Last week, the Federal Trade Commission issued a Notice of Penalty Offense regarding substantiation for product claims to 670 companies in the health-related marketing space. This new Notice is yet another signal from the FTC that it intends to aggressively pursue its enforcement agenda using all available tools, including previously long-dormant avenues, like its Penalty Offense Authority.
Using its Penalty Offense Authority, the FTC can seek civil penalties from a company or individual that engages in conduct the FTC has determined was unfair or deceptive in a litigated administrative enforcement proceeding, provided the FTC can prove they had actual knowledge that the conduct was unlawful. The purpose of the notice letter is to allow the FTC to argue that the recipients had the requisite “actual knowledge” to support civil penalties of up to $50,120 per violation.
The Notice of Penalty Offense Concerning Substantiation of Product Claims focuses on—as the name implies—claim substantiation. The Notice identifies five practices that the Commission asserts violate the FTC Act:
- Objective product claims made without the support of evidence
- Health or safety claims made without the support of objective scientific evidence or evaluation by a qualified professional in the field
- Representations that products can treat, cure, or mitigate a serious disease without at least one random, well-controlled, double-blinded, qualified human clinical trial that measures or validates disease end points/surrogate markers and yields significant results
- Misrepresentations of the type or level of substantiation used for a claim
- Representations that a claim has been proven, clinically or scientifically, without relying on sufficient evidence to show the claim’s truth to the scientific community
Although the FTC targeted companies marketing health products, the agency made it clear that the Notice is not limited to health claims. Instead, the FTC asserts it applies to any product efficacy or performance claims.
Organizations should not treat this Notice lightly. Although the FTC clarified that the notices do not reflect a finding that any recipient violated the FTC Act, the letters nevertheless reflect the FTC’s intent to flex its Penalty Offense Authority and seek stiff monetary penalties against one or more of the listed companies.
Regardless of whether your company received the Notice, now is the time for all organizations that make efficacy and performance claims in their marketing to ensure their claims are adequately substantiated. Venable’s advertising and marketing lawyers can help you evaluate your claims, assess your substantiation, and gauge your risk of running afoul of the FTC’s substantiation standards.
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