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May 17, 2012

How Many Reasonable Consumers Does it Take to Change a Light Bulb?

Seller Beware: Consumer Protection Insights for Industry,

In a recent decision on cross-motions for summary judgment, a California federal court ruled on FTC allegations that Lights of America, Inc. (LOA) deceptively marketed its LED lamps in violation of section 5(a) of the FTC Act. The decision was a partial win for each party, with the Court granting summary judgment to FTC on one count and to LOA on a second and part of a third.

The FTC alleged that LOA falsely claimed that its LED lamps would "replace" incandescent bulbs of a given wattage; overstated the lamps' output in lumens; and exaggerated the lifetime of the lamps. On the first count, the Court ruled for the Commission, rejecting a variety of LOA arguments. LOA argued, for instance, that a reasonable consumer would understand that packaging claims such as "replaces 45 watts" meant only that the LED lamps would fit into the same sockets as a conventional bulb. It also argued that undocumented observations by LOA's Vice President of Sales and Marketing, as well as by Wal-Mart employees who looked at prototype products, were enough to substantiate claims of equivalent wattage. The Court also ruled that subsequent brightness testing, even if it proved the claims true, could not serve as a defense because the tests were done after the claims were made. Under section 5, it is a deceptive practice not to have substantiation for a claim before it is made.

The Court summarily ruled for LOA on the second count, which alleged that LOA made false or unsubstantiated statement regarding the lamps' light output in lumens, on the grounds that LOA based these claims on documented independent testing, the reliability of which FTC did not dispute.

On the third count, which concerned LOA's claims that the LED lamps had a lifetime of 15,000 hours or more, the Court held that there were genuine issues of material fact — namely, whether LOA had adequate substantiation for these claims. LOA alleged that the manufacturer of the individual LEDs used in the lamps told LOA that the estimated life of the LEDs was 30,000 hours, but there was also evidence that LOA knew that testing revealed a rapid decline in brightness after less than 1,000 hours. Moreover, the Court held, there was a question of fact whether the incorporation of the individual LEDs into the final LED lamp product may have compromised the LED lifetime. Finally, the meaning of "lifetime" in this context — specifically, whether the life of an LED expires when it loses half of its brightness, or when it goes out completely — was disputed. However, the Court granted summary judgment for LOA on its claims that "you'l never change your light bulbs again," reasoning that this was obvious puffery, and consumers would not rely on it.

LOA also faces a series of consumer class actions in California arising from similar facts (see here and here).

© Arnold & Porter Kaye Scholer LLP 2012 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.

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