On April 13, 2023, the Federal Trade Commission (FTC) used its penalty offense authority to issue Notices to approximately 670 advertisers, warning that the FTC will not hesitate to use its authority to target those who cannot substantiate their claims, with large civil penalties of up to $50,120 per violation.  The Notice does not suggest that the recipients have engaged in deceptive or unfair conduct, but rather simply remind companies that they are required to have a reasonable basis to support their objective product claims. 

The Notice warns each recipient that, “receipt of a notice of penalty offenses puts your company on notice that engaging in conduct described therein could subject the company to civil penalties of up to $50,120 per violation.  See 15 U.S.C. 45(m)(1)(B).”  Through this approach, the FTC will be able to seek civil penalties against companies that engage in conduct that it knows has been found unlawful by the FTC.

Although the FTC’s warning is not limited to health claims, it appears to focus primarily on companies involved in the marketing of over-the-counter drugs, homeopathic products, dietary supplements, or functional foods.  In fact, the Notice also suggests recipients consult the FTC staff’s recently issued Health Products Compliance Guidance.   

The Notice outlines specific unlawful acts and practices, including failing to have:

  • Reasonable bases, consisting of competent and reliable evidence for objective product claims;
  • Competent and reliable scientific evidence to support health or safety claims; and
  • At least one well-controlled human clinical trial to support claims that a product is effective in curing, mitigating, or treating a serious disease.

The FTC notes that unlawful acts or practices may also include:

  • Misrepresenting the level or type of substantiation for a claim; and
  • Misrepresenting that a product claim has been scientifically or clinically proven.

The FTC points to additional unlawful acts and practices, including but not limited to, misrepresenting that an endorser is an actual, current, or recent user of a product or service.  In support, the Notice enclosed a copy of a previously approved notice of penalty offenses regarding the use of endorsement and testimonials.

The Notice was approved March 31, 2023, by a 3-1 vote, with Commissioner Wilson voting no, issuing a separate statement on her final day as Commissioner.  The statement noted that although then-Commissioner Wilson supported the issuance of other notices,[1] the subject matter at hand does not present “largely clear-cut violations of the FTC Act” that constitute “outright fraud or patently false statements.”[2]  On the other hand, the remaining Commissioners voted yes and commented that, many product claims found at gas stations, pharmacies, and corner stores “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.”[3]

Takeaway

The warnings issued by the FTC suggest that deceptive and misleading advertising is a concern for health-related products.  Although the warnings do not indicate that any of the recipient advertisers engaged in unlawful advertising practices, it nonetheless reflects the FTC’s intent to crack down on health-related claims, as well as other misleading advertising, generally.  For now, advertisers should take note that FTC is on high alert, and should carefully consider FTC rules, litigated decisions, and prior FTC administrative cases, as well as the cases cited in the Notice, to avoid facing hefty fines.   


[1] e.g., Notice of Penalty Offenses Concerning Deception or Unfair Conduct around Endorsements and Testimonials, Notice of Penalty Offenses Concerning Deceptive or Unfair Conduct in the Education Marketplace, and Notice of Penalty Offenses Concerning Deception or Unfair Conduct for Money-Making Opportunities.

[2] Dissenting Statement of Commissioner Christine S. Wilson Regarding the Issuance of a Notice of Penalty Offenses on Substantiation of Product Claims, FTC Comm’n (Mar. 31, 2023), https://www.ftc.gov/system/files/ftc_gov/pdf/commissioner_wilson_dissenting_statement_substantiation_npo_3.31.23_final.pdf.

[3] Statement of Commissioner Rebecca Kelly Slaughter Joined by Chair Lina Khan and Commissioner Alvaro M. Bedoya Regarding the Issuance of a Notice of Penalty Offenses on Substantiation of Product Claims, FTC Comm’n (Mar. 31, 2023),  https://www.ftc.gov/system/files/ftc_gov/pdf/rks_substantiation_pno_statement_lk_ab_final.pdf.