BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 1130|
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THIRD READING
Bill No: SB 1130
Author: Wieckowski (D), et al.
Introduced:2/17/16
Vote: 21
SENATE JUDICIARY COMMITTEE: 5-2, 3/29/16
AYES: Jackson, Hertzberg, Leno, Monning, Wieckowski
NOES: Moorlach, Anderson
SUBJECT: False advertising: substantiation of claims: county
counsel
SOURCE: Santa Clara County Board of Supervisors
DIGEST: 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.
ANALYSIS:
Existing law:
1)States that it is unlawful for any person, firm, corporation
or association, or any employee thereof with intent directly
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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 misleading, as specified. (Bus. &
Prof. Code Sec. 17500.)
2)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.)
3)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.)
4)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
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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.)
5)States that it shall be unlawful for any person doing business
in California and advertising to consumers in California to
make any false or misleading advertising claim, including
claims that: (a) purport to be based on factual, objective, or
clinical evidence; (b) compare the product's effectiveness or
safety to that of other brands or products; or (c) 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).)
6)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: (a) purport to be based on
factual, objective, or clinical evidence; (b) compare the
product's effectiveness or safety to that of other brands or
products; or (c) 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).)
7)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).)
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8)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:
1)Provides that, in addition to other specified public
prosecutors, upon written request of any county counsel, any
person doing business in California and on whose behalf
advertising claims are made to consumers in California,
including claims that: (a) purport to be based on factual,
objective, or clinical evidence; (b) compare the product's
effectiveness or safety to that of other brands or products;
or (c) 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.
2)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
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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.
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
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
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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 additionally authorizes 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.
Comments
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.
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
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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.
Related/Prior Legislation
AB 1543 (Lempert, Chapter 947, Statutes of 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, Chapter 1002, Statutes of 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, Chapter 23, Statutes of 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.
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AB 1538 (Meade, Chapter 1417, Statutes of 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.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:NoLocal: No
SUPPORT: (Verified3/29/16)
Santa Clara County Board of Supervisors (source)
California State Association of Counties
Urban Counties of California
OPPOSITION: (Verified3/29/16)
Civil Justice Association of California
ARGUMENTS IN SUPPORT: According to the California State
Association of Counties, under the False Advertising Law, county
counsels have the same authority as the Attorney General, any
district attorney, and any city attorney to bring a false
advertising action on behalf of California's consumers. Current
law does not provide county counsels with the authority to ask
advertisers to substantiate their advertising claims before
filing a lawsuit as it does public attorneys. As a result,
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county counsels are not as well positioned as other public
attorneys to evaluate, litigate and seek indemnity for false and
misleading advertising. Without this authority, county counsels
are more likely to file unnecessary lawsuits because the
information needed to fully evaluate the false advertising claim
is lacking. SB 1130 therefore facilitates the correction of
false advertising claims and assists in eliminating unnecessary
lawsuits.
ARGUMENTS IN OPPOSITION: According to the Civil Justice
Association of California, this bill is unnecessary and is
intended to facilitate additional litigation. 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
counsels are already included in Business and Professions Code
Section 17535 as among the entities that can seek injunctive
relief, including restitution, for false advertising.
Prepared by:Tobias Halvarson / JUD. / (916) 651-4113
3/31/16 15:45:59
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