Worst False Ad Court Actions 2015

December 14th, 2015

Worst Settlements 2015 NEW

Legal actions against companies accused of false or deceptive advertising filled the court dockets this year. But consumers who may have been duped by the alleged misleading marketing don’t always get what they should from courts. We keep a close eye on court proceedings in deceptive advertising cases and, for the second year in a row, present TINA.org‘s list of the worst false ad court actions this year.

+ 1. Herbalife

herbalife2

This California-based nutrition and weight loss MLM that is under investigation by federal regulators settled a class-action lawsuit filed against it alleging that the company operates an illegal pyramid scheme and deceptively advertises that recruits can earn significant income. The settlement, opposed by TINA.org and several distributors but approved by a federal court judge in May, essentially allows the company — which is also in the midst of a Wall Street battle with activist hedge fund manager Bill Ackman who said it is a pyramid scheme and shorted the company — to maintain the status quo while banning 1.3 million class members from every suing Herbalife again. In addition, most class members, many of which lost thousands of dollars, will receive at most $20 while the attorneys who negotiated the consumer-unfriendly deal walk away with $5.25 million.

+ 2. Subway

RPLC_subway_meltPut this in the “really?” category, or maybe the foot-in-mouth category. A proposed settlement in a class-action lawsuit over the actual length of Subway’s footlong sandwiches requires franchisees to measure the bread to ensure that the six-inch or 12-inch sandwiches really are that length. The chain also has to disclose that the size of bread may vary. Under the terms of the proposed deal, sandwich eaters get no money back for the footlongs they paid for that were short of the mark. A fairness hearing is set for January and if the proposed settlement is approved it will only be in effect for at least four years. So, mark your calendars for 2020 and then bring your ruler to Subway.

+ 3. Ignite

A Texas-based federal appeals court held that failed distributors of a Dallas-based MLM could not bring a lawsuit alleging that the company was a pyramid scheme as a class action under the anti-racketeering act (RICO) because some plaintiffs might have known that it was a pyramid scheme based on the company’s marketing pitches. Or said another way, because the court found ample evidence that the company, which markets energy and mobile services, was a pyramid scheme it figures distributors could have known it was as well. But in effect, this decision shields pyramid schemes from civil litigation, vaccinating them, as the dissenting opinion stated, against not just class-actions but all judicial challenges. TINA.org has filed a friend of the court brief in support of plaintiffs’ petition to have the case reheard before all the judges of the court.

+ 4. Glucosamine

Glucosamine Featured Image Slider

Consumers seeking relief from joint pain were essentially stiffed in not one, but at least two court-approved settlements for glucosamine products this year. To make a long marketing story short, a host of companies in the U.S. advertised that their glucosamine supplements could not only ease joint pain but protect — even rebuild — cartilage. But there are no scientific studies that sufficiently prove these claims and consumers sued in droves. The settlement agreements with two companies specifically — Wellesse and Move Free — did little to alleviate the misleading advertising issues. Under the settlement terms, the companies have to refrain from using just a few specific phrases in their marketing for a period of a few years while the class members are forever prohibited from suing them again. Meanwhile, the lawyers made out handsomely. What a pain.

+ 5. Groupon

This legal battle extends back through 2011 when several class-action lawsuits alleged that the expiration dates on Groupon vouchers were illegal under federal and state laws. In 2012 the company reached a settlement that, among other things, provided class members with a voucher to purchase goods or services from the same merchant for which the original coupon expired. The company also agreed to disclose more information about expiration dates and restrictions. But that didn’t fly. Class members objected on several fronts including that Groupon was offering nothing more than what customers were already entitled to under its refund policies. An appeals court ultimately vacated the settlement and sent it back to district court for further inquiry.

Groupon

The new proposed settlement pending in court isn’t much better though. It allows Groupon customers who purchased a voucher between November 2008 and December 2011 to obtain Groupon credits. So, still no cash back for consumers and lots of restrictions on the credits themselves. They can’t be used to purchase Groupon merchant products, hotel reservations on Groupon Getaways, Groupon gift cards or for Groupon to Go food delivery or take out. Consumers also have to submit the voucher numbers of the expired ones that they couldn’t use from way back when along with proof of purchase and a statement that no part of said expired voucher was ever redeemed or refunded. Who has time to do all that even if you still have all that stuff available? And if you don’t have that available, you have to email and call Groupon and if you changed your email from the one you used for Groupon, that’s an issue too. In addition, you also have to use the Groupon credits you receive under the settlement within nine months or — wait for it– they expire. And lastly, the attorneys get $2.1 million. (Do you see a pattern here of the attorneys who filed the suit filling their coiffeurs?)  Meanwhile, Groupon, which has been struggling, announced it was going to lay off 1,000 staffers. Better use those credits — if you get them — while you can.

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Multi-Level Marketing – a way of distributing products or services in which the distributors earn income from their own retail sales and from retail sales made by their direct and indirect recruits.

Multi-Level Marketing – a way of distributing products or services in which the distributors earn income from their own retail sales and from retail sales made by their direct and indirect recruits.

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