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POM v. FTC: A dozen quotable quotes from the D.C. Circuit opinion

9 November 2019

From The Federal Trade Commission:

POM Wonderful’s advertising claims were false and deceptive. That’s the conclusion of the United States Court of Appeals in upholding the FTC’s ruling. We think it’s a momentous victory for our two clients: American consumers and the cause of truth in the marketplace. You’ll want to read the entire opinion, of course, but here are twelve quotes from the D.C. Circuit’s decision that businesses, attorneys, and law enforcers will be citing for years to come.

“The FTC Act proscribes – and the First Amendment does not protect – deceptive and misleading advertisements.”  Companies often cite the First Amendment as a defense in FTC cases. They forget the foundational principle that misleading ads get no constitutional protection.

“The Commission had no obligation to adhere to notice-and-comment rulemaking procedures before imposing liability in its adjudicatory proceeding.”  POM claimed that the FTC had to undertake a rulemaking – rather than bringing a lawsuit – because it was imposing a major change to its substantiation standard. Wrong on two counts, the Court concluded. First, the FTC is “not precluded from announcing new principles in an adjudicative proceeding.” But the bigger point is that the legal principles the FTC applied were well-settled “business as usual” standards. As the Court held, “With respect to POM’s establishment claims, the substantiation standard applied by the Commission is consistent with Commission precedent. When an advertiser represents that claims have been scientifically established, the FTC has long held the advertiser to the level of evidence required to convince the relevant scientific community of the claim’s truthfulness.”

“The Commission is often in a better position than are courts to determine when a practice is deceptive within the meaning of the FTC Act, and that admonition is especially true with respect to allegedly deceptive advertising since the finding of a § 5 violation in this field rests so heavily on inference and pragmatic judgment.”  Courts give administrative agencies a lot of deference when it comes to subject matters within their purview. For the FTC, that includes determinations of what an ad conveys and when it’s deceptive under Section 5. Why such a standard? Given its decades of collective institutional experience, that’s the FTC’s bread and butter.

“The Commission examines the overall net impression left by an ad and considers whether at least a significant minority of reasonable consumers would likely interpret the ad to assert the claim.”  Nothing new there, but the D.C. Circuit offers a succinct reminder of that touchstone. People can interpret ads more than one way and advertisers must substantiate all reasonable interpretations consumers take from their ads.

“In identifying the claims made by an ad, the Commission distinguishes between efficacy claims and establishment claims. An efficacy claim suggests that a product successfully performs the advertised function or yields the advertised benefit, but includes no suggestion of scientific proof of the product’s effectiveness. An establishment claim, by contrast, suggests that a product’s effectiveness or superiority has been scientifically established.”  This, too, should be old hat for advertisers. If an ad conveys an efficacy claim, the advertiser needs a reasonable basis to support it. The FTC analyzes that under the Pfizer factors the type of product, the type of claim, the benefit of a truthful claim, the ease of developing substantiation for the claim, the consequences of a false claim, and the amount of substantiation experts in the field would consider reasonable. But once advertisers claim to have a certain level of proof, they’ve upped the ante and “must possess the specific substantiation claimed.” What if an ad conveys a non-specific establishment claim – for example, by saying that a product has been “medically proven” to work or by using visuals that suggest it’s “based upon a foundation of scientific evidence”? In that case, the advertiser “must possess evidence sufficient to satisfy the relevant scientific community of the claim’s truth.”

. . . .

“The use of one or two adjectives does not alter the net impression, especially when the chosen adjectives (such as “promising”) provide a positive spin on the studies rather than a substantive disclaimer.”  That’s a quote from the FTC opinion cited favorably by the D.C. Circuit. POM tried to disavow its numerous establishment claims by arguing that it just said the scientific research was “promising,” “initial” or “preliminary.” As the FTC countered, “Those sorts of modifiers do not neutralize the claims made when the specific results are otherwise described in unequivocally positive terms.” The message to marketers: Don’t sprinkle a few adjectives here and there and expect them to undo the net impression conveyed to the buying public.

Link to the rest at The Federal Trade Commission

What does this all mean? In short, ప్రకటనదారు జాగ్రత్త వహించండి and Пусть рекламодатель остерегается, or for those without a legal background, let the advertiser beware.

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2 Comments to “POM v. FTC: A dozen quotable quotes from the D.C. Circuit opinion”

  1. This is an article that goes into detail behind the empire that triggered the case.

    A Kingdom from Dust
    https://story.californiasunday.com/resnick-a-kingdom-from-dust

    Stewart Resnick is the biggest farmer in the United States, a fact he has tried to keep hidden while he has shaped what we eat, transformed California’s landscape, and ruled entire towns.

    But the one thing he can’t control is what he’s most dependent on — water.

    January 31, 2018

  2. Note that the DC Circuit opinion being referred to is nearly five years old now. Professor Rebecca Tushnet offered some much more detailed comments when the decision came down that put the matter in a great deal more context. Once one gets past the abbreviations… but then, the fully-spelled-out terms would have been at least equally intimidating!

    As an aside, the conclusion that “intentional deceptive commercial statements (known to the speaker to be untrue) do not get First Amendment protection” has been inescapable since Madigan v. Telemarketing Assocs., Inc., 538 U.S. 600 (2003), which held that a fundraiser for a charitable foundation could not falsely exaggerate the proportion of donations that would actually go to the charitable purpose. Anyone claiming that “commercial speech” and “advertising” had more First Amendment protection than did a charitable fundraiser (whose purpose was arguably bordering on political speech) is… probably a publishing executive.

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