FTC Issues Notice of Penalty Offenses on Substantiating Product Claims

The Federal Trade Commission just issued a Notice of Penalty Offenses Concerning Substantiation of Product Claims to nearly 700 marketers of OTC drugs, homeopathic products, dietary supplements, and functional foods, putting them on notice that the FTC could seek civil penalties from them if they fail to adequately substantiate their product claims.  

In its announcement of the action, Sam Levine, the Director of the FTC's Bureau of Consumer Protection, said, "The requirement for advertisers to have adequate support for their advertising claims at the time they're made is a bedrock principle of FTC law.  The prospect of steep civil penalties will help ensure that advertisers don't pay fast and loose with the truth."  

Although the FTC sent the notice to about 670 companies, the fact that a company is getting the notice doesn't indicate that the FTC believes that the company is engaging in any false advertising.  The FTC emphasized that the fact that a company received a notice "does not in any way suggest that it has engaged in deceptive or unfair conduct." 

Notice of Penalty Offenses

This new Notice of Penalty Offenses doesn't change well-established FTC substantiation standards. The purpose of the Notice is to formally put advertisers on notice of these standards, so that if an advertiser violates them, the FTC has the ability to seek civil penalties of up to $50,120 per violation.  Ordinarily, the FTC doesn't have the authority to obtain civil penalties in connection with false advertising.  How successful the FTC will be in obtaining civil penalties as a result of its mass mailings of these Notices is too soon to tell. 

The Notice of Penalty Offenses sent to advertisers lays out a number of key practices that the FTC says violates the FTC Act: 

• Making objective product claims without having a reasonable basis, at the time the claim is made, consisting of competent and reliable evidence;
• Making a claim relating to the health benefits or safety features of a product without possessing and relying upon competent and reliable scientific evidence that has been conducted and evaluated in an objective manner by qualified persons and that is generally accepted in the profession to yield accurate and reliable results, to substantiate that the claim is true; 
• Representing that a product is effective in the cure, mitigation, or treatment of any serious disease without possessing and relying upon at least one human clinical trial of the product that meets specific standards; 
• Mispresenting the level or type of substantiation that an advertiser has for a claim; and
• Representing that a product claim has been scientifically or clinically proven, unless, at the time the representation is made, the advertiser possesses and relies upon evidence sufficient to satisfy the relevant scientific community of the claim's truth. 

Letter to Advertisers

When the FTC sent the new Notice of Penalty Offenses to advertisers, the FTC also included the previously-issued Notice of Penalty Offenses Concerning Deceptive or Unfair Conduct around Endorsements and Testimonials.  In this prior notice, which was issued back in October 2021, the FTC warned marketers about misusing endorsements, including consumer reviews.  

The FTC also called the recipients' attention to the fact that the FTC recently issued new guidance about the marketing of health-related products, Health Products Compliance Guidance.  This guidance replaces the FTC’s guidance on the advertising of dietary supplements from the 1990s, and expands its coverage to apply to all health-related claims.  

Although the FTC sent the letter to marketers who it believes are likely to make health claims, the FTC emphasized that the new Notice of Penalty Offenses "is not limited to health claims and applies to any marketer making claims about the efficacy or performance of its products." 

What Does This Mean for Advertisers? 

Although the new Notice of Penalty Offenses doesn't change the rules on substantiation, it certainly highlights the fact that the FTC is seriously concerned about whether advertisers are properly substantiating their health and other claims. 

As Commissioner Rebecca Kelly Slaughter explained in a statement accompanying the action (which was joined by Chair Lina Khan and Commissioner Alvaro M. Bedoya), "Everyone gets sick, and most of us will experience the infirmities that accompany aging. That shared vulnerability leaves us all susceptive to health-claim scams and to plausible sounding treatments that promise to alleviate pain, to restore lost virility, or to help cure the most deadly and tragic of illnesses. Anyone who has ever walked into an American gas station, corner store, or pharmacy has seen aisles of products making these kinds of promises. At best, many of these product claims are unreliable and waste tens of billions of consumer dollars a year, and, even worse, they can cause serious health problems requiring acute medical attention." 

If you're making health claims in your advertising (or any other claims for that matter), and particularly if you're on the list of companies that received the Notice, this is a great time to take a fresh look at the processes you've got in place to ensure that the claims you are making are properly substantiated in accordance with FTC standards.  And, while you're at it, it's a good time to make sure your practices related to the use of consumer endorsements (including consumer reviews!) are up-to-date as well.