POM v. FTC: A dozen quotable quotes from the D.C. Circuit opinion

POM Wonderful’s advertising claims were false and deceptive. That’s the conclusion of the United States Court of Appeals in upholding the FTC’s ruling. We think it’s a momentous victory for our two clients: American consumers and the cause of truth in the marketplace. You’ll want to read the entire opinion, of course, but here are twelve quotes from the D.C. Circuit’s decision that businesses, attorneys, and law enforcers will be citing for years to come.

“The FTC Act proscribes – and the First Amendment does not protect – deceptive and misleading advertisements.”  Companies often cite the First Amendment as a defense in FTC cases. They forget the foundational principle that misleading ads get no constitutional protection.

“The Commission had no obligation to adhere to notice-and-comment rulemaking procedures before imposing liability in its adjudicatory proceeding.”  POM claimed that the FTC had to undertake a rulemaking – rather than bringing a lawsuit – because it was imposing a major change to its substantiation standard. Wrong on two counts, the Court concluded. First, the FTC is “not precluded from announcing new principles in an adjudicative proceeding.” But the bigger point is that the legal principles the FTC applied were well-settled “business as usual” standards. As the Court held, “With respect to POM’s establishment claims, the substantiation standard applied by the Commission is consistent with Commission precedent. When an advertiser represents that claims have been scientifically established, the FTC has long held the advertiser to the level of evidence required to convince the relevant scientific community of the claim’s truthfulness.”

“The Commission is often in a better position than are courts to determine when a practice is deceptive within the meaning of the FTC Act, and that admonition is especially true with respect to allegedly deceptive advertising since the finding of a § 5 violation in this field rests so heavily on inference and pragmatic judgment.”  Courts give administrative agencies a lot of deference when it comes to subject matters within their purview. For the FTC, that includes determinations of what an ad conveys and when it’s deceptive under Section 5. Why such a standard? Given its decades of collective institutional experience, that’s the FTC’s bread and butter.

“The Commission examines the overall net impression left by an ad and considers whether at least a significant minority of reasonable consumers would likely interpret the ad to assert the claim.”  Nothing new there, but the D.C. Circuit offers a succinct reminder of that touchstone. People can interpret ads more than one way and advertisers must substantiate all reasonable interpretations consumers take from their ads.

“In identifying the claims made by an ad, the Commission distinguishes between efficacy claims and establishment claims. An efficacy claim suggests that a product successfully performs the advertised function or yields the advertised benefit, but includes no suggestion of scientific proof of the product’s effectiveness. An establishment claim, by contrast, suggests that a product’s effectiveness or superiority has been scientifically established.”  This, too, should be old hat for advertisers. If an ad conveys an efficacy claim, the advertiser needs a reasonable basis to support it. The FTC analyzes that under the Pfizer factors the type of product, the type of claim, the benefit of a truthful claim, the ease of developing substantiation for the claim, the consequences of a false claim, and the amount of substantiation experts in the field would consider reasonable. But once advertisers claim to have a certain level of proof, they’ve upped the ante and “must possess the specific substantiation claimed.” What if an ad conveys a non-specific establishment claim – for example, by saying that a product has been “medically proven” to work or by using visuals that suggest it’s “based upon a foundation of scientific evidence”? In that case, the advertiser “must possess evidence sufficient to satisfy the relevant scientific community of the claim’s truth.”

“When an ad represents that tens of millions of dollars have been spent on medical research, it tends to reinforce the impression that the research supporting product claims is established and not merely preliminary.”  The Court quoted the Commission’s opinion to reject POM’s contention that it wasn’t making establishment claims. The company said that it mentioned medical research just to explain the context so consumers could evaluate things for themselves. The Court didn’t see it that way: “Here, however, the advertisements go beyond merely describing specific research in sufficient detail to allow a consumer to judge its validity.”  In fact, “The study results are referenced in a way that suggests they are convincing evidence of efficacy.” What’s more, POM’s ads “invoked medical symbols, referenced publication in medical journals, and described the substantial funds spent on medical research, fortifying the overall sense that the referenced clinical studies establish the claimed benefits.”

“The use of one or two adjectives does not alter the net impression, especially when the chosen adjectives (such as “promising”) provide a positive spin on the studies rather than a substantive disclaimer.”  That’s a quote from the FTC opinion cited favorably by the D.C. Circuit. POM tried to disavow its numerous establishment claims by arguing that it just said the scientific research was “promising,” “initial” or “preliminary.” As the FTC countered, “Those sorts of modifiers do not neutralize the claims made when the specific results are otherwise described in unequivocally positive terms.” The message to marketers: Don’t sprinkle a few adjectives here and there and expect them to undo the net impression conveyed to the buying public.

“In reviewing whether there is appropriate scientific substantiation for the claims made, our task is only to determine if the Commission’s finding is supported by substantial evidence on the record as a whole. When conducting that inquiry, we are mindful of the Commission’s special expertise in determining what sort of substantiation is necessary to assure that advertising is not deceptive.” The Court again deferred to the FTC’s stock-in-trade: ascertaining the kind of proof companies need to support their ad claims. The opinion carefully evaluated POM’s purported evidence and why the FTC was correct in concluding that it fell short. You’ll want to read the opinion for the details, but one thing that caught our eye was the number of times the Court observed that POM made broad claims in its ads about the nature of the scientific evidence while ignoring serious flaws:

• “POM touted the results of the second Ornish study in its ads and promotional materials without noting the study’s limitations or acknowledging that patients in the treatment group showed no statistically significant improvement in blood flow on two of three measures.”
• “POM, however, made no mention of the limitations of the Pantuck study in its public statements."
• “In its public statements about Dr. Padma-Nathan’s study, POM made no mention of the negative results with respect to the validated IIEF measure.”
• “In 2009 and 2010, POM similarly touted the GAQ findings – again without any mention of the negative IIEF results – on websites and in print ads.”

A related example cited by the Court is where POM “repeatedly touted the results of Dr. Aviram’s limited CIMT study without noting the contrary findings in Drs. Ornish’s and Davidson’s later and larger studies.” What can advertisers take from that? Don’t latch on to one intriguing tidbit to the exclusion of bigger, better evidence. Put another way, rather than searching for the one potentially favorable needle, evaluate the haystack of relevant science.

“In finding petitioners liable for deceptive ads, the Commission determined that petitioners’ efficacy and establishment claims were misleading because they were  unsubstantiated by RCTs. We have upheld that approach in this opinion.”  The FTC’s experts in cardiology and urology testified that randomized, double-blinded, placebo-controlled clinical trials are necessary to substantiate claims that a product treats, prevents, or reduces the risk of disease, a conclusion the Court upheld. Why RCTs? Because methodologically sound studies build in procedures – control groups, the random assignment of test subjects, double-blinding, etc. – that work together to ensure the reliability of the results. Furthermore, the RCT requirement is nothing new: “With respect to POM’s efficacy claims, the Commission arrived at its RCT substantiation requirement by applying the traditional Pfizer factors. That conclusion coheres with past Commission decisions applying Pfizer, including Pfizer itself.”

“Petitioners contend that it is too onerous to require RCTs to substantiate disease-related claims about food products because of practical, ethical, and economic constraints on RCT testing in that context. The Commission was unpersuaded by that argument, and so are we.”  Good science takes time and money. But that doesn’t change advertisers’ obligation to support disease-related claims for all products – including foods – with randomized clinical testing. What’s more, POM said it spent “$34 million in medical research,” including several RCTs. The point here is that if you’re investing in clinicals, it’s wise to use testing methodologies designed to yield reliable results and to evaluate those results with objective eyes. What if a company doesn’t want to do that kind of testing? The Court cited the FTC’s position that “the need for RCTs is driven by the claims” that an advertiser has “chosen to make.” Simply put, if you’re not prepared to meet the RCT standard, don’t make the kind of claims that require it.

“Individuals may be liable for FTC Act violations committed by a corporate entity if the individual participated directly in the deceptive practices or acts or had authority to control them.”  Former POM President and COO Matthew Tupper challenged the Commission’s decision to hold him individually liable, arguing that the company’s co-owner Lynda Resnick had the “final say” on the ads. The Court rejected the assertion that individual liability under the FTC Act extends only to those with “final say” over deceptive acts or practices. The Court also rebuffed his claim that the FTC had the burden of proving he knew POM’s ad were misleading. “When the Commission does not seek restitution or monetary penalties, the FTC Act imposes a strict liability standard and creates no exemption . . . for unwitting disseminators of false advertising.”

“. . . [T]he injunctive order’s requirement of some RCT substantiation for disease claims directly advances, and is not more extensive than necessary to serve, the interest in preventing misleading commercial speech. We reach the opposite conclusion insofar as the remedial order mandates two RCTs as an across-the-board requirement for any disease claim.”  Based on the facts of this case, the Court scaled back the portion of the Commission Order that required two RCTs for all disease claims. An evaluation of the Court’s rationale offers guidance for advertisers and the FTC. Most importantly, the Court put the emphasis on quality, not quantity, and offered this hypothetical:

Consider, for instance, a situation in which the results of a large-scale, perfectly designed and conducted RCT show that a dietary supplement significantly reduces the risk of a particular disease, with the results demonstrated to a very high degree of statistical certainty (i.e., a very low p-value) – so much so that experts in the relevant field universally regard the study as conclusively establishing clinical proof of the supplement’s benefits for disease prevention. Perhaps, moreover, a wealth of medical research and evidence apart from RCTs – e.g., observational studies – reinforces the results of the blue-ribbon RCT. In that situation, there would be a substantial interest in assuring that consumers gain awareness of the dietary supplement’s benefits and the supporting medical research (and without any qualifiers stating, misleadingly, that the evidence is “inconclusive.”)

What we take from the Court’s decision is that there could be a single study that is large, well-designed, well-conducted, and consistent with the entire body of relevant and reliable scientific evidence that it would be sufficient to support a disease claim. Of course, there could be claims the very nature of which might militate in favor of multiple RCTs and the Court left that door open: “That is not at all to say that the Commission would be barred from imposing a two-RCT-substantiation requirement in any circumstances.” The Court simply concluded that a standard of at least one RCT was appropriate in light of the record before it in POM.

(This post was updated on February 9, 2015, to indicate that the Court said a standard of at least one RCT was appropriate in light of the record before it in POM.)