Antitrust Law Daily Wrap Up, ADVERTISING—S.D. Cal.: Positive results for false advertising suit against at home drug testing kit, (Sep 29, 2025)

By Donielle Tigay Stutland, J.D.

The court claims related to alleged statements that drug testing kits are “FDA approved” and “Made in the USA” can proceed, but the court trimmed claims related to the kits package inserts.

The federal district court for the Southern District of California denied most parts of a motion to dismiss in a suit brought by the seller of home drug testing kits against a competitor alleging false advertising and unfair business practices. The court denied the majority of the motion to dismiss, finding that the competitor had standing and that the competitor had sufficiently pleaded violations of California’s Unfair Competition Law (“UCL”), California’s False Advertising Law (“FAL”), Idaho’s Consumer Protection Act (“ICPA”) and the Lanham Act, (“Lanham Act”). However, the court trimmed claims related to the package insert, finding that because consumers only have access to the Package Insert after they have purchased Defendant Axium’s drug testing kits, the allegedly false statements in the Package Insert do not constitute “commercial advertisement about [Defendants’] own... product.” The court also granted the motion to dismiss the intentional interference with a prospective economic advantage, but gave the competitor leave to amend its complaint (Haney, Inc. v. Axium BioResearch, No. 3:23-cv-01990-RBM-JLB (S.D. Cal. Sept. 25, 2025)).

Background. The case involves the manufacturer and distributor of the FDA-approved drug testing kits. Haney, Inc., which does business as UTEST brought this lawsuit against Axium Bioresearch (a California corporation doing business as DrugExam) and its founder/sole officer/director, Sergius Albert Salvatore, alleging false advertising and unfair business practices in the sale of at-home drug testing kits. The kits are developed and manufactured by non-party Advin Biotech, a San Diego-based company that has obtained FDA 510(k) clearances since 2013 for 14 different kits, which are 100% "Made in USA." Advin distributes bulk kits to resellers like Haney and Axium, who repackage them under private labels and sell them to consumers via online platforms such as Amazon.com and Walmart.com

Haney alleges that Salvatore, a former Advin employee founded his own company to manufacture and sell similar drug test kits. Haney alleges that the kits made by Salvatore and his company Axium advertise that they are “FDA approved” and “Made in the USA” when Salvatore sources components from other companies and allegedly is not using the Advin kits.

Haney’s complaint asserts five claims: (1) violation of California’s Unfair Competition Law,(“UCL”); (2) violation of California’s False Advertising Law (“FAL”); (3) violation of Idaho’s Consumer Protection Act (“ICPA”); (4) violation of the Lanham Act, (“Lanham Act”) and (5) intentional interference with a prospective economic advantage (“IIPEA”). Haney seeks injunctive relief, damages (including punitive), and disgorgement. The suit was previously dismissed in August 2024 for lack of Article III standing with leave to amend.

Defendants seek to dismiss the FAC on the following grounds: (1) lack of subject matter jurisdiction under Rule 12(b)(1), arguing that Plaintiff has not established an injury-in-fact; (2) Plaintiff is not the real party in interest under Rule 17(a); and (3) failure to state a claim under Rule 12(b)(6), including under the heightened pleading standard of Rule 9(b) for claims sounding in fraud.

Standing. While the court had dismissed the competitor’s previous complaint after finding a lack of standing, the court found the competitor sufficiently amended its complaint to show an injury that was traceable to the drug testing kit seller. The court laid out that a plaintiff may allege a competitive injury for purposes of Article III standing “(1) by using lost sales data, that is ‘actual market experience and probable market behavior,’ or (2) ‘by creating a chain of inferences showing how defendant’s false advertising could harm plaintiff’s business.’”

Here, the court found that the competitor plead that the drug kit seller’s false advertising deprived it of “rightful business opportunities and revenue” and that the competitor “suffered a significant loss of sales and market share, damaging its reputation and standing in the industry.” The court also found that the competitor showed a chain of inferences showing that the seller’s actions allegedly false advertising caused its competitive injuries. The court pointed to factors that the false advertising of the seller’s drug test kits as “FDA Approved” and “Made in the USA” “was and is likely to influence relevant consumers’ purchasing decisions.” However,“when a competitor gains an unfair advantage by sidestepping regulatory obligations, it is entirely plausible for a court to conclude that economic harm exists for entities competing in the same market while adhering to the rules.” The court concluded that the it is reasonable to infer that the challenged advertisements may divert sales from Plaintiff to Defendants, and the competitor therefore sufficiently established an injury-in-fact for purposes of Article III standing.

Real Party in Interest. The court also denied the motion to dismiss with respect to the competitor is not the real party in interest to this action, as required under Rule 17, because the “FAC is entirely centered on allegations that Axium is misusing the drug testing kits of non-party Advin.” The court found the seller failed to show that the competitor lacked the right to sue under substantive law.

Failure to State a Claim. The sellers sought to dismiss the UCL, FAL, ICPA, and Lanham Act claims because: (1) the seller Axium had obtained a CLIA certification from the FDA which the sellers claim makes their drug testing kits “FDA approved”; and (2) the competitor’s false advertising allegations based on Defendants’ use of the Package Insert do not meet Rule 9(b)’s heightened pleading standard.

The court found the competitor plausibly alleged violations under all prongs based on predicate violations of the FAL, Lanham Act, and California's Sherman Law (unapproved medical device sales). The competitor asserted that the sellers made three false statements on Amazon’s website “that its drug test kits were (I) approved by the [FDA], (II) ‘Made in the USA’ and (III) have a 99% success rate in the Product Insert.” The court concluded that the competitor has stated a false advertising claim based on the seller’s alleged statements that their drug testing kits are “FDA approved” and “Made in the USA.” However, the court found that seller’s alleged use of, and statements contained in, the testing kits Package Insert do not support a false advertising claim under the FAL and Lanham Act, as it was not found to be commercial advertising when it is opened after purchase. The court denied the motion to dismiss the UCL claim for the same reasoning, noting that violations of the Lanham Act and the FAL can serve as a predicate basis for a claim of unlawful and unfair practices under the UCL. The court also denied the motion for the claim under the ICPA, applying the same reasoning.

As to claim for IIPEA the court granted this claim with leave to amend. The court found the competitor failed to allege specific, existing economic relationships with third parties and determined that vague references to sales on Amazon was insufficient.

The Case is No. 3:23-cv-01990-RBM-JLB.

Judge: Montenegro, R.

Attorneys: Jeffrey G. Jacobs (Law Office of Jeffrey G. Jacobs) for Haney, Inc. d/b/a uTest. James H. Turken (Norton Rose Fulbright US LLP) for Axium BioResearch d/b/a DrugExam and Sergius Albert Salvatore.

Companies: Haney, Inc. d/b/a uTest; Axium BioResearch d/b/a DrugExam

Cases: Advertising StateUnfairTradePractices CaliforniaNews