BILL ANALYSIS                                                                                                                                                                                                    




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          |SENATE RULES COMMITTEE            |                       SB 1130|
          |Office of Senate Floor Analyses   |                              |
          |(916) 651-1520    Fax: (916)      |                              |
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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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