Peter, thank you for your comments. They've been very helpful. As you'll see I decided to take this paper in a related although different direction. I decided to focus on one particular litigation that illustrates some of the problems with one particular area of products liability class actions. This focus hopefully makes it easier for me to work things through in 1,000 words. I also think working with one particular case helps to provide evidence. I worked on a few products liability cases as a paralegal and purposefully chose to avoid mentioning any of them. I'm attaching (at some point today) several of the key case documents to this paper.

I still think I need to work through some of the material that surrounds the case description and perhaps devote less words to the case. I'm hoping to return to this in a few weeks. I understand the semester is over so don't feel obligated, but obviously your continued input is always appreciated.

False Advertising and the Airborne Litigation

-- By JoshLerner - 17 Apr 2010

When a company falsely advertises their products our current system is largely ineffective in levying any real punishment against the company.

Although false advertising claims are anything but new, recently a large number of litigations have been filed that have followed or are on their way to following a pattern similar to the Airborne litigation. Lawsuits have been filed against everyone from multi-grain manufacturers for claiming to be heart healthy to suits against yogurt companies for claiming to be good for your digestive system.

The questions we face are first, whether we care about the false advertising and second, if we do care, what can we do to better regulate.

Airborne Litigation

The Product

Airborne is a vitamin supplement that contains 1,000 mg of vitamin C along with smaller levels of other vitamins and herbs. At a Duane Reader on the Upper West Side it retails for a price of $0.80 per tablet, while a mere one aisle over a 1,000 mg vitamin C pill is sold for $0.13 per tablet. In short, Airborne is a rip-off. Airborne gets consumers to spend more than 6 times the retail price for the same product through a false advertising campaign in which they claimed to be a remedy for the common cold and jazzed up their packaging with some funky cartoons and a snazzy fizzing in water effect. By convincing consumers that they offered some unique and valuable product they were able to gross sales of over $300 million between the middle of 2005 and 2007 alone.

The Settlements

When sales got large enough the public started to take notice and lawsuits were filed against Airborne and its creators. Airborne’s response was to settle and settle with everyone. First the class of plaintiffs who settled for $23.5 million, then the FTC for $0 (monetary provisions never came to fruition) and finally 33 state Attorney Generals for $7 million. All three settlements involved some form of injunctive relief, restricting future advertising. The restrictions have little impact as Airborne has already become well-known as a cold remedy.

The sales records were not released as part of the class settlement. Although the records were supplied they were ordered sealed by the court. Evaluating the adequacy of the $23.5 million settlement is difficult for the public when they don’t know how much could have been won at trail, but class counsel knew and that was enough for the court. Class counsel was paid nearly $3.5 million for their work on the case, with many attorneys billing out at more than $1,000/hour and up to $1,400/hour.

The settlement ended up paying out $14.9 million to supposed class members. In addition to those $14.9 million, the claims administrator also received $6.8 million in claims that were deemed physically impossible based on the claimed date of sale and/or claimed location of purchase. That raises a huge red flag that perhaps those submitting claims were in large part not actually class members (if $6.8 million in claims were obviously false, how many of the $14.9 million were also false but involved better guessers), but the court approved the settlement nonetheless. Currently counsel in the case are still debating proposals for giving the unpaid funds to various nonprofit organizations with some faint connection to vitamin supplements.

The Airborne litigation is a case where false advertising created a company and the lawsuits against it did almost no damage and those who were deceived received almost no benefit. With more than $300 million in sales and the possibility of treble damages the recovery of $30 million (in the three lawsuits combined) seems like a small price for Airborne to pay for their cold remedy empire.

Do We Care?

Many Americans have the buyer beware attitude toward false advertising. We have consumers wasting millions of dollars on unnecessary products, everything from bottled water to high-priced perfume. Do we really care if people waste their money on Airborne as well? More than half those who objected to the Airborne settlement didn’t care, in fact they objected because they didn’t think there should be a lawsuit at all.

Do we want money being funneled from hundreds of thousands of Americans into one company under false pretenses? When we’re dealing with a fake cold remedy we might be willing to let false advertising slide, but certainly we wouldn’t feel the same about $300 million being spent on a fake cancer remedy.

It can be difficult to draw a line in terms of what products we allow to be sold to consumers. We would have trouble banning bottled water sales, but we should make sure that consumers are allowed to make informed decisions about the products they buy. Through false advertising consumers are denied the information to make those informed decisions.

What Can Be Done?

The system we have now seems to be caught in the middle. We aren’t completely telling buyers to beware by allowing false advertising, but at the same time aren’t providing serious remedies or doing anything to significantly impair companies. The Airborne litigation is an example of blatant false advertising that resulted in an insignificant punishment. If we’re going to regulate advertising of products we need to have a real impact.

The Government needs to take more of a role in both preventing false advertising from the start and litigating once it has reached significant levels. Where the fault often occurs is that class action firms and government entities are afraid to take the case to trial. Unwilling to put the litigation expenses into the case and perhaps afraid they will actually win and bankrupt the company. While these excuses make sense for a private company, the government should be less hesitant to invest in litigation. Non-profit law firms that also involve themselves in the cases also need to have a mindset of actually preventing the false advertising instead of merely obtaining enough money to keep their nonprofit running.