Bona Law Tells Ninth Circuit That Bogus Product Reviews are not Exempt From Lanham Act False Advertising Laws
Bona Law attorneys Aaron Gott, David Codell, and Jarod Bona, and filed a brief with the U.S. Court of Appeals for the Ninth Circuit July 11, 2019 asking the court to rule that sham product reviews bought and paid for by companies who make the reviewed products do not fall within a so-called Consumer Reports exception to the Lanham Act false advertising laws.
The case, brought by a Bona Law client that sells nutritional products, Ariix, LLC, alleged that a leading nutritional publication called the NutriSearch Guide to Nutritional Supplements violated the Lanham Act by giving falsely inflated ratings and awards to Ariix’ competitor, Usana Health Sciences, Inc., and falsely low ratings to Ariix in exchange for hundreds of thousands of dollars of payments from Usana to NutriSearch and its author over a period of years. Worse yet, NutriSearch took great pains to describe itself as neutral, objective, and not affiliated with any of the companies whose products it reviews. All of that, it turned out, was false, as alleged by Ariix.
The Lanham Act is a federal statute that, among other provisions, makes it unlawful to publish false or misleading statements in a commercial advertising or promotion. While false and misleading statements might also be subject to enforcement by the Federal Trade Commission under other U.S. laws or consumer class actions under state laws, the Lanham Act is distinct in that it creates and relies upon a federal private right of action for enforcement only by those who suffer competitive injury. You can read more about the requirements of the Lanham Act here, and we have also discussed a recent decision by the Supreme Court at The Antitrust Attorney Blog.
One issue in the case is whether a “consumer reports” or “product reviews” exception should apply to the Lanham Act. Some other courts—but not the Ninth Circuit—had either explicitly found such an exception or held that the Lanham Act test, which requires analysis into whether speech is sufficiently commercial to qualify as an “advertising or promotion” as required by the statute, is not satisfied where the alleged statement is nothing more than a product review. Even among those courts, those who had occasion to consider allegations that the reviews were sham or otherwise paid for by the company benefiting from the review have generally held that such reviews are actionable under the Lanham Act.
Nevertheless, the U.S. District Court for the Southern District of California dismissed Ariix’ complaint on the grounds that the NutriSearch guide was subject to this exception, holding that (a) Ariix’ allegations of quid pro quo payments by Usana to NutriSearch and MacWilliam were insufficient to overcome the “consumer reports” exception and, even if it could, (b) ratings are inherently subjective and thus cannot qualify as false or misleading statements under the Lanham Act, even though NutriSearch itself proclaimed they were objective and scientific.
On appeal, Ariix argues for reversal of the district court’s decision for several reasons. Ariix alleged detailed facts showing that the real purpose of the guide is to promote Usana’s products, even though it masquerades as a neutral product review. And the defendants’ claims in the guide disclaiming that neither defendant is “associated with any manufacturer or product represented in this guide” is false and actionable by Ariix, because it reasonably could have influenced consumer decisions on whether to buy highly rated Usana supplements, or poorly rated Ariix supplements. Finally, Ariix also argued the district court applied the wrong standard in granting dismissal: instead of making inferences in favor of Ariix as the plaintiff, as required on a motion to dismiss, the district court made inferences in favor of the defendants by imagining alternative explanations for defendants’ conduct.
Bona Law regularly helps businesses with issues relating to, appeals, business litigation and competition, including issues involving the Lanham Act. If your business has a competition or advertising problem or seeks to avoid one, please contact us today.