March 22, 2012

FTC Loses Again on Substantiation Issue

Seller Beware: Consumer Protection Insights for Industry

The FTC's efforts to enforce consent judgments were set back again, this time by a federal district court ruling in the Southern District of Florida. The FTC again lost on the question of whether the advertiser possessed competent and reliable scientific evidence supporting its claims.

The court rejected what it apparently saw as an overly aggressive enforcement position regarding a 2006 consent judgment with Garden of Life, Inc. and its owner. That consent judgment prohibited disease claims unless such claims were substantiated by competent and reliable scientific evidence and prohibited the misrepresentation of any test or study. The FTC alleged that Garden of Life (i) falsely claimed that three products did not contain soy allergens; (ii) made unsubstantiated claims about the benefits of its Ocean Kids products; (iii) made unsubstantiated claims about the superiority of two products compared to competing products; and (iv) falsely claimed that the superiority claims were supported by human clinical studies.

In support of its no soy allergens claim, Garden of Life received an allergen statement from its supplier that the raw materials used did not contain soy, confirmation from one of the supplier's executives that allergenic ingredients were not used, and a statement from the supplier that its fermentation process consumes or destroys any residual soy. Although the FTC's testing found soy in the affected products, it did not provide any evidence that the soy came from the supplier's products. Furthermore, the product at issue was voluntarily recalled prior to the FTC's complaint, undercutting the FTC's claims of harm. Based on these facts, the court held that the FTC failed to prove by clear and convincing evidence that Garden of Life lacked competent and reliable scientific evidence substantiating the no soy allergens claim.

Garden of Life made various claims about the ability of its Ocean Kids soft gels to boost or support mental and cognitive functions, mood and behavior, and eye development. The FTC's expert opined that these claims were not substantiated by competent and reliable scientific evidence. Garden of Life's expert opined that they were. With no detailed discussion of either expert's opinion, the court refused to find that Garden of Life violated the consent judgment based on a disagreement between experts.

The court held that the prohibition on unsubstantiated claims concerning "absolute or comparative health benefits, efficacy, [or] performance" did not cover comparisons to competing products, but only claims about the product's health benefits or health improvements compared to not using the product. Even if the order did cover comparisons to competing products, the court concluded that the FTC "took several statements out of context and manipulated them in an attempt to substantiate its allegation that [Garden of Life] made unsubstantiated comparisons of the Grow Bone System to other products."

Finally, the court rejected the FTC's allegation that Garden of Life misrepresented "'the results and validity of clinical studies of AlgeaCal when marketing RAW Calcium and the Grow Bone System.'" The court concluded that under the consent judgment Garden of Life was not required to conduct studies of RAW Calcium and the Grow Bone System. Furthermore, in a strict reading of the consent judgment, the court stated that it did not require that the studies "be reliable or performed in a certain manner" -- instead, all the consent judgment requires is that the statements about the studies (e.g., that study participants consumed the ingredients in the Grow Bone System) be literally true, which they were. Perhaps influencing these conclusions, the court went on to note that Garden of Life's expert had opined that the RAW Calcium and the Grow Bone System claims were supported by competent and reliable scientific evidence.

The Garden of Life decision is another example of a trend we have documented here over the past couple of years: a court disagreeing with the FTC about the quantity and quality of evidence required to satisfy the competent and reliable scientific evidence standard. These decisions have prompted the FTC to incorporate into consent orders more specific and stringent standards for what constitutes competent and reliable scientific evidence for certain claims, such as the requirements regarding two adequate and well-controlled human clinical studies and essentially equivalent products in the Iovate and Nestle cases. What remains to be seen is whether courts will construe the new substantiation provisions in the way that the FTC intends. Given recent history, that is hardly a sure thing.

© Arnold & Porter Kaye Scholer LLP 2012 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.

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