FTC Enforcement Actions Hurt, Don’t Lose Your Shirt

FTC Enforcement Actions Hurt, Don’t Lose Your Shirt

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FTC Enforcement Actions Hurt, Don’t Lose Your Shirt, that is the title of today’s video.

I was actually thinking of that song, the lyrics go: “Love hurts, Love scars, Love wounds and marks, Any heart not tough or strong enough, To take a lot of pain … Ooh love hurts.”

Well there you have it.  Any health and wellness company not strong or tough enough to take the FTC pain, should have its marketing materials reviewed by legal counsel before putting them up on the Web.

But I’m getting ahead of myself.  Let’s talk about what gets the FTC involved, and what you can do to avoid it.  As the song also says, “Love is like a cloud, it holds a lot of rain.”

I’m Michael H. Cohen, founding attorney of the Cohen Healthcare Law Group.  Since 1999, our law firm has counseled hundreds of healthcare industry clients each year on healthcare and FDA legal issues.  We work with health and wellness companies that offer services and products in the cloud, we help them make rain, they can hold a lot of rain.  And one of the things we do is help them understand their FTC exposure, so they don’t get into regulatory trouble.

In a nutshell, the FTC, or Federal Trade Commission, regulates advertising, including advertising and marketing of healthcare services and products.

Whether you’re a licensed medical doctor, or chiropractor, or medical group; a medical spa or holistic healing, wellness center; a telemedicine company or mobile IV clinic; a nurse, cannabis company, functional medicine practice, health coach, psychologist, medical device and life sciences company, concierge medicine practice, or whether you make a health and wellness app that is powered by AI, artificial intelligence, the Federal Trade Commission laws and regulations apply to you.

According to the FTC itself: “When consumers see or hear an advertisement, whether it’s on the Internet, radio or television, or anywhere else, federal law says that ad must be truthful, not misleading, and, when appropriate, backed by scientific evidence. The Federal Trade Commission enforces these truth-in-advertising laws, and it applies the same standards no matter where an ad appears – in newspapers and magazines, online, in the mail, or on billboards or buses.

“The FTC looks especially closely at advertising claims that can affect consumers’ health or their pocketbooks – claims about food, over-the-counter drugs, dietary supplements, alcohol, and tobacco and on conduct related to high-tech products and the Internet.”

What else does FTC do?  FTC tells us on its webpage, Protecting Consumers: “As the nation’s consumer protection agency, the Federal Trade Commission has a broad mandate to protect consumers from fraud and deception in the marketplace. To fulfill this goal, the FTC takes law enforcement actions, provides consumer and business education, issues reports and policy guidance, leads workshops, and participates in other forums.”

Let’s talk about the enforcement actions.  FTC conducts investigations and sues companies and people that violate FTC laws.  FTC’s annual budget is hundreds of billions of dollars.

Then there is you, a healthcare company with a website.

Let’s take a look at what can happen if FTC goes after you, and, after you’ve spent a lot of money and several years of your life fighting an enforcement action that threatens your company with tens of millions of dollars in penalties—this happened to one healthcare client that came to us after the fact—FTC graciously settles the case and signs what is known as an FTC Consent Decree.

In that consent decree, you stipulate to a judgment with FTC, and that judgment will include a permanent injunction, which is an order from the Judge that you stop making all the claims that the FTC found objectionable.

This is death to those marketing campaigns that had generated so much revenue for your healthcare company.

FTC will also insist that you do a whole bunch of things that you already should have been doing.  For example, make certain disclosures.

How detailed are these requirements?  Here is an example of how FTC defines just one phrase, the requirement that disclosures be made “clearly and conspicuously.”

“Clearly and conspicuously means that a required disclosure is difficult to miss (i.e., easily noticeable) and easily understandable by ordinary consumers, including in all of the following ways … In any communication using an interactive electronic medium, such as the Internet or software, the disclosure must be unavoidable….

“The disclosure must not be contradicted or mitigated by, or inconsistent with, anything else in the communication.” 

Those are just two of 8 different clauses used by FTC to define just one, three-word phrase, “clear and conspicuous.”

  1. The disclosure must be presented simultaneously in both the visual and audible portions of the communication.
  2. A visual disclosure, by its size, contrast, location, the length of time it appears, and other characteristics, must stand out from any accompanying text or other visual elements so that it is easily noticed, read, and understood.

Now, let’s go back to that permanent injunction portion of the Consent Decree.   FTC will say something like this:

“IT IS ORDERED that Defendants, Defendants’ officers, agents, employees, Licensees, Franchisees, and all other Persons in active concert or participation with any of them, who receive actual notice of this Order, whether acting directly or indirectly, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of any Covered Product, are hereby permanently restrained and enjoined”—that’s right, permanently restrained and enjoined….

“from making, or assisting others in making, expressly or by implication, including through the use of a product or program name, Endorsement, depiction, or illustration, any representation”—and here FTC will list a whole bunch of claims that you are forever more prohibited from making.

This can include, for example, false and misleading claims about weight loss, or, as another example, claims that the product “effectively treats, mitigates, or cures a disease.”   

There’s an old joke that goes like this: what’s worse than biting into an apple and finding a worm?  The answer: biting into an apple and finding half a worm.

It’s best not to have to tango with the FTC.  You sign the Consent Decree as a last act, before the regulators essentially demolish the company … and you agree that you can keep going only after abiding by agreeing to some very tight parameters drafting by some very capable lawyers.

That’s why it’s best to have ALL your marketing material reviewed by FDA and FTC legal counsel, before you put this material out on the Web.  Once the cat is out of the bag, so to speak, FTC can take screenshots and begin its enforcement process.

If this sounds like a lot to absorb, we encourage you to book a Legal Strategy Session with us.  That gives us time to assess your business model or proposed arrangements, and provide valuable legal insight as well as recommendations for risk mitigation.

Thanks for watching. Here’s to the success of your healthcare venture, we look forward to speaking with you soon.

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