Ambiguity could be deceptive where "buy 3, get two free" really meant "get 5 at a lower price per unit"

Sihler v. Fulfillment Lab, Inc, No. 20cv1528-LL-DDL, 2023 WL 4335735 (S.D. Cal. Jun. 23, 2023)

Common sense is a big part of advertising law, as implemented by the reasonable consumer. It can be hard to distinguish one case from another in its formal characteristics. Here, the view of a reasonable consumer is established by empirical evidence of deceptions and complaints, the court says—though is it really making a normative judgment?

Defendants allegedly use fake celebrity and magazine endorsements, as well as misrepresentations about price and limited availability, to induce consumers into buying “keto” weight-loss pills. As described:

Consumers click on ads that appear to be news articles with false celebrity endorsements of the Keto Products. This ad takes them to a landing page for the product with more misrepresentations. When they click on the purchase button, they are presented with several purchase offers including “Buy 3 Bottles, Get 2 Free.” Consumers are warned that supplies are limited or that the special offer will expire soon. These landing pages are allegedly inaccessible to anyone who does not view the advertisements or are deleted after a few weeks or months to avoid detection. After consumers complete their purchase, they are allegedly overcharged for the full price of all five bottles of product instead of the discounted “Buy 3 Bottles, Get 2 Free.” When consumers dispute the charge with their bank or credit card company, Defendants allegedly present investigators with a “false front” website for the Keto Products that includes the actual purchase prices of the different options, no false advertising, and an easy-to-find “terms and conditions” hyperlink. Defendants allegedly use the false front websites to deceive the bank and credit card companies into believing that consumers purchased Keto Products from those websites rather than the landing pages.

Plaintiffs brought both California statutory claims and RICO claims; the court certified a nationwide RICO class and a California subclass.

If you want a sense of how this is going to go, defendants contested numerosity because there was only shipping data, not data on how many different consumers bought and used products. With tens of thousands of shipments, and sales of about $93 million in two and a half years, the court found numerosity. (They also argued that there was no typicality because a named plaintiff described viewing a website promoting “Buy 3 bottles, Get 2 free” but the website examples submitted instead promote “Buy 3, Get 2 Free.” The court disagreed.)

Commonality of deception on a classwide basis:  Under California law, no individualized proof of deception, reliance, or injury is required if the conduct would deceive a reasonable, ordinary consumer in the target population. Defendants argued that there was no evidence of deception of reasonable consumers other than named plaintiffs’ own declarations, but the court disagreed:

Plaintiffs provided examples of webpages with the same allegedly false and misleading endorsements and pricing information similar to what they viewed and relied on. They also submitted instructions for Keto Products call center employees that describe three standard buying packages, which match the package options and unit prices on the webpages that Plaintiffs viewed and in the examples that they provided. The only other buying packages described in the instructions are for unadvertised special promotional packages. The call center instructions also describe typical calls, which include complaints of being overcharged in the same manner that Plaintiffs describe: that they believed they would be charged the listed price for two or three bottles and receive one or two bottles free, but were instead charged the listed price for all bottles received.

Along with a witness who testified to the lack of change in ads over time, plaintiffs showed that they and absent class members viewed the same or substantially similar endorsements and pricing information.

Would this be likely to mislead a reasonable consumer?

The three package options are advertised as follows: (1) text reads “Buy 3 Get 2 Free!” followed by “$39.74/bottle” with a depiction of a group of three bottles next to a group of two bottles with a plus sign between them; (2) text reads “Buy 2 Get 1 Free!” followed by “$49.97/bottle” with a depiction of a group of two bottles next to one bottle with a plus sign between them, and (3) text reads “Buy 1 Bottle” followed by “$69.99/bottle.”

Are those additional bottles "free"?

Defendant argued that a reasonable consumer would understand that they’d be charged $39.74 for each of 5 bottles if they bought five. It’s obvious to an ordinary English speaker that you wouldn’t offer that deal that way (you’d say “buy 5 at $39.74 each!” etc.) if you wanted it understood. The FTC’s guides on the use of “Free” would also count against this, if considered.

The court found the same declarations, webpage examples, and call center scripts to be sufficient evidence that a reasonable consumer is likely to be misled. (E.g., a standard script for "I was overcharged" that begins when a caller says words to the effect of "I thought it was $39.74 x 3 bottles which would be $119.22.") Here, the “ambiguity” in the pricing information supported misleadingness—compare the treatment of “ambiguity” in cases that reject consumer claims. Would this work if there were fine print disclosures “resolving” the ambiguity? My suspicion is that it wouldn’t—and shouldn’t—because a substantial number of reasonable consumers would have no reason to think that “free” was ambiguous. But how, otherwise, are we to tell what counts as “correctable ambiguous” and “misleadingly ambiguous”? As the court points out, “even a perfectly true statement couched in such a manner that it is likely to mislead or deceive the consumer, such as by failure to disclose other relevant information, is actionable under [the FAL].” I tend to think the “correctable ambiguity, thus plaintiffs lose” cases downplay misleadingness without a good theory.

And since misleadingness is an objective test, it’s capable of classwide resolution. The rest (including predominance) follows, including certification on the RICO claims of all things.