Monthly Archives: November 2015

“Virtually All” Made in The USA Guidance

made-in-usa-2

**Federal Trade Commission Staff Provide Guidance on Regulations Proscribing the “All or Virtually All” Standard for Made in the USA labeling** . . .                                                                                                                                                                                         

The Federal Trade Commission (FTC) has a role in regulating “Made in the USA” labeling.  15 U.S.C. § 45aSee prior post.  Under FTC regulation if “virtually all” of a product is made in the United States, then it is permissible to use the Made in the USA label.  62 FR 63756-01 at pp. 63757, 63764–65.  Unfortunately, this “virtually all standard” is vague – and the FTC has declined to come up with a bright line test for manufacturers.  Id.  The FTC’s Enforcement Policy Statement informs that in making a “virtually all” determination, the FTC will look at factors such as:  (1) the portion of manufacturing costs attributable to foreign parts and processing; (2) whether the foreign parts and processing are significant to the final product; and (3) how far back in the manufacturing process the foreign content is.  Even with this broad guidance, a case by case analysis is needed on “Made in the USA” labeling.

Fortunately, when the FTC closes an enforcement proceeding on a case, it often provides a closing letter to the target.  Such a closing letter may contain an explanation of the findings of the investigation and the rationale for why the case was closed.  A number of these FTC Closing Letters are available on the FTC website: https://www.ftc.gov/enforcement/cases-proceedings/closing-letters-and-other-public-statements/staff-closing-letters.  Recent  FTC Closing Letters regarding “Made in the USA” labeling have highlighted the importance of the second factor (see above) — whether foreign parts and processing are significant to the final product.  With respect to Loctite glue made by the German multinational Henkel, the FTC looked at the cost and function of cyanoacrylate (an ingredient imported and added to the U.S. manufacturing of the glue).  Because both the cost and function of cyanoacrylate were significant in the glue, the FTC decided that it was inappropriate for Henkel to use an unqualified “Made in the USA” label.  A similar finding was made with respect to Gorilla Glue earlier this year.  In another recent closing letter concerning the product Spray Pal (a cloth diaper cleaning device) that included a foreign-made clip used to fasten the diaper to the device, the FTC determined that, while the cost of the clip may be small relative to overall manufacturing costs, it nevertheless was essential to the function of the product.  As such, an unqualified claim of “Made in USA” was not permissible.  Companies need to be mindful that the FTC is not looking merely at the cost factor.  If an inexpensive foreign component is integral to the design and function of the product, it may be significant enough to  negate a claim of “Made in the USA.”

 

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FDA Seeks All Natural Comments

Green apple with stethoscope

**Are we a step closer to solving the All Natural problem?**

There are problems faced by “All Natural” or “100% Natural” defendants.  See prior post. A specific problem for defendants is the inability to rely on any definitive Food and Drug Administration (FDA) guidance.  The FDA’s position has been clear – it “has not promulgated a formal definition of the term ‘natural’ with respect to foods.”  See Letter Leslie Kux, Assistant Commissioner for Policy, Food and Drug Administration, to the United States District Court, Northern District of California, dated January 7, 2014.  To date the FDA has created only an “informal policy statement.” Janney v. Mills, 944 F. Supp. 2d 806, 812 (N.D. Cal. 2013) (citing 58 Fed. Reg. 2302–01).  If there was federal regulation – defendants would have clarity in their positions – and state law claim would likely be pre-empted, see e.g., Lam v. General Mills, Inc., 859 F.Supp.2d 1097, 1102–03 (N.D.Cal.2012). In the absence of regulation, the question of what “natural” means and whether a product’s labeling violates the law is currently governed by an unwieldy “reasonable consumer standard”.  Williams v. Gerber Prods. Co., 552 F.3d 934, 938 (9th Cir.2008) citing Freeman v. Time, Inc., 68 F.3d 285, 289 (9th Cir.1995)). This lack of objective standards is one of the reasons why the litigation has been able to take hold – at the same time as “natural” labeled food has boomed (the Washington Post reports that nearly $40.7 billion worth of food items in the U.S. has some labeling of this type). Fortunatley, the FDA has changed tack – responding, inter alia, to requests from Federal Courts and a citizen petition from the Grocery Manufacturers Association it has published a Federal Register notice asking for information and comments on the use of the term “natural” in food labeling. Specifically, the FDA asks for information and public comment on questions such as: whether it is appropriate to define the term “natural,”; if so, how the agency should define “natural,”; and how the agency should determine appropriate use of the term on food labels.  Notably, the FDA notes that it may be looking to expand its policy on natural foods to include – not only the synthetic/artificial divide, but also questions of whether pesticide free and manufacturing processes should be part of the equation.  The FDA is accepting public comments beginning on November 12, 2015 and finishing February 10, 2016.  Comments may be submitted electronically (under FDA-2014-N-1207).

 

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Natural Tobacco?

**Class Action Bid in Florida Against “Natural” Tobacco Maker Accused of Falsely Advertising the Natural Benefits of its Products** . . .                                                                                                                                                                                                           

Past “All Natural” class action suits, see prior post, cover various products but the plaintiffs’ allegations are the same – the consumers were allegedly duped because they believed the products labeled “natural” were healthier for them.  Surely, this logic cannot apply to cigarettes — a product consumers have known for decades to have very little, if any, redeeming health qualities?  Hence, can plaintiff’s counsel allege with a straight face that his client bought Santa Fe Natural Tobacco Company cigarettes for their health and safety?  That is the question raised by the complaint bought in the United States District Court, Southern District of Florida in Sproule v. Santa Fe Natural Tobacco Co., No. 0:15-cv-62064-JAL (October 14, 2015).  Certainly a case to watch.

 

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Stop the Press – Lawyers Fighting Over Fees

**Plaintiffs’ Counsel for Class of Student Athletes Seeks Sanctions Against Late-in-the-Game Class Objectors’ Bid to Derail Settlement in Landmark NCAA College Football Case in the Northern District of California** . . .                                                                                                                                                                          

One of the blockbuster class actions cases of the last few years appeared to be settled in August of this year when Judge Wilken approved the settlement motion between Electronic Arts Inc., the National Collegiate Athletic Association and a class of former players whose names and likenesses were “licensed” (without compensation to the players) for use in video games.  O’Bannon v. National Collegiate Athletic Association, 4:09-cv-03329-CW, ECF No. 429 (N.D. Cal. Aug. 19, 2015).  Plaintiff’s counsel sued on the basis that the players’ “right of publicity” was unlawfully expropriated – and after 6 years of litigation – a $60 million settlement was agreed.  Id.  (This settlement should not be confused with the bifurcated issues of anti-trust violations by the NCAA also bought in this suit – which has recently been affirmed in part by the Ninth Circuit in favor of the athletes.)  Of the $60 million settlement in this “right of publicity” suit – the named class representatives (including name lead Plaintiff UCLA great Ed O’Bannon) will get incentive awards ranging from $5,000 to $15,000 and the balance split amongst approximately 20,000 college athletes who made claims.  Of course that is after attorney fees which were set at $17.8 million.  But not so fast.  Plaintiff counsel still had to deal with objectors who filed an appeal to the approval with the Ninth Circuit.  O’Bannon v. National Collegiate Athletic Association, No. 15-16860 (9th Cir. October 10, 2015).  On October 28, 2015, Plaintiff’s counsel made a pre-emptive strike: filing a scathing motion for sanctions.  Id. at ECF No. 9. The sanction motion makes a number of allegations against Objectors’ counsel – leaving little to the imagination – (and is worth the read).  Interestingly, Plaintiff counsel did not just seek dismissal of the appeal – they sought an award of sanctions – and engaged an expert to measure the “cost” of the delay in distributing the $60 million caused by objectors’ appeal.  The expert came up with this cost – $55,109.00.  Unsurprisingly, a week after Class counsels’ motion for sanctions Objectors stipulated to withdraw their appeal.

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