The New Jersey Supreme Court handed a victory to both the plaintiffs and advocates of truth in advertising this week when it ruled that lawsuits against the maker of dietary supplement Relacore could go forward as a class action.
If you've ever heard of Relacore, or purchased it for $40 a bottle at a drug store, it's surely only because of the product's marketing campaign: Relacore's a pill, and there's no way to tell what it does just by looking at it. Contrast that with say, a screwdriver or a cell phone. Unless a marketer persuaded you -- or a friend who had in turn been persuaded by a marketer -- to buy it, there's no way you'd just pick it off the shelf and pop it in your mouth.
Such products are called "credence goods," explains consumer advocacy group Public Citizen's Consumer Law and Policy Blog, and Relacore's marketing didn't deserve any credence, according to the lawsuits filed against it. Distributor Carter Reed's claim that Relacore attacked the "stress-to-belly-fat cycle" had no proof.
However, regardless of the strength of plaintiffs' claims that Relacore's marketing was false, their most powerful weapon to stop the false advertising was attaining class action status. A class action suit means real money's at stake, and it's a powerful motivator for a corporate defendant to agree to a settlement. Indeed, given that each individual plaintiff lost only $40 a bottle, it's unlikely that any single plaintiff would have seen a suit through to the end, and unless a court rules, Carter Reed's marketing can go on.
But to be a class, plaintiffs have to prove their claims share enough features to make it appropriate to group them together. One of the things plaintiffs have to prove is that law and fact issues shared by the class members outweigh the individual issues. Unfortunately for plaintiffs in the Relacore case, they lost the class action fight at both the trial level and intermediate appellate level because the courts found individual issues predominated. The appellate court specifically focused on the fact that Relacore did so much marketing, and made many different claims in different media: It decided that each plaintiff would have to show which marketing they relied on in making the purchase.
However, on appeal to the New Jersey Supreme Court, public interest groups helped plaintiff Melissa Lee persuade all the justices that a class should be certified, because if, as claimed, all the marketing claims were false, it didn't matter which marketing any individual relied on. Because Relacore is a credence good, marketing was the only reason anyone purchased it: Thus, if the all of its marketing claims were false, the burden of proving the advertising was unlawful and caused all the individual damages was met.
As a result, the case will go forward as a class action, at least on its New Jersey Consumer Fraud Act claim -- the court didn't rule on class status for the other claims, finding an insufficient record -- and Carter Reed is going to have back up its claims about Relacore, or cease making the claims and pay out triple damages and attorneys fees. Or Carter Reed could settle, which would surely also involve stopping its marketing of Relacore.
Introduction to ETFs
The basics of Exchange Traded Funds and why ETFs are hot.View Course »