More Fair Competition: Corporate Defendants Gain a Measure of Protection Against Nationwide Consumer Class Actions
February 1, 2017
Visa Requires Change to Merchant Agreements
February 3, 2017

The Federal Trade Commission’s (FTC) relentless attack on perceived deception in health-related advertising, particularly weight-loss and disease-prevention claims, continues. From March 2004 through February 2005, approximately half of the consumer protection cases filed by the FTC involved allegedly deceptive health-benefit claims made by direct response/Internet marketers and national advertisers alike.

The FTC appears to treat DR marketers with a far heavier hand than national advertisers when it comes to the choice of remedies. Whereas the Commission regularly pursues not only injunctive relief but permanent bans and consumer redress against direct response marketers, it tends to require only “go and sin no more” injunctions, without redress, against national advertisers alleged to have engaged in substantially similar conduct.

Consider three recent FTC cases against Kentucky Fried Chicken Corp. (“KFC”), Tropicana Products Inc. (a subsidiary of PepsiCo), and the FiberThin/Propolene marketers, respectively.

Similar Cases, Different Results

Last year, the FTC accused KFC of running a false national advertising campaign which claimed that (1)eating two “Original Recipe” fried chicken breasts is better for a consumer’s health than eating a Burger King Whopper; and (2)eating KFC fried chicken is compatible with “low carbohydrate” weight-loss programs. The FTC contends that two KFC fried chicken breasts actually are less healthy than a Whopper, and that the latter claim is false because “low carbohydrate” weight-loss programs advise against eating breaded, fried foods.

Then, in June, the FTC threatened action against Tropicana over allegedly deceptive claims that drinking two to three glasses per day of its “Healthy Heart” orange juice would dramatically and measurably reduce the risk of heart disease and stroke — and that clinical studies proved it.

Also in June, the FTC moved against the direct response marketers of the dietary supplements FiberThin and Propolene for allegedly exaggerating their weight-loss benefits. Clinical studies supplied by the marketers showed that these supplements caused significant weight loss without change in diet or exercise. However, the FTC regards these and certain other weight-loss claims (so-called “red flag” claims) as patently unbelievable and prohibits them.
The FTC settled each of these cases by consent decree prohibiting the contested claims and any other false or unsubstantiated health claims. True to form, however, the FTC required the FiberThin defendants to pay substantial “consumer redress” as a condition to settlement without imposing the same requirement on KFC and Tropicana.

Why This Double Standard?

These and countless other cases involving similar claims exemplify the FTC’s disparate treatment of advertisers based on their “pedigree.” Part of the problem undoubtedly derives from the FTC’s own (arguably biased) perceptions. Companies like KFC and PepsiCo represent the perceived “reputable establishment,” while the marketers of FiberThin and Propolene came of age in the newer, more innovative and dynamic world of direct response marketing.

Admittedly there were bad actors in DR’s formative years, but the industry has now matured and taken its rightful place at the table of responsible commercial advertising. Simply put, if there ever was a basis for the FTC to “discriminate” against DR marketers, it no longer exists today.

Fairness dictates the FTC should require direct response marketers and national advertisers to play by the same rules, and hold them equally accountable when they don’t. Indeed, FTC Commissioner Paula Jones-Harbour appears to agree that national advertisers are getting off too easy, repeatedly noting the need for stronger remedies against those who would exploit consumer health concerns.

Confidence in government, including the FTC, requires that similarly situated parties be treated equally. The FTC has failed to meet this standard in its advertising enforcement efforts. To earn this confidence, it must begin to treat all advertisers alike in its application of remedies, particularly consumer redress.

Comments are closed.