Friday, March 15, 2019

supplement guide isn't "advertising or promotion" under the Lanham Act, even w/undisclosed affiliation

Ariix, LLC v. NutriSearch Corp., 2019 WL 1040135, No. 17CV320-LAB (BGS) (S.D. Cal. Mar. 5, 2019)

Previous iteration discussed here. Arrix competes fiercely with Usana in the nutritional supplement market.  NutriSearch publishes the NutriSearch Comparative Guide to Nutritional Supplements, a guide used by consumers and professionals that reviews various companies’ products, including both Ariix’s and Usana’s. It’s now in its sixth edition. In 2005, individual defendant/author MacWilliam was working directly as a sales representative for Usana and writing the Guide, which he had conceived as a way to promote Usana’s products. “At the time, the Guide could have been considered commercial advertising.” But after several editions, it no longer qualifies as such.

The fifth edition awarded the Gold Medal of Achievement designation to companies that meet particular standards; Ariix made a vigorous effort to qualify, but was denied while four other companies were given the award. NutriSearch allegedly admitted Ariix had met the standard, but refused to award the company the Gold Medal because it was reworking its criteria. The new sixth edition has bronze, silver, gold, diamond, and platinum award tiers. Usana was the only platinum medalist. Ariix didn’t allege that Usana didn’t meet the criteria for this award, or that Ariix or any other manufacturer did.

As in its previous order, the court held that  “the Lanham Act does not apply to reviews of consumer products. This is true even if they are alleged to be biased, inaccurate, or tainted by conflicts of interest.” However, self-labeling as a consumer product review isn’t all it takes to be protected. The ultimate question is whether a publication is a consumer product review or commercial advertising. This one is the former. Although “reviewers who have undisclosed conflicts of interest may be liable under other laws, such as the FTC Act or various states’ advertising or unfair competition laws,” Ariix could not bring a Lanham Act claim against them.

The Guide as a whole wasn’t advertising. It includes two major sections: a set of ratings of 1,500 different nutritional supplements sold by different companies, and general information about supplementation. “The only feature alleged to be commercial advertising are the Guide’s awards. But even if the awards were commercial advertising, this would not suffice to bring the entire book within the statute.”  Moreover, the sheer number of companies whose supplements were reviewed made it implausible that the purpose of the reviews was “merely” to urge consumers to buy Usana’s products. And the book was sold commercially as a guide to supplements, and “is regarded” as a standard guide on the subject, though the court doesn’t say by whom.

“The [fifth edition] Guide itself included a preliminary note, disclaiming any association between either MacWilliam or NutriSearch and any manufacturer or product the Guide reviewed.” This wasn’t a commercial ad because it was part of the Guide, even if it could be viewed by potential Guide buyers online.  And the removal of the statement from the sixth edition wasn’t an admission of falsity; it could be a nod to the fact of this litigation. Moreover, its omission made the sixth edition even less likely to be the basis of a valid claim.

After several companies won the Gold Medal award in 2008, Usana allegedly demanded that it be positioned ahead of its competitors; NutriSearch allegedly then created a new “Editor’s Choice” award and gave it to Usana. But Ariix didn’t allege what the criteria for that award were, or that defendants ever claimed objectivity; the name itself suggests subjectivity.  Then, for the sixth edition, NutriSearch allegedly failed to notify Ariix when its new criteria were finalized, preventing it from being listed as a medalist. But there were no factual allegations indicating Ariix had a right to be told about new criteria or prompted to submit an application, or that others were treated differently—and even if there were such allegations, that wouldn’t make a misrepresentation; Ariix was still just criticizing a product review. “[E]ven if Ariix thinks NutriSearch’s criteria were illegitimate, as a reviewer NutriSearch is entitled to decide what its criteria should be.”

Going further, the court’s broad latitude for product reviews made it hesitant to find that awards of this type are ever fully objective, even if they involve objective criteria.

Previously, the court held that the “cozy relationship” between NutriSearch and Usana wasn’t enough to make the Guide commercial advertising. There weren’t allegations plausibly suggesting that speaking fees or Usana’s purchases and recommendation of the Guide were “some kind of under-the-table payment for promoting Usana and its products.” The amended complaint’s new allegations were still conclusory. The only “payments” NutriSearch allegedly received were “Usana’s promotion of the Guide, its purchase of many copies of the Guide, and its use of the Guide to promote its products.” But this behavior was fully consistent with non-liability.  “A company whose products are favorably reviewed has every incentive to capitalize on those reviews by doing what Usana did, and the fact that it does so does not suggest it has entered into some kind of secret agreement with the reviewer.”

The amended complaint alleged that in 2009, after NutriSearch gave Usana the Editor’s Choice award, MacWilliam decided to cash in on it, asking Usana to send him on a speaking tour. Usana agreed, and paid him $90,000 that summer. But this occurred far too long before the fifth or sixth editions to count as payment in connection with them, and wasn’t alleged to reflect a previous understanding, only an “afterthought.”  “Furthermore, a recognized and knowledgeable author who has just favorably reviewed a company is a natural choice as that company’s promoter or spokesman.” The complaint alleged that Usana continued to pay MacWilliam to promote its products and to speak to its reps, but didn’t support the conclusion that these were payments for advertising in the Guide as opposed to payments for speaking as agreed.  “MacWilliam could be liable under the Lanham Act if, while speaking, he made misrepresentations of fact about Usana or Ariix. But the only allegations show expressions of opinion or value judgments, rather than facts.”

Assuming the truth of the allegations, MacWilliam could be criticized for an undisclosed bias or conflict of interest, but that wasn’t enough for a Lanham Act claim [where the result wasn’t a commercial advertisement].  It wasn’t enough to allege that defendants had a direct economic motive for their speech to make it commercial speech.

The complaint was dismissed, this time without leave to amend.

1 comment:

Anonymous said...

I think the court is wrong. This was extensively explained by USANAWatchDog years ago. Perhaps if Ariix simply presented the evidence the USANAWatchDog had already disclosed, the ruling would have been a little different...

See for yourself and please comment back