Source: https://www.consumeradvertisinglawblog.com/
Timestamp: 2019-04-19 07:20:54+00:00

Document:
Arnold & Porter has updated our handy, in-depth Consumer Product Safety Commission (CPSC) Desk Reference, which explains the notification requirements and the routes to a product safety recall under Section 15 of the Consumer Product Safety Act, and discusses penalties and injunctive relief for late reporting violations. The new information includes updates on civil penalties, reporting and recall trends, and a settlement by the Republican-controlled Commission of administrative litigation through which staff had sought to require a product recall. These developments and other issues addressed in the Desk Reference can have important implications for companies going forward.
Section 15 is a powerful enforcement tool for the Commission. CPSC has aggressively pursued multi-million dollar penalties for alleged late reporting and other violations. Moreover, helping to protect consumers and guarding a company’s brand reputation provide incentives for companies to identify and address potential safety issues quickly and effectively. All companies in the distribution chain should ensure that they understand the scope of Section 15 and have internal controls to identify, track, and analyze complaints and other information that may trigger a duty to notify CPSC.
We previously reported on the Federal Trade Commission’s (FTC’s or the Commission’s) efforts, commenced in 2012, to buff up its Guides for the Jewelry, Precious Metals, and Pewter Industries, 16 C.F.R. Part 23, (Jewelry Guides). By unanimous approval, the Commission has finally adopted amendments to the Jewelry Guides that reflect public comments.
Through its Jewelry Guides, the Commission assists marketers, retailers, and other members of the jewelry industry in avoiding making claims considered “unfair” or “deceptive” under Section 5 of the FTC Act, 15 U.S.C.§ 45. Although they are not legal obligations, the Jewelry Guides provide those “in the business” with very useful guidance as they shape their marketing and advertising strategies. The Jewelry Guides apply to a sparkling array of products, including gemstones, precious metals such as gold, silver and pewter, and pearls (natural, cultured, and imitation). They specify, among other things: the proper meaning of the word “diamond”; when a product can appropriately be described as “hand-made”; how a product’s gold or silver content should be marketed; and many other facets of jewelry advertising.
Although the amendments are extremely extensive, the Commission has published with the amendments a comprehensive, well-organized, and easy-to-follow Statement of Basis and Purpose, which examines the comments made and the rationale for each of the amendments.
We have updated our handy, in-depth CPSC Desk Reference, which explains the Section 15 notification requirements and the routes to a product safety recall, and discusses penalties and injunctive relief for late reporting violations. The new information includes case updates concerning a late reporting enforcement action in the Spectrum case and a challenge to CPSC’s recall order in the Zen Magnets case, both of which could have important implications for companies going forward.
In the last several years, CPSC has been aggressively pursuing multi-million dollar penalties for alleged late reporting and other violations. Moreover, helping to protect consumers and guarding a company’s brand reputation remain powerful incentives for companies to identify and address potential safety issues quickly and effectively. It is more important than ever for companies to ensure that they understand the scope of Section 15 and have internal controls in place to capture, track, and analyze complaints and other information that may trigger a duty to notify CPSC.
The US Consumer Product Safety Commission (CPSC) is a small federal agency with a big job: protecting consumers from unreasonable risks of injury from more than 15,000 types of products. With a budget request for fiscal year 2019 of approximately $123 million and 538 employees — tiny by federal government standards — CPSC uses safety data submitted by companies pursuant to the notification requirements in Section 15 of the Consumer Product Safety Act (CPSA) to help carry out the agency’s mandate.
Further, following implementation of the Consumer Product Safety Improvement Act of 2008 (CPSIA), which expanded the Section 15 requirements and increased dramatically the maximum penalties for noncompliance, CPSC has been aggressively pursuing multi-million dollar penalties for alleged late reporting and other violations. Moreover, helping to protect consumers and guarding a company’s brand reputation remain powerful incentives for companies to identify and address potential safety issues quickly and effectively. It is more important than ever for companies to ensure that they understand the scope of Section 15 and have internal controls in place to capture, track, and analyze complaints and other information that may trigger a duty to notify CPSC.
We have published a handy, in-depth Desk Reference that first explains the Section 15 notification requirements, including the broad scope of CPSC’s jurisdiction, and then discusses routes to a product safety recall, reporting and recall trends, and penalties and injunctive relief for late reporting.
On September 8, 2016, we reported that the Consumer Product Safety Commission (CPSC) had issued a notice of proposed rulemaking that would reduce the burden of testing for phthalates in children’s toys and child care articles. Phthalates are commonly used to soften plastics and as components of paints and adhesives. Under the final rule issued on August 30, 2017, CPSC has determined that the following plastics made with any additive specified in the rule would not contain prohibited phthalates, and therefore third party laboratory testing for the prohibited phthalates will no longer be required: Polypropylene (PP), Polyethylene (PE), Acrylonitrile butadiene styrene (ABS), High-impact polystyrene (HIPS), and—added to the final rule—General Purpose Polystyrene (GPPS), Medium-Impact Polystyrene (MIPS), and Super High-Impact Polystyrene (SHIPS).
Under the Consumer Product Safety Improvement Act of 2008 (CPSIA), manufacturers (including importers) are required to certify, based upon testing by an accredited third party lab accepted by CPSC, that a children’s product complies with all CPSC-enforced standards before the product is imported or distributed in commerce. Among the CPSC-enforced standards for which such third party lab testing is required is the 0.1 percent limit on the following phthalates in accessible components of children’s toys and child care articles that are plasticized or may contain phthalates: di-(2-ethylhexyl) phthalate (DEHP), dibutyl phthalate (DBP), benzyl butyl phthalate (BBP), diisononyl phthalate (DINP), diisodecyl phthalate (DIDP), and di-n-octyl phthalate (DnOP).
This new rule does not change the underlying obligation to comply with the phthalates prohibition and certify compliance of children’s toys and child care articles with the prohibition, but the rule should provide manufacturers and importers some relief from the required testing.
The effective date for the rule is September 29, 2017.
People are willing to do anything to improve their memory (especially if it means drinking champagne and eating dark chocolate!). It’s no surprise that dietary supplements that are intended to improve memory are a booming market. According to a recent report, the surprise is how little consumers know about who regulates the promotion of such products.
On June 15, the Government Accountability Office (GAO) released a report recommending that the U.S. Food and Drug Administration (FDA) and Federal Trade Commission clarify their roles in overseeing marketing of memory supplements on the internet. Generally speaking, the FDA and FTC share oversight of dietary supplement marketing and claims, based on a 1971 Memorandum of Understanding (MOU) between the agencies. Under the MOU, FDA has primary jurisdiction over labeling, while FTC exercises primary jurisdiction in regulating the truth or falsity of all other advertising.
The GAO found that while memory supplement advertising is primarily on the internet (as opposed to other mediums, such as TV or magazines), consumers and other stakeholders are either unaware or unclear about how the agencies share oversight of internet advertising.The FTC has never published formal guidance on this issue (although it has discussed how to effectively format disclosures in internet advertising in the FTC’s Dietary Supplement: Advertising Guide for Industry, .COM disclosures, and other guidance), and the FDA’s guidance is limited to a 2007 Dear Manufacturer letter on food labeling (recognizes that company websites that promote a regulated product and allow a purchaser to purchase the product directly from the website are likely to be considered "labeling"). The GAO found that the lack of clarity could risk that consumers would not report issues to the proper agency, and/or that it could take longer for the appropriate agency to learn about a potential problem.
The FDA and FTC are now working to develop and provide additional guidance to consumers, which delineates the agencies’ differing roles in overseeing dietary supplement marketing on the internet. And the GAO’s report suggest that increased scrutiny of such claims could be forthcoming. Sellers of memory supplements should beware of this report and the likelihood that forthcoming FDA and FTC guidance can increase the level of consumer complaints submitted regarding the products.
A federal district court sustained the validity of the FTC’s informal opinion letter that brings telemarketing calls that utilize soundboard technology within the purview of the Telemarketing Sales Rules (TSR) and rejected a First Amendment challenge to the TSR on summary judgment.
The TSR prohibits telemarketing calls that deliver prerecorded messages, commonly referred to as “robocalls,” without the call recipient’s prior written consent. As we previously reported, the FTC issued a Staff Opinion Letter in November 2016 in which the FTC determined that telemarketing calls that use soundboard technology are akin to robocalls and therefore are subject to the TSR. This was a reversal from the FTC’s prior determination in 2009 that telemarketing calls utilizing soundboard technology were outside the scope of the TSR. The FTC’s new guidance on soundboard technology went into effect on May 12, 2017.
Second, the Soundboard Association argued that the November 2016 letter violated the First Amendment because the TSR contains an exception in which a call recipient’s prior written consent is not required for robocalls soliciting donations from a prior donor or member of a charity, but prior written consent is required if the call recipient is a non-member and has not previously donated to that charity. This distinction, according to the Soundboard Association, constitutes an impermissible regulation on the content of speech. The district court rejected this argument reasoning that the prior written consent exception was not a regulation on the content of speech, but rather a regulation dependent on the relationship between the caller and the recipient to which intermediate scrutiny applies. The court found that the November 2016 letter satisfies intermediate scrutiny because it advances the government’s interest in protecting privacy while allowing charities to freely make robocalls to those who have effectively indicated their consent to receive such calls (i.e., their members and past donors) and leaving charities alternative means for contacting first-time donors (e.g., advertising, direct mail, in-person solicitations, etc.).
The Soundboard Association has appealed the district court’s decision, which means the fight over the validity of the FTC’s November 2016 letter is not over yet. But for now, the FTC’s guidance on soundboard technology remains effective pending the appeal, and telemarketers using soundboard technology should align their practices with the FTC’s new guidance.
EPA has officially announced a wee bit of regulatory relief by handing down a 90-day extension of the effective date on an information gathering rule concerning nanoscale chemicals the Agency had issued in the closing days of the Obama administration. The announcement, however, did not contain the full-throated regulatory relief many had come to hope might be meted out in the form of a complete revocation of the rule by the incoming political appointees from the Trump administration.
On January 12, 2017, EPA issued in final form a reporting and recordkeeping rule issued pursuant to the Toxic Substances Control Act (TSCA). 82 Fed. Reg. 3641. [For more on the announcement of the final nanoscale chemicals reporting rule see our previous advisory.] TSCA was amended in 2016, forty years after its enactment, following a years-long bipartisan effort that produced the first major piece of environmental legislation to emerge from Congress in more than 20 years. Ironically, the nanoscale chemicals reporting rule was proposed by EPA well in advance of the 2016 amendments and is grounded on Section 8(a) of TSCA, a provision not substantially touched by the 2016 amendments. The final rule requires reporting to EPA to both identify and to provide further production and commercial information on chemical substances when they are manufactured, imported or processed in the US at the nanoscale. The effective date of the final rule was delayed from May 12, 2017, to August 14, 2017.
The Eagles’ Hotel California Case: Who Will Win “In the Long Run”?
There may be “plenty of room” at the Hotel California in Todos Santos, Mexico, but The Eagles aren’t checking in any time soon.
While the Eagles have just filed suit, this case potentially raises a host of issues and is thus one to watch. For example, who really came first? Will the Mexican hotel counterclaim, alleging that it has prior rights in the name? The defendant hotel actually began using “Hotel California” back in the 1950’s, long before Don Henley and Glenn Frey founded The Eagles and became “The New Kids in Town”. But did the defendant abandon any trademark rights it acquired in the hotel’s name through nonuse? Under the U.S. federal trademark statute, the Lanham Act, abandonment of a trademark may be presumed after three years of non-use. See 15 U.S.C. §1127. The apparent long hiatus between when the defendant hotel first used “Hotel California”, and when the new owners took up the name, suggests that any priority argument the defendant asserts would not succeed.
Then there is the jurisdictional issue: Is it even clear that the Lanham Act applies to what the defendant hotel in Todos Santos calls itself, given that it is located in Mexico?? The complaint alleges that the hotel has solicited business in the Central District of California. In similar cases, courts have found south-of-the-border establishments within the reach of U.S. trademark law, and this court may do so too, on the theory that the U.S. public has frequented the hotel.
The scope of the claimed infringement is also an issue. “Hotel California” is, of course, the band’s most famous album and song title -- arguably The Eagles’ greatest hit. In general, titles of single works, such as a book or song title, are not protected as trademarks. See generally 2 McCarthy on Trademarks and Unfair Competition § 10.4 (4th ed. Mar. 2017) (explaining that the titles of individual works may not be registered as trademarks). They may, however, be protected under the unfair competition laws, including Section 43(a) of the Lanham Act, 15 US.C. §1125(a). See EMI Catalogue P’ship v. Hill, 228 F.3d 56, 63 (2d Cir. 2000) (“Titles of works of artistic expression, including films, plays, books, and songs, that have acquired secondary meaning are protected from unfair competition under § 43(a)”). Interestingly, although the Eagles claim to have begun selling merchandise bearing the “Hotel California” mark as early as the 1970’s, the band does not hold any trademark registrations with the U.S. Patent and Trademark Office (PTO) for this mark, which would have conferred exclusive nationwide rights in the mark for the goods for which it were registered. Instead, it is the defendant that has sought registration for “Hotel California” with the PTO -- a registration that The Eagles have challenged.
Although this case is in its early stages, the Eagles will likely “Take it to the Limit” to protect their rights. So stay tuned.
The United States Government since 1930 has prohibited the import into the United States of goods “mined, produced, or manufactured wholly or in part” by convict, forced, or indentured labor. The sweep of this prohibition is potentially very broad. Approximately 21 million people around the world are currently subjected to forced labor, including millions of children. Enforcement of this prohibition was relatively rare until February 2016, when Congress, on a bipartisan basis, repealed the so-called “consumptive demand” exception to the import ban as part of the Trade Facilitation and Trade Enforcement Act of 2016. That exception had allowed goods into the United States, despite their production by forced labor, if the domestically produced supply of the goods was not sufficient to meet domestic demand for the goods.
Soda ash, calcium chloride, caustic soda, and viscose/rayon fiber from China (March 29, 2016).
Potassium products from China (March 29, 2016).
Stevia from China (June 1, 2016).
Peeled garlic from China (September 16, 2016).
This uptick in enforcement actions highlights the potential for increased enforcement of the prohibition against forced labor goods. It remains to be seen whether its current geographical focus on China expands to capture other countries as well.
The Trump Administration has emphasized the need to fight much more aggressively against “unfair” trade. President Trump and his team have been outspoken, both during the presidential campaign and in the first months of his term, about trade enforcement in general. This has applied to a number of US trading partners, with China as a particular focus.
The fact that China was the subject of all four of CBP’s most recent forced labor enforcement actions may therefore presage a potential new enforcement trend moving forward. The likelihood of active enforcement of this law is only enhanced by Congress’ recent attention to this issue, and the bipartisan consensus it reflects. This law may become one of the tools employed actively in that effort, and other countries, in addition to China, could become targets.
Importers of goods into the United States are advised to be aware of this issue and take actions to mitigate the risk of forced labor products in their supply chains. Importers may monitor US Government resources such as CBP’s list of all enforcement actions and the Bureau of International Labor Affairs’ list of goods and their source countries that raise concerns about forced or child labor. Many companies also review other publicly available information, including reports in the countries from which they import, comments by international organizations, press reports, and other data sources. They may draft and issue a policy against using forced labor in their supply chain, perform a supply chain audit and conduct due diligence on outside parties, and implement a strong anti–forced labor compliance program. It is important for importers to document these and other efforts clearly, to ensure there is a clear record of the company’s compliance in this area, and to help address inquiries by federal authorities, should any occur.
For a more full description of this issue, read our Advisory that can be found here.
*Licensed to practice law in Virginia; application pending in Washington, DC.
A word to those brand managers and marketers choosing new product names: for maximum trademark protection, select unusual or made-up monikers for your goods and services. A trio of recent decisions issued by the Central District of California in Reserve Media, Inc. v. Efficient Frontiers, Inc. et al., Case No. CV 15-05072 DDP (here, here and here), described in this blog, highlights the limited protection that merely descriptive -- as opposed to more imaginative --terms may enjoy.
Imagine if only one baker could make and sell “Pumpkin Nut Bread”, only one beauty company had the rights to “Lathering Soap”, or a sole drycleaner could offer “Clean and Pressed Shirts Daily”. These phrases, which merely describe the characteristics of certain products and services, would no longer be in the public domain, but instead would be co-opted by one manufacturer or seller -- something the trademark laws are intended to prevent.
A trio of recent summary judgment decisions out of the federal district court for the Central District of California illustrates the limited protection descriptive terms merit. Reserve Media, Inc. v. Efficient Frontiers, Inc. et al., Case No. CV 15-05072 (here, here and here). Efficient Frontiers, Inc. (EFI) marketed software products facilitating dining reservations under several brands including the word “Reserve”, such as “Reserve Interactive”, “Reserve Cloud”, “Reserve It”, “Reserve 2.0”, “Reserve Gateway”, and “Reserve Q”. Start-up Reserve Media later adopted “Reserve” and “Reserve for Restaurant” for software programs allowing consumers to book restaurant reservations through mobile devices or websites. EFI, smelling something suspect brewing in the kitchen, charged Reserve Media with infringing EFI’s marks. In turn, start-up Reserve Media sued for a declaration that it had not violated EFI’s trademark rights, claiming that EFI’s “Reserve” marks were not valid and protectable, but merely descriptive.
In a series of summary judgment decisions, the California district court agreed with Reserve Media in large part. While EFI prevailed in the parties’ most recent clash earlier this week, in which the court found EFI’s “Reserve Q” name distinctive, the court ruled, in two earlier decisions, that the bulk of EFI’s “Reserve” marks were merely descriptive. See decisions of November 28, 2016 and January 11, 2017. Specifically, in the first of these cases, the court ruled that EFI’s use of “Reserve Interactive” was not a valid and protectable mark. Likewise, in granting Reserve Media’s second summary judgment motion, the court found that of EFI’s use the phrases “Reserve It”, “Reserve Cloud” , “Reserve 2.0”, and “Reserve Gateway” were not protectable as a matter of law, but instead were merely descriptive.
In the first two cases, the district court applied two tests in reaching these conclusions. First, it asked whether or not use of the “Reserve” phrases at issue would require the public to use its imagination or make a “mental leap” to determine the product referenced by the supposed brand name; only if this were the case would the product name qualified as a trademark. Second, the court applied the competitors’ needs test, asking whether the would-be trademark owner’s competitors would need to use the same “trademark” to market their goods or services. If so, then the mark was likely descriptive. On both tests, the court found EFI’s uses of its “Reserve” phrases failed to qualify as trademarks. For instance, the court stressed that consumers need not exercise any imagination to connect “Reserve Interactive” with EFI’s restaurant reservation systems offered through computer programs, and that competitors would be hard-pressed to offer reservation systems under product names that did not include the word “reserve”. So, too, conferring exclusive trademark rights on EFI’s use of “Reserve Cloud” would risk excluding any competitor who wanted to create a cloud-based reservation system” from using that descriptive phrase.
The lesson of these “Reserve” cases? Brand Managers would be wise to steer clear of developing merely descriptive product names. Instead, they should consider devising brand names that require their consumer bases to exercise some thought or imagination, or, ideally, to create made-up words for their products or services.
In its decision last week in McGill v. Citibank, the California Supreme Court fired the latest salvo in the battle over arbitration clauses. In McGill, Citibank sought to compel arbitration of claims under California’s Unfair Competition Law (UCL), False Advertising Law (FAL), and Consumers Legal Remedies Act (CLRA) asserted by one of its customers. Citibank’s petition to compel arbitration turned on application of California’s Broughton-Cruz “rule,” which makes agreements to arbitrate claims seeking an injunction that would benefit the public at large (and not just benefit an individual consumer) invalid. Applying this rule, the trial court denied the petition to arbitrate the plaintiff’s claims for relief. The Court of Appeal reversed, finding that Concepcion preempts Broughton-Cruz. The California Supreme Court took the case, seemingly prepared to directly address the question of whether it views the Broughton-Cruz rule as still valid in light of Concepcion.
The Court avoided addressing that issue, however, by finding that the arbitration agreement at issue did NOT require arbitration of claims seeking an injunction that might benefit the public. Indeed, the Court determined that the agreement at issue precluded arbitrating such claims -- and further precluded customers from asserting such claims in court as well. In other words, the arbitration provision “purports to preclude [McGill] from seeking public injunctive relief in any forum.” That complete preclusion, the Court said, rendered the arbitration agreement invalid because California law prevents parties from waiving a right that is “established for a public reason.” Since the public injunctive relief provisions of the UCL and CLRA are intended for the public benefit, the Court found that they cannot be waived, and the arbitration provision that stopped the customer from seeking such relief in any forum was improper.
On March 9, 2017, the U.S. Food and Drug Administration (FDA) held a public meeting to seek stakeholder input on its plan to update the regulatory standards for using “healthy” as an implied nutrient content claim in human food labeling. The meeting follows FDA’s announcement, during the waning days of the Obama Administration, that delayed the close of the comment period on its September 2016 Request for Information for another 90 days, until April 26 (which we discussed here).
FDA’s efforts to redefine “healthy” responds, in part, to KIND LLC’s December 2015 Citizen Petition, which was submitted following FDA’s 2015 Warning Letter and scrutiny of the company’s compliance program (see here and here). At the public meeting, KIND advocated for FDA to change the regulatory standard to focus on the health benefits of whole foods, such as salmon, nuts, and olives, rather than on their nutrient content (e.g., limits on total fat per serving, which result in none of the aforementioned foods meeting the current criteria for a “healthy” nutrient claim). Other panelists also recommended a focus on whole foods, noting that while many processed and packaged foods may bear labels claiming they are “healthy,” raw, unaltered fruits and vegetables typically are not labeled at all -- but perhaps should be, given FDA’s mandate to improve public health.
Clinical guidelines have changed since “healthy” was first defined in 1993. A new focus on the presence of added sugar and avoidance of allergens such as gluten has emerged, and FDA has proposed new targets for sodium content. Alternatively, some interest groups recommended that FDA create a more flexible approach with exceptions for certain types of products, suggesting that chicken livers, avocados, specialty foods processed by small enterprises, and even bottled water might qualify for exceptions. Another group of stakeholders recommended that FDA eliminate the definition of “healthy” altogether, as they believe that the term is overly broad and inflexible, and therefore meaningless, to both consumers and the food industry.
Breakout sessions at the public meeting discussed both the food-based and nutrient-based standards as potential policy options, with FDA staff apparently favoring a hybrid approach. Many details remain open for debate, including the nutrients (and quantities of them) that FDA should include in a new standard, and how best to distinguish whole foods and ingredients that are derived from whole foods (e.g., fresh apples… and dried apples? Applesauce? Apple juice? Apple pie?) Other major themes that emerged include the need to align the FDA’s regulations with other government initiatives to simplify compliance, and to encourage investment in innovative products that are “healthy” but also meet consumers’ preferences for taste, price, and convenience.
The decision to update the definition is not without controversy, and while there is an emerging consensus on some issues, the path forward for FDA’s policy-making activity is presently unclear. FDA has released guidance stating that the Agency intends to apply enforcement discretion for foods that bear “healthy” labeling and exceed the limits for total fat, provided that mono- and polyunsaturated fats are present in larger amounts than saturated fats. FDA also plans to exercise enforcement discretion for foods rich in potassium or vitamin D, despite their absence from the current regulations.
Based on the discussion at the public meeting, it could be some time before new regulations will be proposed, and there is still ample time to influence the agency’s thinking. But FDA’s focus could quickly shift over the coming months with a new Commissioner. And it is reasonable to expect that drafting new regulations may be a lower priority than eliminating existing ones.
We recommend that you read this blog post from Arnold & Porter Kaye Scholer's Digital Health Download blog, a post that provides a summary and perspective on the January 23 Federal Trade Commission (FTC) report regarding the increased incidence of cross-device tracking. The report, which follows a November 2015 FTC workshop on cross-device tracking, sheds light on the privacy concerns raised by the practice and alerts companies engaged in cross-device tracking of certain best practices for avoiding potential violations of applicable law and regulations.
On January 17, 2017, FDA issued a draft guidance entitled “Medical Product Communications That Are Consistent With the FDA-Required Labeling—Questions and Answers” that should be on the reading list for every manufacturer engaged in the marketing of consumer healthcare products. The guidance addresses how FDA will treat medical communications that present information that is not contained within the FDA-required labeling of a product but is, nonetheless, “consistent with the FDA-required labeling” and, in pertinent part, discusses (1) specific examples of the types of communications that FDA would consider to be “consistent with” the FDA-required labeling (e.g., claims regarding the mechanism of action for a product or the product’s onset and duration of action), (2) how FDA will exercise its enforcement discretion for such communications and (3) general (but not comprehensive) recommendations to companies wishing to communicate information that is consistent with the FDA-required labeling in a truthful and non-misleading way.
The Draft Guidance also offers several recommendations about the types of evidentiary support that, in FDA’s view, are required to substantiate communications that are consistent with FDA-required labeling. Notably, the examples provided by FDA in the draft guidance document reflect a shift away from strict application of the “substantial evidence” test to a more flexible standard that rests on disclosure of context and material limitations on underlying study design. In this respect, the Draft Guidance is arguably closer to standards applied by the FTC to health product claims, as well as the PhRMA-BIO principles on responsible communications to health care professionals issued last Summer. For more information about the Draft Guidance, we invite you to read our recent advisory on the topic, here.
FDA released the draft “Medical Product Communications That Are Consistent With the FDA-Required Labeling—Questions and Answers” guidance in conjunction with two other very important documents that address product communications by manufacturers: (1) Memorandum: Public Health Interests and First Amendment Considerations Related to Manufacturer Communications Regarding Unapproved Uses of Approved or Cleared Medical Products; and (2) Drug and Device Manufacturer Communications with Payors, Formulary Committees and Similar Entities--Questions and Answers (see also our advisory on the guidance here).
It is possible that the Trump Administration could take different positions than (and, subsequently, alter course from) those taken in these documents. Collectively, however, the documents set forth FDA’s current positions on the First Amendment as it relates to manufacturer communications and offer companies an opportunity to reevaluate the types of claims they would like to make for their medical products in the context of FDA’s new guidance. The agency is accepting comments on each guidance until April 19, 2017.
In its final weeks, the Obama Administration has continued to implement its food labeling policies with full force. Over the holidays and within the first few days of the new year, FDA released two draft guidance documents clarifying key aspects of the Nutrition Facts and Serving Size Rules, confirmed the compliance date for calorie labeling on menus, and extended the comment period for the use of the term “healthy” on food labeling. We briefly discuss each development below.
On January 5, 2017, FDA released two draft guidance documents to help manufacturers comply with the sweeping changes to conventional food and dietary supplement labels under the Nutrition Facts and Serving Size final rules. See our prior post here for an analysis of the new requirements, which were finalized on May 27, 2016.
The second draft guidance document provides examples of products that belong in each of the Reference Amounts Customarily Consumed (RACCs) per Eating Occasion product categories. The guidance is split into two tables: (1) RACCS per Eating Occasion for foods for infants and young children ages one through 3 years; and (2) RACCs per Eating Occasion for individuals four years and older. The 31-page document goes into extensive detail, by for example, clarifying which crackers are considered “crackers that are usually not used as a snack” (e.g., melba toast) versus “crackers that are usually used as a snack” (e.g., peanut butter sandwich crackers).
Despite release of the latest guidance documents, it is possible that the Nutrition Facts and Serving Size final rules could be delayed or repealed by the incoming administration or legislatively. The Freedom Caucus, a faction of conservative House Republicans, has requested that President-elect Trump undo both rules within his first 100 days in office, and the President-elect has previously advocated for rolling back FDA’s regulation of foods.
On December 30, 2016, FDA clarified that it is extending the compliance date for the menu labeling rule from December 31, 2016 to May 5, 2017.
As we previously discussed here, FDA promulgated regulations in December 2014 requiring certain restaurants and retail food establishments to post calorie counts on their menu or menu boards. In December 2015, however, Congress passed a policy rider prohibiting FDA from enforcing the menu labeling requirements until at least one year after issuing final guidance to help industry comply with the rule. FDA finalized the guidance on May 5, 2016, and announced its intention to extend the compliance date to one year thereafter. The December 30, 2016 final rule clarifies and confirms that the compliance date for the menu labeling requirements is May 5, 2017.
On December 30, 2016, FDA announced that stakeholders will have an additional 90 days to comment on the use of the term “healthy” on food labels.
As we discussed here, FDA began reassessing its standards for making a “healthy” claim in September 2016, in an effort to align labeling regulations with shifting dietary recommendations and in response to requests from stakeholders, including a citizen petition filed by KIND, LLC. After several requests for an extension, asserting that the 120-day comment period did “not allow sufficient time to develop meaningful or thoughtful comments,” the Agency agreed to extend the comment period from January 26, 2017 to April 26, 2017.
Encouraging Americans to eat healthier has been a key priority for the Obama Administration and is a signature achievement of the First Lady’s Let’s Move initiative. As such, industry will want to keep a close eye out for additional last-minute efforts to cement their nutrition and food labeling legacy.
Given that January 20 will bring a new Administration that has been openly resistant to several Obama Administration regulations, manufacturers will want to continue to look for congressional and administrative actions that aim to roll back or modify food labeling policies.
We thought our readers might be interested in a recent Untitled Letter that FDA sent to Zydus Discovery DMCC, the US agent/subsidiary of Indian pharmaceutical company Zydus Cadila, alleging that the company’s promotional claims for the product on YouTube, prior to obtaining FDA approval for the drug in the U.S., caused the product to be misbranded under the U.S. Federal Food, Drug, and Cosmetic Act.
Zydus launched the drug Lipaglyn™ (Saroglitazar) in India, which is approved by Indian regulators to treat Type 2 diabetes patients with hypertriglyceridemia or diabetic dyslipidemia, not controlled by statins alone. Saroglitazar is not, however, approved for any indication in the US. Zydus is currently studying the drug in Phase 2 trials (under an FDA-approved IND) for possible US indications in dyslipidemia and NASH.
The Dec. 21, 2016 Untitled Letter cites Zydus Discovery DMCC for preapproval promotion of Saroglitazar. (FN: FDA has requested a response to the Untitled Letter by Jan. 6, 2017. Cadila Healthcare Ltd., who markets the drug in India, noted on Wednesday that it has already taken responsive corrective action.) Specifically, FDA took the position that a YouTube® video posted by a Zydus representative, in which safety, efficacy, and superiority claims are made about Saroglitazar, renders the investigational drug misbranded under 21 USC 352(f). Among other things, FDA alleged that the YouTube content caused the drug to be misbranded because the content includes unsubstantiated compound-specific safety and efficacy claims (e.g., “novel, superior, dual acting” and “dual lipid and glycemic control”), associates these claims with the Lipaglyn proprietary name, and is cross-linked to a Lipaglyn promotional website. The cross-linked Lipaglyn.com promotional website was not access-restricted or user-limited in any way (e.g., with a “speed bump” or other viewer acknowledgement message). (FN: We note that in response to the Untitled Letter, a disclaimer that the drug is only approved in India now appears on the site). And, according to FDA, some of the claims in the YouTube video were also present in a branded Lipaglyn booth banner used by the company at the American Diabetes Association Scientific Sessions meeting this past June.
The Saroglitazar Untitled Letter is an important reminder of why FDA-regulated companies and their communications agencies need to continue to be sensitive to pre-approval promotion risks not only in traditional promotional channels, but also when developing web-based and social media content. Companies with global brands must take into account local marketing restrictions when developing global web and social media content. This is particularly important for companies conducting studies in the US on investigational compounds that have been approved in other jurisdictions. Pre-approval “pipeline” presentations, trial recruitment initiatives, investor communications, and disease awareness activities should all be subject to careful review to ensure that they do not run afoul of the regulatory requirements that govern the target audience. However, global marketing teams should not despair: often, creative web and other content design (e.g., thoughtful “redirect” messages, well-placed disclaimers, use of country-specific URLs, etc.) can be a way to artfully manage US regulatory expectations while also meeting global communication needs in a competitive business environment.
In 2008, the FTC amended the TSR to include new restrictions on the use of prerecorded messages in telemarketing, including the prohibition on certain telemarketing calls that “deliver a prerecorded message” without prior written consent. (See our prior post on the 2008 amendments).
In 2009, the FTC issued a Staff Opinion Letter (2009 Letter) to address the use of soundboard technology to make telemarketing calls. Soundboard technology allows a live agent to communicate with a call recipient by playing recorded audio snippets instead of using his or her own live voice. The 2009 Letter concluded that telemarketing calls using soundboard technology were outside the scope the 2008 amendments to the TSR “because a single live agent stays with the call from beginning to end, listens to every word spoken by the call recipient, determines what is heard by the call recipient, and has the ability to interrupt recordings and use his or her own voice to communicate with the call recipient if needed.” At that time, the FTC understood soundboard technology to be “virtually indistinguishable” from normal two-way conversations with live operators.
Now, however, FTC has issued a mea culpa on the issue and is revoking its 2009 Letter for three primary reasons.
Second, the FTC noted that it is has received numerous complaints from consumers about telemarketing calls utilizing soundboard technology since the issuance of the 2009 Letter. For example, consumers complained about not receiving appropriate responses to their questions, live operators no intervening when requested to do so, and calls that were terminated in response to questions.
Third, the FTC added that, because calls made using soundboard technology do indeed deliver a prerecorded message, such calls are covered by the plain language of the TSR.
The revocation of the 2009 letter will be effective as of May 12, 2017, rather than immediately, affording companies using soundboard technology time to come into compliance with the TSR’s provisions.
The revocation of the 2009 Letter, however, does not render all calls made using soundboard technology subject to the TSR’s restrictions. Some calls, such as purely informational calls, political calls, and calls from charities themselves, for example, do not fall under the TSR’s provisions.
The FTC’s decision to revoke its 2009 Letter is the latest development in the FTC’s continuing efforts over the years to combat telemarketing abuses. As previously reported by this blog, the FTC has pursued telemarketing scammers that target Spanish speakers has pursued “friends” of telemarketers (here), and even has held a contest soliciting ways to block illegal robocalls on landlines and mobile phones (here). It should also be noted that the FCC also has rules that align with the FTC’s TSR (we blogged about the FCC rules here).
Telemarketers that use soundboard technology, or similar methods, to make telemarketing calls should modify their business practices accordingly in light of the FTC’s new guidance.
On November 15, 2016, the Federal Trade Commission (FTC) released a new “Enforcement Policy Statement on Marketing Claims for Over-the-Counter (OTC) Homeopathic Drugs” memorializing its position that, (1) when reviewing substantiation for claims for homeopathic products, the FTC will apply the same legal standard that it applies to other OTC drugs and (2) in cases where the substantiation in support of the efficacy for a homeopathic product is less than what would be required for an OTC drug product, the FTC will require any advertising for the homeopathic product to include prominent disclosure of the limited evidence supporting the efficacy of the homeopathic product.
According to the FTC’s press release, the agency issued the Policy Statement in response to the “burgeoning mainstream marketing of OTC homeopathic products alongside other OTC drugs.” The FTC’s Policy Statement was informed by last year’s FTC workshop entitled “Homeopathic Medicine & Advertising,” and accompanied by a staff report that summarizes the results of the agency inquiry into the marketing and sale of homeopathic products.
Moving forward, FTC’s new enforcement policy is a signal that the agency will monitor the marketing of OTC homeopathic drugs more closely. Pursuant to the FTC Act, companies are required to have a reasonable basis for making product claims and the FTC has taken the position that in the case of health-benefit claims a reasonable basis requires competent and reliable scientific evidence. The FTC’s Policy Statement, however, notes its position that (1) for the vast majority of OTC homeopathic drugs, “the case for efficacy is based solely on traditional homeopathic theories and there are no valid studies using current scientific methods showing the product’s efficacy” and (2) as such, the marketing claims for these products are likely misleading, in violation of the FTC Act.
The FTC’s Policy Statement is the most recent development in the balancing act that has occurred in FDA and the FTC’s joint regulation of homeopathic products. While, all products that meet the definition of a drug under the Food, Drug, and Cosmetic Act are subject to regulation by the FDA, due to an explicit reference to homeopathy in the 1938 statute, FDA has generally permitted homeopathic products to remain on the market if their composition and claims are consistent with the tenets of homeopathy. Specifically, under FDA’s Compliance Policy Guide (CPG) addressing its approach to homeopathic products, FDA does not take enforcement action against drug products labeled as homeopathic and marketed without pre-market review and approval, provided that certain conditions are met regarding ingredients, labeling, prescription status, and good manufacturing practices). FDA has on a number of occasions sent warning letters to manufactures of homeopathic products who are not in compliance with the CPG’s conditions. Examples include letters sent to Nutri-Dyn Midwest, Inc. (January 15, 2016), HomeopathyStore.com (July 6, 2015), A Nelson & Co., Ltd. (July 26, 2012), Pacific Naturals (April 28, 2011), and Homeopathy For Health (June 8, 2010).
The FTC has also taken enforcement action challenging misleading claims for homeopathic products, but, as noted in the FTC’s Policy Statement, such challenges were rare (e.g., FTC complaints filed against HCG Diet Direct, LLC (January 7, 2014) and Iovate Health Scis. USA, Inc. (July 14, 2010)). The FTC’s issuance of this Policy Statement, however, is a clear indication that the FTC will be more active in monitoring and challenging the truthfulness and accuracy of health-benefit claims made for homeopathic products going forward.
For more information regarding the FTC’s scrutiny of homeopathic products, please see our prior post here.
*Licensed to practice law in Pennsylvania; application pending in Washington, DC.
On August 30, 2016, California approved an overhaul of Proposition 65’s longstanding warning regulations. The regulatory amendment finalizes significant changes to the decades-old “safe harbor” warnings that businesses have relied upon for their compliance programs and which have been incorporated in thousands of Proposition 65 settlement agreements. The amendment stems from Governor Jerry Brown’s 2013 initiative to reform Proposition 65, and it followed four different regulatory proposals that received numerous public comments.
The regulatory amendment makes critical changes to the language of Proposition 65 warnings and the methods by which warnings are communicated. Businesses that provide Proposition 65 warnings, either under their own compliance programs or under a settlement agreement, will need to revisit their existing warnings and ensure future warnings are in compliance.
Please join our panel of experienced Proposition 65 attorneys and policy professionals to understand the significance of these major developments and their potential impact on your company’s compliance efforts.
This webinar for in-house counsel will take place on Monday, September 26, 2016 (10:00-11:00 am PT / 1:00– 2:00 pm ET).
On August 17, 2016, the Consumer Product Safety Commission (CPSC) issued a notice of proposed rulemaking that would reduce the burden of testing for phthalates in children’s toys and child care articles. Phthalates are commonly used to soften plastics and as components of paints and adhesives. Under the proposed rule, third party laboratory testing for certain phthalates would no longer be required for four plastics—Polypropylene (PP), Polyethylene (PE), High-impact polystyrene (HIPS), and Acrylonitrile butadiene styrene (ABS)with specified additives.
This new rule would not change the underlying obligation to comply with Section 108 phthalate prohibitions, but would provide some relief from required testing for manufacturers and importers.
CPSC is accepting comments regarding the proposed rule until October 31, 2016.
*Application to the District of Columbia bar pending.
Herbalife’s 2+ year FTC investigation came to an end last month when it settled with the FTC for $200 million, which will be distributed to former Herbalife program participants. The Stipulated Order entered on July 25 also requires Herbalife to restructure its business model to compensate its distributors based on verifiable retail sales, and prohibits Herbalife from paying compensation solely for enrolling or recruiting new distributors. If less than 80% of Herbalife’s sales are to actual end-users, it must reduce compensation.
The Herbalife settlement is consistent with how the FTC has treated multilevel marketing programs in the past. Under the FTC’s test, a multilevel marketing program runs afoul of the FTC Act if participants pay money in return for “(1) the right to sell a product and (2) the right to receive in return for recruiting other participants into the program rewards which are unrelated to sale of the product to ultimate users.” Here, the FTC alleged that Herbalife did not offer “a viable retail-based business opportunity” and that the compensation structure “incentive[d] not retail sales, but the recruiting of additional participants.” If your company uses multilevel marketing, you’ll want to read the complaint and order carefully to see how your company’s program stacks up.
The settlement bars misleading and unsubstantiated income representations. It also prohibits Herbalife from representing or implying that participation in the program “is likely to result in a lavish lifestyle,” including through images of mansions, exotic automobiles, yachts, or similar luxury items. This demonstrates again the FTC’s willingness to look beyond words to the surrounding imagery, and to hold companies responsible for implicit messages in their marketing and promotional materials that create unrealistic or unsubstantiated consumer expectations. This enforcement action is also a reminder that companies will be well-served by providing clear, simple, and prominent disclosures of the typical results consumers can expect in ads and endorsements touting above-average outcomes.
Last month, the Ninth Circuit clarified the requirements for pleading a fraudulent advertising claim. In Haskins v. Symantec Corp., the court ruled that a plaintiff seeking damages for fraudulent advertising must allege reliance on specific advertisements to avoid dismissal under Federal Rule of Civil Procedure 9(b) ("FRCP 9(b)"). The court distinguished plaintiff's factual allegations from those in the Tobacco II case, which recognized an exception to FRCP 9(b) for ubiquitous and widespread advertising campaigns.
In Haskins, plaintiff asserted multiple causes of action under California's Unfair Competition Law and Consumers Legal Remedies Act alleging that Symantec Corp., an antivirus software maker, had fraudulently concealed that hackers had stolen the secrets to its antivirus software, which left computers relying on Symantec's products more vulnerable to hackers. The district court dismissed the plaintiff's first three complaints under FRCP 9(b) because they each failed to cite any specific advertisement the plaintiff had relied upon when she made her decision to purchase Symantec's software. The plaintiff attempted to work around her inability to cite a specific advertisement by citing Tobacco II's exception to the usual pleading requirements of FRCP 9(b).
In Tobacco II, the plaintiff class was allowed to pursue fraudulent advertising claims against a number of tobacco companies without citing any specific advertisements that class members had relied upon, by convincing the court that the defendant tobacco companies' advertisements were so widespread and pervasive that they had "saturated" California. Proving a plaintiff's reliance on any single advertisement would be unrealistic in those circumstances, the court decided.
The Haskins court found Tobacco II inapposite, however, because the plaintiff had failed to allege that Symantec had saturated the California market with advertisements in the same way as the Tobacco II defendants had. Accordingly, the plaintiff would have to plead reliance on a specific Symantec advertisement prior to her purchase to survive a motion to dismiss.
This decision will pose an obstacle to consumer advertising class actions in California federal courts. To satisfy FRCP 9(b), plaintiffs will have to allege they relied on specific advertisements, which will make class certification less likely where each plaintiff relies on distinct and individualized facts.
For information about the Warner Bros. settlement and other considerations to keep in mind when developing influencer or other media campaigns, you may want to consider attending the ABA’s upcoming program entitled “Complying with FTC’s Endorsement and Testimonial Guidelines,” which will be held on July 26, 2016 from 12:00 p.m. to 1:00 p.m. ET. The program will be moderated by Raqiyyah Pippins of Arnold & Porter and include remarks from Robin Spector of the Federal Trade Commission, Kathryn Farrara of Unilever, and David Mallen of Loeb & Loeb about the Warner Bros. settlement and other developments impacting companies interested in using novel marketing strategies to promote their products.
For more information regarding the seminar, click here.
Earlier this month, Warner Bros. Home Entertainment, Inc. settled Federal Trade Commission charges for deceptive marketing practices stemming from a 2014 online “influencer” campaign for its video game Middle Earth: Shadow of Mordor. According to the FTC’s complaint, Warner Bros. paid YouTube influencers to post positive gameplay videos on YouTube and other social media platforms without ensuring that the influencers adequately disclosed their material connection to the company. As a result, the FTC took the position that the company’s marketing campaign violated the FTC Act because it insinuated that sponsored, positive gameplay videos posted on YouTube by gaming enthusiasts were objective and independent assessments of the video game, when they were not.
The Warner Bros. settlement highlights the importance of consumer product companies ensuring that all agreements governing the promotion of company products are reviewed by attorneys who are familiar with the FTC’s concerns about native advertising. In the Warner Bros. matter, the Company hired Plaid Social Labs, LLC to coordinate a “YouTube Influencer Campaign” to help generate interest for the Shadow of Mordor game. Plaid Social Labs contracted with influencers, tasking them with creating YouTube videos reviewing the game and then, subsequently, promoting the videos on other social medial platforms. Per the agreements, the influencers were required to disclose that the videos were sponsored, but they were instructed to place the disclosure in the description box below the gameplay videos. (According to the complaint, this requirement often resulted in the influencer placing the disclosure in a place that could only be seen if a viewer clicked on a “Show More” button.) The agreements also required the influencer’s reviews to be positive, prohibiting the influencer from showing any bugs or glitches in the game or communicating any negative sentiment about Warner Bros., its affiliates or the game.
The FTC took the position that the resulting videos were in essence “sponsored advertisements” and thus “misled consumers by suggesting that the gameplay videos of Shadow of Mordor reflected the independent or objective views of the influencers” when they did not. The FTC also took the position that Warner Bros., due to improper instruction and monitoring of the YouTube influencers, failed to adequately disclose that the gamers were compensated for their positive reviews.
This settlement is a helpful reminder of the importance of marketing and legal departments taking a collaborative approach when developing marketing campaigns that include special attention to the FTC’s enforcement priorities related to native advertising. It is no longer prudent for a company to rely on a third party marketing company or media consultant to handle digital media campaigns. Instead, to mitigate risk, the strategy must include a legal review focused on ensuring that the relationship between the company and potential influencers does not develop unexpected legal obligations for the company.
On July 14, hours before the start of a seven-week congressional recess, the House passed a national GMO labeling bill by a vote of 306 to 117. As we discussed here, the Senate recently approved the measure by a vote of 63 to 30. House passage effectively ends a multi-year debate over a national GMO labeling standard and brings preemption of the Vermont GMO labeling law almost to the finish line just two weeks after going into effect.
This bill marks a compromise for both sides of the aisle, with 81 Democrats and 36 Republicans voting against the bill on the House floor. While Democrats were successful in securing a mandatory GMO labeling standard, Republicans negotiated flexibility in the disclosure, which can be in the form of text, a symbol, or a QR code.
President Obama is expected to sign the bill into law within the coming days. Food manufacturers will then want to watch closely for USDA’s implementation of the GMO labeling standard.
The House will need to consider the bill, but will likely take it up in September because its recess starts the week of July 17. Last July, the House passed its GMO labeling preemption bill (H.R. 1599) that would allow manufacturers to voluntarily label their food products -- instead of being required to label -- under the jurisdiction of the Food and Drug Administration (FDA). House Agriculture Committee Chairman Mike Conaway (R-TX) has indicated that leadership is determining its strategy and considering all options, but has provided no further detail.
Although passage of the Senate bill required a simple majority, Sens. Roberts and Stabenow faced challenges from opponents on both sides of the aisle. Opponents notably argued that the bill’s definition of “bioengineering” would create consumer confusion and that the digital disclosure option could limit consumers’ access to information. Vermont Sens. Patrick Leahy (D) and Bernie Sanders (I) attempted to hold up the bill in protest of Majority Leader Mitch McConnell’s (R-KY) decision not to consider amendments.
Disagreement over key provisions of the bill extends to USDA and FDA, which may inform some of the challenges USDA will face in implementing the bill should it be enacted. FDA contends that genetically engineered foods (“GE”) do not pose any safety concerns and, for that reason, GMO labeling should remain voluntary. FDA also contends that the QR code option conflicts with the agency’s statute and regulations requiring disclosures directly on food labels.
FDA also believes the bill’s mandatory disclosure standard would conflict with FDA’s labeling requirements at times. For example, depending on USDA’s GMO labeling requirements for small packages, manufacturers may have difficulties including both the USDA information and the FDA required statements on the label.
FDA also finds the definition of “bioengineering” in the bill to be narrow in scope, which could lead to consumer confusion. The agency points to the phrase “that contains genetic material” and argues that foods from GE sources (e.g., GE soy, starches, and purified proteins) will fall outside of the scope. USDA disagrees with FDA’s interpretation. USDA asserts that it has the authority to require GMO labeling on food products with ingredients from commercially grown GMO crops, but the agency would consider its authority to determine the threshold of bioengineered material needed for foods to be regulated under the legislation.
Additionally, FDA has concerns with the bill limiting its application to foods where the genetic modification “could not otherwise be obtained through conventional breeding or found in nature,” because this would be difficult to prove.
While waiting for the House’s consideration, manufacturers should evaluate their compliance with the Vermont law, which took effect on July 1. As we noted previously, the Vermont law presumes compliance for foods distributed before July 1, 2016 and sold for retail until January 1, 2017. By contrast, foods produced before July 1, 2016, but distributed after that date, will be subject to penalties. The Vermont Attorney General may enforce the law today, but private rights of action may not be brought until July 1, 2017.
On July 1, the U.S. Food and Drug Administration released yet another clarification on its food and dietary supplement labeling policies by way of guidance for industry on declaring small amounts of nutrients and dietary ingredients on nutrition labels.
The guidance narrowly focuses on how FDA would exercise enforcement discretion when a conflict occurs between complying with the requirements for declaring the nutrient value in a serving of food or dietary supplement (21 C.F.R. § 101.9(c)(1)-(8)) and the compliance requirements for declaring nutrients and dietary ingredients in nutrition labeling (21 C.F.R. § 101.9(g)(4)-(5)). While in most cases the regulatory requirements do not conflict, in some cases, certain small amounts of nutrients or dietary ingredients cannot be stated in accordance with both the declaration and compliance regulations. In these cases, the guidance recommends that manufacturers declare the amounts in accordance with the declaration regulations rather than the compliance regulations.
Food and dietary supplement manufacturers should continue to watch FDA, which is expected to finalize gluten-free claims and address claims based on the Nutrition Facts and Serving Size Rules in future rulemaking.
When Congress returns to Washington DC next week, we expect the House Energy and Commerce Committee to mark up legislation to reform and limit the authority of the Federal Trade Commission (FTC) as part of its #DisruptFTC series during the two weeks Congress is in session (weeks of July 5 and 11). Congress then leaves for a seven-week recess for party conventions and its traditional August recess.
Last week, the full committee postponed a June 23 mark-up of the #DisruptFTCF legislation due to last-minute changes to the congressional calendar related to the Democrats’ gun control sit-in. If the committee does not find time in its schedule to mark up the FTC bills in July, it will have to wait until September to consider the legislation.
The Consumer Review Fairness Act and the comprehensive bill were approved by the Subcommittee on Commerce, Manufacturing, and Trade on June 9. For more information about these bills, please see our previous posts from May 5 and June 2.
Vermont’s GMO Labeling Law will go into effect in less than a week, despite numerous congressional attempts to pass a national GMO labeling standard.
Most recently, on June 23, Senate Agriculture Committee Chairman Pat Roberts (R-KS) and Ranking Member Debbie Stabenow (D-MI) unveiled a bipartisan agreement that would establish a mandatory, nationwide label for foods that contain GMOs. If enacted, this agreement would preempt Vermont and other states and localities from establishing or carrying out conflicting GMO labeling laws. Under the proposal, the U.S. Department of Agriculture (USDA) would be directed to establish a mandatory GMO labeling standard within two years after enactment. Members intend that manufacturers would be able to disclose GMOs on their food packaging either through text on the package, a symbol, or a link to a website using a Quick Response (QR) code or similar technology.
The bill directs USDA to provide alternative, reasonable disclosure options for food contained in small packages. There would also be allowances for small food manufacturers. “Small food manufacturers” would have at least one additional year to comply with the labeling standards, while “very small food manufacturers” would be exempt from the GMO labeling requirement altogether. The bill, however, does not define either term.
This agreement is the result of months of negotiations between Chairman Roberts and Ranking Member Stabenow, and it contains key priorities for both Members. Aligned with the interests of the Chairman’s constituent ranchers, the bill would prohibit the USDA from considering any food derived from an animal to contain GMO based solely because the animal may have eaten GMO feed. Likewise, Ranking Member Stabenow fought to ensure that organic producers would be able to display a “non-GMO” label in addition to the organic seal. Although organic foods are by definition non-GMO, Ranking Member Stabenow recognized the importance of providing consumers with more information about the foods that they buy.
Chairman Roberts and Ranking Member Stabenow are now scrambling to get the 60 votes needed to pass their negotiated deal before the Senate recesses for the Independence Day holiday. As the House has already recessed, the lower chamber will not consider the measure before Vermont’s law goes into effect on July 1. Assuming that the Senate approves the agreement before recessing, the House could consider the legislation when it returns on July 5. House Agriculture Committee Ranking Member Collin Peterson (D-MN) has endorsed the bill.
Manufacturers should, by now, be prepared to comply with the Vermont law. Under the law, there is a presumption of compliance for foods distributed before July 1, 2016 and sold for retail until January 1, 2017. Foods produced before July 1, 2016, but distributed after that date, will not receive this presumption and be subject to penalties. As for civil liability, consumers must wait until July 1, 2017, one year from the law taking effect, to bring a private right of action against a manufacturer.
If enacted, Congress’s GMO labeling measure would preempt the Vermont law, and manufacturers would need to pay close attention to USDA’s implementation of the GMO labeling standards.

References: §1127
 § 10
 §1125
 v. 
 § 43
 v. 
 v. 
 v. 
 v. 
 § 101
 § 101