FTC warns 60 companies for noncompliance on ad disclosure guidelines

23-Sep-2014 - Last updated on 26-Sep-2014 at 18:00 GMT

The Federal Trade Commission has sent warning letters to 60 companies, including 20 of the nation’s largest advertisers, warning them about their failure to make adequate disclosures in their print and television ads. One observer said the effort was unusual in its scope and in the caliber of companies targeted.

“I think it’s fairly unusual to have this volume of warning letters that went out all at once and sent to this level of advertiser. These are big brands, not just some smaller supplement companies,” Ivan Wasserman, an attorney with the Manatt law firm told NutraIngredients-USA. Wasserman is the managing partner of the firm’s Washington, DC office.

Noncompliant ads were for wide range of products

The FTC action, dubbed Operation Full Disclosure, focused on disclosures that were in fine print or were otherwise easy to miss or hard to read, yet contained important information needed to avoid misleading consumers. In the warning letters, staff identified problematic ads, recommended that advertisers review all of their advertising to ensure that any necessary disclosures are truly “clear and conspicuous,” and asked them to notify the staff of the actions they intended to take with respect to their advertising.

“Consumers depend on information in advertising to make their buying decisions – whether it’s computers or cleaning products, televisions or tools, hotel rooms or hair care,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “Through efforts like these, the Federal Trade Commission ensures that consumers can have confidence that the ads they see are not hiding important information.”

The FTC’s longstanding guidance to companies is that disclosures in their ads should be close to the claims to which they relate – not hidden or buried in unrelated details – and they should appear in a font that is easy to read and in a shade that stands out against the background. Disclosures for television ads should be on the screen long enough to be noticed, read, and understood, and other elements in the ads should not obscure or distract from the disclosures.

The two C’s

Wasserman said that specific to dietary supplement companies, disclaimers pertaining to health claims made on the products need to be clear and conspicuous, and must obvious relate to the claim. When in doubt, be painfully obvious, he said.

“Disclaimers can’t be a game of ‘Where’s Waldo’,” he said.

As has often been the case, advertisements for weight loss products and the claims for the products' effectiveness came in for particular FTC attention. According to FTC, weight-loss ads featuring testimonials claiming outlier results that did not adequately disclose the weight loss that consumers generally could expect to achieve. A handful of ads did not adequately disclose issues related to the safety or legality of a product or service. Several ads included a demonstration that was materially altered and did not adequately disclose the alteration. A couple of ads made false claims that the advertisers attempted to cure with contradictory disclosures, which are not sufficient to prevent ads from being deceptive.

The four P’s

When using disclaimers, it’s always wise to adhere to the four P’s, the metric FTC uses in evaluating when disclaimers adhere to advertising guidelines, Wasserman said.

“The FTC often cites the four Ps: placement, proximity, prominence and presentation,” Wasserman said. “The placement refers to making sure the disclaimer is in there. Proximity refers to its location in relation to the claim in question. Prominence refers to the size and style of type, and its contrast against the background. And presentation goes to the actual wording of the disclaimer itself,” he said.

But the best placed and presented disclaimer is no panacea against an unsupported health claim, Wasserman said. If you make a claim, you had better be able to back it up, he said. A disclaimer can merely serve to relate the field experience with a product to what the initial science may have shown.

“A disclaimer can’t act as a cure for a false claim,” he said.

Who’s responsible for science?

Wasserman said recent cases involving the manufacturer of a green coffee bean extract and a company that marketed a finished product using the ingredient points to a shift in the responsibility for ensuring that claims on dietary supplements are sufficiently backed by science. In those cases, FTC brought actions against the finished goods marketers, which based their claims on the ingredient supplier’s study, and against the ingredient supplier itself, citing the poor study design and shoddy data integrity of the original clinical trial. The ingredient supplier, Applied Food Sciences, agreed to a settlement that included a $3.5 million fine.

These cases seem to place an extra burden on a potential brand holder to vet the experimental design and conclusions of backing studies, Wasserman said. Just as certificates of analysis can no longer in and of themselves be relied upon to satisfy GMP ingredient identity requirements, taking studies at face value may not fulfill FTC’s expectations. Indeed, the green coffee bean study in question that was basically blown out of the water by FTC can still be found on PubMed ready for reference by the ill-informed.

“The problem then becomes as a finished product company to what level of diligence should you go to make sure the study is legit. When I have clients come to me wanting help with launching a product and they show me a study backing a claim, my first question is, can you get the raw data?” Wasserman said.

“FTC is not taking these study reports at face value. Relying on studies you didn’t conduct has gotten a lot scarier than it used to be,” he said.