Second Circuit Affirms Summary Judgment Against an “Affiliate Marketing”Network That Participated in Native Advertising Violations Committed by Its Customer
FTC v. LeadClick Media, LLC, --- F.3d ---, No. 15-1009-cv, 2016 WL 5338081 (2d Cir. Sept. 23, 2016)
The Second Circuit affirmed summary judgment in favor of the FTC and the State of Connecticut on claims that defunct affiliate marketing network LeadClick Media LLC violated the FTC Act and the Connecticut Unfair Trade Practices Act. LeadClick connected its merchant-customers with third-party websites that advertised the merchants’ products in a variety of ways, including “email marketing, banner ads, search-engine placement, and creating advertising websites”; tracked the flow of traffic its referral service directed to its merchants’ websites; and received a commission from its merchants in exchange for this service. LeanSpa, an internet retail business that “sold purported weight-loss and colon-cleanse products under various brand names, “began working with LeadClick in 2010 and soon became its “top customer.” An FTC investigation revealed that, among other things, LeadClick marketed LeanSpa products on “fake news” sites, which “generally represented that a reporter had performed independent tests that demonstrated the efficacy of the weight loss products,” and often included a “consumer comment” section containing purely invented content. LeadClick employees knew of and affirmatively approved of the use of the fake news sites, participated in the deception (among other ways, by “advis[ing] affiliates on the content to include in their pages to increase consumer traffic”), and had the authority to control the practices of the affiliates on its network. On appeal, LeadClick argued that it was not a direct participant in LeanSpa’s actions, and that “applying a test that imposes liability based on direct participation in or authority to control deceptive practices conflates principal liability with aiding and abetting liability, which is foreclosed under the FTC Act.” The Second Circuit rejected this argument, noting that LeadClick had engaged “through its own actions” in the challenged practices. View the decision.
New FDA Guidance Articulates Alternative Criteria for “Healthy” Claims Based on Fat Content or Beneficial Nutrients
On Sept. 27, the FDA released nonbinding guidance offering food manufacturers a set of alternative criteria for establishing a “healthy” claim based on the fat content or the presence of certain beneficial nutrients in packaged foods. Noting the evolving scientific understanding of the role of dietary fat, the FDA announced that it is “no longer recommending limiting overall fat intake,” and is instead “prioritizing increasing intakes of polyunsaturated and monounsaturated fats and decreasing intakes of saturated fat and trans fat.” Thus, the agency will now use its “enforcement discretion” to allow “healthy” labeling claims based on a food’s fat content if two criteria are met: “(1) The amounts of mono and polyunsaturated fats are declared on the label; and (2) the amounts declared constitute the majority of the fat content.” Similarly, the guidance explains, the agency will use its enforcement discretion to permit “healthy” claims based on the presence of two “Beneficial Nutrients” that were newly classified as “nutrients of public health concern”: potassium and vitamin D. Now, the guidance provides, “if a food is basing its eligibility for bearing a ‘healthy’ claim on potassium or vitamin D, whichever nutrient is being used as the basis for eligibility should be declared on the Nutrition Facts label.” In addition, the food must “contain at least  percent of the [daily value] per [reference amount customarily consumed] of potassium or vitamin D.” The Sept. 27 guidance takes immediate effect and will not be submitted to the public for notice and comment.
“Short Term” and “Long Term” FDA Guidance Issued on Salt Content
Following the release of its long-awaited final guidance on the use of the term “evaporated cane juice” on food labeling in May, the FDA issued draft guidance to the food industry on June 1 for voluntarily reducing sodium in processed and commercially prepared food. The draft guidance proposes 16 overarching categories with individual targets for about 150 subcategories of food, in recognition that a one-size approach does not fit all, and targets (“particularly encourage[s]”) the participation of the biggest industry players – “food manufacturers whose products make up a significant proportion of national sales in one or more categories and restaurant chains that are national or regional in scope.” The guidance proposes a “short-term” target of two years and a “long-term” target of 10 years. Based on estimates using National Health and Nutrition Examination Survey data, if the food industry adjusts sodium levels in food based on the FDA’s targets, the agency expects the short-term targets to reduce sodium consumption to about 3,000 mg per day and long-term targets to reduce sodium consumption to about 2,300 mg per day. The FDA had originally provided for a 90-day comment period for the short-term target and a 150-day comment period for the long-term target. But on Aug. 19, the FDA extended the comment periods in response to requests from industry trade associations. The comment period for the short-term target closed Oct. 17, and the comment period for the long-term target will close Dec. 2.