In case you were like Alabama football coach Nick Saban and unware, there was an election last week. One post-election issue has been the use of “fake news” to try and sway voters and possible steps to prevent those types of stories going forward. The FTC has been trying to stop “fake news” advertising for some time; see our earlier posts on the Lean Spa case, Lord & Taylor case, and Native Advertising Statement. Earlier this month, a court affirmed those efforts. The case provides a list of lessons on what not to do when advertising your products.
The FTC sued a company called Pure Green Coffee and others in 2014 alleging that they violated the FTC Act by making unsubstantiated and false weight loss claims and through the use of deceptive advertorials and testimonials in the sale of Green Coffee Weight Loss products. Apparently, the defendants entered the business after having seen an excerpt of the Dr. Oz Show touting the effects of Green Coffee Extract. The company’s advertising made claims that the product could cause dramatic weight loss including: 17 lbs. in 22 weeks; 17 lbs. in 12 weeks, 16% of body fat in 22 weeks, 20 lbs. in four weeks, and 1-2 inches of belly fat in one month.
In 2015, most of the defendants settled for judgments in the amount of $30 million, with almost all of that suspended based on the inability to pay. One defendant, Nick Congleton, chose to fight. In early November, the court entered summary judgment against him for $29 million, a HUGE amount.
Lesson 1: Using the word “Advertorial” at the top of a fake news site will not cure the deceptive nature of that advertisement. The FTC alleged and the court agreed that the “fake news sites” used by defendants were meant to appear as objective news when in fact they were paid advertisements. The court agreed that this made the pages deceptive. The presence of the word “Advertorial” at the top of the page did not change the FTC’s or the court’s mind.
If you are a marketer using something that looks like this, you might want to rethink your approach. On a similar note, the court found these pages to be deceptive because the defendants used testimonials that they had simply copied from other websites and/or from testimonialists who were compensated without disclosing the compensation.
Lesson 2: Too good to be true weight loss claims are incredibly risky. The FTC requires two well-controlled random clinical trials to substantiate weight loss claims, and courts seem to accept that standard. Here, the court agreed with the FTC’s expert that the weight loss claims were false with the exception of the 17 lbs. in 22 weeks claims, which could only be accomplished with close medical supervision and medical care, which was not disclosed. The court also agreed with the FTC that the claims were unsubstantiated. If you are not sure what claims are risky, take a look at the FTC’s Gut Check guidance.
Lesson 3: If you get a CID or subpoena from the FTC, a state AG, or a California DA, you need to review your claims carefully (with your counsel) and tighten up any loose or problematic claims or address other issues. One of the affiliated companies that was sued received a CID from the FTC in March 2013, but the group of affiliated companies did not change their advertising. This was a big mistake. The FTC ultimately used this fact to argue that Congleton knew or should have known the ads were unsubstantiated and that, therefore, personal financial responsibility should attach to Congleton.
Lesson 4: You cannot rely on science you have not read, do not understand or have not seen, to substantiate your claims. Congleton admitted that he was not aware of the details of any science backing up the claims. The court rejected the efforts of Congleton’s lawyers to point to published studies finding flaws in those studies or dosages different from those in the products sold by defendants. The court rejected Congleton’s “good faith” defense that he relied on the same reports and studies as Dr. Oz, relied on what he saw on Dr. Oz, and copied claims from competitors’ websites. The court rejected all of this finding it insufficient to defeat the FTC’s allegations.
Lesson 5: The First Amendment and a lack of evidence of actual consumer deception will not save you. The court rejected Congleton’s argument that his conduct was protected by the First Amendment. The court easily found no First Amendment protection for false advertising.
The court also rejected Congleton’s argument that the FTC had to prove that Congleton had actually misled consumers. Instead, the court found that the representations made by the defendants “were likely to mislead consumers” and that this was sufficient.
Now that the election is over, I am sure we all miss the endless political ads. For advertisers, however, using fake news stories continues to have very real consequences.