In This Issue:
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Kim Kardashian Initials Are Foundation of Makeup Brand War
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Penny Auction Site Accused of Thinly Veiled Illegal Gambling
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Clorox Hit with Laundry List of Alleged Green Marketing Violations
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FBA Stores Leaves ESRP Investigators Only Partly Fulfilled
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Don’t Pick Up the Phone: Third Circuit Allows TCPA Standing from One Call
Kim Kardashian Initials Are Foundation of Makeup Brand War
Danish makeup artist applies Lanham Act to reality star
What a Difference a “K” Makes
Kirsten Kjaer Weis, a respected Danish makeup artist who is well known by her initials “KKW” and for her KW-branded “natural, organic, luxury” cosmetics and skin care line, filed a complaint in late July against the queen of reality stars, Kim Kardashian West.
Kardashian West recently released her own “KKW” makeup line. The product name and branding led Weis to send Kimsaprincess, Inc. and Kardashian West, its president, a cease-and-desist letter demanding that Kimsaprincess immediately cease using the KKM mark on its cosmetics. When the letter was ignored, Weis filed a complaint alleging trademark infringement and false designation of origin under the Lanham Act, as well as charges under Illinois state law.
Popular Kid
Weis claims that she has been using her initials “KKW” and the federally registered “KM” marks in connection with her cosmetics and skin care line since 2009, and, according to the complaint, she has built up significant acclaim and goodwill through her product line.
Kardashian West, on the other hand, has only just entered the arena—but in a characteristically big way. Her KKW line debuted on June 21 and sold out in less than three hours, earning her company millions according to the complaint.
Weis seeks preliminary and permanent injunctive relief and an award of profits and actual damages from Kimsaprincess in the Northern District of Illinois, Eastern Division.
The Takeaway
Kardashian West’s public relations representatives claim that Weis’s complaint has no merit, as their client applied for and received approval for KKW and related brands from the U.S. Patent and Trademark Office. They also claim that when Weis sought re-examination, the PTO approved Kardashian West’s branding again.
It seems likely that Kardashian West will file a motion to dismiss in response to the complaint, especially in light of Ms. Kardashian West’s claims to have already won trademark approval. Time will tell whether the additional “K” will be enough to defeat Weis’s claims.
Penny Auction Site Accused of Thinly Veiled Illegal Gambling
Watchdog investigation notifies FTC of deceptive marketing by DealDash.com
More Than One Will Get You One
Expecting consumers to derive entertainment from paying more for a product than it is worth seems like a terrible business model, but the funny thing is: It works.
According to a recent investigation by watchdog organization Truth in Advertising (TINA), DealDash.com, a “penny auction” site, adheres to precisely this business model and has profited handsomely as a result.
Website members participate in auctions hosted by DealDash, bidding on items by using “blocks” of hundreds of bids typically purchased at $.60 per bid. A timer on the product page counts down for 10 seconds, within which time new bids can be placed. Website members use their pre-bought bids to raise the price of the product by $.01 and to reset the clock; if no one bids again, the last bidder takes home the merchandise for the final price.
Nonetheless, according to TINA, in most cases members wind up paying more through their purchase and use of their bids than they would have paid for the object in a store or online. But the chance at securing a real bargain through the auction is enough to keep people bidding, in spite of the overall bias of the system against them. In one case, for example, a DealDash member purchased a $100 Walmart gift card for $115.19, plus the undisclosed cost of bidding.
Fig Leaf
A feature that DealDash believes sets it apart is the “Buy It Now” option, which allows auction losers to buy the same item at DealDash’s price-point, and apply all the bids used in that auction against the price. However, according to TINA, it is only a poor disguise, as outlined in their report sent to the FTC on June 5.
The report notes that the “Buy It Now” option, rather than legitimizing the service, adds to the damage it causes, because it disguises the fact that illegal pay-to-play gambling is at the heart of DealDash’s business.
According to TINA, DealDash engages in deceptive marketing, including failing to disclose bid costs in the final cost of the item won at auction, misleading customer testimonials, conducting perpetual sales for “bid blocks,” and failing to disclose material connections between DealDash and the sellers of some of the products up for auction.
The Takeaway
DealDash is one of the largest “penny auction” websites, with tens of millions in annual revenue and an advertising budget to match. And that budget is put to effective use, with ads and taglines asserting that the site is “fair and honest.” But the website—and others that may follow in its path—may now face difficulty maintaining a reputation for honesty considering TINA’s allegations.
As of this writing, the FTC has yet to post a formal announcement of an investigation, or file a complaint.
Clorox Hit with Laundry List of Alleged Green Marketing Violations
Consumers launch a class action charging misrepresentations and false advertising, naturally
Eco-Chamber
A class action complaint filed in July by New York and California residents in the Northern District of California takes aim at a series of Clorox-brand products that are marketed as comprising “green” or “natural” ingredients.
The Clorox Company is targeting eco-conscious consumers with its “Green Works” line of cleaning products, more than a dozen individual products characterized as containing “natural” and “naturally derived” ingredients. The products are decked out with green labels that feature leaves and flowers and prominently display the word “green.” “Cleaning done naturally” is stated on the back label of some of the products.
Rogue’s Gallery
The complaint defines “natural” as “existing in nature and not made or caused by people; coming from nature” or “not having any extra substances or chemicals added; not containing anything artificial.”
In contrast to the claims, the plaintiffs allege, Clorox products boast at least 20 different synthetic ingredients. The offending list of components ranges from familiar household chemical agents like boric acid, lye and hydrogen peroxide to substances that sound like dreaded antagonists in a science-fiction movie: methylisothiazolinone, octylisothiazolinone, and dimethicone/silica antifoam.
In addition to being synthetic substances, claim the plaintiffs, some items on the ingredient list are potentially harmful to consumer health. According to the plaintiffs’ summary, health effects include possible developmental defects, higher likelihood of cancer, gastrointestinal irritation, ulceration, and hypercalcaemia – not the sort of effects consumers usually associate with “natural” products.
The Takeaway
Plaintiffs are demanding monetary relief as well as a Clorox-run corrective advertising campaign to clarify its misrepresentations. All told, the company faces 11 counts, including fraud, negligent misrepresentation, unjust enrichment, breach of warranty, false advertising, and Magnuson-Moss Warranty violations. As consumers become more environmentally conscious and companies strive to market products that appeal to that sentiment, we will undoubtedly see more cases like this.
FBA Stores Leaves ESRP Investigators Only Partly Fulfilled
Retailer-turned-educator revises some of its claims, eliminates others
A New Model
Fresh-faced entrepreneurs looking to sock away extra cash or launch their own businesses have found Amazon’s Fulfillment By Amazon (FBA) program quite attractive. Amazon’s fulfillment system is legendary, and the company allows small business owners to piggyback on that system.
Entrepreneurs create their product—or purchase product in bulk for retail prices—and then hand over storage and fulfillment to the experts at Amazon. The retailing giant then “picks, packs, ships, and provides customer service” on behalf of the small business.
Success Stories
FBA Stores, a Weymouth, MA-based company, promises to help those new businesspeople. Started by brothers Chris and Adam Bowser, the company originally served as an outlet for the pair to sell products on sites like Amazon and eBay. But, as the company rather breathlessly claims, they recently reached a saturation point. “Over the past 17 years together, Adam and I have sold Millions of Dollars [sic] in product through the internet,” Chris writes on the company website. “But we have reached a point in our business where there is no way we can sell enough product for the demand that exists on Amazon alone!”
Having found no more room to grow, the company decided to offer seminars and other educational programs to help entrepreneurs stake out their fortunes through FBA channels. The results, they say, can be life-changing.
Bold Promises
Claims like these are what inspired an anonymous competitor to report the company to the Electronic Retailing Self-Regulation Program (ESRP), an investigatory arm of the Council of Better Business Bureaus. Both online and in print, FBA Stores seemed to assert that money-making was almost inevitable once the student took the Bowsers’ courses.
After examining FBA Store’s claims, the ESRP concluded that some of the company’s marketing be retooled or eliminated altogether.
The Takeaway
Once the investigation started, the company told the ESRP that it was currently reviewing earnings claims in its marketing, and was planning on removing all such claims shortly. In light of this promise, the ESRP moved ahead to address other claims. The group recommended that FBA Stores properly disclose the costs of running an FBA business, and revise its claim that “All you have to do is join the membership, pay attention, list products on Amazon and Get [sic] paid.” The ESRP let certain other claims stand, and FBA Stores promised to “adhere to all recommendations made by ERSP in its Final Decision.”
Don’t Pick Up the Phone: Third Circuit Allows TCPA Standing from One Call
Appeals court keeps the line open on single-call class actions
What’s the 411?
One call was all it took.
New Jersey resident Noreen Sussino received a call on her mobile phone on July 28, 2015, from Work Out World (WOW), an Ocean Township, NJ-based business. She did not answer the call, but when she checked her messages, she discovered a one-minute voicemail from WOW regarding a promotional offer.
Within days, Ms. Sussino filed a class action complaint against WOW under the Telephone Consumer Protection Act (TCPA). She claimed a passel of wrongs by WOW, including intrusion on her seclusion, wasting her time, and depleting her cell phone battery.
Nonetheless, a little over a year later, the putative class action was dismissed with prejudice by the District Court of New Jersey. The district court claimed that Ms. Sussino’s allegations were not “the type of case that Congress was trying to protect people against,” and that the phone call had caused no concrete injury, so she had no standing to sue.
Still Standing
The Third Circuit reversed the district court’s decision in an opinion that not only kept the class action alive, but kept the door wide open for future TCPA cases.
The appellate decision tackled and undercut both of the District Court’s arguments against the action. First, the court maintained that Ms. Sussino’s receipt of an unwanted call was precisely what Congress intended to address. WOW had based its defense on the notion that because Ms. Sussino had not paid for the call, the TCPA did not apply. The court maintained that WOW was arguing from a strained grammatical interpretation of the relevant passage, and, moreover, that the TCPA elsewhere granted discretion to the FCC to exempt such calls from the law—an exemption that wouldn’t be necessary if the law didn’t apply.
On the question of whether or not the harm toward Ms. Sussino was sufficiently concrete to give her standing to sue, the court held first that Congress had openly identified precisely this injury – invasion of privacy and nuisance – in the body of the TCPA. Second, the court agreed that although the harm to Ms. Sussino was intangible, nonetheless such claims can grant standing to sue—provided that the “injury has been made legally cognizable through the democratic process, and the injury closely relates to a cause of action traditionally recognized in English and American courts…”
The Takeaway
The Circuit Court’s opinion allows plaintiffs to cast a very wide net when they go fishing for TCPA suits. Every company that markets via mobile phone should remain wary of potential class action claims.
