The NAD recently took a swipe at Goop, the lifestyle blog founded by Gwyneth Paltrow. To make “GP’s Morning Smoothie,” Goop had recommended using “dust” dietary supplements, such as Action Dust and Brain Dust, both sold by Moon Juice. With its usual mix of practical – if also luxurious – wisdom, Goop advised, “Choose your Moon Juice dust depending on what the day holds ahead . . . brain dust before a long day at the office, sex dust before a date, etc.” The blog hyperlinked to a purchase page that made additional claims about the dust.
Because Goop agreed to permanently discontinue the dust claims, the NAD closed the case. In announcing the closing, the NAD took its turn at wisdom, noting, “The advertising marketplace is changing and advertisers are increasingly using third parties, including endorsers, influencers, and affiliate marketers, to reach consumers. . . .The obligation to ensure advertising claims are truthful extends beyond the manufacturer of the product to affiliates who market it.”
The FTC and the NAD both occasionally go after third parties arguing that they are equally liable for false advertising as the manufacturer who creates the product and claims. Courts, however, have found that there is a difference in the level of culpability.
As we’ve discussed before, the FTC often cites the 1970s case, Porter v. Dietsch, to support the proposition that retailers may be held liable for false advertising. In that case, the FTC found a retailer liable for disseminating deceptive ads for a weight loss product even though the retailer had not participated in creating the product or ads. The Seventh Circuit affirmed the FTC’s findings on liability, but significantly narrowed the FTC’s order. The narrowed order applied only to future advertising for weight loss products made by the same manufacturer, rather than any future advertising for any weight loss product. The court pretty clearly had misgivings with treating the retailer just like the manufacturer, even though it found that both are subject to the FTC Act. The court observed that “the extent of a party’s culpability has an important bearing . . . on the nature of the relief that should be granted.”
Courts – particularly, the Ninth Circuit – have been even more reluctant to find liability on the part of celebrities who repeat a manufacturer’s claims. In FTC v. Garvey, the Ninth Circuit found that Steve Garvey lacked the requisite knowledge of the falsity of claims he made for a weight loss supplement. More recently, the Ninth Circuit dismissed a case against Joe Theismann for his endorsement of a prostate supplement. The court reasoned that Theismann couldn’t be a “seller” for the purposes of California false advertising laws because he never held title to the products he promoted.
Whether you’re a third party swept up in a case or a manufacturer sweeping in third parties, it’s helpful to know what the real story is on third party liability.