The Federal Trade Commission's crackdown on fraudulent "all-natural" claims in the personal-care space is not likely to undermine pending class actions or curtail litigation. In fact, it could encourage more suits, attorneys suggest.

The agency announced proposed settlements April 12 with four companies for all-natural and 100% natural claims in online advertising for personal-care products that in reality contained synthetic ingredients, as well as a fifth complaint against a purported all-natural sunscreen marketer that was just filed ([A#02160418001]).

The developments mark the first actions FTC has taken to regulate use of natural claims in the personal-care sector.

Asked April 13 whether the FTC's involvement is likely to deter the plaintiffs bar from going after companies, Ronie Schmelz, an attorney at Tucker Ellis LLP who focuses on class-action defense, predicted that to the contrary, "I think it's going to embolden them."

She explained: "What you're going to have now is the plaintiffs class-action lawyers jumping on these companies for what they've done, because they're copycats generally."

A similar trend has been seen in class-action filings that follow FDA warning letters Also see "Audio Feature: FDA Monitoring Cosmetic Claims, But Litigation Remains Biggest Threat" - HBW Insight, 14 May, 2015..

"Plaintiffs' lawyers will definitely want to use this to say, 'See, the FTC has said that if there's anything synthetic in a product, you can't be calling it all-natural.' They'll try to make as much hay about it as they can," Schmelz said.

In refraining from providing a "natural" definition, FTC has not addressed some of the more complex issues being debated in federal courts, Wasserman says.

The attorney does not believe that FTC's crackdown on all-natural claims generally will be effective grounds for primary-jurisdiction arguments, which are available to defendants in cases where a key issue in litigation is being explored, or should be considered first, by a federal agency.

Mayer Brown partner Dale Giali, who also represents companies in false-advertising class actions, is of a similar mind. "I don’t believe FTC’s actions will be particularly helpful in on the primary-jurisdiction front," he said in an email.

He echoed that they actually are likely to spur litigation against firms using natural claims.

Ivan Wasserman, administrative partner for Manatt, Phelps & Phillips' Washington office who focuses on advertising and labeling reviews and compliance, agreed that the impact on ongoing class actions will be minimal, "just like FTC's typical actions against false and misleading claims do not impact those types of class actions (not in the 'natural claim' area)."

What might have had significant implications, but was missing from FTC's response, is a formal definition of "natural" as applied to personal-care or other consumer products.

"Had FTC defined the term, either in the orders or otherwise, it might have had an impact," he said. "But the FTC did not do that."

In an article published April 13 on the New Hope Network's IdeaXchange platform, Wasserman posits that the ingredients identified by FTC as synthetic in its complaints against the four companies are "clearly not 'natural.'"

FTC cited hair and skin protectant and conditioning agent dimethicone and preservative phenoxyethanol as substances included in the companies' offerings that conflict with their all-natural positioning, as well as ethyhexylglycerin, polyethylene, polyquaternium-37, polyquaternium-7 and caprylyl glycol.

Other ingredients fall less obviously into the natural or non-natural categories, Wasserman suggests.

"Can these companies claim a product is 100% natural if it has a very processed botanical ingredient? A GMO ingredient? The orders do not provide clear guidance with respect to any particular ingredient, and it seems whether an ingredient is 'natural' under the order will depend on expert opinion, which can certainly vary and can change over time," he says.

Generally, in refraining from providing a "natural" definition, FTC has not addressed some of the more complex issues being debated in federal courts, the attorney asserts.

"So if you want to play the 'natural' game, you can add the FTC to the list of referees trying to ensure fair play. However, it is still a very tough game to play without clear rules."

FDA Movement May Be More Consequential

Like FTC, FDA has been asked by the courts to establish a natural definition but has declined to date.

The agency has provided limited guidance on what "natural" on a food label should signify, namely that "nothing artificial or synthetic … has been included in, or has been added to, a food that would not normally be expected to be in the food."

FDA warned Alexia Foods, Inc. in 2011 about an "All Natural" labeling claim that the agency deemed misleading based on that guideline due to the presence of a synthetic preservative in the company's product. Alexis was hit with a class action following the warning letter that resulted in late 2013 in a $3.2m settlement.

"I just don't see an end in sight. The way the class-action plaintiffs bar operates, they take an idea and beat it to death," Schmelz said.

The agency's largely hands-off approach to natural regulation has not served defendants overall in making primary-jurisdiction arguments in recent years.

However, the agency announced in November a comment period to solicit public input on whether and how the agency should define the term "natural" for use in the food sector, in response to citizen petitions on the subject.

Legal experts speculated that the initiative could have bearing on pending class actions, and that anticipated impact indeed is beginning to register, representing potential opportunity for litigants to invoke primary-jurisdiction doctrine.

In a March 24 decision, the US Court of Appeals for the Ninth Circuit vacated a California district court's February 2014 order granting dismissal of a consumer complaint against "natural" yogurt maker Chobani, Inc. The appellate court ruled that the case is more appropriately stayed until FDA completes its business apropos of natural food labeling.

Based on that decision, the US District Court for the Northern District of California issued an order April 8 staying a suit against Hain Celestial Group on primary-jurisdiction grounds. The plaintiff in the Hain case alleged that the firm's Sunflower Dream Drink was falsely represented as "All Natural" because it contained synthetic ingredients.

A separate case against Hain, targeting alleged deceptive natural claims for the firm's JASON personal-care products, was stayed in October 2015 to await the outcome of Ninth Circuit appeals with relevant implications for class-action certification ([A#02150928005]).

FDA's announcement regarding the "natural" comment-gathering initiative made no reference to cosmetic products, focusing exclusively on use of the term in food and dietary supplement marketing, but the agency's show of increased interest in natural claims regulation potentially could provide a basis for personal-care firms' primary-jurisdiction arguments.

That said, courts likely will have differing views on FDA's initiative and what it should mean for suits alleging natural fraud.

"The problem is that it takes so long" for FDA to complete these undertakings, Schmelz noted. "It's considering thousands of comments received, and this was only an invitation to decide whether or not they should even define it. That's one of the questions they're considering. So it's not as though they're saying, 'Let us do all this stuff and then we're going to define it.' They're asking the threshold question, 'Should we even be defining it?'"

Schmelz expects that some courts may decide to abstain from proceeding with natural cases until FDA's intentions are clear, but without a guarantee of relevant FDA rulemaking in the offing, "other courts will say, 'Look at the history of this whole issue. FDA has not done anything, and who knows if they're going to do anything. I'm going to let the case proceed.'"

'No End In Sight'

According to the attorney, natural litigation is far from drying up.

"I just don't see an end in sight," she said. "The way the class-action plaintiffs bar operates, they take an idea and beat it to death."

Moreover, plaintiffs are getting "more gutsy and pushing the envelope" with their claims, according to the attorney. For example, she's representing a client that is being sued not for promoting a product as natural, but merely for having "Natural" in its company name.

Legal experts have suggested that in the absence of regulations governing natural personal-care claims, firms can protect themselves by openly disclosing their interpretation of "natural" and providing rationale for their claims in the context of their marketing Also see "Natural Brands Work To Deter Lawsuits, Some More Successfully Than Others" - HBW Insight, 15 September, 2015..

But another of Schmelz's clients identifies its product as natural and includes an asterisk directing consumers to an explanation of its own definition and use of the term, which nevertheless failed to keep the company out of court.

The attorney said that case is the first of its sort that she's aware of, and she's confident that it will not be successful.

Still, she emphasized that the "reasonable consumer" test – the standard generally used by courts to determine whether a natural claim is likely to mislead – plays out differently from one court to the next.

Schmelz noted that in each case, "the plaintiff of course is going to say, 'I'm a reasonable consumer, and I was deceived.'"

Consumer perception studies can be useful in defending against such assertions, she suggested.

FTC Action Against 'All Natural' Claims Likely To 'Embolden' Plaintiffs

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