BILL ANALYSIS                                                                                                                                                                                                    



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          SENATE THIRD READING


          SB  
          1130 (Wieckowski)


          As Introduced  February 17, 2016


          Majority vote


          SENATE VOTE:  24-11


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          |Committee       |Votes|Ayes                  |Noes                |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Judiciary       |7-2  |Mark Stone, Burke,    |Wagner, Gallagher   |
          |                |     |Chau, Chiu, Cristina  |                    |
          |                |     |Garcia, Holden, Ting  |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
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          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  
            claims are made. 








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          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 and 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  
            information, or if the official making the request has reasons  








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            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) and (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 $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  








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            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:  None.


          COMMENTS:  This bill seeks to remedy what is arguably an  
          oversight in California's False Advertising Law (Business and  
          Professions Code Sections 17500 to 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,  
          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  








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          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.  Yet, 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  








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          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.   
          Before the county 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. 




          Analysis Prepared by:                                             
                          Thomas Clark / JUD. / (916) 319-2334  FN:  
          0003417