Reasonable Consumer Standard Prevails in California and Beyond

What standard applies to false advertising lawsuits in California? Attorney General Bill Lockyer contended that courts should consider whether ads are likely to mislead from the perspective of the “least sophisticated consumer” -- what might be called the Gomer Pyle standard. In January 2003, the California Court of Appeal rejected the Attorney General’s argument, holding in Lavie v. Proctor & Gamble Co. that a court usually must approach an ad from the standpoint of the “ordinary consumer acting reasonably under the circumstances.” It is not enough that the ad may fool an unusually gullible consumer. However, ads aimed at specific audiences that are either more or less savvy than ordinary adults (such as toy ads aimed at kids or prescription drug ads aimed at physicians) must be evaluated from that particular group’s level of sophistication. This case clarifies California’s false advertising laws and harmonizes them with the federal standard, to the benefit of national and California advertisers.

Promotional Drawings May Violate Lottery Laws

Can a merchant conduct a promotion in which each customer is given a card, the card is stamped whenever a product is purchased, and cards bearing four stamps are entered in a drawing for a free vacation? No, warns a recent opinion of the California Attorney General. Except for the State Lottery, lotteries are illegal in California. A lottery is basically any mechanism to distribute a prize by chance in which participants must pay to play. As the California Supreme Court observed four decades ago, “it is very difficult, if not impossible, for the most ingenious and subtle mind to devise any scheme or plan, short of a gratuitous distribution of property, which has not been held by the courts of this country to be in violation of the lottery laws.” Merchants should take a close look at the lottery prohibition before they roll out a marketing program that involves any sort of drawing.

Class Action Filed Against Local Auto Dealers

Car purchasers have filed a class action suit in Sacramento Superior Court against Folsom Lake Ford, Toyota and Kia, alleging that the dealerships sold cars at more than the advertised prices. California law (Vehicle Code section 11713.1(e)) requires that dealers sell cars at or below their advertised prices as long as the ads have not expired. This law applies whether or not shoppers are aware of the advertised prices.

Steve Garvey Prevails in FTC Suit

Infomercials frequently feature celebrity testimonials. In the fall of 2002, the Federal Trade Commission went to trial in federal court in Los Angeles against former Dodger star Steve Garvey. The FTC faulted Garvey for touting a diet system with such statements as: “Look at all these delicious supposedly forbidden foods: barbecued chicken and ribs, buttered biscuits. Foods you can eat when you crave them without guilt, without worry, and it’s all because of a few little capsules.” The federal trial judge ruled in favor of Garvey, noting that he had tried the product and believed it worked for him. Despite this particular ruling, celebrity endorsers should be cautious as they may be found liable for deceptive ads under federal or state law.

“Napa” Wine from Lodi Grapes

The Court of Appeal in Sacramento ruled in December that wine bearing the “Napa Ridge,” “Rutherford Vintners,” and “Napa Creek Winery” brand names may be used on wine bottles even though the grapes may come from other parts of California. The court found that federal law preempted a state law adopted in 2000 to protect the Napa appellation. Wine drinkers, better read the whole label if you care.

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