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AVON PRODS. v. S.C. JOHNSON & SON

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK


November 19, 1997

AVON PRODUCTS, INC., Plaintiff,
v.
S.C. JOHNSON & SON, INC., Defendant.

The opinion of the court was delivered by: SOTOMAYOR

OPINION AND ORDER

 SONIA SOTOMAYOR, U.S.D.J.

 FINDINGS OF FACT, CONCLUSIONS OF LAW, AND ORDER

 In Frigaliment Importing Co., Ltd. v. B.N.S. Int'l. Sales Corp., 190 F. Supp. 116 (S.D.N.Y. 1960), Judge Friendly posed the question "What is chicken?" This case poses the question "What is insect repellent?"

 Plaintiff and counterclaim defendant Avon Products, Inc. ("Avon") manufactures Skin-So-Soft bath oil "(SSS"), a beauty product that, for reasons not entirely clear, also has some efficacy as an insect repellent, though it is not registered as such with the Environmental Protection Agency ("E.P.A."). Defendant and counterclaim plaintiff S.C. Johnson & Son, Inc. ("S.C.Johnson") manufactures various E.P.A.-registered chemical based repellents, including OFF!. S.C. Johnson alleges that Avon has marketed SSS as an insect repellent in violation of Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a) (1992), and Sections 349 and 350 of the New York General Business Law; and has engaged in unfair competition under the common law.

 S.C. Johnson seeks compensatory damages equivalent to the profits of which Avon has allegedly deprived S.C. Johnson because of Avon's marketing of SSS as an insect repellent. S.C. Johnson also seeks various forms of injunctive relief, including an order requiring Avon to place disclaimers on all SSS promotional materials and bottles for a three year period stating that scientific testing has revealed that SSS does not effectively repel insects. S.C. Johnson also seeks orders requiring Avon to adopt policies that sanction employees and sales representatives who promote SSS as a repellent and requiring Avon to respond to all media inquiries regarding repellency with a statement that it has been demonstrated through scientific testing that Skin-So-Soft bath oil does not effectively repel insects. Finally, S.C. Johnson seeks an award of attorney's fees pursuant to 15 U.S.C. § 1117(a) (1992).

 Avon denies that it has marketed SSS as an insect repellent and contends that SSS is sufficiently effective as a repellent such that marketing it as such does not constitute false advertising. Avon also asserts that S.C. Johnson's claims are barred by the equitable doctrines of laches and unclean hands. Finally, Avon seeks an award of attorneys' fees pursuant to 15 U.S.C. § 1117(a).

 For the reasons to be discussed, I find that Avon has, to a limited extent, marketed SSS as an insect repellent, but that SSS is sufficiently effective as an insect repellent that Avon's actions do not violate the Lanham Act or the New York General Business Law, and do not constitute common law unfair competition. I also find that S.C. Johnson's delay in bringing this suit renders the relief it seeks unwarranted as a matter of equity. Accordingly, S.C. Johnson's claims for monetary damages and injunctive relief are denied. Avon's claim for attorneys' fees is denied because I do not find that S.C. Johnson has brought this case in bad faith.

 A. PROCEDURAL HISTORY

 Avon initiated this case, originally assigned to Judge Allen G. Schwartz, by seeking to enjoin S.C. Johnson from publishing a print advertisement and a television commercial it claimed violated Section 43(a) of the Lanham Act. By Opinion and Order dated June 10, 1994, Judge Schwartz denied Avon's motion as to the television commercial, but enjoined distribution of the print ad. By Order dated February 7, 1997, the Court dismissed Avon's claim based upon the parties' settlement of the issue.

 In response to Avon's motion for a preliminary injunction, S.C. Johnson asserted two counterclaims. The first counterclaim alleged that Avon's marketing of an E.P.A. approved product under the name "Skin-So-Soft Moisturizing Suncare Plus Mosquito, Flea & Deertick Repellent SPF 15 PABA-Free Sunscreen Lotion" ("Skin-So-Soft Three-In-One Product") violated Section 43(a) of the Lanham Act, Sections 349 and 350 of the New York General Business Law and constituted unfair competition under the common law. By Order dated August 22, 1996, Judge Schwartz granted Avon's motion to dismiss Count I of S.C. Johnson's counterclaim, leaving the second counterclaim as the only remaining part of this case.

 The second counterclaim, which is the only claim sub judice, alleged that Avon had violated the Lanham Act and the New York General Business Law ("GBL"), and had engaged in unfair competition by marketing and selling SSS as an insect repellent.

 On January 13, 1997, this case was reassigned to Judge Leonard B. Sand, who by Order dated January 23, 1997, denied Avon's motion for summary judgment on S.C. Johnson's second counterclaim. On January 27, 1997, this case was reassigned to the undersigned.

 Trial of S.C. Johnson's second counterclaim commenced on July 14, 1997. The parties presented direct testimony in the form of testimonial declarations submitted to the Court prior to trial. The court heard cross-examination on July 14, 15, 16, 17, 18, 22, 23 and 24, 1997. Summations were presented on August 18, 1997.

 B. STIPULATED FACTS

 The parties stipulated to the following facts in their Joint Consolidated Pretrial Order of May 1997, which the Court adopts as findings of fact:

 I. THE PARTIES

 1. S.C. Johnson & Son, Inc. is a Wisconsin corporation having its principal place of business in Racine, Wisconsin.

 2. Avon Products, Inc. is a New York corporation with its principal place of business in New York, New York.

 II. S.C. JOHNSON'S OFF! REPELLENTS

 3. S.C. Johnson markets a wide variety of chemical specialty products, including products used for insect control.

  4. S.C. Johnson's insect control products include the OFF! line of insect repellents which are sold primarily through retail channels of trade.

 5. OFF! insect repellent is currently sold by S.C. Johnson in a variety of forms including aerosol, pump spray, lotion, stick, and towelettes.

 6. Each year a seasonal increase in sales of S.C. Johnson's OFF! repellents occurs in the late spring and summer months.

 7. The active ingredient in S.C. Johnson's OFF! line of insect repellents is N.N. dimethyl-meta-toluamide ("DEET"). Different concentrations of DEET are used in the various OFF! repellents. DEET is proven to be an effective insect repellent.

 8. S.C. Johnson's OFF! repellents are registered with the E.P.A..

 9. In 1988, S.C. Johnson initiated Project Vulture, which resulted in the development of OFF! Skintastic.

 10. In 1991, S.C. Johnson began to market a DEET-based insect repellent in a moisturizing lotion under the mark "OFF! Skintastic." That product is registered with the E.P.A..

 III. S.C. JOHNSON KNOWLEDGE OF THE USE AND SALE OF SKIN-SO-SOFT BATH OIL TO REPEL INSECTS

 11. In the mid-1970s, the President of S.C. Johnson asked Arthur Hageman of S.C. Johnson to conduct insect repellency tests of Skin-So-Soft Bath Oil. In the 1970s, Mr. Hageman tested Skin-So-Soft Bath Oil for repellency against black flies and mosquitoes and found no repellency.

 IV. AVON'S SALES STRUCTURE

 A. Sales Representatives

 12. Avon primarily sells its products to the public through sales representatives, not retail stores.

 13. The majority of sales representatives are women who sell Avon products in their "spare" time, either to supplement their earnings from a full-time job, or to provide some income while being full-time care providers to their families.

 14. At any given time, there are approximately 450,000 to 500,000 active sales representatives selling Avon's products.

 B. District Managers

 15. At any given time, there are between approximately 1,800 and 2,000 District Managers.

 16. Avon's District Managers are employees of Avon.

 C. Division Managers

 17. At any given time, there are between approximately 80 and 100 Division Managers.

 18. Avon's Division Managers are employees of Avon.

 19. Each Division Manager trains, supervises and coordinates the activities of all of the District Managers who are assigned to his or her Division.

 20. From time to time, Avon Division Managers may attend the District Manager's monthly sales meetings with representatives for observation purposes.

 D. Regional Vice Presidents

 21. Regional Vice Presidents are responsible for supervising and coordinating the District Managers within each of Avon's four "operating business units" or "OBUs." There are four Regional Vice Presidents, one for each of the following regions: North; Northeast; Southeast; and West.

 V. SKIN-SO-SOFT BATH OIL

 22. Since approximately the early 1960s, Avon has sold a bath oil under the name Skin-So-Soft bath oil.

 23. Avon has been aware at least since 1978 that many consumers use Skin-So-Soft bath oil to repel insects.

 24. Skin-So-Soft bath oil has never been registered with the E.P.A. as an insect repellent.

 25. Avon considered registering Skin-So-Soft bath oil as an insect repellent with the E.P.A., but decided not to do so.

 26. Avon tested Skin-So-Soft bath oil for insect repellency as early as 1987.

  VI. THE "SECRET" AND "EIGHTH WONDER" ADS

 27. In 1988, Avon advertised Skin-So-Soft bath oil in a print advertisement which stated:

 

"Millions of people know the secret of Skin-So-Soft. Do you? It used to be America's best kept secret. Now, more and more people simply won't face the summer without Avon Skin So Soft. Here's a perfect way to discover the soothing benefits of America's number one selling bath oil. Try it now and see for yourself what millions already know. Avon.

 28. In 1988, the "Secret" ad was published in USA Today.

 29. In 1989, Avon advertised Skin-So-Soft bath oil as the "EIGHTH WONDER OF THE WORLD" in a print ad.

 VII. AVON'S CONSUMER INFORMATION CENTER

 30. Avon operates a Consumer Information Center ("CIC"), a function of which is to respond to questions from consumers and to provide management with information about questions or issues that arise regarding Avon products. Avon's CIC can be reached via a 1-800 toll free direct number throughout the year.

 31. Avon's CIC has received questions from consumers regarding use of Skin-So-Soft bath oil as an insect repellent for at least 13 years.

 VIII. LISTS OF ALTERNATIVE USES

 32. Certain sales representatives have disseminated lists of alternative uses for Skin-So-Soft bath oil, which include its use to repel insects.

 33. Avon's CIC has, on occasion, received inquiries from consumers and sales representatives about obtaining copies of "lists" of many uses.

 34. Avon had copies of "lists of uses" in their company marketing files.

 IX. "AVON CALLING" AND OTHER AVON PROMOTIONS

 35. In 1954, Avon began a national advertising campaign, including television advertising, which featured the slogan "DING DONG. . .AVON CALLING."

 36. In 1971, Avon registered the slogan "AVON CALLING" as a trademark in the United States Patent and Trademark Office in International Class 35 for Advertising and Business Services, Reg. No. 927,039. In 1991, Avon renewed its "AVON CALLING" trademark for a period of ten years alleging continuous use of "AVON CALLING" since January, 1955.

 X. AVON'S LAUNCH OF SKIN-SO-SOFT THREE-IN-ONE PRODUCT

 37. In 1993, Avon's marketing managers developed and adopted a "megabranding" marketing strategy for Avon's Skin-So-Soft business.

 38. Avon's "megabranding" strategy was based on a marketing concept of extending the known equities of the brand into line extensions which would enable the brand to achieve further growth.

 39. As part of its megabranding strategy, Avon conducted market research to determine the brand equities associated with Skin-So-Soft bath oil.

 40. Annette DeVita was involved in developing and implementing Avon's megabranding strategy for Skin-So-Soft.

 41. Avon obtained a sublicense to sell an E.P.A. registered insect repellent product developed by another company, Primavera Laboratories, Inc. and in May 1994, Avon began to market that product under the name "Skin-So-Soft Moisturizing Suncare Plus Mosquito, Flea & Deertick Repellent SPF 15 PABA-Free Sunscreen Lotion" ("Skin-So-Soft Three-In-One Product").

 42. In May 1994, Avon promoted the Skin-So-Soft Three-In-One Product with a national television campaign entitled "Let Kids Be Kids."

  XI. DEET

 43. All of S.C. Johnson's personal repellent products contain DEET. DEET is the most commonly used active ingredient in insect repellents.

 44. S.C. Johnson has never offered a non-DEET personal repellent to the public.

 XII. EFFICACY TESTS: APPLICATION AMOUNT

 45. For products applied directly to the skin, a relevant element in both laboratory and field tests may be the amount of test substance applied to a test subject's skin.

 46. In the late 1980's, Avon retained Insect Control and Research of Baltimore, Maryland ("ICR") to conduct insect repellency tests of Skin-So-Soft bath oil.

 47. In conducting its laboratory and field tests of various personal repellents, S.C. Johnson generally applies approximately 1 gram, or 1.54 mg Ö, of the test repellent to the forearm (wrist to elbow) of each test subject.

 48. When Avon conducted a field study of Skin-So-Soft bath oil in December 1995 in the Everglades, approximately 2 mg Ö was applied to each of the test subjects.

 XIII. EFFICACY TESTS: FIRST CONFIRMED BITE

 49. The term "first confirmed bite," in reference to mosquito repellents, refers to a bite followed by another bite within a thirty minute period. The first bite is the confirmed bite; the second bite is the confirming bite.

 XIV. EFFICACY TESTS: MOSQUITO DENSITIES

 50. In order to obtain reliable results, mosquito repellency field tests must be conducted where there is sufficient mosquito density.

 51. Variables such as weather conditions, mosquito biting habits, and differences in attractiveness of people to mosquitoes play a role in whether or not a person is bitten by a mosquito at any given point in time.

 OFF! SKINTASTIC FOR CHILDREN

 52. In 1993, S.C. Johnson test-marketed a product labelled as "OFF! Skintastic for Children" in the Northeast United States.

 53. S.C. Johnson discontinued OFF! Skintastic for Children at the end of 1994. In 1995, S.C. Johnson introduced "OFF! Skintastic for Kids" a spray product with 5% DEET, a lower percentage than the 7.5% DEET in OFF! Skintastic.

 C. ADDITIONAL FACTUAL FINDINGS

 Based on the testimony presented and the exhibits admitted at trial, I make the following additional factual findings pursuant to Fed. R. Civ. P. 52.

  XV. THE REPELLENCY FOLKLORE

  54. SSS was the best selling insect repellent in 1992, 1993, and 1994. (Causey Decl *fn1" PP 4-6.) *fn2"

  55. The average user of SSS as an insect repellent uses the product as a repellent for an average of 6.5 years. (TX *fn3" 203 at 176.)

  56. Consumers perceive SSS to be an effective repellent and use it as such.

  57. Consumer surveys conducted by S.C. Johnson indicate that consumers believe that SSS lasts approximately as long as chemical based repellents, somewhere between three and four hours. (Wind Decl. P 39; TX 165, 166 at 2-4, 199 at 1058, 200 at 003326.) SSS is sold on store shelves next to insect repellents (TX 19).

  XVI. AVON'S AMBIGUOUS RESPONSE TO THE REPELLENCY FOLKLORE

  A. Avon's Official Policy Regarding SSS

  58. The marketing of SSS as an insect repellent is contrary to Avon's official policy.

   a. Since the 1980's, it has been Avon's official policy to respond to consumer inquiries about the repellency power of SSS with a statement to the effect that "Avon markets this product solely as a moisturizing bath product and there is no ingredient or combination of ingredients in Skin-So-Soft that could be considered an insect repellent." (See e.g. TT *fn4" at 962, 993-996; Baron Decl. passim ; TX 420 at 0001898, 0001901, 0001906.)

  b. "1-800" Teletech operators who were hired to take customer orders for Avon were provided with a "help screen" in the early 1990's instructing them to inform callers that "there is no ingredient or combination of ingredients in Skin-So-Soft that could be considered an insect repellent. Skin-So-Soft is a bath oil and all the ingredients in the product are approved cosmetic ingredients." (TT 992-993; TX 418.)

  c. Avon has consistently responded to inquiries from sales representatives about the marketing of SSS by informing them that SSS should not be marketed as an insect repellent. (See e.g. TX 382, 384, 385, 386.)

  d. For at least the last fifteen years, all Avon representatives have received a guide to working for Avon entitled "Managing Your Avon Business." The manual states that "only approved performance or ingredient claims . . . are allowed in promoting and advertising Avon products." In the next sentence, the manual states "For example: 'Avon Skin-So-Soft is the world's # 1 bath oil.' (Any other claim is unofficial and not approved.)" (TX 9 at 0113935; TT 922, 941-942, 951.)

  e. At least some Avon employees have received warnings from Avon that SSS is not to be marketed as an insect repellent (Merritts Decl. P 10; Rodriguez Decl. P 9) and at least some Avon managers have given Avon sales representatives explicit instructions not to market SSS as an insect repellent (Penninger Decl. PP 14-15; Rodriguez Decl. P 9).

  f. Maria Penninger, currently Vice President of Avon's Southeast Operating Business Unit and an employee of Avon for over thirteen years, also testified that she has received numerous communications, both written and oral, from Avon senior management that SSS should only be promoted as a bath oil and not as an insect repellent, and, consequently, orally informed sales representatives and district managers that SSS should only be promoted for its authorized use. (TT 919-920.) Ms. Penninger has taken "a very aggressive stance" in telling district managers and representatives not to promote SSS as an insect repellent. (TT 930.)

  g. Barbara Merritts was told by her District Manager not to promote SSS as an insect repellent when she was a sales representative, and was present at sales meetings when other sales representatives received the same instruction. (TT 939-941.)

  h. Avon has also informed some retailers that SSS should not be marketed as a repellent. (See e.g. TX 391, 394, 397, 401, 407.)

  i. Avon has also consistently informed those conducting consumer opinion surveys about insect repellency that Skin-So-Soft is not an insect repellent. (See e.g. TX 387, 395, 396, 400.)

  B. Avon's Promotion of the Repellency Folklore

  59. Although the promotion of SSS as an insect repellent is contrary to Avon's official policy, Avon has profited from the use of SSS as an insect repellent and some segments of Avon management have sought to exploit SSS' popularity as an insect repellent by encouraging sales representatives to market it as such.

  a. Avon management considers insect repellency to be a brand equity of SSS (TX 137, 144, 145; TT 838-839, 1062), monitors registered insect repellents as competition for SSS (TX 68-72), and has sought to gain marketing benefits from the recall of chemical based repellents, such as S.C.Johnson's Deep Woods OFF! (TX 68-72).

  b. At least some members of Avon management have endorsed the idea of reinforcing "SSS's positive word-of-mouth by communicating that it is more than an ordinary bath oil" and, in 1989, Avon's Manager of Advertising, Ron Muckstadt, "instructed two creative teams to pursue advertising" along these lines. (TX 23; TT 970.)

  c. A draft "Divisional Managers Speech" which was apparently prepared for an Avon sales meeting refers to SSS as "the ultimate bathing and bug experience." (TX 53.)

  d. I find that this draft speech, in combination with other evidence of management identification of SSS as an insect repellent, is indicative of a culture within Avon that has sought to exploit the popularity of SSS as an insect repellent. This conclusion is reinforced by the fact that Avon's Public Relations Department has never initiated public relations to dispel the notion that SSS is an effective repellent. (TT 963.)

  C. The Lists of Uses

  60. Avon sales representatives have used a number of promotional materials to promote SSS as a repellent. These include buttons, flyers, tee-shirts and business cards bearing the words "Avon" or "Skin-So-Soft" and depicting a dead insect inside a circle with a red line through it. (TX 14, 16, 17.)

  61. However, the primary promotional material used by Avon's sales representatives to market SSS as a repellent are lists of uses for SSS that identify insect repellency as one such use. (TX 18.)

  a. Many of the lists appear to be homemade insofar as they are handwritten or unprofessionally typed and contain spelling errors. (See e.g. TX 18 at 0001777, 0001778-0001779, 0000220-0000221, 0117590, 0117592.)

  b. Some of the lists also bear disclaimers explaining that the lists are not authorized by Avon. (TX 18 at 0114697.)

  62. However, the Court finds that the strong degree of similarity among the lists, and the variety of locations in which they have appeared, suggest that they are not simply the spontaneous and independent creations of Avon sales representatives.

  a. Indeed, Avon has admitted that certain Avon employees, including two District Managers, Jan Schaffer and Brenda Beginski, have, on occasion, provided certain Avon sales representatives with materials in which the use of the Skin-So-Soft Bath Oil as a repellent was described. (TX 231 at 12; TX 237 at 49.)

  b. Avon has also admitted that it is aware that some of its sales representatives have violated Avon policy by promoting Skin-So-Soft Bath Oil as an insect repellent. (TX 231 at 14.)

  c. By the Court's count, the parties have submitted approximately 110 versions of the lists, though some of these appear to be duplicates. (TX 18.)

  d. The lists generally identify approximately 30 uses for SSS including use as a shower moisturizer, a suntan oil, a massage oil and an insect repellent. Insect repellency is almost always use # 8 on the lists. (TX 18.)

  e. The majority of lists state that SSS is a "good insect repellent." Some of the lists state that it is an "excellent insect repellent," others state only that is an insect repellent, and still others state only that Avon consumers have used it as an insect repellent. (TX 18.)

  f. Some versions of the lists include a reproduction of the "Eighth Wonder of the World" ad. (TX 33-38.)

  g. It is not clear how frequently the lists were distributed.

  h. Maria Penninger, currently Vice President of Avon's Southeast Operating Business Unit and an employee of Avon for over thirteen years, however, testified that when she was a District Sales Manager in North Carolina in 1983, she saw a list of alternative uses about ten times in one year. (Penninger Decl. PP 1, 3, 13.) In eight years as a Division Sales Manager for the geographic area covering mid-west Tennessee and a part of Mississippi, she had occasion to see such lists about 50 times. (Penninger Decl. P 13; TT 912.)

  63. Evidence before the Court, however, does not support the conclusion that the use of the lists has been widespread.

  a. In a survey prepared for this litigation by S.C. Johnson, only 1 of 121 respondents identified a list as the source of their perception that SSS is an effective insect repellent, suggesting that the lists have not been disseminated very widely. (TT 1217.)

  b. Although it is not clear where each list was created or where it was distributed, the lists submitted to the Court indicate creation/or distribution in the following limited locations:

  

(1) Atlanta, Georgia (TX 18 at 0001775 bears an Atlanta fax legend);

  

(2) Charlotte, North Carolina (TX 18 at 0001773 invites the customer to contact an Avon representative in Charlotte area code);

  

(3) New York City (TX 18 at 0001774 and 0001880 bear Manhattan fax legends);

  

(4) Michigan (TX 18 at 0113639-0113640 is a letter referring to distribution of a list at a Michigan workplace);

  

(5) Wisconsin and Illinois (TX 18 at 0117662 invites customers to contact Avon District Managers in area code 608, which corresponds to Madison, Wisconsin, 414 which corresponds to Milwaukee, Wisconsin, and 309, which corresponds to Peioria, Illinois);

  

(6) Anchorage, Alaska, (TX 18 at 118010 invites customers to call an Avon representative in Anchorage, Alaska);

  

(7) Washington (TX 18 at 118011 invites customers to contact an Avon sales representative in Bremerton, Washington);

  

(8) Kentucky (TX 18 at AVG 0000199 appears to invite customers to contact an Avon representative in Magnolia, Kentucky);

  

(9) Virginia (TX 18 at 0001760 and 0001772 bear a Virginia fax legend).

  c. Distribution of the lists by sales representatives seems to have been especially prevalent in Wisconsin. In addition to TX 18 at 0117662, a copy of a list which invites consumers to contact Avon District Managers in Milwaukee and Madison, there is substantial deposition testimony regarding distribution of the lists in Wisconsin.

  (i) Karen Balian, a former Avon District Manager in Southern California from 1983 to 1987 and a District Manager in Wisconsin from 1987 to 1991, testified that she was encouraged by her Division Managers in Wisconsin to instruct Avon representatives to use the lists as a sales tool and that she gave the lists to representatives as a selling tool at sales meetings. (Balian Dep. *fn5" at 26, 33, 38.) Balian also testified that she saw the lists circulated within Avon between one and ten times. (Balian Dep. at 57-58.)

  (ii) Mary Murphy, a former Avon Sales Representative in Wisconsin in 1990 and 1991, was told by her District Manager to market SSS as an insect repellent and received lists of uses for SSS directly from Avon. (Murphy Dep. at 9-11, 16.) Murphy then distributed the lists of uses to her customers and marketed SSS as an insect repellent to her customers. (Murphy Dep. at 10, 21.) Murphy was never told by her District Manager or anyone from Avon not to market SSS as an insect repellent. (Murphy Dep. at 11.)

  (iii) Constance Van Woelderen, a former Avon sales representative in Wisconsin from 1985 to 1992, heard her District Managers say at sales meetings that the bath oil "was excellent for insect repellent." (Van Woelderen Dep. at 8-9, 18-19.) She also testified that she saw lists of uses given out on several occasions. (Van Woelderen Dep. at 19.) Van Woelderen was also instructed by her District Managers at sales meetings to market SSS as an insect repellent, was given the lists at sales meetings to use for this purpose, and used the lists to sell SSS as an insect repellent to her customers. (Van Woelderen Dep. at 19-22, 27.) Van Woelderen was never instructed by anyone from Avon not to market SSS as an insect repellent. (Van Woelderen Dep. at 27-28.)

  (iv) Brenda Fry, a former Avon Sales Representative in Wisconsin in 1994 and 1995, was never told by her District Manager or anyone else from Avon not to market SSS as an insect repellent. (Fry Dep. at 17.) *fn6"

   64. Distribution of the lists appears to have been less widespread in Avon's Southeast Operating Business Unit ("OBU").

  a. There is no testimony regarding the distribution of lists by District Managers outside of Wisconsin, and, in fact, Balian testified that she did not see the list of alternative uses at any point during her five year tenure in California. (Balian Dep. at 33-34.)

  b. Barbara Merritts, currently a District Sales Manager in Florida, testified that she has never circulated a list of SSS uses or encouraged or given others permission to circulate that list. She has also never known any of the other District Sales Managers that she works with to circulate the lists of alternative uses of SSS. (Merritts Decl. P 11.) When customers inquire about the use of SSS as an insect repellent, Merritts always responds by telling them that SSS is sold as a bath oil only. (Merritts Decl. P 9.)

  c. Maria Penninger, presently Vice President of Avon's Southeast OBU, testified that her OBU has never sent out a list of uses and she has never heard of any Avon OBU sending out such lists with Avon's brochures. (Penninger Decl. P 11.) Whenever Penninger has seen such a list during her thirteen year career with Avon, she has instructed the sales representative in possession of the list not to circulate it. She has also instructed trainees not to promote the product as a repellent. (Penninger Decl. PP 14-15.)

  d. Similarly, Marie Rodriguez testified that ever since becoming a District Sales Manager in 1972 she has received repeated and explicit instructions from Avon that SSS is not to be sold for any alternative uses. (Rodriguez Decl. P 9.) Rodriguez has seen such lists on approximately three occasions during her 25 year career with Avon, and, on each occasion, has instructed the sales representative who brought the list to her attention that the list was prohibited. (Rodriguez Decl. P 10.)

  e. There is no evidence before the Court regarding distribution of the lists in other geographic regions.

  65. Although the lists appear to have been in circulation since the 1970's, the lists appear to have been distributed primarily during the period 1987 to 1993.

  a. One list submitted to the Court is dated July 1987. (TX 18 at 0001878.) Another list, which appears to have been reproduced at least three times, is dated September 1988. (TX 18 at 0117633 and TX 18 at 0117637, TX 18 at 0117647.) Another list appears to have been distributed in August 1991 (TX 18 at 0113639-0113641), while another list is dated May 1992. (TX 18 at 0117662).

  b. Three of the lists bear fax legends from 1992 (TX 18 at 0001775, TX 18 at 0001879, TX 18 at 118010) and seven bear fax legends from 1993 (TX 18 at 0000233, TX 18 at 0001760, TX 18 at 0001763, TX 18 at 0001771, TX 18 at 0001772, TX 18 at 0001880, TX 18 at 0001774).

  c. Barbara Merritts, currently an Avon District Sales Manager and formerly an Avon sales representative, testified that she first saw a list "in the late seventies." (TT 943.)

  d. Maria Penninger, an employee of Avon for over thirteen years, testified that she first saw a list at a sales meeting in 1983. (TT 911.)

  e. John Tunnacliffe, an Avon employee since 1980 and Director of National Sales Incentives since 1994 (Tunnacliffe Dep. at 4), testified that he saw an Avon District Manager provide a list of uses of SSS to a new sales representative in 1987 (Tunnacliffe Dep. at 99-101).

  66. Distribution of the lists appears to have ceased in approximately 1993, as the Court has been unable to identify any lists that bear a date later than 1993. Moreover, Maria Penninger, Vice-President of Avon's Southeast Operating Business Unit, testified that she has not seen any lists in the past three or four years. (TT 917.) Barbara Merritts, currently an Avon District Sales Manager and formerly an Avon sales representative, testified that she has not seen a list in the past five or six years (TT 944) and Maria Rodriguez, currently a Regional Sales Director in the Southeast (Rodriguez Decl. P 1), has not seen any lists in approximately five years (TT 952).

   D. Newspaper Ads

  67. SSS has also been advertised as an insect repellent in certain newspaper advertisements. However, on the limited evidence available, the Court is unable to determine Avon's responsibility for these ads.

  a. A newspaper ad which states that Skin-So-Soft is an especially effective insect repellent appears to have run in the area of Monroe, New York. (TX 28.) The ad also invites readers to contact Avon at 1-800-882-1597, for more information. However, Gail Blanke, who until recently was Senior Vice President, Public Affairs, and President of Life Designs at Avon, testified that the 800 number which appears on the ad is probably not an Avon number. (TT 1039.)

  b. Another newspaper ad (TX 18 at 0002147) for a store in Edison, New Jersey, claims that "Avon Skin-So-Soft Repels Annoying Insects." There is nothing on the face of this ad to indicate that it was placed by anyone directly connected with Avon management.

  c. Another newspaper ad which states "Local Country Meadows Lady Offers Summertime Hints To Make Your Summer More Enjoyable" touts SSS as an "excellent insect repellent" and invites readers to contact an Avon representative named Michelle Parrish. There is nothing in this ad to indicate the date on which it appeared or the location in which it ran. (TX 18 at 0117587.)

  68. Having reviewed the promotional materials submitted by S.C. Johnson, I find that some Avon sales representatives have marketed SSS as an insect repellent and have been encouraged to do so by some members of Avon management.

  XVII. AVON'S CORRECTIVE MEASURES

  69. Avon has taken some measures to enforce its official policy against the marketing of SSS as an insect repellent. However, these measures have been short-term responses to E.P.A. inquiries, rather than sustained efforts to ensure that the policy is followed. Avon has also failed to penalize or discipline representatives for the unauthorized promotion of SSS as an insect repellent. (TT 943-44, 926.)

  a. Although Avon has been aware of the repellency folklore since 1975 (TX 89), there is no evidence that Avon warned its sales representatives not to market SSS as a repellent before it received a letter from the E.P.A. in September 1987 stating that certain literature and advertising for SSS was in violation of federal law (TX 127).

  b. In 1987, in response to the E.P.A. warning, Avon immediately sent out a "Friday Letter," a weekly communication to district managers, regional managers and national sales managers, instructing them not to promote SSS as an insect repellent. (TT 779; TX 423.) Avon also instructed its Consumer Information Center to advise consumers who called in to ask about SSS' repellency that they should not use SSS as a repellent. (TT 785-786.)

  c. In response to the E.P.A. warning, Avon also sent out a first-class mailing to all of its 450,000 sales representatives "asking them not to promote or discuss the product in any way as an insect repellent." (TT 779, 783-784.)

  d. Avon did follow-up communications to its sales representatives in the first and second quarters of 1988. (TT 780, TX 426.) In September 1989, in response to a visit from an E.P.A. inspector, Avon distributed a short flyer to District Sales Managers asking them not to promote SSS as anything other than a bath oil. (TX 428.)

  e. In March 1990, Avon again reminded District Managers and Sales Representatives that SSS should not be marketed as an insect repellent. (TX 431.)

  f. On August 1, 1992, Avon sent out another Friday Letter asking District Managers to "please remind your Representatives that they should not be promoting Skin-So-Soft as anything but a bath oil." (TX 68 at 0001405.)

  g. By letter dated January 21, 1993, the E.P.A. warned Avon that the continued promotion of SSS as an insect repellent could constitute a violation of federal law. (TX 134.) In response, Avon assembled a task force to respond to the E.P.A.'s concerns. (DeVita Decl. PP 23-24; Hall Decl. P 11.) The task force assembled several communications that were distributed throughout the sales organization. Among these communications was a letter dated October 22, 1993 (nine months after the date of the E.P.A. warning letter) from Avon's President, Walker Lewis, to all District Sales Managers and Representatives, reminding the sales force of Avon's policy against promotion of SSS as a repellent. (DeVita Decl. P 25; TX 135, 434.)

  h. When Avon launched the Skin-So-Soft 3-in-1 product in 1994, it again sent a letter to all representatives reiterating that SSS bath oil is not to be sold as an insect repellent. (TT 1046.)

  70. These intermittent communications with managers and sales people were the only steps Avon took during the period 1988-1993 to ensure that its sales representatives would not market SSS as an insect repellent (TT 1049), even though the annual turnover rate of Avon sales representatives is in excess of 100% (Jung Decl. P 7; TT 751), and Avon could reach only 50%-60% of its sales representatives with a mailing (TT 780).

  71. Avon has taken no other steps to follow up on the Lewis letter or to insure that its many new representatives were made aware of the warnings set forth in the letter. (TT 860-861.)

  72. Avon has an annual turnover rate of over 100%. (Jung Decl. P 7; TT 751.)

  73. However, because of the lack of evidence of distribution of the lists since 1993 (see PP 66 above) the Court concludes that the Lewis letter and Avon's other actions, including the introduction of the 3-in-1 product have been effective in curtailing the unauthorized distribution of the lists.

  74. On the basis of this evidence, I find that Avon's response to the widespread consumer perception that SSS is an effective insect repellent has been a mixed one. Although Avon's general corporate policy is to discourage the promotion of SSS as an insect repellent, Avon has clearly sought to reap the benefits of the repellency folklore. This is demonstrated by the evidence that (1) Avon has monitored traditional repellents as competition for SSS; (2) Avon has pursued a "megabranding" strategy designed to leverage the popularity of SSS as a repellent into line extensions like the 3-in-1 product; (3) some members of Avon management have sought to pursue advertising strategies based on SSS' popularity as a repellent and have encouraged sales representatives to market SSS as a repellent; and (4) Avon's corrective measures have been short-term responses to E.P.A. warnings rather than the kind of sustained efforts necessary to ensure compliance given the 100% annual turnover in Avon's sales force.

  XVIII. INDEPENDENT SOURCES OF THE REPELLENCY FOLKLORE

  75. Although Avon has to some extent promoted SSS as an insect repellent, I find that Avon is not the primary source of consumers' perception that SSS is an effective insect repellent. Indeed, several non-Avon sources, including independent media sources, "word-of-mouth," and S.C. Johnson's comparative advertisements have contributed more to the repellency folklore than Avon has.

  A. S.C. Johnson's Attitude and Usage Studies

  76. S.C. Johnson's own studies indicate that Avon is not primarily responsible for most consumers' perception that SSS is an effective insect repellent.

  77. S.C. Johnson periodically conducts market research on the insect repellent market. It does this primarily through Insect Repellency Category Attitude and Usage Studies ("A&U"). Each A&U surveys consumers in an attempt to determine, inter alia, why consumers use the repellents they use. (Boomsma Decl. P 6.) Numerous A&U's conducted during the period 1988-1993 to determine Avon's role in consumers' perception that SSS is an effective repellent yielded widely divergent results and do not offer a precise conclusion as to the exact number of consumers who have been influenced to use SSS as a repellent by an Avon representative. However, taken as a whole, the A&U's do indicate conclusively that only a minority of consumers who use SSS as an insect repellent first learned of its repellency qualities from an Avon representative. a. Specifically, A&U's in the following years found the following percentage of those who use SSS as an insect repellent first learned of SSS' repellency qualities from an Avon sales representative: Year of SCJ A&U Percentage influenced by Avon sales representative 1988 26% (TX 198 at 015745) 1991 16% (TX 199 at 001054) 1992 14% (TX 200 at 003313) 1993 7% (TX 201 at Table 62) 1995 32% (TX 203 at 031098)

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© 1992-2004 VersusLaw Inc.



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