevocably surrender all rights to compel arbitration and to prevent class actions against all other purchasers of your products and services.  You also agree to cover all of my costs associated with bringing an action, including attorneys' fees and any damages awarded against me, irrespective of the outcome of the action. 
As he says, let the battle of the forms begin.

A couple of Google v. Garcia amicus briefs

Int’l Documentary Ass’n brief, now with actual evidence on standard contracts! Makes a nice pair with Netflix’s brief, which cogently criticizes Kozinski’s entirely typical reliance on “facts” not in the record about what standard entertainment contracts are like.

ordinary consumer goods jump on the lawsuit waiver bandwagon

We all knew it was only a matter of time.  Apparently not sure that merely buying a product with a lawsuit waiver on the wrapper would work, GM now seeks to bind consumers who visit its website or "like" its page.  Speaking of "unfairness," FTC ... I would hope the FTC will act on this. In the meantime, there's Adam Levitin's response.

Wednesday, April 16, 2014

The ASA on insufficiently close comparisons

The ASA found's ad misleading for claiming "FURNITURE DIRECT FROM THE MAKERS By the time the average sofa hits the high street it's been marked up by 500%. Agents, importers and wholesalers all add a little extra along the way. Our unique and award-winning concept cuts out the middle steps and passes the savings on to you." Though the ad explicitly stated the that the typical high street price was "based on closest equivalent products in design and functionality," that wasn't enough. Most consumers would understand that the "high street" prices were for equivalent, not identical, products, but consumers would expect the high street items to be "of a similar quality, in terms of finish, and the materials used, not just design." Since they weren't, the ad was misleading.

US advertisers don't always know how good they have it.

Tuesday, April 15, 2014

FDA has a standard, so no Lanham Act claim can be made

OraLabs, Inc. v. Kind Group LLC, 2014 WL 1395954, No. 13–cv–00170 (D. Colo. Apr. 10, 2014)

The court adopted the magistrate judge's recommendation to deny Kind leave to amend its counterclaims to add a Lanham Act false advertising claim. OraLabs filed a declaratory judgment seeking a ruling that it wasn't infringing Kind's design patent and trade dress rights by selling certain lip balm products. Now that OraLabs has begun selling a particular product, Lip Revo, in the US, Kind alleged that the labeling was false and misleading: while OraLabs advertised a net weight of 7 grams, Kind's test showed actual useable weight of less than 6 grams.

The magistrate found that amendment would be futile because the claim was preempted (precluded) by the FDCA. "When the Lanham Act and the FDCA overlap, any conduct that amounts to a violation of the FDCA is within the Food and Drug Administration’s jurisdiction." (Noting cert. grant in Pom which may change this a bit.) In particular, claims that require interpretation and application of the FDCA can't be recognized under the Lanham Act. Here, the FDCA requires that a product's net weight must be accurately disclosed on the label. Thus, determining whether the 7g representation was false or misleading required interpreting "accurately" in the FDCA. (The "thus" is where all the action is, and it's underanalyzed. Aren't there independent standards for figuring out whether 7g is false or misleading?) To figure out whether the representation was accurate enough, the court would need to know how "accurate" the FDA expects net weight statements to be.

Absolute literalism shouldn't be required; otherwise rounding to the nearest gram would violate the law. If the FDA requires accuracy within one tenth of a gram, the alleged difference could be false and misleading. But if the FDA requires only 1 1/2 grams, 1 gram of difference would be fine. Thus, resolving Kind's claim would require interpretation and application of the FDA’s definition of "accuracy." (Again, I don't see it. Application and interpretation aren't the same thing; if the FDA's rule were really this clear, resolving this particular issue should require no interpretation at all and thus no interference with the FDA's role, any more than a blatantly false claim of FDA approval when a product is in fact unapproved requires interpretation.) Because this was an attempt to enforce the FDCA's net quantity accuracy requirement, it was preempted (precluded).

Kind argued that its false advertising claim wouldn't require interpreting the FDCA, and that it could use surveys or other evidence. While surveys might aid in determining whether consumers "actually felt misled when purchasing 6g of Lip Revo while expecting 7g." ("Felt"? How about "were"?) But that didn't matter where a claim required direct interpretation and application of the FDCA. Thus, adding this claim would be futile.

conflict mineral disclosure unconstitutional, DC Circuit rules

National Association of Manufacturers v. Securities and Exchange Commission, No. 13-5252 (D.C. Cir. Apr. 14, 2014)

If we needed an example of how the First Amendment can reinstate Lochner, this would be a good one.  Here we have a regulation, whose merits are debatable, which easily survives APA challenges because Congress is allowed to make rules even if the rules are dumb and the SEC just did what Congress told it to do.  But then a substantial chunk of it founders because the output of the regulation is a disclosure.  Argh.
In response to horrific human rights violations in the Congo, where war is financed by selling several minerals, Congress enacted a law requiring the SEC to issue regulations requiring firms using “conflict minerals” to investigate and disclose the origin of those minerals.  The required annual report to the SEC needs to disclose whether conflict minerals originated in the Congo or an adjoining country, describe the due diligence measures taken to establish the source and chain of custody of conflict minerals, and list  “the products manufactured or contracted to be manufactured that are not DRC conflict free.” A product is “DRC conflict free” if its necessary conflict minerals did not “directly or indirectly finance or benefit armed groups” in the covered countries.   There’s no exception for de minimis uses, or for issuers who only contract for the manufacture of products made with conflict minerals.
The SEC estimated that the rule would be expensive--$3-4 billion to begin with, then roughly $200-600 million annually thereafter.  It was unable to quantify the benefits of reduced violence in the Congo, because it couldn’t assess how effective the rule would be. Instead, the SEC relied on Congress’s judgment that supply-chain transparency would promote peace and stability by reducing the flow of money to armed groups, a judgment that undergirded the SEC’s discretionary choices in favor of greater transparency.
The court rejected the APA-based claims.  E.g., the SEC had the authority to create an exception for de minimis uses of conflict minerals, but given that Congress knew that conflict minerals are often used in very small quantities, the SEC was not arbitrary and capricious in determining that such an exception would conflict with Congress’s purpose.
The plaintiffs alleged that the SEC failed adequately to analyze the benefits of the final rule by failing to determine whether the rule would achieve its intended purpose.  But the plaintiffs were objecting to Congress’s purpose, not to the SEC’s process:
[W]e find it difficult to see what the Commission could have done better. The Commission determined that Congress intended the rule to achieve “compelling social benefits,” but it was “unable to readily quantify” those benefits because it lacked data about the rule’s effects.
That determination was reasonable. An agency is not required “to measure the immeasurable,” and need not conduct a “rigorous, quantitative economic analysis” unless the statute explicitly directs it to do so. . Here, the rule’s benefits would occur half-a-world away in the midst of an opaque conflict about which little reliable information exists, and concern a subject about which the Commission has no particular expertise. Even if one could estimate how many lives are saved or rapes prevented as a direct result of the final rule, doing so would be pointless because the costs of the rule—measured in dollars—would create an apples-to-bricks comparison.
Congress told the SEC to make a rule despite the lack of data.  The SEC could rely on Congress’s determination that the costs were necessary and appropriate in light of the goals. “Congress did conclude, as a general matter, that transparency and disclosure would benefit the Congo. the Commission invoked that general principle to justify each of its discretionary  choices. What the Commission did not do, despite many comments suggesting it, was question the basic premise that a disclosure regime would help promote peace and stability in the Congo.” The SEC was not supposed to second-guess Congress on this point; if it had found that disclosure wouldn’t work, it couldn’t have adopted any rule, and that would’ve been contrary to Congress’s explicit direction.
But wait!  There’s also a First Amendment claim based on the requirement that an issuer must describe certain products as not “DRC conflict free” in the report it files with the SEC and on its website.  The majority agreed that this was unconstitutionally compelled speech under Central Hudson.  (The plaintiff didn't challenge other disclosures required by the regulation.  What result if it did?)
The SEC argued that rational basis review was appropriate because the disclosure involved purely factual non-ideological information.  But Zauderer is limited to cases in which disclosure requirements are reasonably related to the prevention of deception, and this requirement isn’t.  (But see Am. Meat Inst. v. USDA, No. 13-5281, 2014 WL 1257959, at *4-7 (D.C. Cir. Mar. 28, 2014), vacated and en banc rehearing ordered, Order, No. 13-5281 (D.C. Cir. Apr. 4, 2014) (en banc).)
The factual nature of the disclosure is insufficient because speakers also have a right to avoid disclosing facts they don’t want to. Also, it was “far from clear” that “conflict free” was factual and non-ideological, since “[p]roducts and minerals do not fight conflicts.”  “Conflict free” was a “metaphor” that “conveys moral responsibility for the Congo war. It requires an issuer to tell consumers that its products are ethically tainted, even if they only indirectly finance armed groups.”   Issuers might disagree with that assessment of their moral responsibility, and convey that disagreement through silence.  “By compelling an issuer to confess blood on its hands, the statute interferes with that exercise of the freedom of speech under the First Amendment.”  (Compare the result in the tobacco RICO case, where statements that the defendants lied—something that is true, but that they don’t really want you to know—were upheld as reasonable corrective measures.  “Controversial” is not a good standard for disclosures, and this is why.)
Intervenor Amnesty International argued that SEC v. Wall Street Publishing Institute, Inc., 851 F.2d 365 (D.C. Cir. 1988), applied rational basis review to securities regulation.  That case allowed the SEC to seek an injunction requiring that a magazine disclose the consideration it received in exchange for stock recommendations, but the case didn’t hold that rational basis review governed securities regulation “as such,” but might be “roughly tantamount to the government’s more general power to regulate commercial speech.”  Anyway, that was a classic deception rationale governing inherently misleading speech.
To read Wall Street Publishing broadly would allow Congress to easily regulate otherwise protected speech using the guise of securities laws. Why, for example, could Congress not require issuers to disclose the labor conditions of their factories abroad or the political ideologies of their board members, as part of their annual reports? Those examples, obviously repugnant to the First Amendment, should not face relaxed review just because Congress used the “securities” label.
(WTF? Disclosure of labor conditions, at least, is the exact same thing as this regulation. Repeating it doesn't make it more obvious.)
Once rational basis was out of the picture, the regulation flunked even Central Hudson, since “narrower restrictions on expression would serve [the government’s] interest as well.”  Plaintiff suggested that issuers could use their own language to describe their products, or the government could compile its own list of products that it believes are affiliated with the Congo war, based on information the issuers submit to the Commission.  The SEC didn’t show that this would be less effective.  “[I]f issuers can determine the conflict status of their products from due diligence, then surely the Commission can use the same information to make the same determination. And a centralized list compiled by the Commission in one place may even  be  more  convenient  or  trustworthy  to  investors  and consumers.” These “intuitive” alternatives were sufficient to invalidate the rule.
The SEC argued that the rule’s impact was minimal because issuers could explain what “conflict free” meant in their own terms, but almost all compelled speech offers the possibility of explanation, and that’s inadequate to cure a First Amendment violation. Thus, the rule (and the statute) was unconstitutional to the extent that it (they) required regulated entities to report to the Commission and to state on their website that any of their products have “not been found to be ‘DRC conflict free.’”
The concurrence would’ve waited for the en banc review of the COOL regulations raising this exact issue under Zauderer, and stayed just that part of the SEC’s rule while allowing the rest to go into effect.