Sac DA Targets “Repo Joe”

Last month the Sacramento and Solano County District Attorneys filed suits in Sacramento Superior Court against a Georgia marketing firm, Action Integrated Marketing. The firm allegedly designed a campaign featuring “Repo Joe” and the “Repo Team.” According to the DAs, the premise of the campaign was that “Repo Joe” and the “Repo Team” would bring a special selection of repossessed vehicles for sale to the public, when in fact the dealers offered their normal inventories for sale. The marketing firm supplied clothing and hats which stated or implied that the wearers were “Repo Joe” when in fact they were regular employees of the dealers. Without admitting any liability, the marketing firm agreed to pay $20,000 to the prosecuting authorities and to refrain from misleading statements in the future. A local vehicle dealer that participated in this program agreed to pay $15,000 to the Sacramento DA.

Sac DA Charges Dealer With Selling for More Than Advertised Price

The Sacramento DA also filed suit last month against a local dealer that allegedly sold vehicles for more than the prices advertised in the Sacramento Bee. Vehicle Code section 11713.1(e) requires that dealers sell vehicles at their advertised prices, whether or not customers are aware of the ad, unless the ad has expired. The dealer faces civil penalties of up to $2,500 per violation. For the dealer in question, this is more bad news. The DA’s case is related to a suit filed in December by some of the customers who purchased the vehicles. These two cases illustrate that merchants charged with unlawful advertising may be forced to litigate on two fronts, one with a public prosecutor and the other with a private plaintiff.

Challengers Must Prove Advertising Is False

In a case that should be reassuring to advertisers, the California Court of Appeal ruled in April that a plaintiff who files a false advertising suit must prove that the ad in question is likely to mislead. The National Council Against Health Fraud, Inc. contended that ads for 50 homeopathic remedies were misleading in that the products were not effective as claimed. The group performed no tests to determine the effectiveness of the particular products, nor did it present any anecdotal evidence. Instead, the group contended that the burden of proof should fall on the merchant to prove that its ads were truthful. The court rejected this argument, finding “no basis in California law” to shift the burden of proof. National Council Against Health Fraud, Inc. v. King Bio Pharmaceuticals, Inc. (April 22, 2001).

Telemarketers Can Be Sued for Taking a Large Cut of Charitable Donations

The U.S. Supreme Court repeatedly has held that the First Amendment bars state and local laws that attempt to restrict the percentage of charitable donations that may be spent on fundraising. Earlier this month, however, the Supreme Court decided a case involving telemarketers who allegedly retained 85 percent of the donations they obtained for a nonprofit that served Vietnam veterans. The Illinois Attorney General alleged that the telemarketers misled donors as to the percentage of funds that would be used for charitable purposes. The Supreme Court allowed the Attorney General to proceed with the case. While fraud “may not be inferred simply from the percentage of charitable donations absorbed by fundraising costs,” the First Amendment does not protect a fundraiser who actively deceives donors about how donations will be used. Illinois v. Telemarketing Associates, Inc. (May 5, 2003). This case may spark new litigation in California against nonprofits and fundraising firms. The California Attorney General recently issued a report revealing that the average charitable donation campaign run by commercial fundraisers in 2001 yielded less than 40 percent of contributions for the charity.

Momentum Grows for New Anti-Spam Laws

The Federal Trade Commission released an analysis of 1,000 samples of unsolicited commercial e-mail (“spam”). According to the FTC, 66 percent of the spam contained deceptive “from” lines, “subject” lines, or message text, and the rate increased to 96 percent with respect to messages involving investment or business opportunities. Only two percent of the spam contained the “ADV” label in the “subject” line, as required by law in California and several other states. The FTC survey will add fuel to the growing fire of support for anti-spam regulation. In California, the Legislature almost certainly will enact a ban on spam this year, replacing the current rules that regulate but do not prohibit spam. Meanwhile, a weaker federal bill has been introduced in the U.S. Senate. However, given the nature of spam and limitations on enforcement resources, the proposed new laws seem unlikely to stem the tide.

Californians Flock to Do-Not-Call Registry

On March 31, the California Attorney General began to accept pre-registrations of residential and cellular telephone numbers for the national “do-not-call” registry. Consumers may pre-register, free of charge, at http://nocall.doj.state.ca.us. The Sacramento Bee reported that nearly a million Californians had pre-registered in the first week that the AG’s site was operational, a preliminary indication that the registry may have a major impact on telemarketers. The registry will become operative in October, when most telemarketers will have to scrub their call lists against the registry at least once every 90 days. Meanwhile, in May, the FTC filed suit in federal court in San Francisco against the private operator of a web site who allegedly made deceptive claims while purporting to offer “pre-registration” services.

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