Stay ADvised: What’s New This Week, May 17 – Lexology

In This Issue:

NJ AG Hopes to Repair Allegedly False Solar Panel Claims

Shining a metaphorical light on claims about solar panels, the office of New Jersey State Attorney General Gurbir S. Grewal has entered into a consent order compelling a company accused of deceptive advertising its solar panel products to change its tune.

In addition to the nearly $70,000 monetary penalty imposed by the settlement, NRG Residential Solar Solutions will make changes to its business practices and sales claims. Notably, the settlement obligates NRG to enter into binding arbitration concerning pending claims and any complaints filed within one year from the settlement. The company will also uninstall its solar panels from the homes of two consumers at no cost as part of the settlement.

The allegations of wrongdoing paint a pattern of misrepresentations NRG made about its solar panels. According to the AG’s consent order, the company claimed that consumers who installed its solar panels would save money on energy costs, but instead consumers faced higher bills after installing the solar panels. NRG also neglected to disclose important terms in the lease contract, leaving consumers with an impression of the terms that varied from the actual agreement they signed.

In addition to making allegedly false savings claims, NRG engaged in a number of less than aboveboard business practices. According to AG Grewal, NRG failed to respond to consumer complaints, damaged the roofs of customers during installation and failed to repair the damage when customers complained, and did not honor certain terms in its lease agreements.

As a consequence of the settlement, NRG also committed to cease making misrepresentations about its products. The company must also disclose material terms in the lease agreements, especially the three-day cancellation period. It must honor any customer cancellation rights and put in place a consumer “complaint resolution process.”

NRG ceased marketing its products to new customers in February 2017, but continues to service existing customers. The settlement arises from an investigation ongoing since at least 2018 that the AG’s Office conducted of NRG after it received multiple complaints about the company.

Key Takeaways

Given that an appeals court ruled in 2018 that a class action case alleging that NRG made misrepresentations while marketing the solar panels could not proceed because it was barred by the company’s arbitration provision, the settlement term that obligates NRG to enter into arbitration to resolve consumer complaints makes sense but can hardly provide much comfort for those consumers affected by NRG’s actions who wished to circumvent the arbitration provision.

Judge Not High for THC Candy, Rules Knockoff Is Out

A California judge has ordered a cannabis delivery company to cease selling THC-infused “Nerds Ropes,” finding the company may be in violation of the unfair competition and trademark infringement provisions of the Lanham Act.

Candy company Ferrara, maker of kid favorite Nerds, late last year sued cannabis delivery service Tops Cannabis and a service provider of the company. It alleged that Tops’ “Nerd Ropes” THC-infused candy made to look and taste like Nerds but containing THC, sought to “benefit off the goodwill embodied by the NERDS mark and in so doing are endangering consumers’ well-being.”

According to the complaint, by advertising its product to look like Nerds, Tops caused likelihood of confusion and deception as to the origin of the product, trademark infringement, and trademark dilution. As the complaint avers, the products look remarkably the same, down to the trademarked Nerds logo and the shape and color of the packaging and product.

Ferrera claimed that not only is there a likelihood of confusion between the two very similar-looking products, but actual confusion has caused some consumers to “believe, mistakenly,” that the THC-infused Nerds are affiliated with the Ferrara Nerds. This likelihood of confusion, coupled with the high THC content in the medicated Nerd ropes, has led to “multiple reports of children being rushed to emergency rooms after consuming THC when they mistakenly” ate the product.

While issuing his order in the matter pursuant to the parties’ stipulation for entry of judgment and permanent injunction, Judge Stephen V. Wilson reiterated the allegation Ferrara made in the complaint that Nerds are marketed to kids, and that Ferrara does not condone the use of Nerds in connection with products that are harmful to children.

Ferrara also stressed that it had not consented to the use of its Nerds mark to sell THC-infused Nerds, and was actively enforcing against such uses. “There can…be no question that Tops’ marketing and sale of Medicated Nerds Rope is willful and in callous disregard both for Ferrara’s rights and the health of the consuming public,” it added.

The judgment blocks Tops from selling the THC-infused Nerds or in any way falsely representing or leading consumers to believe that any Tops product is associated with Ferrara. The order also requires Tops to pay Ferrara for all profits derived from sales of the Nerds following the date it received a cease and desist letter from Ferrara. Finally, Tops must destroy any and all remaining Medicated Rope Nerds and send a notice to any vendors selling the product that doing so is illegal.

Key Takeaways

Tops’ actions are a storybook example of “what not to do with your cannabis labeling and marketing.” First, do not design your label to be confused with the original non-cannabis label. (In fact, so similar are the products that a food shelter in Utah handed them to kids thinking they were original Nerds, and the kids ended up in the hospital). Second, though not at issue here, this case is a reminder for advertisers to hew to the strict California labeling requirements for cannabis, including by not creating labels that are attractive to children.

#designerdupe? Apparel Trade Association Report Takes Down New Trend

A new report by the American Apparel & Footwear Association (AAFA) alleges that certain social media influencers may play an important role in the spread of apparel counterfeits. These so-called “dupe influencers” use their fame to promote fakes—mostly knockoff luxury goods—online.

The report by the national trade association of the apparel industry highlights how these influencers market and glamorize the purchase of counterfeit luxury goods by filming “dupe hauls” and tutorials, promoting dupe sites and products, and generally advertising “how to shop and find dupes” online.

As the report notes, litigation involving social media dupe influencers is on the rise. Late last month, Gucci sued an individual who allegedly used social media platforms to sell counterfeit products.

The AAFA proposes a few possible solutions in the report. First, it says social media platforms should continue to “clean up their sites.” The AAFA notes that the platforms have undertaken “significant efforts” to fight counterfeit sales on their sites, including implementing multiple “proactive features” to address the problem, and urges them to do more. According to AAFA, “online platforms need to recognize that this is a fast-growing problem and take proactive measures against the advertisement and facilitation of the sale of counterfeit goods.”

The AAFA also says platforms should block problematic hashtags like #designerdupe or #brandnamecopies (though the report acknowledges that influencers are then likely to move on to other hashtags in a sort of whack-a-mole situation, which will necessitate constant monitoring of new hashtags). Relatedly, the report recommends that platforms block targeted ads from websites selling counterfeit products that pop up when users search for dupes on social media.

The report also recommends that dupe influencers themselves improve their understanding of the counterfeiting problem. AAFA points out that some influencers do not seem to understand that the goods they are promoting are fake. Here the AAFA speaks directly to influencers, telling them they have an “obligation” to explain to followers the difference between a counterfeit and a legitimate product and to communicate clearly about the problems that counterfeiting entails.

Finally, the report emphasizes the importance of educating consumers about counterfeits and the adverse consequences of purchasing counterfeit products. AAFA notes that the goods may be low quality and that purchasers of counterfeits may be susceptible to being scammed by unscrupulous sellers who use deceptive sales tactics. AAFA also observes that some influencers have begun to warn followers of the problems presented by counterfeits, including possible associations with child labor and other illegal activities.

Key Takeaways

That the AAFA issued this report at a time when social media companies are stepping up to address promotion of counterfeit products speaks to the increasing prevalence of the problem and to the desire of social media companies to keep their sites free of counterfeiting.

Strawberry? More Like Pear, Claims New False Advertising Suit Filed by the “Vanilla Guy”

A newly filed class action lawsuit claims that Kashi falsely advertises its strawberry “Breakfast Bars” by not divulging in its marketing that they are actually made mostly with pear and apple rather than strawberry, which it calls the “most expensive of the major fruits.”

According to the complaint, the product’s marketing is misleading because it promises strawberries and delivers apples and pears. Argues plaintiff, everything from the juicy-looking strawberries on the front of the product packaging to the product name “Ripe Strawberries-Soft-Baked Breakfast Bars” gives consumers the impression that the “fruit filling contains more strawberries than it does.”

Reasonable consumers would expect the bars to contain mostly if not entirely strawberry for the fruit filling, plaintiff contends, but the ingredients list reveals that “strawberry puree” is only the last of three fruit ingredients, behind pear and apple, and that the product even contains more tapioca than it does strawberry.

Plaintiff argues that consumers rely on Kashi to “honestly describe the components and features of the [p]roduct…[and Kashi] misrepresented the [bars] through affirmative defenses, half-truths, and omissions.” This violates the Illinois consumer protection statute and breaches common law and statutory warranties, asserts plaintiff.

The claims are based primarily on two factual allegations. First, according to the complaint, consumers prefer strawberries. Part of the reason for this preference is that strawberries are also healthy, says plaintiff. The complaint goes into significant detail to make the case that strawberries “protect your heart, increase DHL” and “are an excellent source of vitamin C.” (However, the complaint does not allege that Kashi marketed the product as healthier because it contained strawberries.)

Second, the market also prefers strawberries, says plaintiff. The fruit is significantly more expensive than pears or apples. Yet, plaintiff also contends that “a soft-baked breakfast bar filled with strawberry fruit ingredients or even predominantly strawberry…is not a rare or pricey delicacy,” and that it would not have cost Kashi much to add the strawberry.

Key Takeaways

The law firm responsible for the recent wave of “vanilla” litigation has turned its sights on strawberries. Time and the court system will determine if this lawsuit—and others in the same vein which may be filed—goes anywhere.

Unlike some false advertising lawsuits which have successfully argued that the reasonable consumer cannot be expected to know the content of ingredients lists with complicated chemical names or opaque signifiers for food flavoring (such as the words “natural flavor” as a signifier of chemical vanilla flavoring) to avoid dismissal, plaintiffs in this case might have a tougher time making headway given the clarity of the ingredients list.

Source: https://www.lexology.com/library/detail.aspx?g=818e792f-314d-463a-add2-6a2a1aaf25b4

May 24, 2021 Harry Hall