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In brief

On 13 April 2023, the Federal Trade Commission (FTC) issued a letter containing a Notice of Penalty Offenses Concerning Substantiation of Product Claims to approximately 670 advertisers, putting each company on notice that deceiving consumers with advertisements that make unsubstantiated product claims could subject the company to civil penalties of up to USD 50,120 per violation under 15 U.S.C. § 45(m)(1)(B). 

The FTC noted that, while the initial distribution of the Notice was specific to those making or likely to make health claims, the Notice can potentially extend to any claims made about the performance of its products generally.  Companies that advertise the efficacy of their products should consult counsel to ensure advertising practices do not violate the law.


In Depth

Under 15 U.S.C. § 45(m)(1)(B), a Notice of Penalty Offenses puts a company on notice that engaging in conduct it knows has been found unlawful in a previous FTC administrative order, other than a consent order, could subject the company to civil penalties of up to USD 50,120 per violation. 

The Notice of Penalty Offenses Concerning Substantiation of Product Claims alerts companies that it is unlawful for an advertiser to make an objective product claim without competent and reliable supporting evidence. This includes misrepresenting the level or type of substantiation for a claim and misrepresenting that a product claim has been scientifically or clinically proven.

In its 13 April 2023 press release, the FTC asserted that many sellers continue to make unsubstantiated claims about their products and false claims about the basis for their claims. The FTC plans to use its penalty offense authority to deter companies from making deceptive claims in the future. “The FTC warned that it will not hesitate to use its authority to target violators with large civil penalties”. The press release also quotes Sam Levine, Director of the FTC’s Bureau of Consumer Protection, saying: “The requirement for advertisers to have adequate support for their advertising claims at the time they’re made is a bedrock principle of FTC law. The prospect of steep civil penalties will help ensure that advertisers don’t play fast and loose with the truth”. 

The letter also provided companies with a copy of a previously approved Notice of Penalty offenses concerning deceptive or unfair conduct around endorsements and testimonials. The Notice explains to companies that it is unlawful to: falsely claim an endorsement by a third party; misrepresent that an endorsement represents the experience or opinions of product users; misrepresent that an endorser is an actual, current, or recent user of a product or service; continue to use an endorsement without good reason to believe that the endorser continues to hold the views presented; use an endorsement to make deceptive performance claims; fail to disclose an unexpected material connection with an endorser; and misrepresent that the experience of endorsers are typical or common. Inclusion of this notice indicates that the FTC also plans to use its penalty offense authority to deter companies from making deceptive claims regarding endorsements and testimonials.

Conclusion

Companies should continue to carefully evaluate all advertising claims made to ensure compliance with the FTC Notices. It is important to audit any advertising claims now to avoid any civil penalties down the road. 

Author

Mark H. Hamer is Global Chair of the Firm's Antitrust & Competition Practice Group, comprised of over 300 competition lawyers in over 60 offices across 43 countries. Mark has over 25 years of wide-ranging litigation experience, including first-chair roles in jury trials, bench trials and arbitrations. His primary focus is antitrust litigation. Before joining Baker McKenzie, Mark was a successful trial attorney in the Antitrust Division of the US Department of Justice. He was involved in some of the DOJ's highest-profile antitrust trials. Before joining the DOJ, Mark was a partner at another global law firm where he handled complex multidistrict antitrust class actions in courts across the nation.

Author

Nandu Machiraju is a counsel in Baker McKenzie's North America Antitrust & Competition Practice Group. He has significant industry experience in antitrust matters affecting the healthcare, pharmaceuticals, chemicals, mining, and technology sectors. Nandu advises clients on a wide range of antitrust matters and has considerable experience counseling clients in government investigations, proposed mergers and acquisitions, conduct matters, compliance, and litigation. Before joining the Firm, Nandu worked as an attorney with the US Federal Trade Commission (FTC). Most recently, Nandu was an attorney in the Bureau of Competition’s Litigation Group where he served a critical role on merger litigation challenges in the hospital and medical-device industries. Before that, he served as an Attorney Advisor to FTC Chairman Joseph J. Simons where he advised on enforcement, appellate advocacy, policy, and congressional relations as well as matters relating to agency management. Nandu also was an attorney in the Mergers I Division where he worked on mergers involving pharmaceuticals, medical devices, retail pharmacies, and cement plants. Before joining the FTC, Nandu was an associate at an international law firm where he practiced antitrust and competition law in that firm’s Washington, D.C. and Brussels offices.

Author

William Roppolo is the Head of Litigation and Government Enforcement for Baker McKenzie's New York and Miami offices and serves as Co-Chair of the North America Trial Team. He is also Lead Partner of the Miami office. William has successfully tried commercial and criminal cases throughout the United States, including matters involving alleged antitrust, fraud and money laundering violations. He began his legal career investigating financial crimes with the United States Customs Service. William is a former President of the Federal Bar Association's South Florida Chapter and served on the national Federal Bar Association's Professional Ethics Committee. He has published many articles on topics including anti-corruption, PFAS litigation, Federal Trade Commission enforcement trends, and trial strategies.

Author

Emily Brait is an associate in Baker McKenzie's New York Office and a member of the Firm's North America Litigation and Government Enforcement Practice Group. She previously clerked for the Honorable Bernice B. Donald in the Sixth Circuit Court of Appeals in Memphis, Tennessee. Prior to joining Baker McKenzie, Emily worked as a litigation associate at another global law firm.

Author

Ashley Eickhof is a senior associate in the Firm's North America Antitrust & Competition Practice Group. Ashley is an experienced litigator and has tried criminal cases in federal court.
Prior to joining Baker McKenzie, Ashley worked at another large international law firm in the Antitrust and Competition Practice Group. Before that, Ashley began her career as a federal prosecutor for the Antitrust Division of the US Department of Justice.

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