US Federal Court Enforces Against Deceptive Advertising Practices

06/12/2020 Technology & Regulation in the Spotlight Utah’s federal district court has recently issued its decision in the case of Vitamins Online, Inc. v. Heartwise, Inc. (doing business as “NatureWise“). The case addressed NatureWise’s alleged violations of the Lanham Act, which forbids false advertising, and Utah’s common law, due to its unfair competition and false advertising practices, namely manipulated product reviews. Both parties of the case are competitors in the dietary supplement business, selling their products, inter alia, on Amazon. Heartwise claimed that NatureWise falsely mislead customers regarding its products’ ingredients, and manipulated its customers’ reviews, in violation of Amazon’s policies and the Lanham Act. The court emphasized the importance and influence of customer reviews, especially in eCommerce platforms. The court held that NatureWise’s practices indeed violated the Lanham act and Amazon’s policies. For example, per the court’s findings, several positive reviews had similar patterns, suggesting a common author, and some of them were posted within minutes of each other. NatureWise has also directed employees to endorse positive reviews, to influence the order of their appearance, and offered customers free products in exchange for reviews. Due to NatureWise’s abovementioned practices, the court ordered disgorgement of its sales profits in the relevant years, totaling over $9.5 million. However, the court refused to order the removal of all of NatureWise’s product reviews on Amazon, as it found that such remedy would be against the public interest, as legitimate reviews of actual consumers would also be removed. This judgement joins the Federal Trade Commission’s (“FTC“) continuous enforcement actions against deceptive advertising. Earlier this year we reported on some of the FTC’s efforts in this regard.   These developments demonstrate the legal focus on advertising practices, and the special sensitivity around customer reviews. Feel free to contact us if you have any questions regarding the compliance of your company’s advertising practices. **************************************** Feel free to contact us with any further question or comments regarding the update and subjects detailed above. Kind regards, Ariel Yosefi, Partner Head of Technology & eCommerce Regulation Herzog Fox & Neeman