Using Cy Pres to Tangibly Reduce Consumer Deception and Harm
Mar 24, 2021 by Hal Hodes, Senior Attorney, National Advertising Division
While much of the work of BBB National Programs’ National Advertising Division (NAD) involves resolving truth-in-advertising challenges brought by one competitor against another, NAD also fulfills its consumer protection mission through its own robust independent monitoring and investigation of misleading advertising in the marketplace. These efforts have led to NAD being named as a cy pres recipient in several class action settlements.
What is cy pres?
In class action settlements, the cy pres doctrine (from a French phrase meaning “as close as possible”) allows for the distribution of unclaimed settlement funds to non-profit organizations that indirectly benefit the injured class.
While in the past these awards have gone to charitable organizations generally, courts have begun to require a closer nexus between the organization granted a cy pres award and the harm alleged in the underlying case.
For instance, in Dennis v. Kellogg, the 9th Circuit rejected the cy pres clause in a false advertising class action, stating that, “[t]he cy pres awards in the settlement here are . . . divorced from the concerns embodied in consumer protection laws. . .” It noted that the cy pres award in the settlement was for a charitable purpose but that, “[t]his noble goal . . . has ‘little or nothing to do with the purposes of the underlying lawsuit or the class of plaintiffs involved.’”
Considering this guidance on cy pres awards, why has BBB National Programs – NAD as well as some of our other program areas – been named the recipient in numerous class action settlements? There are four principal reasons.
1. Our programs have a close nexus to the actual harms alleged in consumer class actions.
When a class action lawsuit alleges false advertising, the relevant harm results from consumers being misled by advertising, in other words, from the advertising promising benefits that were not delivered. Misleading advertising is the only issue NAD reviews and is a primary focus of both BBB National Programs’ Children’s Advertising Review Unit and Direct Selling Self-Regulatory Council. Understanding how consumers interpret advertising claims and how to properly substantiate those claims is central to the guidance these programs provide to industry. The work of these programs helps ensure that advertising is properly supported and enhances consumer trust, providing consumers a benefit closely related to the alleged problem in many consumer class action cases—reducing consumer deception. The same is true for our privacy programs, which aim to address incongruity between the use of consumer data and the privacy policies that govern that data usage. When a cy pres award comes to BBB National Programs, the relief often provides a remedy “as close as possible” to the issues in the underlying matter.
2. Our programs tangibly reduce consumer deception and harm.
BBB National Programs works to better the consumer experience in tangible ways and to create a marketplace where consumer trust is earned. Our programs have a direct impact on the truthfulness of advertising and marketing because our decisions cause marketers to change their problematic practices. Our advertising review efforts have given clear guidance and applied high substantiation standards for telecommunications products, household cleaners, over-the-counter medication, and myriad others, leading to more truthful advertising in these areas. Our privacy programs provide guidance on best practices for transparent privacy policies and have had a direct impact on consumer privacy and related disclosures. BBB National Programs works directly to support a trusted marketplace, an ongoing effort that is often closely tethered to the harm a false advertising or privacy class action seeks to address—more closely related than the more attenuated, though important, work of charitable organizations devoted to health or consumer protection policy.
3. We work with businesses to better help consumers.
By working with businesses to improve their practices, BBB National Programs can create lasting and workable changes in the marketplace. Its programs create a pro-active system for bettering advertising, marketing, and privacy. Each program focuses on improving practices and has developed a track record of businesses cooperating with our efforts.
For example, while participation in an NAD inquiry is voluntary, participation and compliance rates are regularly at 90%. Case decisions lead to usable and practical forward-looking guidance for all businesses, adding to the impact self-regulation has on the marketplace and protecting consumers from misleading practices. We set high standards for business practices, resulting in better protection for consumers.
4. We focus on where consumer harm can be most reduced and on preventing future consumer harm.
Some of BBB National Programs most important work is our independent monitoring of industry. Robust advertising monitoring and investigation produces case decisions that provide guidance to the marketplace and reduce consumer deception when misleading claims are discontinued, and similar claims are avoided in the future. We optimize the benefit of our monitoring actions by focusing on advertising aimed at vulnerable consumers or on issues that would benefit from additional guidance on how to avoid consumer harm.
For example, this year our programs focused on opening cases where the advertising made unproven COVID-19 claims. Similarly, cutting-edge digital marketing issues have been a consistent focus of monitoring cases. In this way, BBB National Programs provides benefits to consumers that are not only related to the alleged harm in their case, but also helps prevent future harm on emerging issues that threaten marketplace trust.
BBB National Programs has a proven track record of improving how businesses communicate with consumers. With the help of cy pres awards, we can continue that work and expand our ability to protect consumers and increase marketplace fairness even in the face of evolving marketing practices.
Visit our website for more information about past cy pres awards we have received or to learn how to name BBB National Programs in a cy pres settlement.