False Advertising

Lumosity Tagged for $2 million by FTC

False Advertising, FTC

234** Maker of “Brain Training” Subscription Service Settles with FTC on Allegations that it did not Have the Science to Back Up its Claims of Cognitive Benefit ** . . .    

By: Brent E. Johnson 

                                                                                                                                                                                                                                                           The Federal Trade Commission has agreed to a settlement with Lumosity Inc., with respect to the company’s well known and widely advertised “brain training” program – after the FTC filed a complaint alleging Lumosity’s ads touting the cognitive benefits associated with the products were scientifically unfounded.  Federal Trade Commission v. Lumos Labs, Inc., No 3:16-cv-00001-SK (N.D Cal. Jan. 4, 2016) at ECF No. 1 (Compl.).  The settlement terms include a payment by Lumosity of $ 2 million and a requirement to notify customers who signed up on an auto-renewal plan between January 1, 2009 and December 31, 2014 about their ability to cancel their subscription.  Id. at ECF No. 10 (Order).  The FTC has issued a public statement about the settlement stating, in part: “Lumosity preyed on consumers’ fears about age-related cognitive decline, suggesting their games could stave off memory loss, dementia, and even Alzheimer’s disease . . . [but]. . .  simply did not have the science to back up its ads.”  The FTC complaint also alleges that Lumosity’s consumer testimonials featured on its website had been, in some cases, pay-to-play – i.e., were solicited through contests that promised significant prizes, including a free iPad, a lifetime Lumosity subscription, and a round-trip to San Francisco.  Id. at ECF No. 1 (Compl.) ¶¶ 19 – 21.  The settlement order requires the company and its officers to have competent and reliable scientific evidence before making future claims about any benefits for real-world performance, age-related decline, or other health conditions.  Id. at ECF No. 10 (Order) at 7 – 9.  The order also imposes a $50 million judgment against Lumosity – suspended upon payment of $2 million to the FTC.  Id. at 10 – 12.

False Advertising to the Dogs

Consumer Class Action, Direct Competitor Lawsuit, False Advertising, Multi-Panel Litigation, , ,

**Record Payout By Blue Buffalo in Multi District Pet Food Class Settlement sparked by Nestle Purina Competitor Law Suit** . . .                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

By: Brent E. Johnson                                                                                                                                       

Competitor lawsuits give class action plaintiffs a helpful leg-up.  See Prior post.  The Blue Buffalo matter is a good case in point.  Blue Buffalo makes pet food which was advertised, amongst other things, as not containing animal by-products or grain.  According to Blue Buffalo’s main competitor Nestle Purina that advertising claim is not true.  Nestlé Purina PetCare Company v. Blue Buffalo Company Ltd., Civil Case No. 4:14-cv-008590 (E.D. Mo. May 6, 2014) Compl. ECF No. 2, see also First Amended Compl. (Nov. 13, 2014) ECF No. 104.  Nestle Purina’s claim was that its own lab testing of the Blue Buffalo’s products found – contrary to the advertising – both poultry by-products and grain.  And indeed, during discovery, Nestle Purina claims that it found smoking gun emails between Blue Buffalo’s suppliers and brokers about by-products in the supply chain (and unfortunately for Blue Buffalo the emails literally used the phrase “smoking gun”).  See 4:14-cv-00859-RWS, Doc. #. 77-1 (E.D. Mo. Oct. 10, 2014).  The inevitable consumer led class actions ensued (using the Nestle Purina claims and findings as their model)–: Fisher et al v. The Blue Buffalo Company, Ltd. et al, Case No. 14-cv-5937 (C.D. Cal.); Teperson et al v. The Blue Buffalo Company, Ltd et al, Case No. 14-cv-1682, (S.D. Cal.); Delre et al v. Blue Buffalo Co., Ltd, Case No. 14-cv-768, (D. Ct.); Renna et al v. Blue Buffalo Co., Ltd., Case No. 14-cv-833, (D. Ct.); Mackenzie et al v. The Blue Buffalo Company, Ltd., Inc., Case No. 14-cv-80634, (S.D. Fl.); Stone et al v. Blue Buffalo Company Ltd., Case No. 14-cv-520, (S.D. Ill.); Keil et al v. Blue Buffalo Company, Ltd., Case No. 14-cv-880, (E.D. Mo.); Hutchison et al v. Blue Buffalo Company, Ltd., Case No. 14-cv-1070, (E.D. Mo.); Andacky et al v. The Blue Buffalo Company, Ltd., Case No. 14-cv-2938, (E.D. N.Y.).  Blue Buffalo in turn counterclaimed against Nestle Purina asking for an injunction to stop Nestle Purina from its advertising attacking Blue Buffalo’s practices.  And when the “smoking gun” appeared, Blue Buffalo sued the third party companies who allegedly supplied it with by-product material.  The various class complaints were transferred after a Multi District Litigation Panel hearing to federal court in Missouri.  In re Blue Buffalo Co., Ltd. Marketing and Sales Practice Litigation Case No. 4:14-md-02562-RWS (E.D. Mo.).   On December 9, 2015 class settlement and class certification approval was filed.  ECF No. 159.  The court, preliminarily approved the certification and settlement a week later.  ECF No. 164.  The fairness hearing is set for May 19, 2016.  Nestle Purina is trumpeting the $32 million settlement as the “largest pet food class action settlement in history.” Interestingly, Blue Buffalo fought most of the litigation at the same time as listing its IPO.  The class action’s impact on the IPO is unclear – the shares gained 38 percent on the issue’s first full day of trading on the Nasdaq in July 2015.  That said, pursuant to the settlement Blue Buffalo will take a charge against Q4 2015 earnings of $32 million. In the third quarter, the company’s net profit totaled $27 million.