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action exposure in this week’s episode.
When it comes to mitigating the risk of class action lawsuits,
the best offense is a good defense. Companies can take many steps
to reduce their exposure to class action litigation before it
happens, including the tactics listed below.
Reducing exposure to class action litigation:
- Carefully review and substantiate advertising and promotions
prior to disseminating them. Hiring experienced advertising counsel
is the most effective way to ensure that advertising comports with
the complex legal requirements of various agencies and states. - Monitor and avoid competitors’ marketing practices that
attract class action scrutiny. Consider setting up a service to
notify your company when a competitor is sued, so that you can
learn from their situation and avoid similar problems. - Enforcement actions by the Federal Trade Commission (FTC), Food
and Drug Administration (FDA), state attorneys general, and
self-regulatory bodies such as the Electronic Retailing
Self‑Regulation Program (ERSP) and the National Advertising
Division (NAD) of the Better Business Bureau (BBB) are breeding
grounds for class action litigation. Plaintiffs’ attorneys
monitor these entities and often piggyback on their complaints and
findings to bring substantively identical private class action
lawsuits. By staying abreast of enforcement actions and conforming
your advertising practices, you may avoid similar troubles. - Areas where businesses interact directly with consumers are the
most frequent targets of class action litigants. Be especially
vigilant about billing, marketing, product fulfillment, website,
and customer service practices. Similarly, unforeseeable lapses
such as data breaches and billing errors are also ripe targets for
class action challenges. Areas that are particularly hot for class
actions are free trials/offers and other negative option programs,
health benefit and healthy inference claims, lack of substantiation
claims, sales pricing and promotion, non‑functional slack
fill claims, Made in USA claims, and “all natural” and/or
organic claims. - Periodically review telephone marketing and call center
practices to ensure they are compliant with the Telephone Consumer
Protection Act (TCPA), the Telemarketing Sales Rule (TSR), and
state eavesdropping/privacy laws, especially when any part of the
function is outsourced to a third-party vendor. - The Supreme Court has held that arbitration provisions and
class action waivers in contracts are enforceable, barring
would‑be class action plaintiffs from filing lawsuits,
regardless of state law to the contrary. Consider mitigating
litigation risk by including a properly drafted mandatory
arbitration provision or class action waiver on the checkout page
of your website for internet sales, in your website terms and
conditions, and in product retail boxes. Enforceability of an
arbitration agreement and/or class action waiver turns on proper
notice and unambiguous manifestation of customer assent. - Track and resolve consumer complaints, including those lodged
with the BBB and state AGs, through your customer service programs
and by monitoring social media. Know what is being said about your
product online. Consult counsel regarding any alarming trends. Do
not ignore pre-litigation demand letters from purported class
action plaintiffs. Many class action matters can be resolved
quickly and inexpensively with help from experienced class action
counsel.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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