BILL ANALYSIS Ó
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
SB 1130 (Wieckowski)
Page 2 of ?
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
SB 1130 (Wieckowski)
Page 3 of ?
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
SB 1130 (Wieckowski)
Page 4 of ?
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
SB 1130 (Wieckowski)
Page 5 of ?
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.
SB 1130 (Wieckowski)
Page 6 of ?
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
SB 1130 (Wieckowski)
Page 7 of ?
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
SB 1130 (Wieckowski)
Page 8 of ?
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.
**************
SB 1130 (Wieckowski)
Page 9 of ?