Thursday, October 17, 2024

Amazon potentially on the hook for marketing mislabeled supplements

Li v. Amazon.com Servs., 2024 WL 4336432, No. 2:23-cv-01975-JHC (W.D. Wash. Sept. 27, 2024)

Plaintiffs alleged that Amazon promoted, sold, and delivered dietary supplements that lacked mandatory FDA disclaimers in violation of California law. Plaintiffs allegedly saw the representations on the “product labels and otherwise” on Amazon’s site and believed “that the [p]roducts harbored therapeutic value, and/or they and the marketing claims were reviewed and approved by the FDA.” Plaintiffs allegedly relied on “Amazon’s stature, representations, and reputation,” its marketing of the dietary supplements, and the “[p]roduct labels and its omissions from the same” when choosing to buy the dietary supplements. They also “purchased more of, and/or paid more for, the [p]roducts” than they would have “had [they] known the truth about the [p]roducts.” As a result, Plaintiffs “lost money” because of Amazon’s conduct and were “exposed to risk of serious bodily injury.”

Amazon allegedly “systematically...promote[s] and sell[s]” dietary supplements that “lack[ ]...mandatory disclaimers from [p]roduct labels.” Many dietary supplements in Amazon’s marketplace allegedly claim to “treat, cure, or prevent various diseases and viruses including...diabetes, high blood pressure, Alzheimer, arthritis, depression, prostate cancer, and others,” when these products have not been “scientifically established as safe or efficacious under the established protocol for drugs, nor are they subject to FDA review and approval.” E.g., this listing for Doctor’s Best Vitamin D3: 


Other companies like Safeway and Target allegedly lawfully label their supplements by not making such claims:


Most of Amazon’s sales come from Amazon’s “Fulfilled by Amazon” (FBA) program, in which Amazon provides services including stocking, maintaining, and storing products at Amazon fulfillment centers; sorting and shipping; and 24/7 customer support for consumers of the products. Amazon controls product listings, communications with consumers about the product, and processing of payments and fees for sale of the product, including Amazon’s service fee. Amazon also purportedly operates an “Industry-Leading Safety and Compliance Program,” which allows Amazon to “ban or delist products” in the marketplace that are “unlawful and/or dangerous.”

Plaintiffs brought both product liability/warranty claims and the usual consumer protection claims under California law.

First, plaintiffs adequately alleged standing, despite Amazon’s argument that the reliance allegations were implausible because the product details and labels showed that all of the products had at least one clear DSHEA disclaimer.

Spending money one would otherwise not have spent is a quintessential injury in fact.

Federal law, which is adopted by California’s Sherman Law, mandates that, if a dietary supplement includes a statement that “describes the role of a nutrient or dietary ingredient intended to affect the structure or function in humans, characterizes the documented mechanism by which a nutrient or dietary ingredient acts to maintain such structure or function, or describes general well-being from consumption of a nutrient or dietary ingredient,” it must also include a DSHEA disclaimer. The disclaimer must be “prominently displayed and in boldface type” and include the text: “ ‘This statement has not been evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure, or prevent any disease.’ ” The disclaimer must also “be placed adjacent to the statement with no intervening material or linked to the statement with a symbol (e.g., an asterisk) at the end of each such statement that refers to the same symbol placed adjacent to the disclaimer[.]”Also, “[o]n product labels...the disclaimer shall appear on each panel or page where there such is a statement. The disclaimer shall be set off in a box where it is not adjacent to the statement in question.” Plaintiffs argued that “to be legally compliant, the disclaimer must: (1) appear ‘on each panel or page’ of a supplement label or package that bears a health-related claim; and (2) be ‘prominent.’ ”

Amazon argued that the product labels and product details pages, including the product images on those details pages, include the DSHEA disclaimer in a box titled, “Important information” in “bold orange font.” It further contended that “the product detail[s] pages for multiple [p]roducts include images showing an actual product label with the prominent DSHEA disclaimer.” The structure function claim on the front label of those products was followed by an asterisk that directs a consumer to a DSHEA disclaimer on the back label.

Plaintiffs rejoined that “[b]urying a disclaimer multiple scrolls down on Amazon’s product page, and/or amongst a multitude of voluntary claims and images (which dominate through placement, size, color, contrast), cannot as a matter of law redress illegality, nor can it redress the deception and fraud.”

The court agreed with plaintiffs: “None of the materials introduced by Amazon refute Plaintiffs’ contention that the products omit disclaimers on the primary panels that carry the structure function claim. For example, no image submitted shows a product that includes the required disclaimer on the same panels that carry the structure function claims.” E.g, the Amazon display page for Safrel Vitamin B-12: 

Thus, plaintiffs plausibly alleged that they were misled when purchasing the dietary supplements on Amazon.

Amazon argued that plaintiffs failed to “plausibly allege” that a reasonable consumer would believe that the dietary supplements had “therapeutic value” or had received FDA approval, given the DSHEA disclaimer under the “Important information” section and that the “[p]roduct photographs” and “Amazon.com display page images” for some of the dietary supplements show that the health claims on the front label were “accompanied by asterisks or other symbols that directed the consumer to a DSHEA disclaimer.” Amazon argued that it is “implausible” and “unreasonable” for a consumer to ignore the asterisk.

But Amazon allegedly omitted disclaimers from display panels that carry health-related claims and, as a result, plaintiffs allegedly did not read “disclaimers in conjunction with reading the effusive health claims, which led to their belief in the products’ therapeutic value and safety.” This wasn’t suitable for resolution on a motion to dismiss. Amazon also provided the court with images of the “product detail pages” of the dietary supplements plaintiffs purchased. The product details page for Nature’s Nutrition Turmeric Curcumin stated in bold, black font that the product provides “Natural Joint Support” and “Support[s] Joint and Heart Health[,]”but there is no asterisk next to either of these assertions nor is there an adjacent DSHEA disclaimer: 


This was consistent with plaintiffs’ allegations that the “proximity and prominence” of the DSHEA disclaimers provides consumers with the opportunity to “see and read them in order to be alerted that the products are not therapeutic and thereby avoid deception.”

Amazon argued that plaintiffs’ claims sought to impose vicarious liability on it, which is unavailable for unfair competition claims, as to which “[a] defendant’s liability must be based on [their] personal ‘participation in the unlawful practices’ and ‘unbridled control’ over the practices that are found to violate [California Business and Professions Code] sections 17200 or 17500.” Under the CLRA, “absent allegations of participation or control[,]” the defendant cannot be held liable for the acts of third parties.

Plaintiffs responded that Amazon was “integral[ly] involv[ed] in the unlawful and deceptive marketing, promotion, sales, delivery into interstate commerce, and delivery to Plaintiffs of illegal products.” The court agreed with plaintiffs, citing Amazon’s promotional efforts as well as FBA and Amazon’s control of consumer support and whether returned items could be resold. Plaintiffs sufficiently alleged Amazon’s “unbridled control” over the “unlawful practices.”

Amazon then argued that California’s Sherman Law protected it by exempting “persons engaged in business as wholesale or retail distributors of foods, drugs, devices, or cosmetics, except to the extent that they are engaged in the packaging or labeling of the commodities or they prescribe or specify the manner in which the commodities are packaged or labeled.” (This exemption must “not be construed to repeal, invalidate, or supersede any other section of this part.”) But the “unbridled control” allegations also sufficiently pled around this. “Amazon’s alleged actions in labeling and promoting the dietary supplements exceed the role of a wholesale or retail distributor. The Amazon product pages for the dietary supplements state structure function claims about the products.”

However, the economic loss rule barred the product liability claims. There was no special relationship between Amazon and the plaintiffs.

Implied warranty of merchantability claims did survive.

 

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