New Penalty Offense Letters Remind Marketers That Health Claims Require Robust Substantiation

On April 13, 2023, the Federal Trade Commission ("FTC") announced the issuance of what is now the fourth round of Notice of Penalty Offense Letters, this time to approximately 670 companies involved in the marketing of drugs, homeopathic products, dietary supplements, and functional foods. The list includes global consumer product companies, many of which have received similar letters in the prior rounds. All recipients likewise received a copy of the FTC's Fall 2021 Notice of Penalty Offense Letter related to the use of endorsements and testimonials in advertising.

The April 13 FTC Notice ("April 13 Notice") warns advertisers and marketers that they could incur significant civil penalties if they are unable to appropriately substantiate the health claims they make for the products they advertise. This follows the recent FTC release of its Health Products Compliance Guidance, which outlines in detail the high level of substantiation the FTC believes is required for health claims.

What's in the April 13 Notice?

Issuance of Notice of Penalty Offense letters has been one of the FTC's responses to its loss of monetary equitable relief following the Supreme Court's decision in AMG Capital Management, LLC v. FTC. Premised on conduct previously found deceptive or unfair through prior administrative proceedings, the April 13 Notice states that the following acts or practices used in advertising or promotion of products are deceptive or unfair and, so, unlawful under Section 5(a)(1) of the Federal Trade Commission Act:

• Making an objective product claim 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 expressly or by implication that a product is effective in the cure, mitigation, or treatment of any serious disease, including heart disease, cancer, arthritis, and erectile dysfunction, without possessing and relying upon at least one human clinical trial of the product that (1) is randomized, (2) is well controlled, (3) is double-blinded (unless the marketer can demonstrate that blinding cannot be effectively implemented given the nature of the intervention), (4) is conducted by persons qualified by training and experience to conduct such studies, (5) measures disease end points or validated surrogate markers, and (6) yields statistically significant results.
• Misrepresenting the level or type of substantiation for a claim.
• Representing that a product claim has been scientifically or clinically proven unless, at the time the representation is disseminated, the advertiser possesses and relies upon evidence sufficient to satisfy the relevant scientific community of the claim's truth.

What substantiation is required to avoid penalty?

The FTC has for many years included detailed definitions in its consent orders of what constitutes an appropriate type or number of randomized clinical trials. Settlements, however, cannot form the basis of an action brought against an unrelated company based on receipt of a Notice of Penalty Offense—such actions must be grounded in previously adjudicated proceedings which are relatively rare (cases cited in the endorsement and testimonial letter are as much as eighty years old).

Still, the FTC has been very clear about its focus on health-related claims and specifically referred recipients to its Health Products Compliance Guidance (the "Guidance") issued in 2022. There, the FTC emphasized that deceptive advertising may arise from either: (1) direct or implied claims about the benefits, safety, or other characteristics of the product; or (2) omitted information that "is material in light of the claims in the ad or with respect to how consumers would customarily use the product," such as not indicating that a vitamin may cause fatigue.

The Guidance further provides that "Before disseminating an ad, advertisers must have adequate substantiation for all objective product claims conveyed, expressly or by implication, to consumers acting reasonable."

These substantiation standards are not new, but the FTC's focus and attempt to provide detail as to their meaning should not be ignored. The type of substantiation needed for an advertising claim depends on many factors, including the product being marketed and the nature of the claim. Generally, however, claims about the health benefits or safety of foods, dietary supplements, drugs, and other health-related products require substantiation in the form of competent and reliable scientific evidence.

In determining the appropriate level of support, the FTC has said it will review several factors including:

• The type of product.
• The type of claim.
• The benefits of a truthful claim, and the cost or feasibility of developing substantiation for the claim.
• The consequences of a false claim.
• The amount of substantiation that experts in the field believe is reasonable.

For a health-related claim, the FTC will rely primarily on experts in the field of health at issue and may, in addition, consult experts on a particular ingredient or type of product. Where there is an existing standard for substantiation developed by a government agency or another authoritative body, the FTC gives great deference to that standard.

As a general matter, the FTC requires substantiation of health-related benefits to be in the form of randomized, controlled double-blind human clinical testing to meet the competent and reliable scientific standard. Epidemiological studies are generally not sufficient. Moreover, ads that claim a specific level of support – i.e., scientific agreement – must have at least the level of support they claim to have.

FTC will also consider whether there are significant discrepancies between the research conditions and the real-life use being promoted. Claims that don't match the research are misleading.

Advertisers should not exaggerate the extent, nature, or permanence of the effects achieved in a study. Claims should be carefully worded to avoid overstating the certainty of science in areas of emerging science.

Although these letters focus on companies that make health claims, the FTC was clear that its substantiation standards apply to all product and service claims.

DWT has a dedicated team of regulatory and litigation experts who advise and counsel companies, including advertisers and marketers, about how to comply with this type of FTC and FDA oversight, led by: Nancy Felsten (nancyfelsten@dwt.com), Nicole Phillis (nicolephillis@dwt.com), Kim Bousquet (kimbousquet@dwt.com), and Alli Condra (allicondra@dwt.com).