FTC Becomes More Aggressive Against False Health Claims

A snake slowly slithers across the moss-covered forest floor, where it discovers a woman, nude but for a few strategically placed leaves, lying on the ground. The snake weaves across her legs and back over her body, sliding suggestively across her waist.

Provocative? Yep.

And that ad, which claims the mythology behind the health powers of pomegranates is backed by modern science, is not the only titillating thing POM Wonderful has been up to lately.

The juice manufacturer, whose parent company is Tropicana, is battling the Federal Trade Commission (FTC) over the agency's aggressive campaign against false health claims. POM started the fight by filing a complaint against the FTC on Sept. 13, 2010, claiming the agency secretly changed its enforcement agenda without going through the federal rulemaking process.

But the FTC didn't take the charges lying down--it swung a punch of its own by almost immediately filing a complaint against POM.

The FTC complaint, filed Sept. 24, charges that there's no science to back up the health claims POM makes about its drinks. The complaint lambasts POM's claims that the juice is 40 percent as effective as Viagra in treating erectile dysfunction, decreases arterial plaque by 30 percent, and treats and reduces the risk of prostate cancer. The FTC alleges that those claims are both false and unsubstantiated.

In a related case, the FTC issued a final order Nov. 16 settling charges filed Sept. 27 accusing Mark Dreher, a former vice president at POM, of making false and unsubstantiated claims about the juice during his nearly four-year tenure with the company, which ended in 2009. The settlement bars Dreher from making claims unsupported by science about any food or drug. The order also contains a cooperation clause requiring him to assist with the current investigation into POM.

POM is the latest target in an FTC crackdown on overstated or misleading health claims launched by the Obama administration. But POM claims that the crackdown is going too far, holding food products up to the same standards as drugs.

Quick and Dirty

On the most basic level, what makes this round of FTC action different than previous campaigns is that the agency is targeting not just lethal health claims--ones involving heart disease, cancer, diabetes and the like--but also less dire disorders such as erectile dysfunction and mental concentration. The FTC is also reaching beyond the low-hanging fruit of small snake-oil-type salesmen to charge large national brands such as POM and, earlier this year, Kellogg's and Nestl?.

"The FTC's broadening its enforcement agenda," says Thomas Cohn, of counsel at Venable and a former regional director at the FTC. "It's expanding from hardcore fraud to other types of claims. In-house counsel have to be more vigilant than ever."

While the breadth of the FTC's enforcement activity may be expanding, the basic themes of its agenda haven't changed, says Jennifer Archie, a partner at Latham & Watkins.

"[The FTC] doesn't like when an ad says, 'Quick and effective. Take this for all of your ailments,'" she says. Rather, the agency insists that health claims be supported by scientific studies--and the expectation for the magnitude of those studies increases proportionally with the size of the company.

If a company launches a multimillion-dollar ad campaign centered on claims supported by a single study that cost only a few thousand dollars, then Archie says it's a red flag.

POM said in a statement released Sept. 27 that it supports the health claims in its ads with 55 published studies conducted over the past decade at a cost of $34 million.

"POM believes very strongly in its First Amendment rights to communicate the promising results of our extensive scientific research program on pomegranates," the statement said. POM did not respond to a request for comment.

New Agenda

At the crux of POM's argument against the FTC is a case the agency settled in July with Nestl? HealthCare Nutrition Inc. (Nestl? HCN), a subsidiary of the company best known as a
chocolate producer.

Ads for the company's Boost Kid Essentials nutrition drink claimed that the beverage had immune-enhancing powers, including the ability to prevent or reduce respiratory infections. In its order settling the case, the FTC required Nestl? HCN to get FDA pre-approval for such claims before including them in future ads. The FTC acknowledged that FDA pre-approval isn't a typical step for ads, but it said that due to the seriousness of these health claims, the Boost situation warranted that
extra scrutiny.

Though the two agencies have always collaborated on labeling, the FDA and FTC are now working more closely than ever, as evidenced by joint warning letters Cohn says they began issuing a little more than a year ago. The letters originated as a response to bogus treatments for H1N1 flu.

POM says in its complaint that the Nestl? HCN settlement is one example of how the FTC is subversively changing the rules for substantiating health claims, illegally bypassing the federal rulemaking process. It also points to a similar July FTC settlement with Iovate Health Sciences Inc. over weight loss and immunity-boosting claims made about the company's nutritional supplements.

William Stern, co-chair of Morrison & Foerster's Consumer Litigation and Class Action Group, for one, isn't convinced POM's argument holds water. The FTC's complaint against POM doesn't go beyond the standards the agency has promulgated for years, he says.

"If POM's theory were true," Stern says, "you would expect the FTC to raise the new standard in its enforcement action."

As to why the FTC ordered stricter standards in its settlements with Nestl? HCN and Iovate, Stern says it's common practice for the government to enter into a consent decree that's higher than the
law requires.

"It's true Nestl? and Iovate agreed to higher standard, but you can't blame the FTC for asking and getting it," he says. "It's just evidence [the FTC] is an aggressive and strong regulator."

Risky Time

Regardless of the outcome of the FTC and POM's dueling cases, it's an alert to in-house counsel that health claims made in ads for their companies' products are going to be under heavy scrutiny during the coming years.

"It's certainly a warning shot to everyone, be they Fortune 500 companies, small up-and-comers or anything in between," Cohn says.

Archie advises paying special attention to a product's premarket phase to ensure thorough documentation of research supporting any scientific claims that may wind up in an ad.

"The FTC doesn't care about what you can come up with after the fact," she says. "If you get that letter from the FTC that says, 'We're curious about this,' you have to have your story together and be ready to go."

Once the FTC sends a warning letter, Stern says companies then also must prepare for an avalanche of class action suits. He says plaintiffs attorneys watch the FTC's website with an eagle eye and will piggyback their own consumer-driven suits on any new action within days. After the FTC and FDA sent 19 warning letters earlier this year, for example, plaintiffs attorneys within two weeks had sued nearly all of the targeted companies.

"For someone in-house at one of these food manufacturers, we're in a risky environment," Stern says. "Not just because of the FTC and FDA. These are easy cases to bring and fairly inexpensive. There are low entry barriers."

Contributing Author

Lauren Williamson

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