The long running saga of the FTC versus POM Wonderful took a major turn today as the D.C. Circuit affirmed in part and reversed in part the FTC’s Order that POM had made deceptive claims about its pomegranate juice products. In 2010, the FTC sued POM alleging it had made false and unsubstantiated claims about the ability of its product to prevent or ameliorate heart disease, prostate cancer and erectile dysfunction. After an extended trial, the FTC’s Administrative Law Judge largely found for the FTC (not a huge surprise). The FTC Commissioners largely affirmed that decision (another shocker). However, Commissioner Ohlhausen, in what would turn out to be an ominous foreshadowing for the Commission as a whole (jump to the end of the blog if you can’t stand the suspense), and who wrote the Commission’s opinion, disagreed with the majority’s view that two Randomly Controlled Clinical Trials (RCTs) should be required as part of the order. POM appealed to the DC Circuit challenging the factual and legal bases on which the FTC relied as well as the remedy imposed. The DC Circuit affirmed on liability, but modified that part of the FTC’s order that required POM to have two RCTs to substantiate any disease claims going forward. The revised order will require only one RCT for any disease claims.
The DC Circuit found that there was no basis for setting aside the FTC’s finding of what efficacy and establishment claims POM had made in its advertising, noting the careful record the ALJ had made and the thorough treatment the Commission had given the issues in its opinion. The DC Circuit agreed with the FTC that the use of words such as “promising,” or “initial” to describe certain studies referenced in POM’s advertising failed to adequately qualify the ad so that an establishment claim was not made. Regarding the level of substantiation necessary, the court noted the FTC’s special expertise in this area. The court noted that its role was not to independently weigh the evidence but to determine whether there was substantial evidence to support the FTC’s findings. The court decided there was. The FTC had found that RCTs were necessary to substantiate the disease claims made. The court found adequate evidence to support that finding noting that the controlled, random and double blind aspects of an RCT all serve important functions in evaluating the efficacy of a product or treatment. POM argued that applying the RCT standard to food products was too onerous and expensive. The court agreed with the FTC that although there might be certain instances where it was not possible to conduct double-blind studies of food products, this was not such a situation. Among other things, the court pointed to the fact that POM had done some RCTs on its products. Regarding cost, the court displayed no sympathy for the marketer’s plight finding that if the claim was too expensive to substantiate then the claim should not be made. Significantly, the court noted that marketers could make lesser health claims without an RCT including claims that accurately reflect the type and results of the science supporting a claim.
POM had also argued that the FTC was engaged in improper rule making by requiring RCTs for claims of this sort. The court summarily rejected this argument finding that the standard being used by the FTC was not really new; that even if the principles were new the agency could announce new principles through adjudication, and that the agency could choose whether to regulate conduct by rule-making or adjudication.
One of the individual defendants fared no better. Matthew Tupper, challenged the imposition of individual liability against him, arguing that his participation in the creation of the advertisements was an insufficient basis for liability. The court disagreed rejecting Tupper’s argument that the FTC must show that he knew the advertisements were deceptive. The court noted that knowledge was only required where the FTC sought equitable monetary relief. The court also rejected Tupper’s argument that injunctive relief was not necessary because he had voluntarily retired from his position at POM. The court agreed with the FTC that Tupper had shown a propensity to misrepresent such that injunctive relief was appropriate.
Finally, as we promised, it gets more interesting at the end. The court saved POM’s First Amendment arguments for last. As to liability, the court found that POM’s advertisements were entitled to no First Amendment protection as they had been found to be deceptive commercial speech. However, it was a different story with regard to remedy. The court examined the two RCT requirement for disease claims under the framework established by the Supreme Court in Central Hudson, which requires that any restrictions on commercial speech pass a three-prong test: 1) the asserted governmental interest must be substantial; 2) the restriction must directly advance that interest; and 3) there must be reasonable fit between the interest advanced and means chosen to restrict the speech. The court found that there was a substantial interest in protecting against deceptive disease claims and that requiring RCTs for disease claims could advance that interest. The court found, however, that requiring two RCTs for all disease claims was overly broad and not a “reasonable fit.” In reaching this conclusion, the court used much of the FTC’s own language against it. In its opinion below, the FTC had expressly refused to say how many RCTs were required to substantiate the claims made but then concluded that two were required in the order as a matter of “fencing-in.” Similarly, the FTC had previously issued guidance that the quality of studies was more important than the quantity. The court also noted that requiring two studies might deprive consumers of useful information upon which to evaluate products. The court rejected the FTC’s argument that FTC precedent or the need for “fencing in” dictated a blanket two RCT requirement. However, the court did not by any means sound the death knell for the two RCT requirement. The court did not disagree with what it characterized as the FTC’s past approach of requiring two RCTs when the requirement is “selectively imposed in specific circumstances based on particular concerns.”
As we’ve noted previously, there has been debate among the Commissioners about the number of RCTs that should be required in FTC orders. The POM opinion should help move the Commission away from a one size fits all two RCT approach and perhaps give advertisers more leverage in settlement discussions, but only time will tell. For now, it’s time to watch erectile dysfunction ads interspersed with a little bit of football.