Under existing law, it is unlawful for a person doing business in California and advertising to consumers in California to make any false or misleading advertising claim. Existing law requires any person doing business, and in whose behalf advertising claims are made to consumers, in California to, upon request of the Director of Consumer Affairs, the Attorney General, any city attorney, or any district attorney, provide evidence of the facts on which the advertising claims are based. Existing law authorizes the Director of Consumer Affairs, the Attorney General, any city attorney, or any district attorney to take specified actions upon failure of the advertiser to adequately substantiate a claim within a reasonable time or if the requesting official has reason to believe that the advertising claim is false or misleading.

This bill would additionally authorize a county counsel to request official evidence of the facts on which the advertising claims are based and take the above-referenced actions on the failure of the advertiser to respond or if the county counsel has reason to believe the advertising claim is false or misleading.

Under existing law, it is unlawful for a person doing business in California and advertising to consumers in California to make any false or misleading advertising claim. Existing law requires any person doing business, and in whose behalf advertising claims are made to consumers, in California to, upon request of the Director of Consumer Affairs, the Attorney General, any city attorney, or any district attorney, provide evidence of the facts on which the advertising claims are based. Existing law authorizes the Director of Consumer Affairs, the Attorney General, any city attorney, or any district attorney to take specified actions upon failure of the advertiser to adequately substantiate a claim within a reasonable time or if the requesting official has reason to believe that the advertising claim is false or misleading.

This bill would additionally authorize a county counsel to request official evidence of the facts on which the advertising claims are based and take the above-referenced actions on the failure of the advertiser to respond or if the county counsel has reason to believe the advertising claim is false or misleading.

Under existing law, it is unlawful for a person doing business in California and advertising to consumers in California to make any false or misleading advertising claim. Existing law requires any person doing business, and in whose behalf advertising claims are made to consumers, in California to, upon request of the Director of Consumer Affairs, the Attorney General, any city attorney, or any district attorney, provide evidence of the facts on which the advertising claims are based. Existing law authorizes the Director of Consumer Affairs, the Attorney General, any city attorney, or any district attorney to take specified actions upon failure of the advertiser to adequately substantiate a claim within a reasonable time or if the requesting official has reason to believe that the advertising claim is false or misleading.

This bill would additionally authorize a county counsel to request official evidence of the facts on which the advertising claims are based and take the above-referenced actions on the failure of the advertiser to respond or if the county counsel has reason to believe the advertising claim is false or misleading.

SENATE THIRD READING

STR Bill Id:

Author:(Wieckowski)

As Introduced Ver:

Majority vote

SENATE VOTE: 24-11

SUMMARY: Authorizes a county counsel to request official evidence of the facts on which advertising claims are based and take other actions, as specified. Specifically, this bill:

1. Authorizes a county counsel to request any person or business, on whose behalf advertising claims are made to consumers, to request evidence of the facts upon which the advertising claims are made.
2. Authorizes a county counsel, upon failure of the advertiser to adequately respond to request within a reasonable period of time, or if the county counsel has reason to believe that the advertising claim is false or misleading, to do either or both of the following:
   1. Seek an immediate termination or modification of the claim by the person, as specified.
   2. Disseminate information, taking due care to protect legitimate trade secrets, concerning the veracity of the claims or why the claims are misleading to the consumers in this state.

EXISTING LAW:

1. Makes it unlawful for a person doing business and advertising in this state from making any false or misleading advertising claim. (Business and Professions Code Section 17508 (a); all further statutory references are to this code, unless otherwise indicated.)
2. Provides that, upon written request by the Director of Consumer Affairs, the Attorney General, any city attorney, or any district attorney, any person doing business and advertising in California shall provide to the official making the request, evidence of the facts upon which the challenged advertising claims are based. Specifies that the request shall be made within one year of the last day on which the advertising claim is made. If the advertiser to whom the request is made fails to adequately respond to the request for information, or if the official making the request has reasons to believe that the advertising claim is false or misleading, the official making the request may do either or both of the following:
   1. Seek an injunction, ordering an immediate termination or modification of the false or misleading advertisement.
   2. Disseminate information, taking due care to protect legitimate trade secrets, concerning the veracity of the claims or why the claims are misleading to consumers of this state. (Section 17508(b) and (c).)
3. Specifies that the above provisions shall not be construed to hold any newspaper publisher or radio or television broadcaster liable for publishing or broadcasting any advertising claims, unless the publisher or broadcaster is the person making the claims. (Section 17508(e).)
4. Authorizes the following entities to seek an injunction ordering an immediate termination or modification of the false or misleading advertising claim: the Attorney General, any district attorney, county counsel, city attorney, or city prosecutor in this state. Specifies that the injunction shall be sought in the name of the people of the State of California, or upon the complaint of any board, officer, person, corporation or association, by any person who has suffered injury in fact and has lost money or property as a result of the false or misleading advertising claim. (Section 17535.)
5. Provides that any person who violates the False Advertising Law shall be liable for a civil penalty not to exceed $2,500 for each violation, which shall be assessed and recovered in a civil action brought in the name of the people of the State of California by the Attorney General or by any district attorney, county counsel, or city attorney in any court of competent jurisdiction. (Section 17536.)

FISCAL EFFECT: None.

COMMENTS: This bill seeks to remedy what is arguably an oversight in California's False Advertising Law (Business and Professions Code Sections 17500 to 17606). California's False Advertising Law makes it unlawful for any person doing business in California to make false or misleading advertising claims to California consumers. In addition to potential civil liability to a person who is harmed by false or misleading advertising claim, a person or business that engages in false or misleading advertising can also be subject to civil actions brought by various government officials for injunctive relief or civil penalties. The public officials who may bring an action under the False Advertising Law include the California Attorney General, any district attorney, county counsel, or city attorney. Prior to bringing an action based upon false or misleading advertising, a public official may request that a person or business suspected of engaging in false or misleading advertising provide evidence to support the veracity of specific advertising claims. If the person or business to whom the request is made fails to respond or provide satisfactory evidence in support of the claim, the public official may do either or both of the following: 1) seek an injunction ordering the person or business to terminate or modify the false or misleading claim; 2) disseminate information to consumers about the nature of the false or misleading claim.

Discrepancy in Existing Law: While the purpose of the False Advertising Law and the methods for enforcing seem clear enough, there is nonetheless a curious discrepancy in existing law that this bill attempts to address. While existing law allows the Attorney General, any district attorney, county counsel, or city attorney to seek injunctive relief or civil penalties to enforce the False Advertising Law, existing law only allows the Attorney General, any district attorney or city attorney to request evidence upon which an advertising claim is based. In other words, while a county counsel is one of the public attorneys who may bring an action alleging false or misleading advertising, the county counsel alone is not authorized to request that a person or business provide evidence of the facts upon which an advertising claim is made. According to the county organizations that support this bill, making this preliminary request is essential in order to determine whether or not there is enough evidence of wrongdoing to bring an action and to give the person or business an opportunity to explain the veracity of the claim.

It is unclear why a county counsel was omitted from the list of officials who may request evidence, but the discrepancy has existed since 1972. Yet, whatever the reason for the omission of county counsel and however they may have dealt with this omission in the past, it certainly makes sense that if the county counsel, like other public attorneys, have the authority to bring an action for injunctive relief and civil penalties, they should have the ability, like other public attorneys, to request a business or advertiser to produce evidence that supports an advertising claim.

Potential Impact on Litigation Seems Limited: Supporters and opponents of this bill offer quite different assessments as to whether this bill will increase or decrease the number of lawsuits alleging false advertising. Supporters suggest that this bill could decrease litigation by allowing county counsel to request substantiation of an advertising claim before filing a lawsuit. It will give a business the opportunity to defend an advertising claim before being subject to a lawsuit and potential civil penalties. Opponents, on the other hand, contend that this bill "is intended to facilitate additional litigation." Opponents apparently believe that county counsel will use this authority to gather information in support of a lawsuit that they otherwise would not have brought. However, there is no evidence that the author and supporters "intend" this bill to lead to more litigation; indeed, it seems more likely that this bill will allow county counsel to resolve false advertising claims without having to initiate litigation. Before the county counsel files a lawsuit, the business or advertiser will be given an opportunity to show evidence in support of their claims. If the county counsel is not satisfied by that evidence, the county counsel may seek an injunction requiring the business or advertiser to terminate or "modify" that claim so that it is not false or misleading. In addition, since 1974 city attorneys have had the power – like the Attorney General and district attorneys – to request substantiating evidence prior to bringing an action, yet the Committee is not aware of (and opponents have not offered) any evidence showing that city attorneys have abused that power by making unwarranted requests or bringing unnecessary lawsuits.

Analysis Prepared by: Thomas Clark / JUD. / (916) 319-2334 FN: 0003417

Date of Hearing: June 8, 2016

ASSEMBLY COMMITTEE ON JUDICIARY

Mark Stone, Chair

SBPCA Bill Id:SB 1130

Author:(Wieckowski) – As Introduced Ver:February 17, 2016

SENATE VOTE: 24-11

SUBJECT: False advertising: substantiation of claims: county counsel

KEY ISSUE: Should county counsel be authorized to request evidence relating to false advertising claims, in the same manner that any city attorney or district attorney is authorized under existing law to request such evidence, especially given that county counsel currently have the authority to bring a civil action againSt a person or business that engages in false advertising?

SYNOPSIS

California's False Advertising Law makes it unlawful for any person doing business in California to make false or misleading advertising claims to California consumers. Accordingly, existing law requires a business that makes advertising claims to provide evidence substantiating such claims to the Director of Consumer Affairs, the Attorney General, any city attorney, or any district attorney when requested to do so by one of those officials. If the person or business to whom the request is made fails to respond or adequately substantiate the claim, the public official making the request may seek an order terminating or modifying the false or misleading claim and disseminate information about the false or misleading nature of the claim to consumers. This bill would add a county counsel to the list of public officials who may request evidence and take the authorized actions if the subject of the request fails to respond to a request for substantiation. The existing omission of a county counsel from the list of public officials who may request evidence is hard to understand given that existing law nevertheless expressly authorizes a county counsel – along with the Attorney General, a city attorney, or a district attorney – to bring a civil action against a person or business that violates the False Advertising Law. One seemingly obvious rationale for authorizing public attorneys to request information is to allow them to determine if there is sufficient evidence to bring a civil action. It is not clear why existing law gives the Attorney General, city attorneys, district attorneys, and county counsel the authority to bring a civil action, but denies the county counsel alone among that group of officials the authority to request the substantiating information upon which a civil action could be based. This bill is supported by the California State Association of Counties, Urban Counties of California, the Consumer Federation of California, and the Santa Clara County Board of Supervisors. The bill is opposed by the Civil Justice Association of California who contends that it is unnecessary and will facilitate litigation.

SUMMARY: Authorizes a county counsel to request official evidence of the facts on which advertising claims are based and take other actions, as specified. Specifically, this bill:

1. Authorizes a county counsel to request any person or business, on whose behalf advertising claims are made to consumers, to request evidence of the facts upon which the advertising claims are made.
2. Authorizes a county counsel, upon failure of the advertiser to adequately respond to request within a reasonable period of time, or if the county counsel has reason to believe that the advertising claim is false or misleading, to do either or both of the following:
   1. Seek an immediate termination or modification of the claim by the person, as specified.
   2. Disseminate information, taking due care to protect legitimate trade secrets, concerning the veracity of the claims or why the claims are misleading to the consumers in this state.

EXISTING LAW:

1. Makes it unlawful for a person doing business and advertising in this state from making any false or misleading advertising claim. (Business & Professions Code Section 17508 (a); all further statutory references are to this code, unless otherwise indicated.)
2. Provides that, upon written request by the Director of Consumer Affairs, the Attorney General, any city attorney, or any district attorney, any person doing business and advertising in California shall provide to the official making the request, evidence of the facts upon which the challenged advertising claims are based. Specifies that the request shall be made within one year of the last day on which the advertising claim is made. If the advertiser to whom the request is made fails to adequately respond to the request for information, or if the official making the request has reasons to believe that the advertising claim is false or misleading, the official making the request may do either or both of the following:
   1. Seek an injunction, ordering an immediate termination or modification of the false or misleading advertisement.
   2. Disseminate information, taking due care to protect legitimate trade secrets, concerning the veracity of the claims or why the claims are misleading to consumers of this state. (Section 17508 (b)-(c).)
3. Specifies that the above provisions shall not be construed to hold any newspaper publisher or radio or television broadcaster liable for publishing or broadcasting any advertising claims, unless the publisher or broadcaster is the person making the claims. (Section 17508 (e).)
4. Authorizes the following entities to seek an injunction ordering an immediate termination or modification of the false or misleading advertising claim: the Attorney General, any district attorney, county counsel, city attorney, or city prosecutor in this state. Specifies that the injunction shall be sought in the name of the people of the State of California, or upon the complaint of any board, officer, person, corporation or association, by any person who has suffered injury in fact and has lost money or property as a result of the false or misleading advertising claim. (Section 17535.)
5. Provides that any person who violates the False Advertising Law shall be liable for a civil penalty not to exceed two thousand five hundred dollars ($2,500) for each violation, which shall be assessed and recovered in a civil action brought in the name of the people of the State of California by the Attorney General or by any district attorney, county counsel, or city attorney in any court of competent jurisdiction. (Section 17536.)

FISCAL EFFECT: As currently in print this bill is keyed non-fiscal.

COMMENTS: This bill seeks to remedy what is arguably an oversight in California's False Advertising Law (Business & Professions Code Sections 17500-17606). California's False Advertising Law makes it unlawful for any person doing business in California to make false or misleading advertising claims to California consumers. In addition to potential civil liability to a person who is harmed by false or misleading advertising claim, a person or business that engages in false or misleading advertising can also be subject to civil actions brought by various government officials for injunctive relief or civil penalties. The public officials who may bring an action under the False Advertising Law include the California Attorney General, any district attorney, county counsel, or city attorney. Prior to bringing an action based upon false or misleading advertising, a public official may request that a person or business suspected of engaging in false or misleading advertising provide evidence to support the veracity of specific advertising claims. If the person or business to whom the request is made fails to respond or provide satisfactory evidence in support of the claim, the public official may do either or both of the following: (1) seek an injunction ordering the person or business to terminate or modify the false or misleading claim; (2) disseminate information to consumers about the nature of the false or misleading claim.

Discrepancy in Existing Law: While the purpose of the False Advertising Law and the methods for enforcing seem clear enough, there is nonetheless a curious discrepancy in existing law that this bill attempts to address. While existing law allows the Attorney General, any district attorney, county counsel, or city attorney to seek injunctive relief or civil penalties to enforce the False Advertising Law, existing law only allows the Attorney General, any district attorney or city attorney to request evidence upon which an advertising claim is based. In other words, while a county counsel is one of the public attorneys who may bring an action alleging false or misleading advertising, the county counsel alone is not authorized to request that a person or business provide evidence of the facts upon which an advertising claim is made. According to the county organizations that support this bill, making this preliminary request is essential in order to determine whether or not there is enough evidence of wrongdoing to bring an action and to give the person or business an opportunity to explain the veracity of the claim.

It is unclear why a county counsel was omitted from the list of officials who may request evidence, but the discrepancy has existed since 1972. When Section 17508 (which authorizes the request) was first in enacted in 1972, it only allowed the Director of Consumer Affairs, the Attorney General, and any district attorney to make the request. In 1974, the section was amended to add city attorneys, but not county counsel. Sections 17535 and 17536, which authorize actions for injunctive relief and civil penalties, respectively, predate Section 17508, but both were amended in 1972 under the same legislation that enacted Section 17508. Since at least 1972, therefore, the law has authorized county counsel – along with the Attorney General, district attorneys, and city attorneys – to bring actions against false and misleading advertising, but only county counsel are not expressly authorized to request substantiating evidence before bringing an action. The Committee is not aware of any legislative history that speaks to why county counsel were treated differently, nor is it clear how county counsel have dealt with this discrepancy since 1972. It could be, as opponents point out in their letter of opposition, that county counsel who wanted to exercise their power to bring an action could obtain the assistance of the district attorney of the county in order to request evidence in support of a suspect claim.

At any rate, whatever the reason for the omission of county counsel and however they may have dealt with this omission in the past, it certainly makes sense that if the county counsel, like other public attorneys, have the authority to bring an action for injunctive relief and civil penalties, they should have the ability, like other public attorneys, to request a business or advertiser to produce evidence that supports an advertising claim.

Potential Impact on Litigation Seems Limited: Supporters and opponents of this bill offer quite different assessments as to whether this bill will increase or decrease the number of lawsuits alleging false advertising. Supporters suggest that this bill could decrease litigation by allowing county counsel to request substantiation of an advertising claim before filing a lawsuit. It will give a business the opportunity to defend an advertising claim before being subject to a lawsuit and potential civil penalties. Opponents, on the other hand, contend that this bill "is intended to facilitate additional litigation." Opponents apparently believe that county counsel will use this authority to gather information in support of a lawsuit that they otherwise would not have brought. However, there is no evidence that the author and supporters "intend" this bill to lead to more litigation; indeed, it seems more likely that this bill will allow county counsel to resolve false advertising claims without having to initiate litigation. In the past, business groups and the Civil Justice Association of California (one of the opponents of this bill) have argued vigorously in other contexts that businesses should be given prior notice of alleged violations and an opportunity to correct violations, if there are any, before being dragged into a lawsuit. This bill appears to do just that. Before the county counsel files a lawsuit, the business or advertiser will be given an opportunity to show evidence in support of their claims. If the county counsel is not satisfied by that evidence, the county counsel may seek an injunction requiring the business or advertiser to terminate or "modify" that claim so that it is not false or misleading. In addition, since 1974 city attorneys have had the power – like the Attorney General and district attorneys – to request substantiating evidence prior to bringing an action, yet the Committee is not aware of (and opponents have not offered) any evidence showing that city attorneys have abused that power by making unwarranted requests or bringing unnecessary lawsuits.

ARGUMENTS IN SUPPORT: The Santa Clara County Board of Supervisors, the sponsor of this measure, points out that even though county counsel "have the same authority as the Attorney General, any district attorney, and any city attorney to bring a false advertising action on behalf of California's consumers," existing law "does not provide county counsels with the authority to ask advertisers to substantiate their advertising claims before filing a lawsuit," unlike the other public attorneys. Similarly, the California State Association of Counties (CSAC), argues that county counsel "are not as well positioned as other public attorneys to evaluate, litigate, and seek indemnity for false and misleading advertising." Without this authority, both CSAC and Santa Clara County contend that a county counsel is more likely to file unnecessary lawsuits due to a lack of information. "SB 1130," CSAC concludes, "would therefore facilitate the correction of false advertising claims and assist in eliminating unnecessary lawsuits."

The Consumer Federation of California (CFC) and the Urban Counties of California (UCC) support this measure for substantially the same reasons as those set forth by CSAC and Santa Clara County. CFC adds that allowing county counsel to "request substantiation of an advertising claim before filing a lawsuit . . . will facilitate the correction of false advertising claims and ensure local recourses are expended efficiently to better protect California consumers from false and misleading advertising."

ARGUMENTS IN OPPOSITION: The Civil Justice Association of California (CJAC) opposes this bill. First, CJAC contends that "the bill is unnecessary," pointing out that existing law "already permits the state Director of Consumer Affairs and Attorney General, and every city attorney, and every district attorney to demand information substantiating advertising claims." CJAC contends that there "is no indication that an inadequate number of substantiation demands are being made, or that a county counsel suspecting false advertising could not get support from one of the entities on the list [of authorized public attorneys]." CJAC concludes their letter by alleging that "this bill is intended to facilitate additional litigation."

REGISTERED SUPPORT / OPPOSITION:

Support

California State Association of Counties

Consumer Federation of California

Santa Clara County

Santa Cruz County Board of Supervisors

Urban Counties of California

Opposition

Civil Justice Association of California

Personal Care Products Council

Analysis Prepared by: Thomas Clark / JUD. / (916) 319-2334

 THIRD READING  

Bill No: SB 1130

Author:

:

Vote:

SENATE JUDICIARY COMMITTEE: 5-2, 3/29/16

AYES: Jackson, Hertzberg, Leno, Monning, Wieckowski

NOES: Moorlach, Anderson

SUBJECT:

SOURCE: Santa Clara County Board of Supervisors

DIGEST: This bill adds county counsels to the list of public prosecutors authorized to require persons who make advertising claims that purport to be based on factual, objective, or clinical evidence, that compare a product’s effectiveness or safety to that of other brands or products, or that purport to be based on any fact, to substantiate their claims. This bill extends to county counsels the authority to seek immediate termination or modification of unsubstantiated advertising claims, or to disseminate information concerning the veracity of such claims.

ANALYSIS:

Existing law:

1. States that it is unlawful for any person, firm, corporation or association, or any employee thereof with intent directly or indirectly to dispose of real or personal property or to perform services, professional or otherwise, or to induce the public to enter into any obligation relating thereto, to make or disseminate or cause to be made or disseminated before the public in this state, or to make or disseminate or cause to be made or disseminated from this state before the public in any state, in any newspaper or other publication, or any advertising device, or by public outcry or proclamation, or in any other manner or means whatever, any statement, concerning that real or personal property or those services, professional or otherwise, or concerning any circumstance or matter of fact connected with the proposed performance or disposition thereof, which is untrue or misleading, as specified. (Bus. & Prof. Code Sec. 17500.)
2. Specifies that a violation of this provision is a misdemeanor punishable by imprisonment in the county jail not exceeding six months, or by a fine not exceeding two thousand five hundred dollars ($2,500), or by both that imprisonment and fine. (Bus. & Prof. Code Sec. 17500, 17534.) Existing law further states that any person who violates this provision shall be liable for a civil penalty not to exceed $2,500 for each violation, which shall be assessed and recovered in a civil action brought in the name of the people of the State of California by the Attorney General or by any district attorney, county counsel, or city attorney in any court of competent jurisdiction. (Bus. & Prof. Code Sec. 17536.)
3. Specifies that any person, corporation, or organization, as specified, which violates or proposes to violate the False Advertising Law may be enjoined by any court of competent jurisdiction, and that a court may make such orders or judgments as may be necessary to prevent the use or employment of practices which violate False Advertising Law, or which may be necessary to restore to any person in interest any money or property, real or personal, which may have been acquired by means of any practice in the False Advertising Law declared to be unlawful, as specified. (Bus. & Prof. Code Sec. 17535.)
4. Specifies that actions for injunction under the False Advertising Law may be prosecuted by the Attorney General or any district attorney, county counsel, city attorney, or city prosecutor in this state in the name of the people of the State of California upon their own complaint or upon the complaint of any board, officer, person, corporation or association or by any person who has suffered injury in fact and has lost money or property as a result of a violation of this law. Existing law specifies that any person may pursue representative claims or relief on behalf of others only if the claimant meets the standing requirements of this section, as specified, but that these limitations do not apply to claims brought by the Attorney General, or any district attorney, county counsel, city attorney, or city prosecutor in this state. (Bus. & Prof. Code Sec. 17535.)
5. States that it shall be unlawful for any person doing business in California and advertising to consumers in California to make any false or misleading advertising claim, including claims that: (a) purport to be based on factual, objective, or clinical evidence; (b) compare the product’s effectiveness or safety to that of other brands or products; or (c) purport to be based on any fact. Existing law specifies that the plaintiff shall have the burden of proof in establishing any violation of this section. (Bus. & Prof. Code Sec. 17508 (a), (f).)
6. States that upon written request of the Director of Consumer Affairs, the Attorney General, any city attorney, or any district attorney, any person doing business in California and in whose behalf advertising claims are made to consumers in California, including claims that: (a) purport to be based on factual, objective, or clinical evidence; (b) compare the product’s effectiveness or safety to that of other brands or products; or (c) purport to be based on any fact, shall provide to the department or official making the request evidence of the facts on which the advertising claims are based. Existing law specifies that the request shall be made within one year of the last day on which the advertising claims were made. (Bus. & Prof. Code Sec. 17508 (b).)
7. Requires any city attorney or district attorney who makes a request pursuant to this subdivision to give prior notice of the request to the Attorney General. (Bus. & Prof. Code Sec. 17508 (b).)
8. Authorizes the Director of Consumer Affairs, the Attorney General, any city attorney, or any district attorney to, upon failure of an advertiser to respond by adequately substantiating the claim within a reasonable time, or if the Director of Consumer Affairs, the Attorney General, a city attorney, or a district attorney has reason to believe that the advertising claim is false or misleading, do either or both of the following:

• seek an immediate termination or modification of the claim by the person, as specified; and
• disseminate information, taking due care to protect legitimate trade secrets, concerning the veracity of the claim or why the claim is misleading to the consumers of this state. (Bus. & Prof. Code Sec. 17508 (c).)

This bill:

1. Provides that, in addition to other specified public prosecutors, upon written request of any county counsel, any person doing business in California and on whose behalf advertising claims are made to consumers in California, including claims that: (a) purport to be based on factual, objective, or clinical evidence; (b) compare the product’s effectiveness or safety to that of other brands or products; or (c) purport to be based on any fact, shall provide evidence of the facts on which the advertising claims are based, as specified. This bill states that any county counsel who makes a request pursuant to this section shall give prior notice of the request to the Attorney General.
2. Provides that, in addition to other specified public prosecutors, any county counsel may, upon failure of an advertiser to adequately substantiate an advertising claim within a reasonable time, or if the county counsel has reason to believe that the advertising claim is false or misleading, do either or both of the following:

• seek an immediate termination or modification of the claim by the person, as specified; and
• disseminate information, taking due care to protect legitimate trade secrets, concerning the veracity of the claim or why the claim is misleading to the consumers of this state.

Background

California’s False Advertising Law makes it “unlawful for any person, … corporation …, or any employee thereof with intent directly or indirectly to dispose of real or personal property or to perform services … or to induce the public to enter into any obligation relating thereto, to make or disseminate … before the public in this state, … in any newspaper or other publication … or in any other manner or means whatever … any statement, concerning that real or personal property or those services … which is untrue or misleading, and which is known, or which by the exercise of reasonable care should be known, to be untrue or misleading … .” (Kasky v. Nike, Inc. (2002) 27 Cal.4th 939, 950.) A violation of this provision is a misdemeanor, punishable by imprisonment of up to six months and a fine not to exceed $2,500, and an action alleging a violation of the law may be brought either by a public prosecutor or by “any person who has suffered injury in fact and has lost money or property as a result of a violation.” (Bus. & Prof. Code Sec. 17535.) The California Supreme Court has interpreted the False Advertising Law to “embrace not only advertising which is false, but also advertising which although true, is either actually misleading or which has a capacity, likelihood or tendency to deceive or confuse the public.” (Leoni v. State Bar (1985) 39 Cal.3d 609, 626.)

Prior to bringing a civil action in court, the False Advertising Law authorizes the Director of Consumer Affairs, the Attorney General, district attorneys, and city attorneys to require advertisers to substantiate their claims upon written request. If an advertiser fails to substantiate a claim or fails to respond to a request to do so by one of these public prosecutors, the False Advertising Law authorizes these public prosecutors to both seek immediate termination or modification of the unsubstantiated claim and disseminate information to the public concerning the truth of the claims made by the advertiser.

This bill additionally authorizes county counsels to require advertisers, upon written request, to substantiate claims, as well as to seek the termination or modification of unsubstantiated claims, or to disseminate information to the public about the veracity of such claims.

Comments

The author writes:

The False Advertising law provides an administrative procedure through which the Director of Consumer Affairs, Attorney General, any city attorney, and any district attorney may require advertisers to substantiate advertising claims that are based on facts or evidence or that compare a product’s effectiveness or safety to that of other products. This provision enables government entities to obtain evidence and evaluate advertising claims before initiating litigation. In addition, if a person fails to adequately substantiate an advertising claim, the law permits the Director of Consumer Affairs, the Attorney General, any city attorney, or any district attorney to seek an immediate termination or modification of the advertising claim and/or to disseminate information about the misleading nature of the advertising to California consumers.

County counsels currently have the same authority to prosecute false or misleading advertising claims as the Attorney General, any city attorney, and any district attorney, yet they do not have the same authority to obtain information from the advertiser prior to initiating litigation. SB 1130 corrects this oversight by adding county counsels to the list of entities authorized to demand information from an advertiser in response to claims of false or misleading advertising.

SB 1130 will give county counsels the opportunity to properly evaluate claims and seek redress for false and misleading advertising before initiating litigation. As such, SB 1130 will improve county counsels’ ability to prevent and obtain relief from false and misleading marketing of products or services, including those that affect public health and safety. SB 1130 will therefore reduce the need for services from county departments to address the public health and safety consequences of misleading advertising. SB 1130 will also improve county counsels’ ability to resolve claims of false and misleading advertising without initiating costly and potentially unnecessary litigation.

Related/Prior Legislation

AB 1543 (Lempert, Chapter 947, Statutes of 1989) expanded the types of advertising for which specified public prosecutors could request in writing that an advertising claim be substantiated to include claims purported to be based on any fact, and clarified that a plaintiff shall have the burden of proof to establish that a claim was false or misleading.

AB 2789 (Knox, Chapter 1002, Statutes of 1976) removed the requirement that a district attorney first seek the approval of the Attorney General before requesting in writing that an advertiser substantiate a claim, and required district attorneys and city attorneys to provide the Attorney General with prior notice before requesting in writing that an advertiser substantiate a claim.

SB 1163 (Dymally, Chapter 23, Statutes of 1974) authorized any city attorney, in addition to other public prosecutors, to request evidence of facts upon which advertising claims are based, and to seek immediate termination or modification of a claim if an advertiser fails to respond or if there is reason to believe a claim is false.

AB 1538 (Meade, Chapter 1417, Statutes of 1972) required, among other things, that upon written request of the Department of Consumer Affairs, the Attorney General, or a district attorney acting with the approval of the Attorney General, any person who makes advertising claims purported to be based on factual, objective, or clinical evidence, or who compares a product’s effectiveness or safety with other products, to produce evidence upon which these claims are based. This bill also authorized, upon failure of an advertiser to substantiate such claims, these public prosecutors to seek immediate termination or modification of the claim, or to disseminate information concerning the veracity of the claim to consumers.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 3/29/16)

Santa Clara County Board of Supervisors (source)

California State Association of Counties

Urban Counties of California

OPPOSITION: (Verified 3/29/16)

Civil Justice Association of California

ARGUMENTS IN SUPPORT: According to the California State Association of Counties, under the False Advertising Law, county counsels have the same authority as the Attorney General, any district attorney, and any city attorney to bring a false advertising action on behalf of California’s consumers. Current law does not provide county counsels with the authority to ask advertisers to substantiate their advertising claims before filing a lawsuit as it does public attorneys. As a result, county counsels are not as well positioned as other public attorneys to evaluate, litigate and seek indemnity for false and misleading advertising. Without this authority, county counsels are more likely to file unnecessary lawsuits because the information needed to fully evaluate the false advertising claim is lacking. SB 1130 therefore facilitates the correction of false advertising claims and assists in eliminating unnecessary lawsuits.

ARGUMENTS IN OPPOSITION: According to the Civil Justice Association of California, this bill is unnecessary and is intended to facilitate additional litigation. Business and Professions Code Section 17508(b) already permits the state Director of Consumer Affairs and Attorney General, and every city attorney, and every district attorney to demand information substantiating advertising claims. There is no indication that an inadequate number of substantiation demands are being made, or that a county counsel suspecting false advertising could not get support from one of the entities on the list. County counsels are already included in Business and Professions Code Section 17535 as among the entities that can seek injunctive relief, including restitution, for false advertising.

Prepared by:

3/31/16 15:45:59

**** END ****

SENATE JUDICIARY COMMITTEE

Senator Hannah-Beth Jackson, Chair

2015-2016 Regular Session

Bill No: SB 1130 (Author:Wieckowski)

Version: February 17, 2016

Hearing Date: March 29, 2016

Fiscal: No

Urgency: No

Consultant: TH

SUBJECT

False Advertising: Substantiation of Claims: County Counsel

DESCRIPTION

This bill adds county counsels to the list of public prosecutors authorized to require persons who make advertising claims that purport to be based on factual, objective, or clinical evidence, that compare a product’s effectiveness or safety to that of other brands or products, or that purport to be based on any fact, to substantiate their claims. This bill extends to county counsels the authority to seek immediate termination or modification of unsubstantiated advertising claims, or to disseminate information concerning the veracity of such claims.

BACKGROUND

California’s False Advertising Law makes it “unlawful for any person, … corporation …, or any employee thereof with intent directly or indirectly to dispose of real or personal property or to perform services … or to induce the public to enter into any obligation relating thereto, to make or disseminate … before the public in this state, … in any newspaper or other publication … or in any other manner or means whatever … any statement, concerning that real or personal property or those services … which is untrue or misleading, and which is known, or which by the exercise of reasonable care should be known, to be untrue or misleading … .” (Kasky v. Nike, Inc. (2002) 27 Cal.4th 939, 950.) A violation of this provision is a misdemeanor, punishable by imprisonment of up to six months and a fine not to exceed $2,500, and an action alleging a violation of the law may be brought either by a public prosecutor or by “any person who has suffered injury in fact and has lost money or property as a result of a violation.” (Bus. & Prof. Code Sec. 17535.) The California Supreme Court has interpreted the False Advertising Law to “embrace not only advertising which is false, but also advertising which although true, is either actually misleading or which has a capacity, likelihood or tendency to deceive or confuse the public.” (Leoni v. State Bar (1985) 39 Cal.3d 609, 626.)

Prior to bringing a civil action in court, the False Advertising Law authorizes the Director of Consumer Affairs, the Attorney General, district attorneys, and city attorneys to require advertisers to substantiate their claims upon written request. If an advertiser fails to substantiate a claim or fails to respond to a request to do so by one of these public prosecutors, the False Advertising Law authorizes these public prosecutors to both seek immediate termination or modification of the unsubstantiated claim and disseminate information to the public concerning the truth of the claims made by the advertiser.

This bill would additionally authorize county counsels to require advertisers, upon written request, to substantiate claims, as well as to seek the termination or modification of unsubstantiated claims, or to disseminate information to the public about the veracity of such claims.

CHANGES TO EXISTING LAW

Existing law, the False Advertising Law, states that it is unlawful for any person, firm, corporation or association, or any employee thereof with intent directly or indirectly to dispose of real or personal property or to perform services, professional or otherwise, or to induce the public to enter into any obligation relating thereto, to make or disseminate or cause to be made or disseminated before the public in this state, or to make or disseminate or cause to be made or disseminated from this state before the public in any state, in any newspaper or other publication, or any advertising device, or by public outcry or proclamation, or in any other manner or means whatever, any statement, concerning that real or personal property or those services, professional or otherwise, or concerning any circumstance or matter of fact connected with the proposed performance or disposition thereof, which is untrue or misleading, as specified. (Bus. & Prof. Code Sec. 17500.)

Existing law specifies that a violation of this provision is a misdemeanor punishable by imprisonment in the county jail not exceeding six months, or by a fine not exceeding two thousand five hundred dollars ($2,500), or by both that imprisonment and fine. (Bus. & Prof. Code Sec. 17500, 17534.) Existing law further states that any person who violates this provision shall be liable for a civil penalty not to exceed $2,500 for each violation, which shall be assessed and recovered in a civil action brought in the name of the people of the State of California by the Attorney General or by any district attorney, county counsel, or city attorney in any court of competent jurisdiction. (Bus. & Prof. Code Sec. 17536.)

Existing law specifies that any person, corporation, or organization, as specified, which violates or proposes to violate the False Advertising Law may be enjoined by any court of competent jurisdiction, and that a court may make such orders or judgments as may be necessary to prevent the use or employment of practices which violate False Advertising Law, or which may be necessary to restore to any person in interest any money or property, real or personal, which may have been acquired by means of any practice in the False Advertising Law declared to be unlawful, as specified. (Bus. & Prof. Code Sec. 17535.)

Existing law specifies that actions for injunction under the False Advertising Law may be prosecuted by the Attorney General or any district attorney, county counsel, city attorney, or city prosecutor in this state in the name of the people of the State of California upon their own complaint or upon the complaint of any board, officer, person, corporation or association or by any person who has suffered injury in fact and has lost money or property as a result of a violation of this law. Existing law specifies that any person may pursue representative claims or relief on behalf of others only if the claimant meets the standing requirements of this section, as specified, but that these limitations do not apply to claims brought by the Attorney General, or any district attorney, county counsel, city attorney, or city prosecutor in this state. (Bus. & Prof. Code Sec. 17535.)

Existing law states that it shall be unlawful for any person doing business in California and advertising to consumers in California to make any false or misleading advertising claim, including claims that: (1) purport to be based on factual, objective, or clinical evidence; (2) compare the product’s effectiveness or safety to that of other brands or products; or (3) purport to be based on any fact. Existing law specifies that the plaintiff shall have the burden of proof in establishing any violation of this section. (Bus. & Prof. Code Sec. 17508 (a), (f).)

Existing law states that upon written request of the Director of Consumer Affairs, the Attorney General, any city attorney, or any district attorney, any person doing business in California and in whose behalf advertising claims are made to consumers in California, including claims that: (1) purport to be based on factual, objective, or clinical evidence; (2) compare the product’s effectiveness or safety to that of other brands or products; or (3) purport to be based on any fact, shall provide to the department or official making the request evidence of the facts on which the advertising claims are based. Existing law specifies that the request shall be made within one year of the last day on which the advertising claims were made. (Bus. & Prof. Code Sec. 17508 (b).)

Existing law requires any city attorney or district attorney who makes a request pursuant to this subdivision to give prior notice of the request to the Attorney General. (Bus. & Prof. Code Sec. 17508 (b).)

Existing law authorizes the Director of Consumer Affairs, the Attorney General, any city attorney, or any district attorney to, upon failure of an advertiser to respond by adequately substantiating the claim within a reasonable time, or if the Director of Consumer Affairs, the Attorney General, a city attorney, or a district attorney has reason to believe that the advertising claim is false or misleading, do either or both of the following:

• seek an immediate termination or modification of the claim by the person, as specified; and
• disseminate information, taking due care to protect legitimate trade secrets, concerning the veracity of the claim or why the claim is misleading to the consumers of this state. (Bus. & Prof. Code Sec. 17508 (c).)

This bill provides that, in addition to other specified public prosecutors, upon written request of any county counsel, any person doing business in California and on whose behalf advertising claims are made to consumers in California, including claims that: (1) purport to be based on factual, objective, or clinical evidence; (2) compare the product’s effectiveness or safety to that of other brands or products; or (3) purport to be based on any fact, shall provide evidence of the facts on which the advertising claims are based, as specified. This bill states that any county counsel who makes a request pursuant to this section shall give prior notice of the request to the Attorney General.

This bill provides that, in addition to other specified public prosecutors, any county counsel may, upon failure of an advertiser to adequately substantiate an advertising claim within a reasonable time, or if the county counsel has reason to believe that the advertising claim is false or misleading, do either or both of the following:

• seek an immediate termination or modification of the claim by the person, as specified; and
• disseminate information, taking due care to protect legitimate trade secrets, concerning the veracity of the claim or why the claim is misleading to the consumers of this state.

COMMENT

1. Stated need for the bill

The author writes:

The False Advertising law provides an administrative procedure through which the Director of Consumer Affairs, Attorney General, any city attorney, and any district attorney may require advertisers to substantiate advertising claims that are based on facts or evidence or that compare a product’s effectiveness or safety to that of other products. This provision enables government entities to obtain evidence and evaluate advertising claims before initiating litigation. In addition, if a person fails to adequately substantiate an advertising claim, the law permits the Director of Consumer Affairs, the Attorney General, any city attorney, or any district attorney to seek an immediate termination or modification of the advertising claim and/or to disseminate information about the misleading nature of the advertising to California consumers.

County counsels currently have the same authority to prosecute false or misleading advertising claims as the Attorney General, any city attorney, and any district attorney, yet they do not have the same authority to obtain information from the advertiser prior to initiating litigation. SB 1130 corrects this oversight by adding county counsels to the list of entities authorized to demand information from an advertiser in response to claims of false or misleading advertising.

SB 1130 will give county counsels the opportunity to properly evaluate claims and seek redress for false and misleading advertising before initiating litigation. As such, SB 1130 will improve county counsels’ ability to prevent and obtain relief from false and misleading marketing of products or services, including those that affect public health and safety. SB 1130 will therefore reduce the need for services from county departments to address the public health and safety consequences of misleading advertising. SB 1130 will also improve county counsels’ ability to resolve claims of false and misleading advertising without initiating costly and potentially unnecessary litigation.

1. Avoiding Unnecessary Litigation

Like city attorneys and district attorneys, county counsels are authorized to bring certain civil actions on behalf of the public to enforce public rights. Code of Civil Procedure Section 731, for example, authorizes county counsels to bring civil actions to abate public nuisances within their jurisdiction. The False Advertising Law similarly authorizes county counsels to bring civil actions on behalf of the public against persons who engage in false or misleading advertising. Under current law, other named public prosecutors, such as city attorneys and district attorneys, may require an advertiser to substantiate the basis for an advertising claim before filing a civil action. If such a claim cannot be properly substantiated, these public prosecutors may seek to terminate or modify the unsubstantiated claim, or disseminate information about the veracity of the unsubstantiated claim. County counsels do not currently possess this authority.

According to the sponsor, the Santa Clara County Board of Supervisors, the inability of county counsels to require advertisers to substantiate their advertising claims before filing a lawsuit renders them “not as well positioned as other public attorneys to evaluate, litigate, and seek redress for false and misleading advertising.” They state this lack of authority makes it “more likely that [county counsels will] file unnecessary litigation because they lack the information needed to fully evaluate [a] false advertising claim before filing suit.”

This bill would extend the False Advertising Law’s pre-litigation substantiation authority to county counsels. In so doing, it would likely allow county counsels to avoid unnecessary litigation by permitting these public attorneys to verify the accuracy of advertising claims without first having to file a lawsuit. Extending this pre-litigation substantiation process to county counsels would not only preserve scarce judicial resources, but would also potentially allow a county’s legal resources to be preserved as well.

1. Opposition Concerns

Rather than avoiding unnecessary litigation, the Civil Justice Association of California (CJAC), writing in opposition, states, “[w]e believe this bill is intended to facilitate additional litigation. There is no indication that there is a shortage of litigation against advertisers.” CJAC further argues that this bill is unnecessary, stating:

Business and Professions Code [Section] 17508(b) already permits the state Director of Consumer Affairs and Attorney General, and every city attorney, and every district attorney to demand information substantiating advertising claims. There is no indication that an inadequate number of substantiation demands are being made, or that a county counsel suspecting false advertising could not get support from one of the entities on the list. County counsel are already included in [Business and Professions Code Section] 17535 as among the entities that can seek injunctive relief, including restitution, for false advertising.

Support: California State Association of Counties; Urban Counties of California

Opposition: Civil Justice Association of California

HISTORY

Source: Santa Clara County Board of Supervisors

Related Pending Legislation: None Known

Prior Legislation:

AB 1543 (Lempert, Ch. 947, Stats. 1989) expanded the types of advertising for which specified public prosecutors could request in writing that an advertising claim be substantiated to include claims purported to be based on any fact, and clarified that a plaintiff shall have the burden of proof to establish that a claim was false or misleading.

AB 2789 (Knox, Ch. 1002, Stats. 1976) removed the requirement that a district attorney first seek the approval of the Attorney General before requesting in writing that an advertiser substantiate a claim, and required district attorneys and city attorneys to provide the Attorney General with prior notice before requesting in writing that an advertiser substantiate a claim.

SB 1163 (Dymally, Ch. 23, Stats. 1974) authorized any city attorney, in addition to other public prosecutors, to request evidence of facts upon which advertising claims are based, and to seek immediate termination or modification of a claim if an advertiser fails to respond or if there is reason to believe a claim is false.

AB 1538 (Meade, Ch. 1417, Stats. 1972) required, among other things, that upon written request of the Department of Consumer Affairs, the Attorney General, or a district attorney acting with the approval of the Attorney General, any person who makes advertising claims purported to be based on factual, objective, or clinical evidence, or who compares a product’s effectiveness or safety with other products, to produce evidence upon which these claims are based. This bill also authorized, upon failure of an advertiser to substantiate such claims, these public prosecutors to seek immediate termination or modification of the claim, or to disseminate information concerning the veracity of the claim to consumers.

**************