BILL ANALYSIS Ó SB 1130 Page 1 SENATE THIRD READING SB 1130 (Wieckowski) As Introduced February 17, 2016 Majority vote SENATE VOTE: 24-11 ------------------------------------------------------------------ |Committee |Votes|Ayes |Noes | | | | | | | | | | | | | | | | |----------------+-----+----------------------+--------------------| |Judiciary |7-2 |Mark Stone, Burke, |Wagner, Gallagher | | | |Chau, Chiu, Cristina | | | | |Garcia, Holden, Ting | | | | | | | | | | | | ------------------------------------------------------------------ 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. SB 1130 Page 2 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 SB 1130 Page 3 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 SB 1130 Page 4 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 SB 1130 Page 5 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 SB 1130 Page 6 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