On September 2, 2016, the federal trial court in Manhattan issued its opinion in Casper Sleep, Inc. v. Mitcham, relating to a mattress review website and its disclosures. Slip Op., Casper Sleep, Inc. v. Mitcham et al, Case No. 1:2016–cv–03224 (Doc. 26, S.D.N.Y. 2016).
The case involved mattressnerd.com, a website owned by Jack Mitcham, that offered Mitcham’s personal reviews of various mattresses. The site also included a disclaimer on each page stating that Mitcham included links to mattress sellers’ sites and he received a commission if anyone purchased a mattress through those links (so-called “affiliate” marketer links). Casper Sleep is an online mattress seller and former “affiliate” marketer of the site.
Disclaimers used by defendant
More specifically, the website’s general disclaimer stated in part: “I’m an affiliate for many different companies, so I can help find you great deals no matter where they are.” “I have not been paid to write any of these articles and all of these opinions are completely my own.” And “I can act as a brand-agnostic and retailer-agnostic salesman.” (Emphasis in original). Casper alleged that this disclaimer led consumers to believe that the reviews are “independent and unbiased.” In contrast, Casper claimed Mitcham had posted a three-way comparison review where Casper was the winner but, once Casper was no longer an “affiliate”, Mitcham changed the review so that another mattress company was the winner. Even after the change, the disclaimer appearing on that page stated that Mitcham was an “affiliate for all of the companies mentioned in the article.” In addition, Casper claimed that there were several reviews where Mitcham recommended mattresses from Casper competitors over Casper’s products, and those reviews included not only affiliate links to the competitors’ sites but also links to an independent third-party seller for the mattresses made by Casper and two other companies. Casper alleged that the owner received a small payment from the third-party seller (not Casper) if that seller processed the transaction.
Casper’s claims of unfair competition and deceptive acts and practices
Casper sued Mitcham, claiming that his website misled consumers in violation of Section 43(a) of the federal Lanham Act and Section 349 of New York’s General Business Law by implying that his reviews are unbiased when in fact Mitcham collected sales commissions through affiliate marketing relationships with many of Casper’s competitors. Mitcham moved to dismiss the entire complaint, but was successful only on the general Lanham Act claim.
Unfair competition under the Lanham Act – general and specific claims
The court began its analysis with the Lanham Act claim, finding that “many of the statements in question are simply not false or plausibly misleading” noting that “the Lanham Act does not impose an affirmative duty of disclosure.” (The court pointed out that omissions can be actionable under the Lanham Act “if they render affirmative statements false or misleading.”)However, the court denied Mitcham’s motion to dismiss with respect to the specific instance where Casper claimed that the site changed a review after Casper was no longer an “affiliate” market but the disclaimer still indicated that the owner was an “affiliate for all of the companies mentioned in the article.” Here, the court found Casper had alleged a “literal falsehood” and that Lanham Act claim was not subject to dismissal at this point.
With respect to the links from the third-party site, which Casper claimed paid Mitcham a fee if it processed the transaction, the disclaimer on each of those articles stated that the “article includes ‘affiliate links,’ meaning that I’d get paid a commission if you purchased anything from them.” The court characterized this statement as “a closer call,” but ruled that Casper could pursue the Lanham Act claim. The court found that the quoted disclaimer “plausibly materially misleads consumers by directly suggesting that Mitcham has the same pecuniary interest in pushing sales of Casper that he does in pushing sales of each of the other mattress companies mentioned in the review.”
Unsuccessful Lanham Act claims by defendant
Mitcham raised three other arguments relating to dismissal of the Lanham Act claims, and the court rejected all three. First, he claimed that the Lanham Act claim could not be brought because he was not a direct competitor of Casper. This argument failed in light of the U.S. Supreme Court’s 2014 ruling in Lexmark International Inc. v. Static Control, which held that competition between the parties is not required. Lexmark International Inc. v. Static Control, 697 F. 3d 387 (6th Cir. 2012).
Mitcham’s second argument was that the case should be dismissed because he did not make any false statements about Casper’s mattresses. The court rejected this argument because the Lanham Act “unambiguously encompasses false or misleading statements about one’s own goods or services.”
Finally, Mitcham argued that his disclosures did not proximately cause Casper’s alleged injuries. The court viewed Casper’s claims as alleging that Mitcham’s statements suggested he had the same financial interest in sales of Caper mattresses as well as all competitors, and that suggestion caused Casper lost sales and diminished goodwill in the marketplace. “Put differently, to the extent that accurate representations—or even no representations at all—would have resulted in fewer diverted sales for Casper and mitigated the negative impact on its reputation, the alleged misrepresentations proximately caused the alleged harm.”
Casper’s New York law claims of deceptive acts or practices
The court then examined Casper’s claim under New York’s law prohibiting deceptive acts or practices. To make a claim under Section 349 of the General Business Law, a plaintiff must allege that the defendant has engaged in “(1) consumer-oriented conduct that is (2) materially misleading and that (3) plaintiff suffered injury as a result of the allegedly deceptive act or practice.” The plaintiff must also plead that the “acts or practices have a broader impact on consumers at large.”
To provide the “consumer-oriented” requirement, the plaintiff must show that the conduct “potentially affect[s] similarly situated consumers.” Here, the court found that Casper met this standard because the website was “plainly geared toward consumers” and “readers of the website browse the same site and are subject to the same allegedly deceptive conduct.”
Consequently, although Casper’s general claim regarding the website’s disclosures could not proceed under the Lanham Act, it could proceed under New York law. The court stated that New York law “arguably does require such disclosures—prominently and completely.” The court cited the FTC’s Endorsement Guides, which call for clear and conspicuous disclosure of a connection between an endorser and a product “that might materially affect the weight or credibility of the endorsement.” Note that the FTC’s Endorsement Guides are guides regarding the FTC’s requirements (and not formal regulations). At least in this New York court, however, those Guides may now be privately enforceable.
For more information on the FTC’s Endorsement Guides, see this post from our sister blog, the Social Media Law Bulletin.