International Law

Supplement Purchasers Allowed to Proceed with Unfair Competition Class Action

This posting was written by Jody Coultas, Editor of CCH State Unfair Trade Practices Law.

An order denying certification in a consumer?s California Unfair Competition Law (UCL) and Consumer Legal Remedies Act (CLRA) class action against the nutritional supplement retailer GNC was reversed because the trial court?s opinion was based on improper legal criteria and incorrect legal assumptions, according to a California appellate court.

Sale of a Controlled Substance

The consumer purchased an over-the-counter nutritional supplement containing androstenediol, a Schedule III controlled substance, from GNC. It is illegal to sell or possess a Schedule III controlled substance without a prescription, but the retailer failed to disclose that its product contained androstenediol.

The consumer (1) alleged that the retailer violated the UCL by selling the supplement in violation of the California Health and Safety Code and other state statutes and (2) sought restitution and injunctive relief. In June 2004, the action was coordinated with five other class actions in Los Angeles Superior Court.

According to the court, the UCL class action claim presented two predominant issues?whether the retailer?s sales were unlawful and whether the profits from those sales must be restored to the class.

Individualized Proof

In a UCL class action, once the named plaintiff shows that he suffered an injury-in-fact and lost money or property as a result of the unfair competition, no further individualized proof of injury or causation is required to impose liability against the defendant in favor of absent class members.

The trial court had erroneously assumed that individualized issues predominated because the court would need to determine whether the legality of the sale was material to each class member.

Misrepresentations

The consumer also alleged that GNC violated the CLRA by misrepresenting the source, sponsorship, approval, or certification of supplement and by misrepresenting that the supplements were of a particular standard, quality, or grade.

The consumer sufficiently alleged that a reasonable consumer would find the legality of a product important when deciding whether to purchase that product, according to the court. To state a CLRA class action, the consumer needed to show that all class members suffered some damage as a result of the alleged misrepresentation that the supplement was legal. Because these misrepresentations were made to class members, an inference of reliance arose as to the entire class.

The decision?Steroid Hormone Product Cases?appears at CCH State Unfair Trade Practices Law ¶31,995.

Full post as published by Trade Regulation Talk on February 18, 2010 (boomark / email).