Tuesday, February 16, 2016

seller-incentivized reviews might be misleading (and violate FTC guidelines)

Vitamins Online, Inc. v. HeartWise, Inc., 2016 WL 538458, No. 13-CV-982 (D. Utah Feb. 9, 2016)
The parties (plaintiff d/b/a NutriGold and defendant d/b/a NatureWise) make and sell dietary supplements online, including on Amazon; their competing products  include one containing garcinia cambogia and one containing green coffee.  Vitamins Online began selling NutriGold Garcinia Cambogia and NutriGold Green Coffee products on Amazon.com before 2010, when there was little demand or competition because they were not well known to consumers.  In 2011, Dr. Oz showcased green coffee extract for weight loss on his show, causing demand to explode for those that met his recommendations of at least 45% chlorogenic acid and without any binders, fillers, or other artificial ingredients, including NutriGold Green Coffee.  Similarly, demand for garcinia cambogia extract for weight loss purposes, particularly that meeting his recommendations, exploded after Dr. Oz recommended it.  The increased demand attracted competition, including NatureWise, which advertised its products as having Oz-recommended characteristics.
NatureWise then had its employees vote on the helpfulness of reviews on its product pages, voting up positive reviews and down negative reviews, increasing the likelihood that potential consumers would see positive reviews first.  NatureWise also encouraged customers to repost positive reviews on Amazon.com by offering them free products or gifts cards. It would review and, in some cases, edit the reviews before asking the customers to post them on Amazon.com.  (As described, this behavior might also trigger FTC scrutiny.) 
Vitamins Online alleged that NatureWise made false ingredients claims, and impliedly false claims by manipulating the ranking and number of positive reviews on Amazon.com.  NatureWise argued that this manipulation couldn’t be either literally or impliedly false, because Vitamins Online didn’t show that the votes or the reviews themselves were counter to the actual user experience or actually deceived consumers. Vitamins Online did not contend that NatureWise employees were voting as helpful reviews that were in reality unhelpful or that the reposts from consumers were counter to their actual experience, but that the votes and reviews gave a false impression that unbiased consumers found these reviews helpful and chose to post positive reviews without anticipating a reward.  Though the Lanham Act was broad enough to cover these practices as misrepresentations if they were deceptive, Vitamins Online didn’t show that consumers were deceived.  The court denied summary judgment to NatureWise because Vitamins Online might be able to obtain the necessary evidence via consumers surveys, which the court granted it additional time to do.
The court turned to injury; the requisite showing depends on the relief sought. For injunctive relief, likely harm—existing or future—will do, while proof of causation and specific injury is required for damages.  For comparative advertising or a two-player market, most courts presume likely injury for purposes of injunctive relief.  The Tenth Circuit has suggested that this presumption might apply to an “obvious competitor,” which Vitamins Online argued that it was, given their direct competition on Amazon and the fact that NatureWise instructed its graphic designer to create an ad for NatureWise similar to Vitamins Online’s Amazon.com product page. Vitamins Online also offered evidence of declining sales corresponding to NatureWise’s increasing sales and a drop in Vitamins Online’s ranking on Amazon.  The court declined to presume injury here, though competition and the correlation in sales gains/losses was relevant to showing injury.  Thus, genuine issues of material fact existed on causation and injury.
Likewise, the court declined to apply a presumption of irreparable injury, which it found arguably unsupported post-eBay even as applied to comparative advertising.  Instead, there was merely a genuine issue of fact.

No comments: