Advertising: The Federal Trade Commission and Private Rights of … · 2014-03-04 · Hernandez v....

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© 2012 Venable LLP

Advertising: The Federal Trade Commission andPrivate Rights of Action

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© 2014 Venable LLP

FTC’s Role and Authority

Claim Substantiation

Private Rights of Action

Agenda

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© 2014 Venable LLP

Under the Federal Trade Commission Act, an“advertisement” subject to FTC jurisdiction can includemarketing materials in any media—print, electronic(online), television, radio, or verbal representations ofsales staff.

The FTC may challenge an advertisement, if it is:

– False or deceptive

– Likely to mislead reasonable consumers

– Likely to influence consumer purchasing decisions orotherwise affect important consumer decisions

FTC Authority


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FTC has primary jurisdiction over advertising forfood, OTC drugs and cosmetics

FDA has primary jurisdiction over prescriptiondrugs and labeling for food, OTC drugs andcosmetics

– FDA broadly interprets “labeling”(e.g., websites referenced on the label bringsall website content under FDA jurisdiction)

FTC v. FDA


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• “Reasonable Basis” for advertising claims

• What is a “reasonable basis?”

• Pfizer Factors (1972)

– Type and specificity of claim

– Type of product

– Consequences of a false claim

– Degree of consumer reliance

– Type and accessibility of evidence


FTC Substantiation Standard

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For certain types of claims such as, health, safety,and some product efficacy, “reasonable basis”consists of “competent and reliable scientificevidence” to substantiate advertised claims.

What is “competent and reliable scientific evidence”?

Tests, analyses, research, studies, or otherevidence based on the expertise of professionalsin the relevant area,

That have been conducted and evaluated in anobjective manner by persons qualified to do so,

Using procedures generally accepted in theprofession to yield accurate and reliable results.


FTC Substantiation Standard

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FTC v. Iovate Health Sciences USA, Inc., et al. Background: Iovate used depictions of medical doctors in ads claiming its dietary

supplements could treat or prevent colds and flu. Iovate also made claims that itsproducts could treat or prevent allergies and cause significant weight loss, as well asthat some of its products’ effectiveness were ‘clinically proven’. Complaint alleges thatthese claims were false and unsubstantiated.

Settlement Order – Iovate Agreed Not To:

– Claim that any drug or dietary supplement it advertises or sells is effective fordiagnosing, curing, mitigating, treating, or preventing any disease unless theclaim is approved by the FDA.

– Represent that their products cause weight loss or rapid weight loss unless theclaims are truthful and backed by at least two adequate and well-controlledhuman clinical studies.

– Claim that their products provide any other health-related benefit unless the claimis supported by competent and reliable scientific evidence.

Consent Order filed July 29, 2010

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In the Matter of Nestlé Healthcare Nutrition

Background: FTC’s Complaint asserted that clinical studies did not support the claims

that the Nestlé Boost product:

– strengthened children’s immune systems

– reduced the duration of acute diarrhea in children

– reduced illness-related absences from school and childcare

– reduced fevers among infants

Settlement Order – Nestlé Agreed Not To:

– Make claims about reducing or preventing upper respiratory tract infection (URTI),including cold or flu viruses, unless labeling for such claims is approved by theFDA

– Make claims that there was a reduction in the duration of acute diarrhea in childrenup to age 13 or absences from daycare or school due to illness unless it possesses“competent and reliable scientific evidence”

Consent Order filed January 12, 2011


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“[A]t least two adequate and well-controlled humanclinical studies of the product, or of an essentiallyequivalent product, conducted by differentresearchers, independently of each other, thatconform to acceptable designs and protocols andwhose results, when considered in light of the entirebody of relevant and reliable scientific evidence, aresufficient to substantiate that the representation istrue.”

Iovate and Nestlé

Competent and Reliable Scientific Evidence


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A product that contains: the identical ingredients, except for inactive ingredients

(e.g., binders, colors, fillers, excipients) in the same form and dosage and with the same route of administration (e.g., orally,

sublingually), as the covered product.

Provided that the product may contain additional ingredientsif reliable scientific evidence generally accepted by experts inthe field demonstrates that the amount and combination ofadditional ingredients is unlikely to impede or inhibit theeffectiveness of the ingredients in the “essentially equivalent”product.

Iovate and Nestle

What is “essentially equivalent”?


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Background: FTC brought anenforcement action challenging claimsmade by Pom Wonderful in connectionwith its pomegranate juice andsupplement products that the productswill prevent or treat heart disease,prostate cancer, and erectiledysfunction.

Consent Order: The agency reaffirmedthe two well-controlled studyrequirement, at least for the diseaseclaims made by the company.


In the Matter of Pom Wonderful LLC, et al.

Two Study Debate

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U.S. District Court for D.C.

POM contends that the strict two study standardviolates the First Amendment because:

• Does not directly further an importantgovernment interest

• Restricts more speech than is necessary tofurther a legitimate government interest


Pom Wonderful, LLC, et al. v. FTC

Two Study Debate Continues

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Commissioner Ohlhausen Dissent (January 7,2014)

“[The commissioners in the majority] impose an unduly highstandard of at least two randomized controlled trials (or RCTs)to substantiate any disease-related claims, not just weight-lossclaims. Adopting a one-size-fits-all approach to substantiationby imposing such rigorous and possibly costly requirementsfor such a broad category of health- and disease-relatedclaims may, in many instances, prevent useful informationfrom reaching consumers in the marketplace and ultimatelymake consumers worse off.”


In the Matter of GeneLink, Inc.

Two Study Debate – Recent Development

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Factors to consider:

1. Totality of the claims in context must besubstantiated

Advertisers are responsible for all expressed andimplied claims that may be interpreted by areasonable consumer

2. Relationship of the evidence to the claim

3. Quality of the evidence

4. Totality of the evidence

5. Accepted norms in the relevant research field


Evaluating Substantiation and Claims

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Other types of evidence

– Animal – Studies in appropriate animal models thathave been reproduced in different laboratories andprovide statistically-significant dose-responserelationship

– In vitro – Studies that have been reproduced indifferent laboratories

– Testimonial/Anecdotal Evidence – “Honest opinions”are not enough to substantiate claims

– Meta-analysis – May identify relevant reports thatprovide substantiation

– Product monographs – May provide backgroundinformation useful to understand relationship betweensubstance and claimed effect


Evaluating Substantiation and Claims

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Complaints concerning food and dietary supplementscontinue to dominate civil class action litigation filings

– An empirical analysis calculated that half (50%) of thecomplaints filed in the first three quarters of 2013 were againstfood and dietary supplement manufacturers

Key focus: food labeling/nutrition content; performanceclaims; and “natural” claims

– February 2013: General Mills agreed to pay $8.5 million tosettle claims that its Yo-Plus yogurt with fiber and probioticsoffered digestive health benefits

– August 2013: PepsiCo agreed to pay $9 million to settle claimsthat the “All Natural” and “Non-GMO” claims made for its NakedJuice products were false and misleading

– December 2013: Superior Court judge approved a $6.45 millionsettlement for immunity and energy claims made for Emergen-C

Most popular forum state: California

Private Rights of ActionConsumer Class Actions

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All-Natural Claims Litigation

– High Profile Targets: Frito Lay, PepsiCo (Naked Juice),

Skinnygirl, Chipotle…..

– Marketing: “100% Natural,” “Pure,” “All-Natural,”

“Natural,” “Made with real fruit and other all natural

ingredients,” etc.

Private Rights of ActionConsumer Class Actions

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Hernandez v. Chipotle Mexican Grill, Inc.

“Naturally Raised” Case

Chipotle advertised that its products contain “Naturally Raised” meat –that is, meat “from animals that are fed a pure vegetarian diet, nevergiven antibiotics or hormones, and raised humanely”.

Although generally accurate, some Chipotle branches may run out of“Naturally Raised” meat, which is substituted with conventional meat.When this occurs, those Chipotle locations post signs at the point-of-purchase to alert customers.

– Plaintiffs contended that such notice was not adequate.

In December 2013, Chipotle successfully defended a class actionplaintiff’s motion for class certification.

– The question of whether a particular class member had seen thesigns posted at the point-of-sale, or whether it was reasonablyvisible, could not be determined on a class-wide basis.


Consumer Class Actions

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U.S. District Court, Central District of California

Plaintiff alleged that General Mills misled consumers aboutthe digestive benefits of Yo-Plus, a probiotic yogurt, becauseof uncertainty in the scientific community about the digestivehealth benefits of probiotics.

The parties settled the case for $8.5 million, with consumersgetting a $4 refund for each unit purchased between July2007 and July 2012.


Consumer Class Actions

Johnson v. General Mills

Digestive Health Case

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The Lanham act provides a civil cause of action for

competitors who are hurt by false advertising.

Section 43(a)(1)(B) of the Lanham Act:

“Any person who… in commercial advertising orpromotion, misrepresents the nature,characteristics, qualities, or geographic origin ofhis or her or another person’s goods, services,or commercial activities, shall be liable in a civilaction by any person who believes that he orshe is or is likely to be damaged by such act.”


Lanham Act Cases

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Pom Wonderful LLC v. The Coca-Cola Company

In 2007, Pom sued Coca-Cola alleging that Minute Maidpomegranate and blueberry juice blend products had misleadinglabels and health claims -- main ingredients were not pomegranateand blueberry

– Coke argued that the Lanham Act cause of action should bedismissed because the name and label had been authorized byFDA

Decisions:

– District court ruled in favor of Coca-Cola

– Appealed to 9th Circuit, which held that FDCA bars causes ofactions brought under the federal Lanham Act where doing sowould implicate the rules and regulations set forth under theFDCA

– Supreme Court granted certiorari on Jan. 10, 2014 on the issueof “whether the court of appeals erred in holding that a privateparty cannot bring a Lanham Act claim challenging a productlabel regulated under the FDCA”

Private Rights of ActionLanham Act Cases

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State AGs and County Attorneys may be active inpolicing false advertising claims

Most Active State: California (both state and county)

Multiple states may cooperate on larger investigations

– Enviga: Over 25 state AGs initiated an investigation into Coke,Nestle, and Beverage Partnership Worldwide alleging thatcalorie burning and implied weight loss claims made inconnection with the green tea product, Enviga, weremisleading -- settled for $650,000

State and Local Action

States Attorney’s General

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Contact Information

Todd A. Harrison, Partner

[email protected]

t 202.344.4724

f 202.344.8300

Michelle C. Jackson, Counsel

[email protected]

t 202.344.4492

f 202.344.8300

John G. Moore, Counsel

[email protected]

t 202.344.4592

f 202.344.8300

www.Venable.com

Claudia A. Lewis, Partner

[email protected]

t 202.344.4359

f 202.344.8300

Heili Kim, Counsel

[email protected]

t 202.344.4677

f 202.344.8300

mailto:[email protected]





Advertising: The Federal Trade Commission and Private Rights of … · 2014-03-04 · Hernandez v....

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