FTC false advertising legal traps can hurt any business, small or established. Here’s how to walk the compliant side of marketing healthcare products.
FTC’s Advertising advice to small business
For keys to avoiding FTC false advertising legal traps, let’s start with FTC’s own advice to small business:
FTC stays that all advertising must be:
- truthful and non-deceptive
- backed up (all claims must be substantiated)
- not unfair
Also, specialized laws can apply to products such as leases, credit, 900 telephone numbers, and products sold through mail order or telephone sales; and state laws can apply as well. But what makes advertising deceptive?
- FTC looks at how the “reasonable consumer” might interpret the ad in context (words, phrases and pictures)
- FTC looks at “implied” as well as “express” claims. “Mouthwash kills the germs that cause colds” suggests that mouthwash prevents colds.
- FTC looks at what the ad does not include, which can leave consumers with a mis-impression
- FTC looks at whether the claim is “material” (makes a difference to consumers’ purchase decision)
- FTC looks to whether the evidence supports the claim
Consumer anecdotes are not sufficient evidence to support a claim.
Money-back guarantees are also insufficient evidence to support a claim.
We’ll give some examples below.
FTC standards for health claims
Many advertisers of healthcare products and services fail to realize that FTC imposes a higher standard for health claims.
While advertisers in general must have a reasonable basis for their claims, generally health claims must be supported by competent and reliable scientific evidence.
When will FTC initiate enforcement action
So how much heat is out there?
In deciding which cases to bring, FTC looks to several factors:
- Whether FTC has primary jurisdiction to regulate the advertising. Sometimes, other government agencies might be more appropriate (for example, if the case involves an airline).
- The geographic scope of the advertising. This is less of an issue now that online advertising is national in scope.
- The extent to which the ad represents a pattern of deception as opposed to the basis for an individual dispute with one company.
- The amount of injury to consumer’s health, safety, or finances.
FTC’s remedies include:
- Cease and desist orders. While this can be a slap on the wrist, it can also be a major penalty, if the product is central to the company’s growth and all sales must suddenly cease.
- Civil penalties. As FTC notes, this can range from thousands to millions of dollars. Million-dollar penalties are not uncommon.
- Corrective advertising, including disclosures. FTC may combine this with the other two remedies.
Also, FTC is there to hear your complaints about your competitor’s advertising. The flip side is that FTC is there to hear your competitor’s complaints about your advertising.
Competitors can also file a complaint with the National Advertising Division (NAD) (of the Council of Better Business Bureaus (BBB)). NAD will make recommendations which often lead to FTC enforcement.
Some Key FTC Rules
To help avoid FTC advertising legal traps, know some of the key FTC legal rules:
- Disclosures have to be clear and conspicuous, not buried in a website. The information should be presented so that the consumer can see it, and understand it. “Fine print” doesn’t cut the mustard.
- Disclosures and disclaimers are required whether the advertising is on TV or radio, in print, through direct mail, or online.
- FTC and FDA have overlapping jurisdiction when it comes to claims for dietary supplements and OTC drugs, as well as cosmetics and medical devices.
- FTC also regulates endorsements and testimonials for health and wellness products. A key rule here is that endorsements must reflect the experience of the typical consumer.
- FTC also regulates advertising that mention that a product is free, product rebates, product guarantees, product infomercials, and Internet advertising.
- Weight loss products are a particular target of FTC enforcement.
FTC false advertising legal traps include several different kinds of claims
Several different kinds of claims can be made for health and wellness products, so it’s critical to understand the different legal standards and liability that can apply to particular kinds of claims. For example:
- Efficacy Claims: must be supported by competent and reliable evidence. Expert, consumer, or celebrity ndorsements do not constitute competent and reliable evidence.
- Comparative Advertising: In comparative advertising, a company reference its competitors’ brands.FTC allows comparative advertising so long as it is truthful and not deceptive. This is true even if Brand X disparages Brand Y by saying, for example, that Brand X has ingredients that Brand Y does not have.
FTC summarizes many cases in its FTC Advertising Enforcement guide.
- In FTC v. Lane Labs-USA, Inc., FTC challenged allegedly deceptive use of embdedded terms such as “non-toxic cancer therapy” in metatags for a website featuring a shark cartilage product.
- In FTC v. Sili Neutraceuticals, FTC challenged violations of the CAN-SPAM Act and FTCA for allegedly using illegal email to disseminate deceptive claims for weight-loss products and human growth hormone anti-aging products
Our tip here:
It’s important to understand how extensive is FTC’s reach over health and wellness products.
Many healthcare professionals want to stop offering services, and instead brand a line of products.
Healthcare products are regulated, like healthcare professional services, but in the products realm, FDA and FTC (and not medical and other professional boards) are the big players.
Understanding the scope and sweep of regulation can help you spot market opportunities – and avoid market disasters.
FTC Enforcement Action — Dietary Supplement Advertising
FTC has taken action against:
- dietary supplement manufacturers
- ad agencies for dietary supplements
- infomercial producers
- catalog companies, and
- distributors and retailers of dietary supplements
Again, when evaluating claims about the efficacy and safety of foods, dietary supplements and drugs, the FTC has typically applied a substantiation standard of competent and reliable scientific evidence.
In its guidance for the dietary supplements industry, FTC flags some of the following claims as potentially problematic, especially if there is no clear and prominent, qualifying language explaining the claim:
- “university studies prove”
- “90% of cardiologists….”
- advertising showing people sneezing and coughing (i.e., advertising cold care)
- before and after pictures (before: using walker; after: dancing)
- a weight loss ad failing to disclose that test subjects engaged in regular exercise and diet restriction during the test period for the product
- failing to mention side effects while referencing “without the side effects of over-the-counter” drugs
- failing to mention the product’s effect on increase in blood pressure
- “scientists now agree!” and “studied for years abroad” (require a higher level of evidence since these refer to a specific level of support)
- reliance on animal and in vitro studies
- anecdotal evidence
- “found effective”
- relying on “traditional use” (such as “ancient folklore remedy used for centuries”)
- reference to a book (“Miracle Cancer Cure”) in promotions for a particular dietary supplement
“Puffery” is usually allowed and doesn’t necessarily make an ad deceptive or misleading.
Puffery can include “an exaggerated, blustering, and boasting statement” about a product, or a general claim of superiority over comparable products that is so vague it’s commonly understood as a mere expression of opinion. (The overall context is important, though).
It takes a lot of judgment….
While FTC law is broad, the principles are clear. Applying these in practice, though, requires sensitivity to marketing goals.
It’s easy to say “no,” and tougher to take a balanced approach that weighs risks. Especially since FTC can require a company to disgorge profits and thereby level a company’s accumulated earnings, early legal review of all marketing materials for FTC risk can be an invaluable preventative strategy.