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Last week, the Federal Trade Commission filed a lawsuit in federal court in California against Gravity Defyer Medical Technology Corporation alleging the company made unsubstantiated claims that its footwear reduces knee, back, ankle, and foot pain and helps with conditions such as plantar fasciitis, arthritis, joint pain, and heel spurs.

But the FTC’s case is less about footwear than it is about the imaginative ways the agency continues to find ways to pursue monetary relief in the wake of AMG Capital Management LLC v. FTC. There are a few things here worth discussing.

First, the FTC is seeking civil penalties. How, you might ask? The complaint alleges that Gravity Defyer’s owner, Alexander Elnekaveh, violated a 2001 FTC consent order involving his former business, Gadget Universe, which sold an automotive aftermarket fuel-line magnet device. Under the order, Elnekaveh and Gadget Universe agreed to “not mispresent, in any manner, expressly or by implication, the existence, contents, validity, results, conclusions, or interpretations of any test, study or research.”Continue Reading Tied Up with the FTC: Agency Dusts Off 20-Year-Old Settlement to Pursue Civil Penalties

As the rest of us prepare for the Super Bowl by buying avocados to make guacamole, installing new big-screen TVs, and donning Ram/Bengal-themed face paint, select corners of corporate America are preparing for the biggest advertising day of the year.

In 2021, companies spent approximately $485 million on ad slots during the big game, and the average cost of a 30-second commercial slot was about $5.6 million. With such high stakes, plus the intensive “Standards and Practices” review employed by the TV networks, one would assume that anything that makes the cut is above reproach. (The review board won’t even let advertisers use “Super Bowl” because it’s trademarked, which is why you often hear “the Big Game” in ads.)

However, the following examples of legal challenges to your favorite Super Bowl commercials demonstrate that the world of advertising law can be tricky to navigate, and companies that advertise simply cannot mitigate their litigation risk to zero.Continue Reading Defending Against the Blitz: Examining the Legal Issues Surrounding Super Bowl Ads

On July 22, 2021, the Third Circuit ruled against the FTC in its case against Innovative Designs, a company that manufactures and sells a product called Insultex House Wrap, a weather-resistant barrier used in building construction. As we discussed last year, the FTC has targeted companies that produce insulation or building materials and make claims that these materials have more insulating power than they actually do. The court’s rejection of the FTC’s view on what constitutes reliable testing for purposes of substantiation underscores that courts often are more flexible than the FTC in determining whether an advertiser has a reasonable basis for a claim.

Originally, the FTC filed a complaint in the District Court for the Western District of Pennsylvania stating that Innovative Designs falsely claims that its products have a higher R-value than they do. An R-value is a measure of the product’s ability to restrict the flow of heat. So, the higher the R-value, the higher the product’s insulation power. According to the FTC a misleading R-value could prompt customers to purchase a product that will not perform in the way it was advertised. Furthermore, the FTC claimed that Innovative Designs did not use the proper standardized testing, ASTM C518, to make its claims about the product’s R-value.Continue Reading FTC Put to the Test on Inadequate Testing Claims

The FTC routinely pursues dietary supplement makers for making allegedly deceptive or unsubstantiated claims, and most of those investigations are resolved through settlements. The FTC’s recent unsuccessful efforts to bring a contempt action regarding one of those settlements and its decision to then challenge the alleged contemptuous conduct in an administrative proceeding provide interesting insights into FTC settlements and the FTC’s relentless pursuit of companies that fall into disfavor.

On November 20, 2020, the FTC approved an administrative complaint against dietary supplement marketer Health Research Laboratories (HRL), its owner and officer Kramer Duhon, and Whole Body Supplements (WBS), alleging the respondents engaged in deceptive marketing and advertising of their supplements. According to the complaint, respondents are allegedly making unsubstantiated claims that four of their supplements prevent or treat cardiovascular and other diseases.

This is not the first legal challenge that respondents HRL and Duhon have faced with the FTC. In January 2018, a stipulated order permanently banned the defendants from making weight loss claims, joint-related disease claims, and other unsubstantiated health claims regarding defendants’ products and imposed a collective monetary judgment of approximately $3.7 million. The order defined “Covered Products” as “any Dietary Supplement, Food, or Drug, including BioTherapex and NeuroPlus.” Some prohibited weight-loss claims include representations that any Covered Product: (1) causes substantial weight loss no matter what or how much the consumer eats; (2) causes permanent weight loss; or (3) causes substantial weight loss when a product is worn on the body or rubbed into the skin. The order also banned joint-related disease, cognitive performance, and health claims that a product treats or cures arthritis, relieves joint pain, or improves memory concentration or represents a product’s health benefits, safety, performance, or efficacy.Continue Reading Third Bite at the Apple – FTC Administrative Proceeding Signals a Relentless Pursuit Against Supplement Marketers

A recent decision from the National Advertising Division (“NAD”) regarding claims made by SmileDirectClub, LLC (“SDC”) in online advertising for its Smile Direct Club Clear Aligners provides guidance on a variety of key advertising issues, including comparative and savings claims, guarantees and consumer reviews and testimonials. NAD recommended the modification or discontinuation of many of the claims challenged by Align Technology, Inc. (“Align”), maker of Invisalign clear aligners.

First, Align argued that SDC’s advertising misled consumers by claiming that its products and services provide smile correction for the same severity levels, or for a comparable range, as Invisalign. According to the challenger, claims such as “SmileDirectClub invisible aligners straighten most smiles in an average of 6 months” conveyed a message that SDC can fix most teeth issues, including complex conditions, without proper disclosure that SDC’s product is actually intended to treat milder and less complex cases of teeth malocclusion.

In recommending that the advertiser modify its claim by disclosing its limitation to mild-to-moderate malocclusion cases, NAD explained that “[a]dvertisers are free to make ‘apples-to-oranges’ comparisons in order to highlight features or attributes of their products, provided that the advertiser disclose the material differences between the products being compared.”Continue Reading Something to Smile About: NAD Provides Guidance on Key Claim Substantiation Issues in Recent Decision

Last week, the FTC filed its first lawsuit involving COVID-19 disease claims, but the Commission took an approach it had largely abandoned in consumer protection cases, by filing for a temporary restraining order and preliminary injunction in federal court and simultaneously filing an administrative action. Although COVID-19 claims are new, the procedural approach taken by the FTC is one that it has not used in years.

On April 24, the FTC filed a Complaint for a Temporary Restraining Order and Preliminary Injunction in the United States District Court for the Central District of California, in FTC v. Marc Ching. The Complaint alleged that the defendant, Marc Ching doing business as Whole Leaf Organics, disseminated false or unsubstantiated advertisements that its product, Thrive, treated, prevented, or reduced the risk of COVID-19. In addition, the defendant marketed a cannabidiol (CBD) product that it claimed could treat cancer.

The defendant had been the recipient of a warning letter from the federal Food and Drug Administration in November 2019, which warned the defendant that it was making unapproved new drug claims in violation of the Federal Food, Drug, and Cosmetic Act by claiming that its CBD products are intended for use in the mitigation, treatment, or prevention of diseases. According to the complaint, the defendant did not remove the unapproved drug claims from its website.Continue Reading FTC Files Lawsuit Against Company Selling CBD Products, Claiming to Prevent or Treat COVID-19 and Cancer

Recently the National Advertising Division (NAD), as part of its routine monitoring program, evaluated whether certain claims made by Petco Animal Supplies, Inc. (Petco) in marketing and advertising materials for its “no artificial ingredients” advertising campaign were adequately substantiated. The NAD determined that Petco presented sufficient evidence to demonstrate that it is “setting a bold new standard for nutrition” and that it “will continue to evaluate and evolve [its] standards and assortment to take pet nutrition to new levels.” However, it recommended that Petco modify certain claims that it was removing “all” artificial ingredients or that there would be “no more artificials” in any of the pet food or treats it carries. The case provides some important guidance on the rules for making claims regarding “no artificial ingredients.”

Petco launched an initiative to remove artificial ingredients from its dog and cat foods and marketed that initiative heavily. Petco had adopted definitions of “Artificial Flavor,” “Artificial Color,” and “Artificial Preservative” that mimicked the FDA’s definitions and language, and expressly disclosed to consumers its definitions of these terms. Specifically, Petco disclosed that its definition of “artificial ingredients” did not include “synthetic vitamins, minerals and amino acids,” “substances that are derivatives or mimics of national compounds,” and “substances that may fall into categories outside the Petco definition of artificial colors.”Continue Reading Make No Bones About It: NAD Finds Petco Is “Setting a Bold New Standard for Nutrition” but Recommends “No Artificials” and “Better Nutrition” Claims Should Be Discontinued

Guarantees are a common marketing practice and can have two meanings—the marketers guarantees product performance or, perhaps related, the marketer promises the consumer her money back if not satisfied. A recent decision from the National Advertising Division (“NAD”) regarding claims Ava Science, Inc. (“Ava”) made in marketing its Ava Ovulation Bracelet (“the Bracelet”) provides some guidance on this marketing device. NAD reviewed Ava’s “one-year pregnancy guarantee” appearing in its social media marketing and website and determined whether, given the context, a consumer would believe this to be a performance or money back guarantee. NAD found that Ava’s website claims could be interpreted, by a potentially vulnerable audience, to overstate the Bracelet’s benefits.

NAD’s decision addressed the guarantee claims as made in two separate circumstances—Ava’s social media marketing and Ava’s website marketing. Of greatest concern to NAD was the guarantee claim on Ava’s website offering a “one-year guarantee of pregnancy*.” Though the guarantee contained a hyperlink disclosing its conditions, the hyperlink did not appear unless a consumer scrolled over the text. Relying on the FTC’s Dot Com Disclosures Guidance, NAD determined that the embedded hyperlink with specific conditions was not sufficiently “clear or conspicuous.” Further, NAD found the website’s “one-year guarantee of pregnancy” was too closely related “to the performance result—pregnancy—and not to the fact that the ‘guarantee’ is about the refund[.]” Ultimately, NAD recommended that Ava modify its website guarantee to make it obvious that terms exist in a separate hyperlink, and to clarify that it is a money-back, not pregnancy, guarantee.Continue Reading Context is Key: NAD Examines Ava Fertility Bracelet Guarantee Claims

In formulating a health and safety-related claim, advertisers walk a fine line in accurately conveying the results of reliably conducted studies to support their claims. Disclaimers and other qualifying language are limited tools advertisers can use to mitigate the risk of a claims challenge. But as a recent NAD decision shows, just because a study is reliably conducted, does not necessarily mean it is a good fit to support an advertising claim. Thus, basing a claim on a reliably conducted study can still be held to be misleading if the study results do not closely reflect what the average consumer could realistically expect to achieve. What’s more, this recent decision reminds advertisers that a lengthy disclosure may not be sufficient when it fails to disclose a wide variability in observed study results.

On February 25, 2020, the National Advertising Division (NAD) issued a decision and recommendation that Trek Bikes discontinue use of the claim that its WaveCel helmet is “up to 48x more effective than traditional foam helmets in protecting your head from injuries caused by certain cycling accidents.” Although the cited “Bliven Study” demonstrated that the WaveCel helmet in fact outperformed traditional foam helmets for head injury protection in all impact scenarios, the NAD was concerned the claim conveyed the implied message that “People who use the WaveCel Helmet will have little to no risk of experiencing a concussion.”Continue Reading Heads Up! NAD Recommends Discontinuing WaveCel Safety Claim

While the full economic impact of COVID-19 is unknown, the demand—and need— for jobs and work that can be performed from home certainly will increase. Companies offering opportunities to potentially earn income working from home are likely to see an influx in consumer interest—and, of course, likely to ramp up advertising. The FTC always has actively policed the industry, given the challenges inherent in substantiating earnings claims, and will continue to do so during the pandemic. Below are some common advertising pitfalls and general guidelines for avoiding them.

  1. Earnings Claims Must Be Substantiated and Typical

An earnings claim is a representation of how much money a consumer will make or the level of success a consumer will achieve. Such claims can be either express or implied, and all must be substantiated. This means you must possess information that sufficiently backs up every reasonable takeaway of the ad. In addition, any claim should be typical, which means the average person pursuing the offered opportunity is likely to achieve similar success. It may be tempting to advertise results achieved by the most successful students, but those advertisements are risky. From a regulator’s standpoint, atypical results may mislead consumers into thinking they too will achieve a similar level of success. At a minimum, in order to limit (but not eliminate) the risk, a well-drafted disclaimer should be present.Continue Reading Marketing Work-From-Home Opportunities in the Era of WFH