Mitigating Class Action Exposure: An Excerpt From The Advertising Law Tool Kit – Advertising, Marketing & Branding

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.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.