Thursday, August 27, 2009

FTC loses substantiation case because of good faith

FTC v. Lane-Labs USA, Inc. (D.N.J. Aug. 11, 2009)

Liability under the Lanham Act and the FTC Act is strict. What about liability under a FTC consent order requiring the advertiser to have scientifically reliable substantiation for its claims? Here, the district court found no violation of the consent order on what seem to me to be overstated grounds.

Lane-Labs made claims for a calcium product and a male fertility enhancer. Of particular note, among the representative claims for the calcium product were that AdvaCAL has been “clinically shown to be three times more absorbable than other calciums”; it’s “absorbed three times better than typical calcium carbonate/coral calcium supplements”; and it’s the “only” calcium that can increase bone mineral density. The FTC’s expert had previously been employed by Lane-Labs. The study he conducted compared absorbability of calcium between AdvaCAL and Citracal, another supplement. His study concluded that while AdvaCAL was absorbable, it was inferior to Citracal by 20%. The district court thought that he had unreasonable standards for what counted as scientific substantiation, but did not in any way criticize the results of this study.

The court found that the case was a battle of the experts, and credited defendants’ (current) experts over the FTC’s. The FTC’s calcium expert agreed that AdvaCal was a good source of calcium, and its fertility expert opined only that the active ingredient was not proven (also that it might be risky and that he therefore wouldn’t use it). Neither testified, the court concluded, that the products generated a health risk.

The court considered that Lane-Labs did what it was supposed to do: sought expert advice before relying on scientific articles, rather than making claims out of thin air. The court was concerned that laypeople should not have to do more than can reasonably be expected. This seems to be a new standard. So if a company is headed by a layperson, it can make broader and less reliable claims than Pharmacia can? The underlying idea, that one ought to be able to rely on peer-reviewed studies, is not at all crazy, but the court doesn’t seem very concerned about advertisers’ self-serving bias when they decide which evidence to rely on and which to discount, despite what happened in this very case.

The court concluded that various misstatements conceded by Lane-Labs had “slipped through the cracks,” but overall “the impression created by Defendants’ advertisements is that both supplements are good products that will most likely help the people who take them.” I didn’t realize that general impressions were all that was evaluated. The court was satisfied that the products were “good” and “could have the results advertised.”

The court was also concerned that Lane-Labs had, in compliance with the consent order, submitted its marketing materials to the FTC for years and only a few years ago gotten notified of the FTC’s intent to seek monetary penalties. “[T]o tell Defendants that their efforts were not good enough years after not advising them of any compliance issues is disengenuous and is highly relevant to the inquiry into whether Defendants should have done something different in the first instance.” The court, however, claimed not to be relying on a laches theory in rejecting the FTC’s claims. Still, because Lane-Labs obtained scientific evidence that experts said could be relied upon and were never told otherwise, it would be “fundamentally unfair” to find them in violation of the consent order now.

What I find especially interesting is that there is no suggestion in the opinion that there was a whit of evidence supporting the false comparative claims, and defendants had a study in hand concluding that their product was inferior. By the court’s own logic, that was the best evidence they had, and they should not have been making comparative claims even if they hoped that the evidence before them was wrong.


PG said...

FYI, the 3rd Circuit remanded to the District Court asking the judge to have another think about the substantiation of the claims about the defendant's product's superior calcium absorption powers, and the district court just (11/18/11) obediently reversed itself and found for the FTC.

Rebecca Tushnet said...

Thanks; I discuss the 3d Circuit ruling here.