In This Issue:

• Like Oceanfront Property in Arizona, Court Doesn't Buy False Ad Claims v. Zillow
• Zillow Zips Through NARB Appeal of Challenge to Apartments.com Commercial
• New England Lawmakers Target "Crisis Pregnancy Centers" Via Truth-in-Advertising Laws
• Class Action Alleging Gerber Makes Deceptive Baby Food Claims Nothing to Whine About

Like Oceanfront Property in Arizona, Court Doesn't Buy False Ad Claims v. Zillow

In the end, the foundation just wasn't solid. That's what a Vermont federal court found when it dismissed a competitor's suit against Zillow, finding the plaintiff had no standing to sue on the consumer's behalf and dismissing with prejudice plaintiff's first amended complaint.

Picket Fence Preview, a marketplace of For Sale By Owner (FSBO) real estate listings intended to bypass real estate agent and broker fees, sued Zillow, alleging that the popular real estate listing site falsely advertised FSBO listings, but in reality "diverted inquiries" on FSBO ads to real estate agents. Zillow claimed it was offering a free service, while at the same time converting FSBO ads into contacts for real estate agents, said Picket Fence.

According to Picket Fence, Zillow thereby engaged in "illegal and unfair methods of competition as well as fraud and deceit." Picket Fence alleged that Zillow's false advertising cost it millions of dollars and duped consumers, in violation of the Vermont Consumer Protection Act (VCPA) and the Lanham Act.

In finding that Picket Fence did not have standing to sue on behalf of FSBO consumers, the court did not reach the merits of the matter. In its earlier order dismissing plaintiff's initial complaint, the court had held that claims asserted on behalf of FSBO sellers who advertised on Zillow should be dismissed for lack of standing because the company was not a consumer under the VCPA, but Zillow argued that Picket Fence continued to make such claims in its first amended complaint. As Picket Fence did not address this latter argument, the court dismissed these claims.

Regarding plaintiff's claim that Zillow violated the VCPA based on unfair and deceptive practices, plaintiff continued to argue that it could assert claims under the statute despite it not being a consumer. The court found this interpretation to be in direct conflict with Vermont law holding that a plaintiff must be a consumer to recover under the VCPA.

The court likewise rejected Picket Fence's argument that it should recognize a "hybrid" VCPA claim, finding it unlikely that the Vermont Supreme Court would recognize such a claim in this case and reiterating that Picket Fence, as a competitor, "cannot bring a claim for a deceptive practice on the consumer's behalf." Nor was Picket Fence an "indirect" purchaser of Zillow's service such as it could establish consumer status to sue under the VCPA.

On the Lanham Act cause of action, the court found that Picket Fence had not alleged that Zillow made any implied or literal false statements. In the original complaint, the court had dismissed the Lanham Act claim because it found that Zillow's promise of a "free" FSBO listing was not literally false as Zillow doesn't charge sellers to post FSBO listings, and was not impliedly false because Picket Fence "fail[ed] to point to any representation by [Zillow] that any sales will be 'commission free' or any promise that a real estate agent will not be involved in a subsequent sale."

In the amended complaint, Picket Fence provided alternate definitions of FSBO to bolster its argument that Zillow's representations regarding its FSBO listings are false. Picket Fence didn't allege that Zillow uses the term "FSBO advertisement" on its site, but only that it promises to post a free listing. And the court found that because Picket Fence conceded that FSBO sellers on Zillow's site don't have to hire an agent to list their property for free, Zillow's representations that don't use the term "FSBO advertisement" are not literally false.

Attempting to show implied falsity, Picket Fence argued that its customers complained about Zillow's deception and told Picket Fence that had they known how Zillow's site and FSBO ads operated they would have instead chosen to advertise with Picket Fence, but the court found these assertions "vague and conclusory." Picket Fence failed to allege that Zillow required sellers to use an agent at any point, promised that an agent would not be involved, or represented that a subsequent sale would be commission-free.

Key Takeaways

A few takeaways here: First, it goes without saying that plaintiffs who fail to address an issue will forfeit the right to make (and have a chance to win) an argument. Second, competitors will have a hard (if not impossible) time alleging a VCPA consumer cause of action because they are, ahem, not consumers. Third and finally, with regard to Lanham Act claim, is it possible the court here mistook the trees for the forest? While it's true that plaintiff did not allege that Zillow technically represented that sellers would have to pay commissions or work with real estate agents, Picket Fence did allege that inquiries on FSBO ads were diverted to real estate agents—which seems at least in spirit contrary to what an FSBO seller expects from such a listing. But, that was not good enough for the court.

Zillow Zips Through NARB Appeal of Challenge to Apartments.com Commercial

At the courts and at the National Advertising Division (NAD), it seems that Zillow's on a winning streak. In this next matter it also (mostly) prevailed on an appeal by the parent company of competitor Apartments.com to the National Advertising Review Board (NARB) of a NAD challenge Zillow initiated.

As many things do, the challenge began with famous actor and walking meme Jeff Goldblum. CoStar group, doing business as Apartments.com, ran a series of funny commercials featuring Goldblum calling Apartments.com the "Most Popular Place to Find a Place." Several of the commercials expressly referenced renters or rentals, but several did not.

At the NAD, Zillow had challenged a number of claims made by Apartments.com in the commercial. NAD green lit the claim that "Apartments.com has successfully helped get over 40 million leases signed by happy renters nationwide" and that Apartments.com helps landlords "[k]eep [their] property leased at a great ROI" but it recommended Apartments.com discontinue a number of other claims, including the popularity claims.

Of these, only two made it to CoStar's appeal which argued that: NAD wrongly concluded that CoStar's advertising is not related to the rental market, and that the company's claims regarding the popularity of Apartments.com are not supported by "unequivocal website traffic data regarding unique visits to the site."

On the question of whether consumers understand Apartments.com ads to be directed only to the rental market, NARB split the difference. CoStar argued that reasonable consumers would understand the commercials to refer only to rental transactions because the actual words in the tagline the "Most Popular Place to Find a Place" are understood to refer "exclusively to the rental market." Ditto with respect to its business name Apartments.com, which CoStar argued naturally conveys a singular reference to the rental market.

Not so, countered Zillow, noting that because consumers often purchase apartments, the name could refer to purchased properties rather than rentals, and that because brand names are often fanciful, consumers would not necessarily interpret Apartments.com to literally refer only to the rental of apartments.

NARB noted that although the prominent references to the brand name Apartments.com might well convey to most consumers that the ads were directed to the rental market, to drive that point home CoStar should add at least one conspicuous reference to renters or rentals to commercials using the tagline "find a place."

Calling the issue a "complicated and subtle one," NARB next weighed in on whether Apartments.com's claim that it is the "Most Popular" for rental properties is supported based on a showing that its website has the most unique visitors. (CoStar had relied on such evidence to substantiate this claim, and NAD had concluded the evidence was not a good fit for the claim.)

NAD had concluded that the "Most Popular" tagline conveyed the message that Apartments.com boasted the largest number of completed rental transactions or "conversions." Since conversion data was unavailable, NAD considered whether the total number of unique visitors was the "proper proxy for completed real estate transactions." Siding with Zillow, it concluded that other available data such as total website visits would be a better fit.

Noting that it did not agree with NAD's conclusion that the "Most Popular" tagline was a conversion claim, NARB rendered moot the issue of how best to back up a conversion claim when conversion data was not available (which would be via total website visits in this case). Nevertheless, NARB concluded that the reasonable message conveyed by the claim was that the Apartments.com website was the "preferred site for researching available rental properties, a subjective standard."

Because CoStar didn't provide any consumer research to support that message, NARB concluded it should be discontinued. Apartments.com could still, however, make a properly supported claim about a specific data point, such as "most unique visitors."

Key Takeaways

Popularity has long been a tricky claim—even conversion (e.g. sales of goods or services), doesn't make the product necessarily "popular," depending upon the context of the claim. This case is interesting because NAD and NARB came to the same conclusion, but for somewhat different reasons.

New England Lawmakers Target "Crisis Pregnancy Centers" Via Truth-in-Advertising Laws

Some New England city governments are setting their sights on an alternative strategy to target anti-abortion misinformation often spread by Crisis Pregnancy Centers (CPCs): going after the CPCs for false advertising.

Though abortion is legal in Massachusetts, local lawmakers in the state are seeking to counter misleading medical advice provided by CPCs, reproductive healthcare centers which represent themselves as impartial care providers but according to Massachusetts Attorney General Maura Healey, instead often convey "inaccurate and misleading" healthcare information regarding abortion.

AG Healey issued a press release and advisory warning that CPCs "do not provide comprehensive reproductive healthcare [but rather]… seek to prevent people from accessing abortion care." The attorney general emphasized the "limited and potentially misleading nature of the services."

Earlier this year Somerville, Massachusetts, passed an ordinance prohibiting CPCs from falsely advertising their services. The ordinance "concerning deceptive advertising practices of limited services pregnancy centers" forbids CPCs from advertising any deceptive pregnancy-related services.

Somerville's ordinance is similar to a 2021 Connecticut law that bars "deceptive advertising practices" in CPCs that the center "knows or should reasonably know to be deceptive." The Connecticut law also empowers the Connecticut AG to sue a CPC in order to compel it to comply, to correct any deceptive advertising, and to pay for "corrective advertising in the same form" as the touted deceptive advertising. Each offense can incur a fine of $300.

In practice, the Somerville ordinance means that CPCs operating in Massachusetts would have to disclose that they do not advise patients on abortion, do not refer patients to abortion clinics, and that they do not prescribe emergency contraception, according to pro-choice advocates. The ordinance also bars any of the misleading information and medical misinformation that has dogged many of these clinics, such as the fact that most are not medically licensed.

Though so far in Massachusetts only Somerville has passed such an ordinance, other cities in the state are taking note (and taking notes). Cambridge proposed an ordinance inspired by Somerville's, as has Worcester. Another city in the state entertained such an ordinance but it has stalled over concerns that vetting its legality will be pricey.

At the federal level, Senators Elizabeth Warren and Bob Menendez and Congresswomen Carolyn B. Maloney and Suzanne Bonamici in June proposed the Stop Anti-Abortion Disinformation Act "to crack down on false advertising that [CPCs] employ to dissuade patients from getting the reproductive care they need." The bill directs the Federal Trade Commission (FTC) to use its enforcement authority to stop such false or misleading advertising.

Key Takeaway

These regulations, while potentially effective, could face steep legal hurdles. A similar 2015 California law was eventually struck down by the U.S. Supreme Court in 2018 on First Amendment grounds.

Class Action Alleging Gerber Makes Deceptive Baby Food Claims Nothing to Whine About

A recently filed class action lawsuit alleges that Gerber Products makes a number of false and/or misleading claims about baby and toddler food products that amount to false advertising and misbranding.

The matter mostly concerns Gerber baby food pouch products intended for children under two. According to the complaint filed in California federal court, not only does Gerber falsely represent that its baby and toddler food products provide physical health benefits, but it also misbrands them by making "prohibited" nutrient content claims on product packaging.

Plaintiff alleges that the nutrient content claims on the product packaging "mislead purchasers into believing that the products provide physical health benefits for children under two years of age in order to induce parents into purchasing Defendant's products," when the products are actually "harmful both nutritionally and developmentally for children under two."

On the misbranding claims, plaintiff has a beef with Gerber's nutrient content claims, which she argues are "strictly prohibited by the FDA," but which she alleges Gerber includes anyway to mislead consumers into thinking the products have greater health benefits than they do. These include claims on the front label such as "2g of Protein," which nutrient declaration also appears in the Nutrition Facts Panel.

Plaintiff alleges that the products make other "nutrient content claims" like the claim made in the Gerber "Plant-tastic" pouches that the products are "Nutritious, plant-based, and specially designed to provide 2 grams of protein." According to plaintiff, the explicit statement about "protein" alongside the term "nutritious" renders this an implied nutrient content claim. The same goes for the Gerber products that make claims about the number of servings of fruits and "superfoods," which suggest the presence of fiber and vitamins, alleges plaintiff.

According to the complaint, the nutrient content claims are misleading because reasonable consumers rely on labels to make purchasing decisions, and because the nutrient content claims mislead consumers into believing that a product will provide young kids with health benefits when the product allegedly is harmful to them.

To back up her claims, plaintiff notes that the FDA has long warned that express nutrient content claims (such as about protein) can be misleading because consumers have limited nutritional knowledge and could give consumers false impressions about a product's impact on their health. Importantly, plaintiff also alleges that the FDA forbids certain nutrient content claims for products intended for children under two.

Related to plaintiff's misleading and misbranded product claims, plaintiff alleges that rather than being nutritious as advertised the Gerber products have a high amount of "free sugars" which can "lead to many long-term health risks."

The complaint also takes issue with the use of purees (which most of these products are) as a way to feed infants long-term, arguing that they are generally unhealthy and thus Gerber's claims that the products provide a "healthful and safe source of nutrients for babies and toddlers … [are] misleading to reasonable consumers."

Key Takeaways

This case will be interesting to watch to see how this court handles the interplay between front and back of pack: free-standing claims versus mandated nutrient labeling and what is, and is not, a claim or a reasonable take away for false advertising purposes.

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