Worldwide Regulatory Review: United States
Regulatory agencies in the US are coming down hard on false and misleading claims for foods and dietary supplements. Jeff Hilton highlights some of the potential pitfalls facing manufacturers and marketers, and suggests how best to avoid them
History will document that the passage of the Dietary Supplements Health and Education Act in 1994 spurred a wave of growth that swept through the natural products industry. Trade and consumer advertising activity escalated to unprecedented levels, and with heightened visibility came increased bravado in making claims about the health benefits offered by natural products. Structure/function claims were discussed and debated, and many unfair and unsubstantiated claims consequently slipped through the corporate screening process.
By 1996, the Internet was picking up speed, becoming a more integrated part of consumer life. Small, and some might say ?fly-by-night? manufacturers with nothing to lose and much to gain found that it was easy and quick to post outrageous ads and make unsubstantiated claims to a quickly expanding and gullible online audience. And so the stage was set for a new era of intensified scrutiny and regulation by the Federal Trade Commission.
In the years since, millions of new consumers have entered the natural products marketplace, and as manufacturers and retailers have expanded their product offerings, the competition has intensified, fuelling the temptation to be more aggressive with claims language.
Meanwhile, the FTC has become increasingly attentive to the marketplace and diligent in searching out and punishing offending companies, and not with just a slap on the wrist. Redress settlements are now commonly in the millions of dollars.
Current FTC battlegrounds include weight loss and sports nutrition, but others are on the horizon including sexual enhancement, cardiovascular disease and cognitive function. Marketers need to understand how the FTC functions and what types of claims and language might put them at risk.
How the FTC works
The FTC is the primary federal agency regulating advertising and overseeing products sold directly to consumers. It also has broad authority to ?prohibit deceptive acts or practices? in advertising that makes deceptive claims, fails to reveal material information, is unfair, or makes an objective claim for which the advertiser did not possess a reasonable rationale.
The FTC defines false advertising as advertising that is misleading in a material respect—?material? meaning in a way that would likely influence a consumer?s decision to purchase or not purchase a product.
It is important to recognise that FTC investigations are private, but FTC enforcement is very public. Press releases are distributed when a consent order is issued and once it is approved. FTC investigations are initiated in many ways, but are most commonly based upon FTC market surveillance, referral from another agency, competitive complaints, consumer groups or an offended individual. Consent orders are the most common resolution of an FTC complaint. A consent order outlines the steps required for a company to resolve the complaint, including financial redress. While it is not an admission of legal wrongdoing, it is legally binding with civil penalties for noncompliance.
The FTC applies three general legal standards to the regulation of all advertising: substantiation, deception and fairness.
- Substantiation means that the advertiser is accountable for backing up all objective claims, before they are disseminated, at the level and type of substantiation represented in the claims advertised.
- Deception means that the advertiser makes a representation, omission or practice that is likely to mislead the consumer. And that representation must be a material one. The FTC always looks at the practice from the perspective of a ?consumer acting reasonably.?
- Unfairness refers to an act or practice that causes or is likely to cause substantial injury to consumers that is not reasonably avoidable.
Manufacturers need to protect themselves by knowing their product in terms of ingredients, supporting science and intellectual property. Many unsubstantiated claims are made out of ignorance. Some good advice is that the better you understand your product offering, the better equipped you will be to create advertising that represents the product responsibly.
It is vital to also understand the market you are doing business in. Be careful of emotion-driven categories, such as weight loss, breast enlargement and sexual enhancement, because the consumer is often more willing to believe and can be more easily misled or deceived. And obviously, steer clear of FTC lightning rods such as AIDS, SARS or cancer. In addition, be cautious with serious disease statements because the consequences to a misled consumer are much more substantive, particularly if they forgo traditional treatment to pursue a natural course of action. This includes categories such as heart health, brain health, eye health and joint health.
Finally, it helps to understand your consumer. Be careful with vulnerable consumer segments such as the elderly, children and the handicapped. Fairness issues quickly come into play since these groups are more easily misled or deceived.
In 1998, the FTC published guidelines for dietary supplements advertisers. These guidelines address several issues of importance to supplements advertisers.
Substantiation is required for both express claims (stated) and implied claims. Implied claims can be the result of both graphics and copy, including the product name. Advertisers are warned to consider the ?net impression? of their ads in evaluating their liability. The FTC holds advertisers responsible for all ?reasonable interpretations? of their advertising.
Deception has its own set of issues and accusations to avoid. Advertisers should be certain to include any qualifying information on the product?s health benefits—for example a proven weight-loss formula that was only tested on participants already on a diet and exercise programme. In other words, avoid misleading by omission. It is also important to disclose in the advertising any significant safety concerns, and that disclosure must be both clear and prominent in terms of language and type size.
Research support must include studies that have been conducted and evaluated by qualified people using procedures that yield accurate and reliable results. In addition, studies must match the ?level of support? promoted in the ad.
For example, if copy in an ad claims that ?scientists now agree? about the benefits of a product, the advertiser must be able to prove scientific consensus beyond simply a supporting study or two. Consumer testimonials can be powerful advertising tools, but some caution is in order. Consumers in ads should not make claims that would be deceptive or could not be substantiated if made directly. The advertiser must also provide adequate substantiation that the testimonial experience is representative of what consumers will generally achieve. And keep in mind that anecdotal evidence is generally insufficient support for a claim.
Expert endorsements can likewise be effective but also dangerous. The qualifications of the expert must be both appropriate and relevant to the nature of the product and the health benefits it provides. In other words, a physical therapist has little credibility talking about cardiovascular health. It is also critical to disclose in the ad any material (financial) connection between endorser and advertiser.
The regulatory environment will continue to evolve, but the FTC will no doubt get bolder as the consent orders continue to pile up. They will fish where the fish are, and that leaves functional foods and nutraceuticals advertisers in a tenuous spot. Manufacturers and marketers need to play smart by calculating risk, keeping a long-term perspective and seeking out professional guidance to step over the land mines in the marketplace.
Jeff Hilton is president, partner and co-founder of IMG, a branding and marketing agency. He has been recognised by Advertising Age as one of America?s top 100 marketers.
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