Week Adjourned: 4.13.12 (Muscle Milk, Risperdal, GameStop)

Top Class Actions

This Week’s Mantra—Cav-e-at Emp-tor…Cav-e-at Emp-tor! Throw that right in there with ‘om shanti shanti shanti om’ at your next yoga class and see what happens…

This week, a consumer fraud class action against Cytosport got greenlit by a judge in the United States District Court for the Northern District of California. Bottom line, the company is accused of engaging in false advertising  of its popular Muscle Milk line of products. (I’d be wary of a product with that name. What does it mean?)

According to the Muscle Milk class action lawsuit, to increase sales figures, Cytosport intentionally misrepresents the purported health benefits of Muscle Milk, and actively draws consumer attention away from the significant amount of saturated fats in the products.

The lawsuit alleges that Cytosport profits significantly from its deceptive marketing of Muscle Milk (well, why else would they do it?) because the company’s depiction of the products as “healthy” plays into consumers’ increasing interest in health-conscious foods.

In its decision, the Court explained that a “reasonable consumer would be likely to believe that the drink contains unsaturated, not saturated fats. The drink container also states that it is a ‘nutritional shake.’ This representation … contributes to a sufficient claim of deceptive product labeling … the injury to the consumer class as a whole could be substantial, even if the injury to individual consumers is minimal. No benefit is served by false and misleading advertising.” Well, that’s not entirely true —the company has benefited, allegedly.

Hey, maybe Lay’s Potato Chips and Muscle Milk can team up for some co-op ads, eh? Mmmaybe not.

Top Settlements

Costliest Ad Campaign Ever? This settlement is one for the books, if it goes through. According to media reports out this week, Johnson & Johnson (J&J) may have to stump up a cool $1.25 billion in penance for deceptive marketing of its atypical antipsychotic Risperdal, in Arkansas. The Risperdal settlement, ordered by a judge in Arkansas, is one of the larger J&J may have to pay for deceptive marketing of the drug. But it’s worth noting that J$J will likely appeal.

According to a report by Bloomberg, it took jurors in state court in Little Rock, not more than three hours to deliver their verdict: J&J and its Janssen unit were guilty of taking part in “false or deceptive acts.”

These “acts” date back to 2003, when the company allegedly sent what’s known as “Dear Doctor” letter to no less than 6,000 doctors in the state, allegedly claiming Risperdal is safer than competing drugs used in the state. ”

FYI—Risperdal carries a warning stating that older adults with dementia who take antipsychotic medications may have an increased risk of death, stroke or mini-stroke during treatment.

The state of Arkansas is seeking more than $1.25 billion in penalties over the Risperdal marketing campaign, and a judge will decide later whether to fine J&J,” Bloomberg reports.

This is the third case in which states allege J&J hid the risks associated with Risperdal—and tricked Medicaid regulators into paying more than they should have for the medicine. And it is the third case in which a jury has found against the drug-maker. Juries in Louisiana and South Carolina have also found that J&J’s marketing of Risperdal violated consumer-protection laws. (Bloomberg)

GameStop GamePlaying Over. And one more time for good measure—yet another consumer fraud class action, this one a settlement against retailer GameStop, who stands accused of “deceptive and misleading practices” with its used game sales and paid downloadable content.

Filed two years ago, by James Collins of California, the GameStop lawsuit claims GameStop sells used copies of games that require users to purchase downloadable content for features, even though the packaging for those games advertise that content as free.

According to the lawsuit, several games include one-time-use codes for consumers to download free content, but they require users to purchase that same content if the code has been redeemed, as is the case for many used copies of games. “As a result of GameStop’s deceptive and misleading practices, consumers who purchase used games from GameStop unknowingly find that they must pay an additional fee to access the full game they thought they purchased,” the lawsuit states.

According to the terms of the settlement, for the next two years GameStop must post online warnings and in-store signs (in California, where the lawsuit was filed) next to used games to remind consumers that certain downloadable content may require an additional purchase.

Consumers in California who have purchased a qualifying used game and are enrolled in GameStop’s PowerUp Rewards Program may be able to recover the $15 they might have paid for downloadable content. Also, they could be eligible to receive a $10 check and a $5 coupon. Non-PowerUp Rewards members can receive a $5 check and a $10 coupon. FYI—this settlement only applies to California customers.

And on that happy note—that’s a wrap. I hear the ice-cubes calling my name…om caveat emptor caveat emptor om…