Washington State Court of Appeals says it’s fine to listen to the FTC

SACRILEGE!

Living Essentials, producer of the 5-Hour ENERGY drink, claimed in a recent advertising campaign that its product was “Superior to coffee.”

NOTHING IS BETTER THAN COFFEE.

Give us a second, to compose ourselves, will you? We’ll try not to take sides here.

Let’s Start Over

Okay. Deep breaths.

Leaving aside accusations of apostasy – as they must under the First Amendment – Washington state nonetheless found cause to sue Living Essentials for making this claim (which we will not repeat) along with two others: that the decaf version of 5-Hour ENERGY kept drinkers alert and focused “for hours” and implications that “73 percent of doctors would recommend 5-Hour ENERGY.”

The resultant dispute, a grueling “11-day bench trial involving testimony and transcripts of testimony from 20 lay and expert witnesses and the admission of approximately 500 exhibits,” yielded a 57-page decision that “followed FTC guidance” in concluding that all three claims were deceptive and violated the Washington state Consumer Protection Act (CPA).

The reason? Living Essentials, the trial court claimed, lacked evidence to back up the first two claims, while its doctor-recommendation claim left a false impression on consumers. The court ruled in favor of the state and hit the company with a $2,183,747 civil penalty, exclusive of fees and costs.

Living Essentials came back to appeal the ruling, claiming that the trial court had been too stringent in applying the FTC’s “prior substantiation doctrine,” which holds that advertisers must have evidence to back up product claims prior to launching the marketing campaign.

The Takeaway

“Living Essentials’ primary contention,” wrote the Washington Court of Appeals in its March 18 opinion, “is that the trial court erred by relying on the FTC’s ‘prior substantiation doctrine’ because it has not been adopted in Washington, cannot be judicially adopted, and is inconsistent with Washington CPA law.”

The appellate court disagreed with Living Essentials and held that “Washington courts have repeatedly adopted federal court interpretations of [S]ection 5 of the FTCA when reviewing CPA cases.” Additionally, the court maintained that the original ruling relied on a careful critique of the studies the company offered as evidence, in addition to the FTC doctrine.

Living Essentials also argued that the trial court penalty violated due process because it was “grossly disproportionate to other CPA violations.” The appellate court disagreed, pointing out that the per-violation charge of $90 was lower than that in other suits Living Essentials cited in its appeal. The appellate court further noted that “the total penalty here is significantly higher [only] … because Living Essentials violated the CPA more than 24,000 times.”

“In essence,” the appeals court concluded, “Living Essentials is suggesting that the penalty is unconstitutionally excessive because they violated the statute too many times.”

Some aspirin with that coffee?