What retailers need to know about the FTC’s new Health Products Compliance GuidanceWhat retailers need to know about the FTC’s new Health Products Compliance Guidance
Four key implications for retailers from the Federal Trade Commission’s new Health Products Compliance Guidance and how to act on them.
When the Federal Trade Comission (FTC) released its Health Products Compliance Guidance in December 2022, it sent shockwaves through the dietary supplement industry. Some anticipate that a day of reckoning is finally coming for brands making unsubstantiated health claims, whether from federal regulators or from private lawsuits leveraging this new guidance as ammunition in litigation. Others believe these fears are overblown and this FTC guidance is overstepping in its interpretation of the law.
Of note, one significant stakeholder has remained largely silent on the issue. Who, you ask? Retailers. Is it because of uncertainty on the role of retailers in ensuring the products they sell are not misleading consumers and can substantiate all their health claims? Is it the “ostrich effect,” the cognitive bias that describes how humans tend to avoid negative information even when it could help them in the long-term? Or are retailers simply waiting to see the impact of this guidance before taking action? Given continued supply chain issues, record inflation and shrinking consumer wallets, perhaps retailers are struggling enough as it is without taking on the additional effort of evaluating the health claims on their inventory?
Whatever the case may be for their current silence, retailers could benefit from proactively evolving their purchasing requirements, contracts and supplier assurance documentation to ensure compliant health claims on their inventory. This could not only reduce their risk of being targeted by federal regulators or class-action lawsuits, but more importantly, could distinguish them from competing retailers in the eyes of shoppers by removing products with misleading health claims from their shelves. Here are four areas of potential liability where retailers may want to take particular notice.
Retailer watch-out #1: Am I my inventory’s keeper?
That may very well be the case for retailers according to a class action lawsuit filed just last month against Amazon.com. The suit alleges Amazon is selling illegal drugs “masquerading as therapeutic dietary supplements” whose labels make “unapproved disease claims.” The lawsuit asserts that the retailer is complicit in placing unlawful drugs into the stream of commerce just by fulfilling online purchases. The suit references illegal implied health claims including but not limited to diabetes, high blood pressure and depression. But it’s not just retailers like Amazon.com getting sued over the products they carry. In 2022, Whole Foods Market was sued for measurable levels of antibiotics found in beef products on their shelves that were labeled antibiotic-free.
As stated in the Health Product Compliance Guidance: “Before disseminating an ad, advertisers must have adequate substantiation for all objective product claims conveyed, expressly or by implication, to consumers acting reasonably.”
As such, as a retailer, you might want to consider continuous improvement and adding an annual random audit of product labels to your quality system. Document this as part of your safety program so you can track and trend observations and follow-up with suppliers. Do your diligence to protect not only yourself and your store, but also your consumers.
Retailer watch-out #2: Don’t be complicit with implicit claims
Do you engage in online marketing as a retailer? Do you publish weekly circulars? Could the pictures be misconstrued by a consumer? Are each of these documents reviewed for FTC compliance? If they aren’t, they should be. Anyone participating in deceptive marketing is potentially liable under FTC law.
The updated Health Products Compliance Guidance makes it clear that the FTC is not just referring to the explicit statements, but also any claims consumers infer from the whole advertisement. A business must have evidence to substantiate the “net impression” consumers have from all elements of labels or advertisements. An advertisement can be misleading if even a “significant minority” of consumers take away a message that the business cannot substantiate.
As a responsible retailer, consider creating a best practices document for your team on what to avoid when it comes to ad creation. Ensure ads are not misleading with explicit or implied claims by first testing them with representative panels to ensure that any “net impressions” from even a “significant minority” of consumers can be defended.
Retail watch-out #3: Private label may provide more margin but also more liability
Let’s not forget about the private-label products retailers sell in addition to third-party brands. In 2020, Trader Joe’s was sued over the labeling of its 12 Grain Mini Snack Crackers. The lawsuit alleged the label was misleading because a majority of the product was white flour even though the product was marketed as a 12-grain blend. In this case, Trader Joe’s wasn’t just the retailer carrying the product, it was also the brand on the package marketing the product, creating more potential legal exposure and liability on multiple fronts.
According to the recent FTC Health Products Compliance Guidance, anyone directly involved in the marketing, promotion or oversight of a product is obligated to ensure compliance of its health claims. Anyone participating in deceptive marketing is potentially liable under FTC law. The FTC has taken action against product marketers, corporate officers, ad agencies and retailers.
You might want to incorporate a legal review of the health claims on the ads and labels in your inventory, especially private-label products.
Retailer watch-out #4: Product effectiveness shouldn’t be a novel concept
Over the past decade, the number of product certifications has proliferated significantly to give consumers reassurance as to the accuracy of claims such as gluten-free, non-GMO and organic. For whatever reason, ensuring the accuracy of health claims and product effectiveness hasn’t been a priority. Until now.
The new Health Products Compliance Guidance states that claims about the health benefits of a product must be substantiated by “competent and reliable scientific evidence,” which the FTC generally defines as “high-quality, randomized, controlled human clinical trials.” Furthermore, the FTC states that the population studied in the clinical trial should “reflect the characteristics of the population targeted by the ad.” That’s because individuals of different age or ethnicity, living in different geographies, with different lifestyles, diets or environmental exposures, will respond differently to health products. Most of the participants in U.S. clinical trials have been white men living in urban areas. Furthermore, it is not uncommon for supplement companies to run their trials in India. Would you really be able to stand by clinical trial data from urban white men or people in India as “reflecting” the average American being targeted by an ad? Would you expect a product’s effects to be consistent across all these groups? Probably not.
As a retailer, while you might be asking for proof of certification for product purity and origin, consider expanding your purchasing requirements to include proof of effectiveness—in study populations that reflect your shoppers—to substantiate any health claims to reduce your potential liability.
While the hot-off-the-press FTC guidance has many implications yet to be seen, retailers can still begin to mobilize on both the actual and philosophical calls to the actions outlined within the Guidance. It’s clear that the FTC has seen (and taken action) on its fair share of misleading and deceptive ads. Remember, retailers don’t need case law or federal guidance to voluntarily think about safety and effectiveness differently. So, use this FTC guidance as a call to action to scrutinize health claims on products you carry before unleashing them on your shoppers. After all, thoughtful preemptive actions could both reduce your liability exposure while also increasing consumer trust in your retailer brand.
Radicle Science is an AI-powered healthtech company, enabling dietary supplements to clinically prove their true effects beyond placebo at unprecedented affordability, speed and scale with their transformative Proof-as-a-Service approach. Learn more at www.radiclescience.com.
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