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.
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.
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.