Mitigating Class Action Exposure: An Excerpt from the Advertising Law Tool Kit

By Shahin O. Rothermel & Daniel S. Silverman

Join us as we spotlight select chapters of Venable’s popular Advertising Law Tool Kit, which helps marketing teams navigate their organization’s legal risk. Click here to download the entire Tool Kit, and tune in to the Ad Law Tool Kit Show podcast, to hear an author of this chapter dive deeper into mitigating class action exposure in this week’s episode.

When it comes to mitigating the risk of class action lawsuits, the best offense is a good defense. Companies can take many steps to reduce their exposure to class action litigation before it happens, including the tactics listed below.

Reducing exposure to class action litigation:

• Carefully review and substantiate advertising and promotions prior to disseminating them. Hiring experienced advertising counsel is the most effective way to ensure that advertising comports with the complex legal requirements of various agencies and states.
• Monitor and avoid competitors’ marketing practices that attract class action scrutiny. Consider setting up a service to notify your company when a competitor is sued, so that you can learn from their situation and avoid similar problems.
• Enforcement actions by the Federal Trade Commission (FTC), Food and Drug Administration (FDA), state attorneys general, and self-regulatory bodies such as the Electronic Retailing Self‑Regulation Program (ERSP) and the National Advertising Division (NAD) of the Better Business Bureau (BBB) are breeding grounds for class action litigation. Plaintiffs’ attorneys monitor these entities and often piggyback on their complaints and findings to bring substantively identical private class action lawsuits. By staying abreast of enforcement actions and conforming your advertising practices, you may avoid similar troubles.
• Areas where businesses interact directly with consumers are the most frequent targets of class action litigants. Be especially vigilant about billing, marketing, product fulfillment, website, and customer service practices. Similarly, unforeseeable lapses such as data breaches and billing errors are also ripe targets for class action challenges. Areas that are particularly hot for class actions are free trials/offers and other negative option programs, health benefit and healthy inference claims, lack of substantiation claims, sales pricing and promotion, non‑functional slack fill claims, Made in USA claims, and “all natural” and/or organic claims.
• Periodically review telephone marketing and call center practices to ensure they are compliant with the Telephone Consumer Protection Act (TCPA), the Telemarketing Sales Rule (TSR), and state eavesdropping/privacy laws, especially when any part of the function is outsourced to a third-party vendor.
• The Supreme Court has held that arbitration provisions and class action waivers in contracts are enforceable, barring would‑be class action plaintiffs from filing lawsuits, regardless of state law to the contrary. Consider mitigating litigation risk by including a properly drafted mandatory arbitration provision or class action waiver on the checkout page of your website for internet sales, in your website terms and conditions, and in product retail boxes. Enforceability of an arbitration agreement and/or class action waiver turns on proper notice and unambiguous manifestation of customer assent.
• Track and resolve consumer complaints, including those lodged with the BBB and state AGs, through your customer service programs and by monitoring social media. Know what is being said about your product online. Consult counsel regarding any alarming trends. Do not ignore pre-litigation demand letters from purported class action plaintiffs. Many class action matters can be resolved quickly and inexpensively with help from experienced class action counsel.

To learn more about mitigating class action exposure, contact Ed Boyle, Roger Colaizzi, Angel Garganta, or Dan Silverman. For more insights into advertising law, bookmark our All About Advertising Law blog and subscribe to our monthly newsletter.