Antitrust Law Daily Wrap Up, ADVERTISING—D. Utah: Dietary supplement seller’s Amazon.com review tactics could violate Lanham Act, (Feb 10, 2016)

By Greg Hammond, J.D.

Two online sellers of dietary supplements were not entitled to judgment as a matter of law on Lanham Act claims that one seller’s advertising tactics concerning Amazon.com reviews constituted false or misleading representations of fact. In denying the parties’ motion and counter-motion for summary judgment, the federal district court in Salt Lake City concluded that a genuine issue of fact existed about whether there were false or misleading representations of fact and whether those alleged false representations caused injury to the plaintiff (Vitamins Online, Inc. v. HeartWise, Inc., February 9, 2016, Kimball, D.).

Plaintiff Vitamins Online, Inc. and defendant HeartWise, Inc., doing business as NatureWise, both sell dietary supplements online, including on Amazon.com. Vitamins Online alleges that HeartWise’ advertising tactics on Amazon.com constituted unfair competition under the Lanham Act and the common law for false advertising. The case was before the district court on Vitamins Online’s motion for summary judgment and HeartWise’s counter-motion for summary judgment.

False, misleading representations of fact. Vitamins Online alleged that NatureWise had its employees vote on the helpfulness of product reviews and offered free products or gift cards to customers if they reposted favorable reviews on Amazon.com, thereby manipulating the ranking and number of positive reviews on NatureWise’s product pages on Amazon.com. The court agreed with Vitamins Online that the Lanham Act is broad enough to cover a wide range of deceptive practices, potentially including voting on and incentivizing online reviews, and that the conduct of NatureWise may qualify as representations that convey a false impression or are misleading in context. While Vitamins Online has not demonstrated the actual consumer deception required to succeed on a claim for impliedly false advertising, Vitamins Online argued that it could obtain such evidence through consumer surveys conducted and analyzed by expert witnesses. The court granted Vitamins Online’s motion for additional time to conduct this discovery and denied NatureWise’s counter-motion for summary judgment with regard to the Amazon reviews.

Injury. Next, the court determined that genuine issues of material fact existed as to whether NatureWise’s false representations injured Vitamins Online. In particular, the court noted that Vitamins Online offered some evidence of causation and injury because Vitamins Online showed that its products competed with NatureWise’s products in the relevant market; the companies’ products competed on Amazon.com; a logical causal connection existed between NatureWise’s false representations and Vitamins Online’s sales position; each consumer that purchased a NatureWise product due to NatureWise’s false representations resulted in one less consumer in the relevant market willing to purchase a competing Vitamins Online product; and Vitamins Online offered evidence that its decline in sales corresponds in time to an increase in NatureWise’s sales for competing products.

Although there was some evidence of injury that was caused by NatureWise’s alleged false representations, the court found that the evidence was not sufficient to demonstrate that Vitamins Online was entitled to judgment as a matter of law. Both motions for summary judgment were therefore denied.

Injunctive relief. In support of its claim for injunctive relief, Vitamins Online argued that it suffered irreparable harm because its sales and ranking position on Amazon.com plummeted as a result of NatureWise’s false advertising. The court concluded that there was not enough evidence of irreparable harm to show that Vitamins Online was entitled to judgment as a matter of law, but Vitamins Online presented enough evidence to show that a material issue of genuine fact existed for trial. The motions for summary judgment were therefore denied with regard to the injunctive relief claim.

The case is No. 2:13-CV-982-DAK.

Attorneys: Chad E. Nydegger (Workman Nydegger) for Vitamins Online, Inc. Alan R. Houston (Strong & Hanni) for HeartWise, Inc.

Companies: Vitamins Online, Inc.; HeartWise, Inc.

Cases: Advertising UtahNews