Gift Certificates Are Immortal

With the holiday season upon us, merchants and shoppers should take note of the California law that prohibits the sale of gift certificates with expiration dates. Just ask Ticketmaster. The Sacramento County District Attorney recently announced a settlement that required Ticketmaster to pay nearly $450,000 in penalties and costs. Ticketmaster also agreed to honor its certificates even if the expiration dates had passed. Only a few types of gift certificates are exempt from this rule.

Merchants Must Keep Shipping Promises

Merchants also may be unaware of the Federal Trade Commission’s Mail or Telephone Order Rule, which sets ground rules for shipping most products. When merchants take an order by mail, phone, fax or the Internet, they must have a reasonable basis for stating or implying that they can ship within a certain time. If they do not specify the shipment time, they must have a reasonable basis to believe that they can ship within 30 days. Merchants who cannot ship within time stated or within 30 days must cancel and refund the order, or seek the customer’s consent to a delay. Government regulators and California plaintiffs’ attorneys can enforce this rule. For example, the FTC recently sued a Southern California company for charging customers a 20 percent “restocking fee” after customers cancelled their orders because of delayed shipments. For more information on the rule, see www.ftc.gov/bcp/conline/pubs/buspubs/mailorder.htm.

Tighter Limits on Fax Marketing in 2003

Existing state law allows unsolicited faxes provided that the sender includes a toll-free number to request removal from the distribution list. The Legislature recently repealed the state law, so that starting this January marketers in California clearly must follow tougher federal rules that apply to unsolicited faxes. The federal rules generally prohibit unsolicited faxes except where the marketer has an “established business relationship” with the recipient. As with unsolicited commercial e-mail, public outcry has motivated aggressive government enforcement. The Federal Communications Commission announced in August that it may fine Fax.com, Inc. $5.4 million for sending unsolicited faxes. This followed Attorney General Bill Lockyer’s announcement that his office is investigating Fax.com. Based in Orange County, Fax.com claims to have 16 million fax numbers in its database.

Weight-Loss Ads Heavier on Deception, Says FTC

The FTC evaluated 300 weight-loss ads that ran in 2001 and found that 55 percent made at least one false or unsubstantiated claim. Over the past decade, the number of weight-loss ads appearing in eight national magazines more than doubled, and advertisers increasingly have used consumer testimonials and before-and-after photos to tout their wares. Meanwhile, since 1990 the FTC has filed 80 cases against advertisers for allegedly false and misleading weight loss claims, more than half the total number filed since the FTC’s first weight loss case in 1927.

Magnetic Mattress Pads Targeted

In a lawsuit filed in Sacramento, the Attorney General is seeking $1.5 million in civil penalties against European Health Concepts, Inc., charging the company with making false claims regarding the health benefits of magnetic mattress pads. Under California law, drugs and devices generally cannot be promoted as having a “curative or therapeutic effect” on particular medical conditions unless they have been approved by federal or state agencies.

Advertising & Marketing Law Update is a publication of Downey Brand LLP