U.S. FTC Issues Notice of Penalty Offenses Concerning Substantiation of Product Claims

U.S. FTC Issues Notice of Penalty Offenses Concerning Substantiation of Product Claims

The United States Federal Trade Commission (FTC) issued a letter containing a Notice of Penalty Offenses Concerning Substantiation of product claims to approximately 670 advertisers on notice that they should avoid deceiving consumers with advertisements that make product claims that cannot be backed up or substantiated. In notices sent to the companies, the FTC warned that it will not hesitate to use its authority to target violators with large civil penalties.

Under FTC law, companies must back up claims about what their product can do with reliable evidence. If a company makes a claim about the health or safety benefits of a product, that claim must be based on scientific evidence. If a company claims that its product can cure, mitigate, or treat a serious disease such as cancer or heart disease, it must back up that claim through the accepted standards of scientific testing.

Sam Levine, 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 play fast and loose with the truth.”

While the FTC has long history of providing guidance on advertising substantiation, through both litigated cases and policy statements, it was noted that many sellers continued to make unsubstantiated claims about their products and false claims about the proof they retain.

Under U.S. Code: Title 15 Section 45(m)(1)(B), a Notice of Penalty Offenses puts a company on notice that engaging in conduct it knows has been found unlawful in a previous FTC administrative order, other than a consent order, could subject the company to civil penalties of up to USD 50,120 per violation.

Consequently, the FTC deemed that penalty must be imposed on the offense to remind advertisers of the legal requirement to have a reasonable basis to support objective product claims and to deter them from making deceptive claims in the future.

The notices outline specific unlawful acts and practices, including failing to have:

(i) A reasonable basis consisting of competent and reliable evidence for objective product claims;

(ii) Competent and reliable scientific evidence to support health or safety claims; and

(iii) At least one well-controlled human clinical trial to support claims that a product is effective in curing, mitigating, or treating a serious disease.

(iv) Misrepresenting the level or type of substantiation for a claim, and

(v) Misrepresenting that a product claim has been scientifically or clinically proven.

By sending notices of penalty offenses to approximately 670 companies involved in the marketing of OTC drugs, homeopathic products, dietary supplements, or functional foods, the agency is placing them on notice they could incur significant civil penalties if they fail to adequately substantiate their product claims in ways that run counter to the litigated decisions of prior FTC administrative cases.