BILL ANALYSIS                                                                                                                                                                                                    





                             SENATE JUDICIARY COMMITTEE
                         Senator Hannah-Beth Jackson, Chair
                             2015-2016  Regular  Session


          SB 1130 (Wieckowski)
          Version: February 17, 2016
          Hearing Date: March 29, 2016
          Fiscal: No
          Urgency: No
          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  








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          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  







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          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  







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          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  







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          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.








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            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.

           2.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  







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          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. 

           3.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








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                                        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.

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








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