BILL ANALYSIS Ó
SB 1130
Page 1
Date of Hearing: June 8, 2016
ASSEMBLY COMMITTEE ON JUDICIARY
Mark Stone, Chair
SB
1130 (Wieckowski) - As Introduced February 17, 2016
SENATE VOTE: 24-11
SUBJECT: False advertising: substantiation of claims: county
counsel
KEY ISSUE: Should county counsel be authorized to request
evidence relating to false advertising claims, in the same
manner that any city attorney or district attorney is authorized
under existing law to request such evidence, especially given
that county counsel currently have the authority to bring a
civil action againSt a person or business that engages in false
advertising?
SYNOPSIS
California's False Advertising Law makes it unlawful for any
person doing business in California to make false or misleading
advertising claims to California consumers. Accordingly,
existing law requires a business that makes advertising claims
to provide evidence substantiating such claims to the Director
of Consumer Affairs, the Attorney General, any city attorney, or
any district attorney when requested to do so by one of those
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officials. If the person or business to whom the request is
made fails to respond or adequately substantiate the claim, the
public official making the request may seek an order terminating
or modifying the false or misleading claim and disseminate
information about the false or misleading nature of the claim to
consumers. This bill would add a county counsel to the list of
public officials who may request evidence and take the
authorized actions if the subject of the request fails to
respond to a request for substantiation. The existing omission
of a county counsel from the list of public officials who may
request evidence is hard to understand given that existing law
nevertheless expressly authorizes a county counsel - along with
the Attorney General, a city attorney, or a district attorney -
to bring a civil action against a person or business that
violates the False Advertising Law. One seemingly obvious
rationale for authorizing public attorneys to request
information is to allow them to determine if there is sufficient
evidence to bring a civil action. It is not clear why existing
law gives the Attorney General, city attorneys, district
attorneys, and county counsel the authority to bring a civil
action, but denies the county counsel alone among that group of
officials the authority to request the substantiating
information upon which a civil action could be based. This bill
is supported by the California State Association of Counties,
Urban Counties of California, the Consumer Federation of
California, and the Santa Clara County Board of Supervisors.
The bill is opposed by the Civil Justice Association of
California who contends that it is unnecessary and will
facilitate litigation.
SUMMARY: Authorizes a county counsel to request official
evidence of the facts on which advertising claims are based and
take other actions, as specified. Specifically, this bill:
1)Authorizes a county counsel to request any person or business,
on whose behalf advertising claims are made to consumers, to
request evidence of the facts upon which the advertising
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claims are made.
2)Authorizes a county counsel, upon failure of the advertiser to
adequately respond to request within a reasonable period of
time, or if the county counsel has reason to believe that the
advertising claim is false or misleading, to do either or both
of the following:
a) Seek an immediate termination or modification of the
claim by the person, as specified.
b) Disseminate information, taking due care to protect
legitimate trade secrets, concerning the veracity of the
claims or why the claims are misleading to the consumers in
this state.
EXISTING LAW:
1)Makes it unlawful for a person doing business and advertising
in this state from making any false or misleading advertising
claim. (Business & Professions Code Section 17508 (a); all
further statutory references are to this code, unless
otherwise indicated.)
2)Provides that, upon written request by the Director of
Consumer Affairs, the Attorney General, any city attorney, or
any district attorney, any person doing business and
advertising in California shall provide to the official making
the request, evidence of the facts upon which the challenged
advertising claims are based. Specifies that the request
shall be made within one year of the last day on which the
advertising claim is made. If the advertiser to whom the
request is made fails to adequately respond to the request for
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information, or if the official making the request has reasons
to believe that the advertising claim is false or misleading,
the official making the request may do either or both of the
following:
a) Seek an injunction, ordering an immediate termination or
modification of the false or misleading advertisement.
b) Disseminate information, taking due care to protect
legitimate trade secrets, concerning the veracity of the
claims or why the claims are misleading to consumers of
this state. (Section 17508 (b)-(c).)
3)Specifies that the above provisions shall not be construed to
hold any newspaper publisher or radio or television
broadcaster liable for publishing or broadcasting any
advertising claims, unless the publisher or broadcaster is the
person making the claims. (Section 17508 (e).)
4)Authorizes the following entities to seek an injunction
ordering an immediate termination or modification of the false
or misleading advertising claim: the Attorney General, any
district attorney, county counsel, city attorney, or city
prosecutor in this state. Specifies that the injunction shall
be sought in the name of the people of the State of
California, or upon the complaint of any board, officer,
person, corporation or association, by any person who has
suffered injury in fact and has lost money or property as a
result of the false or misleading advertising claim. (Section
17535.)
5)Provides that any person who violates the False Advertising
Law shall be liable for a civil penalty not to exceed two
thousand five hundred dollars ($2,500) for each violation,
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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. (Section 17536.)
FISCAL EFFECT: As currently in print this bill is keyed
non-fiscal.
COMMENTS: This bill seeks to remedy what is arguably an
oversight in California's False Advertising Law (Business &
Professions Code Sections 17500-17606). California's False
Advertising Law makes it unlawful for any person doing business
in California to make false or misleading advertising claims to
California consumers. In addition to potential civil liability
to a person who is harmed by false or misleading advertising
claim, a person or business that engages in false or misleading
advertising can also be subject to civil actions brought by
various government officials for injunctive relief or civil
penalties. The public officials who may bring an action under
the False Advertising Law include the California Attorney
General, any district attorney, county counsel, or city
attorney. Prior to bringing an action based upon false or
misleading advertising, a public official may request that a
person or business suspected of engaging in false or misleading
advertising provide evidence to support the veracity of specific
advertising claims. If the person or business to whom the
request is made fails to respond or provide satisfactory
evidence in support of the claim, the public official may do
either or both of the following: (1) seek an injunction
ordering the person or business to terminate or modify the false
or misleading claim; (2) disseminate information to consumers
about the nature of the false or misleading claim.
Discrepancy in Existing Law: While the purpose of the False
Advertising Law and the methods for enforcing seem clear enough,
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there is nonetheless a curious discrepancy in existing law that
this bill attempts to address. While existing law allows the
Attorney General, any district attorney, county counsel, or city
attorney to seek injunctive relief or civil penalties to enforce
the False Advertising Law, existing law only allows the Attorney
General, any district attorney or city attorney to request
evidence upon which an advertising claim is based. In other
words, while a county counsel is one of the public attorneys who
may bring an action alleging false or misleading advertising,
the county counsel alone is not authorized to request that a
person or business provide evidence of the facts upon which an
advertising claim is made. According to the county
organizations that support this bill, making this preliminary
request is essential in order to determine whether or not there
is enough evidence of wrongdoing to bring an action and to give
the person or business an opportunity to explain the veracity of
the claim.
It is unclear why a county counsel was omitted from the list of
officials who may request evidence, but the discrepancy has
existed since 1972. When Section 17508 (which authorizes the
request) was first in enacted in 1972, it only allowed the
Director of Consumer Affairs, the Attorney General, and any
district attorney to make the request. In 1974, the section was
amended to add city attorneys, but not county counsel. Sections
17535 and 17536, which authorize actions for injunctive relief
and civil penalties, respectively, predate Section 17508, but
both were amended in 1972 under the same legislation that
enacted Section 17508. Since at least 1972, therefore, the law
has authorized county counsel - along with the Attorney General,
district attorneys, and city attorneys - to bring actions
against false and misleading advertising, but only county
counsel are not expressly authorized to request substantiating
evidence before bringing an action. The Committee is not aware
of any legislative history that speaks to why county counsel
were treated differently, nor is it clear how county counsel
have dealt with this discrepancy since 1972. It could be, as
opponents point out in their letter of opposition, that county
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counsel who wanted to exercise their power to bring an action
could obtain the assistance of the district attorney of the
county in order to request evidence in support of a suspect
claim.
At any rate, whatever the reason for the omission of county
counsel and however they may have dealt with this omission in
the past, it certainly makes sense that if the county counsel,
like other public attorneys, have the authority to bring an
action for injunctive relief and civil penalties, they should
have the ability, like other public attorneys, to request a
business or advertiser to produce evidence that supports an
advertising claim.
Potential Impact on Litigation Seems Limited: Supporters and
opponents of this bill offer quite different assessments as to
whether this bill will increase or decrease the number of
lawsuits alleging false advertising. Supporters suggest that
this bill could decrease litigation by allowing county counsel
to request substantiation of an advertising claim before filing
a lawsuit. It will give a business the opportunity to defend an
advertising claim before being subject to a lawsuit and
potential civil penalties. Opponents, on the other hand,
contend that this bill "is intended to facilitate additional
litigation." Opponents apparently believe that county counsel
will use this authority to gather information in support of a
lawsuit that they otherwise would not have brought. However,
there is no evidence that the author and supporters "intend"
this bill to lead to more litigation; indeed, it seems more
likely that this bill will allow county counsel to resolve false
advertising claims without having to initiate litigation. In
the past, business groups and the Civil Justice Association of
California (one of the opponents of this bill) have argued
vigorously in other contexts that businesses should be given
prior notice of alleged violations and an opportunity to correct
violations, if there are any, before being dragged into a
lawsuit. This bill appears to do just that. Before the county
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counsel files a lawsuit, the business or advertiser will be
given an opportunity to show evidence in support of their
claims. If the county counsel is not satisfied by that
evidence, the county counsel may seek an injunction requiring
the business or advertiser to terminate or "modify" that claim
so that it is not false or misleading. In addition, since 1974
city attorneys have had the power - like the Attorney General
and district attorneys - to request substantiating evidence
prior to bringing an action, yet the Committee is not aware of
(and opponents have not offered) any evidence showing that city
attorneys have abused that power by making unwarranted requests
or bringing unnecessary lawsuits.
ARGUMENTS IN SUPPORT: The Santa Clara County Board of
Supervisors, the sponsor of this measure, points out that even
though county counsel "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,"
existing law "does not provide county counsels with the
authority to ask advertisers to substantiate their advertising
claims before filing a lawsuit," unlike the other public
attorneys. Similarly, the California State Association of
Counties (CSAC), argues that county counsel "are not as well
positioned as other public attorneys to evaluate, litigate, and
seek indemnity for false and misleading advertising." Without
this authority, both CSAC and Santa Clara County contend that a
county counsel is more likely to file unnecessary lawsuits due
to a lack of information. "SB 1130," CSAC concludes, "would
therefore facilitate the correction of false advertising claims
and assist in eliminating unnecessary lawsuits."
The Consumer Federation of California (CFC) and the Urban
Counties of California (UCC) support this measure for
substantially the same reasons as those set forth by CSAC and
Santa Clara County. CFC adds that allowing county counsel to
"request substantiation of an advertising claim before filing a
lawsuit . . . will facilitate the correction of false
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advertising claims and ensure local recourses are expended
efficiently to better protect California consumers from false
and misleading advertising."
ARGUMENTS IN OPPOSITION: The Civil Justice Association of
California (CJAC) opposes this bill. First, CJAC contends that
"the bill is unnecessary," pointing out that existing law
"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." CJAC contends that 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 [of authorized
public attorneys]." CJAC concludes their letter by alleging
that "this bill is intended to facilitate additional
litigation."
REGISTERED SUPPORT / OPPOSITION:
Support
California State Association of Counties
Consumer Federation of California
Santa Clara County
Santa Cruz County Board of Supervisors
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Urban Counties of California
Opposition
Civil Justice Association of California
Personal Care Products Council
Analysis Prepared by:Thomas Clark / JUD. / (916)
319-2334