False Advertising Law

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At the end of June 2023, the FTC proposed a new rule targeted at deceptive reviews in the marketplace. The proposed rule would prohibit advertisers and marketers from employing illicit review and endorsement practices such as using fake reviews, buying positive reviews, and suppressing negative reviews.

In explaining its motivation for the proposal, the Commission noted the widespread emergence of generative artificial intelligence (AI), which it fears could lead to a drastic increase in the prevalence of fake reviews. The FTC hopes to “level the playing field for honest companies” with this new rule.

On March 22, the U.S. District Court for the Southern District of California dismissed a putative class action against Saks Inc. alleging that Saks advertised “phantom markdowns” of Saks-branded products. The Plaintiff alleged that he purchased a pair of men’s shoes “valued” by Saks at $145 but sold at a discounted price of $79.99. The plaintiff claimed that he only bought the shoes because he believed he was receiving a significant value and that Saks’s $145 market price was false and misleading.

A new putative consumer class action claiming damages in excess of $5,000,000 was filed earlier this month in the Northern District of California against Goya Foods, Inc. (“Goya”). The plaintiff, a purchaser of Goya octopus products from the website Amazon.com, alleges that Goya tricked consumers into purchasing its products by labeling them as octopus when in reality, the products contained jumbo squid. The plaintiff alleges that independent DNA testing showed that Goya’s products were in fact jumbo squid, which is significantly cheaper and of lower quality than octopus.