FTC warns nearly 700 advertisers of health products

Did you receive a friendly note from the Federal Trade Commission last week about marketing practices? If so, you’re not alone.

After recently updating its Health Products Compliance Guidance, the agency sent out “Penalty Offense” notices to roughly 700 advertisers across a number of industries, including pharma, consumer goods and retail, cannabis, cosmetics, foods, and dietary supplements. These Penalty Offense notices provide reminders of the legal requirements to substantiate advertising claims before they are disseminated, and to avoid deceptive practices with respect to endorsements, influencers, and product reviews.

The FTC has been extremely active in suing companies recently, and the notices assert the FTC’s ability to sue companies in federal court for conduct deemed deceptive by the FTC in a prior agency case. Once the companies are officially on notice of the FTC’s prior findings, the FTC is authorized to seek civil penalties of roughly $50,000 per violation. The Penalty Offense letters constitute the formal notice that empowers the agency to seek those civil penalties.

This is the fourth time the FTC has sent out Penalty Offense Notices in the last 18 months. The FTC’s revitalization of Penalty Offense Notices, which had fallen out of use in recent years, follows a recent Supreme Court case that curtailed the agency’s authority to obtain restitution or disgorgement. The FTC is trying to use these notices as a way to extract significant monetary penalties from allegedly deceptive actors, which it believes provides a critical deterrent against law violations.

A reminder about unfair and deceptive practices

In these notices, the FTC reminds advertisers that, among others, the following are unfair or deceptive practices:

• making an objective product claim without having a reasonable basis consisting of competent and reliable evidence
• making a claim relating to the health benefits or safety features of a product without competent and reliable scientific evidence using generally accepted scientific methods
• representing that a product is effective in the cure or treatment of any serious disease without possessing and relying upon at least one properly conducted human clinical trial
• falsely claiming an endorsement by a third party, including, for example, through the use of fake consumer reviews
• failing to disclose an unexpected material connection with an endorser, such as any payments to an influencer
• misrepresenting that the experience of endorsers, including influencers and online reviewers, represents consumers’ typical or ordinary experience.

Now what?

So what should you do if you receive one of these notices? Begin by reviewing your company’s existing marketing claims, and your processes and policies around claim substantiation, influencers, and customer reviews, and make any appropriate course corrections.

And, overall, whether or not you’ve received a Notice, it’s worth paying close attention to this regulatory trend. These Notices reflect the FTC’s enforcement priorities.  Should your company engage in any of the identified practices, it could end up on the wrong end of an FTC investigation.

Find out more about this development by contacting any of the authors or your usual DLA Piper attorney.