AD-ttorneys Law Blog

Home | AD-ttorneys Law Blog

Advertisers likely recall that back in 2021, the Federal Trade Commission (FTC) created quite the stir when it sent <a href="https://www.adttorneyslawblog.com/ftc/ftc-cracks-down-on-endorsements-and-reviews/">to more than 700 companies warning letters</a> that threatened penalties if companies engaged in deceptive endorsement practices. In a continuation of these pot-stirring practices, the FTC has now notified 670 companies that they may be subject to some serious civil penalties if they make deceptive health or disease claims for any products.&nbsp;

core/paragraph

The letters themselves are called Notice of Penalty Offense (Notice) letters, and since it has been awhile since we discussed the topic, we will provide a brief recap of the legal authority that the agency is invoking. In short, the Notice sets forth specified practices from prior litigated commission adjudications that – the commission alleges – have been found to be deceptive or unfair and can allow for civil penalties against companies with “actual knowledge” that these practices have been deemed deceptive or unfair. It is a somewhat unusual authority, but it is in the FTC’s statute and it has been used previously albeit infrequently. And the “actual knowledge” standard explains why the FTC is sending out these letters, the theory being that if you have the letter, you now have actual knowledge.

The current letters are pretty straightforward and set forth the following health-related areas in which the agency indicates it may be able to seek penalties:

Making claims for the health benefits or safety features of a product without having competent and reliable scientific evidence.

core/list-item

Making claims that a product is effective in the cure, mitigation or treatment of any serious disease, including heart disease, cancer, arthritis and erectile dysfunction, without possessing and relying upon at least one human clinical trial of the product that (1) is randomized, (2) is well controlled, (3) is double-blinded (unless the marketer can demonstrate that blinding cannot be effectively implemented given the nature of the intervention), (4) is conducted by persons qualified by training and experience to conduct such studies, (5) measures disease end points or validated surrogate markers, and (6) yields statistically significant results.

Misrepresenting the level of substantiation that exists for a product.

Representing that a product is clinically proven in the absence of adequate evidence.

core/list

Notably, the second bullet mirrors a lot of what is discussed in the recent <a href="https://www.ftc.gov/system/files/ftc_gov/pdf/Health-Guidance-508.pdf">Health Products Compliance Guidance </a>that the FTC issued in late 2022 and that we previously <a href="https://www.adttorneyslawblog.com/ftc/ftc-updates-long-standing-health-advertising-guidance-with-lessons-learned-from-the-21st-century/">analyzed here</a>.

There is one other aspect of the letter that is curious and important to flag because it goes far beyond the issue of health claims. In the Notice, the FTC also states that it is “an unfair or deceptive act or practice for an advertiser to make an objective product claim without having a reasonable basis, at the time the claim is made, consisting of competent and reliable evidence.” Look over that sentence closely – it has nothing to do with health claims and instead is the agency saying that it can seek penalties for any unsubstantiated product claim. Period. End of sentence. Now to be clear, the letters were almost all sent to companies that market products that may make health claims. But the breadth of this language for any product is quite shocking.

The existence of these Notice letters and the legal authority that allows for potential penalties does not mean that any eventual law enforcement in this area will succeed. There are defenses that may and likely will be raised by any companies alleged to have violated the provisions of the Notice – or the other notices that have issued. And the breadth of this latest Notice is particularly noteworthy.&nbsp;

One such defense that will be raised regarding the FTC’s authority is how close the fit has to be between the act or practice found unlawful in the administrative proceeding and the subsequent act or practice engaged in by the party that has been put on notice. Health claims vary tremendously, and the science varies even more so.&nbsp;

Although Commissioner Christine Wilson is gone from the agency, the vote took place before she left, and her <a href="https://www.ftc.gov/system/files/ftc_gov/pdf/commissioner_wilson_dissenting_statement_substantiation_npo_3.31.23_final.pdf">dissenting statement</a> was released. Her primary concern was that she thinks it inappropriate to seek penalties in substantiation cases. But she also raised the point we discuss above and emphasizes that “the Commission must demonstrate that the conduct of the proposed defendant is sufficiently similar to the litigated cases cited in the Notice. This showing will prove to be far more complex and uncertain for substantiation cases than for other areas in which Notices have been issued recently.”

Whether you received the letter or not, at a minimum, this serves as a reminder that it is a good idea to take a closer look at your health claims and assess whether they are in line with the FTC’s more exacting standards.

FTC Reverts to Penalty Letters, Threatening 670 Companies with Penalties for Unsubstantiated Health Claims and Maybe More