Advertising without proper proof can prove costly under new Notice of Penalty Offenses

Advertising without proper proof can prove costly under new Notice of Penalty Offenses

lfair

April 13, 2023 | 2:58AM

Advertising without proper proof can prove costly under new Notice of Penalty Offenses



By

Lesley Fair






To borrow a phrase the Supreme Court coined in a different context, if there is a “fixed star” in the consumer protection constellation, it’s the advertising substantiation doctrine. In place for decades and explained in a 1984 Policy Statement , the underlying legal requirement is clear: companies must have a reasonable basis to support their advertising claims before those claims are disseminated. Multiple litigated decisions have added detail to that standard, especially in the context of health and safety claims. And yet FTC law enforcement actions demonstrate that some advertisers still flout their long-standing obligation to substantiate their representations with solid proof. The FTC just announced a Notice of Penalty Offenses Concerning Substantiation of Product Claims that could add a costly consequence for non-compliance .

Under Section 5(m)(1)(B) of the FTC Act, if the FTC determines in a litigated proceeding that conduct is deceptive or unfair, the agency may seek civil penalties from a company that engages in that practice in the future with actual knowledge that it was unlawful. To trigger this provision, the FTC can send companies a Notice of Penalty Offenses – a document listing the conduct found to be deceptive or unfair. A company that receives a Notice and nonetheless engages in that unlawful practice can face civil penalties of $50,120 per violation.

As FTC watchers know, the agency has issued Notices of Penalty Offenses covering a wide range of illegal conduct, including three recent NPOs related to endorsements , money-making opportunities , and education . The Notice announced today – and sent to approximately 670 companies involved in the marketing of OTC drugs, homeopathic products, dietary supplements, or functional foods – ensures they’re aware of the FTC’s established standards regarding product substantiation and warns them of the substantial financial ramifications if they break the law.

You’ll want to read the Notice of Penalty Offenses Concerning Substantiation of Product Claims  for the specifics, but it focuses on five practices that violate the FTC Act, with citations to FTC cases: 

Making an objective product claim without relying on competent and reliable evidence to support it;
Making a health or safety claim without relying on competent and reliable scientific evidence conducted and evaluated in an objective manner by qualified persons and that is generally accepted in the profession to yield accurate and reliable results;
Representing expressly or by implication that a product is effective in the cure, mitigation, or treatment of any serious disease without relying on 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 prove blinding can’t be effectively implemented); 4) is conducted by qualified people; 5) measures disease end points or validated surrogate markers, and 6) yields statistically significant results ;
Misrepresenting the level or type of substantiation for a claim ; and
Representing that a claim has been scientifically or clinically proven unle ss the advertiser relies upon evidence sufficient to satisfy the relevant scientific community of the claim’s truth.






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Receiving a Notice isn’t an indication that the FTC thinks the company has violated the law. Rather, the goals are to ensure that marketers understand their legal obligations and to establish a basis for civil penalties for any future violations . Furthermore, although the initial recipients are companies making health claims, the Notice isn’t limited to that sector. The caselaw cited in the Notice covers all objective efficacy or performance representations.





Whether or not your business received the Notice of Penalty Offenses, savvy marketers will take it as a cue to conduct a compliance check. A good place to start: the FTC’s Health Products Compliance Guidance .