Advertising: The Federal Trade Commission and Private Rights of Action Venable LLP

Transcription

1 Advertising: The Federal Trade Commission and Private Rights of Action 2012 Venable LLP 1

2 Agenda FTC s Role and Authority Claim Substantiation Private Rights of Action 2

3 FTC s Role and Authority FTC Authority Under the Federal Trade Commission Act, an advertisement subject to FTC jurisdiction can include marketing materials in any media print, electronic (online), television, radio, or verbal representations of sales staff. The FTC may challenge an advertisement, if it is: False or deceptive Likely to mislead reasonable consumers Likely to influence consumer purchasing decisions or otherwise affect important consumer decisions 3

4 FTC s Role and Authority FTC v. FDA FTC has primary jurisdiction over advertising for food, OTC drugs and cosmetics FDA has primary jurisdiction over prescription drugs and labeling for food, OTC drugs and cosmetics FDA broadly interprets labeling (e.g., websites referenced on the label brings all website content under FDA jurisdiction) 4

5 Claim Substantiation FTC Substantiation Standard 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 5

6 Claim Substantiation FTC Substantiation Standard For certain types of claims such as, health, safety, and some product efficacy, reasonable basis consists of competent and reliable scientific evidence to substantiate advertised claims. What is competent and reliable scientific evidence? Tests, analyses, research, studies, or other evidence based on the expertise of professionals in the relevant area, That have been conducted and evaluated in an objective manner by persons qualified to do so, Using procedures generally accepted in the profession to yield accurate and reliable results. 6

7 Claim Substantiation 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 its products could treat or prevent allergies and cause significant weight loss, as well as that some of its products effectiveness were clinically proven. Complaint alleges that these claims were false and unsubstantiated. Settlement Order Iovate Agreed Not To: Claim that any drug or dietary supplement it advertises or sells is effective for diagnosing, curing, mitigating, treating, or preventing any disease unless the claim is approved by the FDA. Represent that their products cause weight loss or rapid weight loss unless the claims are truthful and backed by at least two adequate and well-controlled human clinical studies. Claim that their products provide any other health-related benefit unless the claim is supported by competent and reliable scientific evidence. Consent Order filed July 29,

8 Claim Substantiation 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 the FDA Make claims that there was a reduction in the duration of acute diarrhea in children up 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,

9 Claim Substantiation Iovate and Nestlé Competent and Reliable Scientific Evidence [A]t least two adequate and well-controlled human clinical studies of the product, or of an essentially equivalent product, conducted by different researchers, independently of each other, that conform to acceptable designs and protocols and whose results, when considered in light of the entire body of relevant and reliable scientific evidence, are sufficient to substantiate that the representation is true. 9

10 Claim Substantiation Iovate and Nestle What is essentially equivalent? 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 ingredients if reliable scientific evidence generally accepted by experts in the field demonstrates that the amount and combination of additional ingredients is unlikely to impede or inhibit the effectiveness of the ingredients in the essentially equivalent product. 10

11 Claim Substantiation In the Matter of Pom Wonderful LLC, et al. Two Study Debate Background: FTC brought an enforcement action challenging claims made by Pom Wonderful in connection with its pomegranate juice and supplement products that the products will prevent or treat heart disease, prostate cancer, and erectile dysfunction. Consent Order: The agency reaffirmed the two well-controlled study requirement, at least for the disease claims made by the company. 11

12 Claim Substantiation Pom Wonderful, LLC, et al. v. FTC Two Study Debate Continues U.S. District Court for D.C. POM contends that the strict two study standard violates the First Amendment because: Does not directly further an important government interest Restricts more speech than is necessary to further a legitimate government interest 12

13 Claim Substantiation In the Matter of GeneLink, Inc. Two Study Debate Recent Development Commissioner Ohlhausen Dissent (January 7, 2014) [The commissioners in the majority] impose an unduly high standard of at least two randomized controlled trials (or RCTs) to substantiate any disease-related claims, not just weight-loss claims. Adopting a one-size-fits-all approach to substantiation by imposing such rigorous and possibly costly requirements for such a broad category of health- and disease-related claims may, in many instances, prevent useful information from reaching consumers in the marketplace and ultimately make consumers worse off. 13

14 Claim Substantiation Evaluating Substantiation and Claims Factors to consider: 1. Totality of the claims in context must be substantiated Advertisers are responsible for all expressed and implied claims that may be interpreted by a reasonable 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 14

15 Claim Substantiation Evaluating Substantiation and Claims Other types of evidence Animal Studies in appropriate animal models that have been reproduced in different laboratories and provide statistically-significant dose-response relationship In vitro Studies that have been reproduced in different laboratories Testimonial/Anecdotal Evidence Honest opinions are not enough to substantiate claims Meta-analysis May identify relevant reports that provide substantiation Product monographs May provide background information useful to understand relationship between substance and claimed effect 15

16 Private Rights of Action Consumer Class Actions Complaints concerning food and dietary supplements continue to dominate civil class action litigation filings An empirical analysis calculated that half (50%) of the complaints filed in the first three quarters of 2013 were against food and dietary supplement manufacturers Key focus: food labeling/nutrition content; performance claims; and natural claims February 2013: General Mills agreed to pay $8.5 million to settle claims that its Yo-Plus yogurt with fiber and probiotics offered digestive health benefits August 2013: PepsiCo agreed to pay $9 million to settle claims that the All Natural and Non-GMO claims made for its Naked Juice products were false and misleading December 2013: Superior Court judge approved a $6.45 million settlement for immunity and energy claims made for Emergen-C Most popular forum state: California 16

17 Private Rights of Action Consumer Class Actions 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. 17

18 Private Rights of Action Consumer Class Actions 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, never given 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-ofpurchase to alert customers. Plaintiffs contended that such notice was not adequate. In December 2013, Chipotle successfully defended a class action plaintiff s motion for class certification. The question of whether a particular class member had seen the signs posted at the point-of-sale, or whether it was reasonably visible, could not be determined on a class-wide basis. 18

19 Private Rights of Action Consumer Class Actions Johnson v. General Mills Digestive Health Case U.S. District Court, Central District of California Plaintiff alleged that General Mills misled consumers about the digestive benefits of Yo-Plus, a probiotic yogurt, because of uncertainty in the scientific community about the digestive health benefits of probiotics. The parties settled the case for $8.5 million, with consumers getting a $4 refund for each unit purchased between July 2007 and July

20 Private Rights of Action Lanham Act Cases 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 or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person s goods, services, or commercial activities, shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act. 20

21 Private Rights of Action Lanham Act Cases Pom Wonderful LLC v. The Coca-Cola Company In 2007, Pom sued Coca-Cola alleging that Minute Maid pomegranate and blueberry juice blend products had misleading labels and health claims -- main ingredients were not pomegranate and blueberry Coke argued that the Lanham Act cause of action should be dismissed because the name and label had been authorized by FDA 21 Decisions: District court ruled in favor of Coca-Cola Appealed to 9 th Circuit, which held that FDCA bars causes of actions brought under the federal Lanham Act where doing so would implicate the rules and regulations set forth under the FDCA Supreme Court granted certiorari on Jan. 10, 2014 on the issue of whether the court of appeals erred in holding that a private party cannot bring a Lanham Act claim challenging a product label regulated under the FDCA

22 State and Local Action States Attorney s General State AGs and County Attorneys may be active in policing 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 that calorie burning and implied weight loss claims made in connection with the green tea product, Enviga, were misleading -- settled for $650,000 22

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24 Contact Information Todd A. Harrison, Partner t f Michelle C. Jackson, Counsel mcjackson@venable.com t f Claudia A. Lewis, Partner calewis@venable.com t f Heili Kim, Counsel hkim@venable.com t f John G. Moore, Counsel jgmoore@venable.com t f

25 the road ahead for ABC CORPORATION Venable LLP