Prop. 64 Limits Attorney-Driven
Suits
Proposition 64, passed by the voters in November, benefits marketers
by limiting suits under California's unfair competition law (Bus.
& Prof. Code section 17200) to consumers who actually sustained
injuries from unlawful, deceptive or unfair business practices.
Under prior law, plaintiffs could file suit even if they had not
purchased the product or service. This allowed private attorneys
to challenge business practices in the absence of any client who
had lost money, much to the consternation of the business community.
The appellate courts are now grappling with whether Prop. 64 applies
retroactively to suits filed before November 2004. Most have conlcluded
that it does.
Blockbuster
Dinged for "No Late Fees" Campaign
Government regulators sometimes move quickly,
as Blockbuster will attest. On December 15, the video rental company
rolled out its catchy "No Late Fees" campaign. Within
weeks, state regulators began to investigate. On March 29, Bill
Lockyer and the AGs of 46 other states announced a settlement under
which Blockbuster will offer refunds to customers and pay the states
a total of $630,000. The AGs contended that the campaign failed
to disclose that customers would be charged a $1.25 restocking fee,
or even the full retail price of the product, for returns that were
substantially late. Additionally, some Blockbuster franchisees did
not participate in the program and the AGs faulted the company for
not conspicuously disclosing that fact. Under the settlement, Blockbuster
agreed to pull the prominent "No Late Fees" signage that
appeared in store windows and internal displays. If Blockbuster
continues the program, it will have to proceed with clearer disclosures
regarding terms and conditions.
“Happy Cows” to Continue
Starring Role
The California Milk Producers Advisory Board rolled
out a major ad campaign with the slogan: “Great Cheese comes from
Happy Cows. Happy Cows come from California.” The spots featured
cows in bucolic pastures. People for the Ethical Treatment of Animals
(PETA) sued the Board on the theory that “the vast majority of California's
dairy cows live anything but easy, comfortable lives.” The California
Court of Appeal ruled that the suit could not proceed because public
entities generally cannot be sued for false advertising.
New Laws Govern California
Marketers
Marketers should take note of at least two California
statutes that took effect January 1:
AB 1721 requires retailers to charge the lowest posted price, even
after any expiration date that appears on a shelf tag or the product
itself. To avoid stiff penalties, retailers must manually pull all
sale markings before they can charge the higher price.
SB 1457 clarifies that recipients of spam (unsolicited e-mail)
may sue for actual damages, liquidated damages of $1,000, and attorneys'
fees, for each message that contains a deceptive subject line, falsifies
header information, or uses a third-party's domain name without
permission. The federal CAN-SPAM Act, in contrast, does not authorize
suits by private parties. This may lead to more enforcement in California,
so those who market to Californians should be careful to avoid teaser-type
subject lines.
Supplement Company to Pay
$3.5 Million
Body Wise International, based in Orange County,
agreed to pay over $3.5 million to settle claims by the Federal
Trade Commission and the Orange County District Attorney. According
to the DA, Body Wise claimed that one of its products could help
prevent and treat diseases such as cancer and AIDS. California law
generally prohibits anyone from claiming that an unapproved substance
can have a curative effect on specified illnesses such that a prosecutor
need not prove that the marketer's claims are deceptive. The DA
touted the settlement as the “largest consumer fraud judgment in
county history.”
Former PR Executive Faces
Criminal Charges
The U.S. Attorney in Los Angeles indicted a former
senior vice president of the Fleishman-Hillard public relations
firm with wire fraud. According to the government, the executive
was responsible for nearly $250,000 in fraudulent bills that Fleishman-Hillard
submitted to the Los Angeles Department of Water and Power. The
executive has pled not guilty. Meanwhile, the City of Los Angeles
is pursuing a civil fraud case against Fleishman-Hillard.
“Car Buyer's Bill of Rights”
Reintroduced
Last year the Governor disappointed consumer advocates
and pleased car dealers by vetoing the “Car Buyer's Bill of Rights.”
A new version of the bill (AB 68) has been reintroduced in the Legislature.
Similar to its predecessor, the bill would give used car purchasers
a three-day cooling off period in which to back out of deals, would
define when cars can be advertised as “certified,” and would limit
interest rate markups. It remains to be seen whether proponents
can strike a deal with the Governor. Meanwhile, a stronger version
of the “Car Buyer's Bill of Rights” will be circulated for voter
signatures and may qualify to appear on the June 2006 primary election
ballot.
Please
contact us if you have questions or want more information. Please
note that the information contained in this newsletter is not intended
to provide specific legal advice. You should consult with an attorney
and not rely on any information contained herein regarding your
specific situation.
