Amazon, Goop, Kourtney Kardashian’s Lemme, Inc., and the Honest Company are among the 600-plus companies that the Federal Trade Commission (“FTC”) has put on notice about “deceiving consumers with advertisements that make product claims that cannot be backed up or substantiated.” In notices sent to the companies last month, the FTC says that it “warned that it will not hesitate to use its authority to target violators with large civil penalties” in the event that they make marketing claims about products/services – including the “health or safety benefits of a product,” such as “over the counter drugs, homeopathic products, dietary supplements, or functional foods” that they cannot back up “with reliable evidence.”
In terms of the parties on the receiving end of the FTC’s notices, the agency states that they have engaged in “specific unlawful acts and practices” including “failing to have: 1) a reasonable basis consisting of competent and reliable evidence for objective product claims; 2) competent and reliable scientific evidence to support health or safety claims; and/or 3) at least one well-controlled human clinical trial to support claims that a product is effective in curing, mitigating, or treating a serious disease.” At the same time, the FTC asserts that “the unlawful [marketing-centric] acts or practices also include: 1) misrepresenting the level or type of substantiation for a claim, and 2) misrepresenting that a product claim has been scientifically or clinically proven.”
“The requirement for advertisers to have adequate support for their marketing claims at the time they are made is a bedrock principle of FTC law,” Sam Levine, Director of the FTC’s Bureau of Consumer Protection, said in connection with the regulator’s announcement of the letters. And while the FTC has a “long history of providing guidance on advertising substantiation, through both litigated cases and policy statements,” it notes that “many sellers continue to make unsubstantiated claims about their products and false claims about the proof they have.”
As a result, the agency is “now using its penalty offense authority to remind advertisers of the legal requirement to have a reasonable basis to support objective product claims and to deter them from making deceptive claims in the future.” Notices of penalty offenses allow the agency to seek civil penalties – up to $50,120 per violation – against a company that “engages in conduct that it knows has been found unlawful in a previous FTC administrative order, other than a consent order.”
(The letters also provide recipients them with a copy of a previously approved notice of penalty offenses regarding the use of endorsement and testimonials, which “addresses falsely claiming an endorsement by a third party; misrepresenting whether an endorser is an actual, current, or recent user; using an endorsement to make deceptive performance claims; failing to disclose an unexpected material connection with an endorser; and misrepresenting that the experience of endorsers represents consumers’ typical or ordinary experience.”)
Reflecting on the FTC notices, Mintz’s Bruce Sokler, Joanne Hawana, Robert Kidwell, and Benjamin Zegarelli note that the agency was “principally prompted by the Supreme Court’s 2021 decision in AMG Capital Mgmt. LLC v. FTC, 141 S.Ct. 1341 (2021), which eliminated the FTC’s use of Section 13(b) of the FTC Act to seek equitable monetary relief for consumers. The FTC’s majority believes that the Notice of civil penalties is a ‘work around’ that limitation.” At a minimum, the message here is that on top of the FTC staff’s recently issued “Health Products Compliance Guidance,” the FTC “has clearly been empowered to increase enforcement.”
As for or the 670 companies on the receiving end of FTC notices – and others in the business of making claims about the efficacy or performance of their products, Sokler, Hawana, Kidwell, and Zegarelli state that “a review of products claims and their substantiation is certainly timely and in order.”
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