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Brand Protection & Advertising

Stay ADvised: What's New This Week, September 27

10.01.21
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In This Issue:

You Say You Want a Resolution: Divided FTC Expands Compulsory Process in Eight Areas to Speed Up Enforcement

In a decidedly divided 3-2 vote, the Federal Trade Commission (FTC) has authorized a series of resolutions intended to facilitate investigations into practices that target particular populations, including: (1) unlawful conduct directed at veterans and service members; (2) unlawful conduct directed at children; (3) bias in algorithms and biometrics; (4) dark patterns and deceptive conduct on the internet; (5) repair restrictions; (6) abuse of intellectual property; (7) common directors and officers and common ownership; and (8) monopolization offenses.

The eight new compulsory process resolutions, authorized by the FTC Act, are intended to enable agency staff attorneys and Commissioners to expeditiously issue civil investigative demands and subpoenas, without consideration by the full commission.

The resolutions are intended to make it easier for the agency to carry out enforcement actions in what it has called eight "key areas where the FTC's work can make the most impact." The time savings are especially important for the FTC right now given the agency's full merger slate, it said in a press release announcing the resolutions.

Along with abuse of repair restrictions, common directors and ownership, and monopolistic practices, the authorized resolutions target:

  • Service Members and Veterans: Enforcement actions against bad actors targeting vulnerable veterans have long been an area of focus. In his statement on the resolutions, Commissioner Rohit Chopra (recently confirmed to lead the CFPB) emphasized the need for more protections in this area, starting with what he called abuses targeting veteran education benefits.
  • Children Under 18: FTC's resolutions enable expeditious review of harmful conduct allegedly directed towards minors.
  • Algorithmic and Biometric Bias: With this resolution, FTC recognized the compelling need to investigate allegations of bias in algorithms and biometrics, which can have significant impacts for affected populations, whether intended or not.
  • Deceptive Conduct on the Internet: Expanding on an existing FTC resolution in this area, this resolution encompasses things like tech support scams and deceptive marketing of goods and services online, including pandemic-era scams—all of which are areas of FTC focus.
  • Intellectual Property Rights: Enabling FTC to more quickly address conduct involving abuse of intellectual property rights as a source of both anticompetitive and deceptive conduct in many different areas, including pharmaceuticals, technology and gasoline refining.

The compulsory resolutions streamline the FTC's ability to bring enforcement actions and gather critical evidence. These eight new resolutions join a number of additional resolutions the agency authorized on July 1, 2021, as well.

The move is not without its detractors, however, and was approved along party lines. In their joint dissent, Commissioners Noah Joshua Phillips and Christine S. Wilson claimed that the resolutions would decrease accountability at the FTC by no longer requiring the "informed and deliberated decision" of all the Commissioners.

FTC Chair Lina M. Kahn and Commissioner Rebecca Kelly Slaughter countered that not only are these resolutions in areas where harmful conduct often targets the most vulnerable, at a time when the FTC's heavy merger workload necessitates expeditiousness in other areas, but the FTC has been using such resolutions for many years. As to claims of decreased accountability, a Commissioner must sign off on any subpoena issued by a staff member, they said.

Key Takeaways

The areas outlined above appear to be in line with Chair Kahn's recent outline of her vision for the agency which suggests a focus on antitrust, rather than consumer protection matters, and an interest in taking a somewhat different approach when enforcing advertising and consumer protection violations.

SlimFast Vows to Appeal NAD Snub of "Clinically Proven" Weight Loss Marketing

SlimFast has "energy for days," but that doesn't mean it's "clinically proven" to help consumers lose weight, according to the National Advertising Division (NAD). That decision left the company stewing after NAD recommended that it discontinue its ubiquitous "Clinically Proven" weight loss claims.

Simply Good Foods, owner of the Atkins brand, brought this challenge before NAD arguing that SlimFast falsely claimed that more than 53 of its products delivered "clinically proven" weight loss. The challenger also targeted claims regarding the product's ability to deliver sustained energy and satiate hunger.

In support of its "clinically proven" claims, SlimFast relied on evidence showing that consumers who follow a structured, calorie-restricted meal plan can expect to lose weight, relying on expert testimony and studies of prior iterations of SlimFast products.

Here, NAD expressed concern that consumers would expect that each product bearing the claim—including SlimFast Original, Diabetic and Keto, among others—had themselves been clinically evaluated and "clinically proven," when in fact they had not. However, NAD noted that "[n]othing in this decision prevents the Advertiser from making a narrowly tailored claim that low-calorie diets are 'clinically proven' to help people 'lose weight' and 'keep it off' provided, however, that it disclose, clearly and conspicuously, in close proximity to the main claim, that long term weight maintenance will likely include some weight regain."

NAD noted that its reasoning was in line with FTC guidance advising that claims, which cite a certain level of support, must be backed up by that level of support. The need for solid establishment evidence to back up "clinically proven" weight loss claims was especially important given that dieters are a vulnerable target audience and considering the high evidentiary standard for establishment claims.

NAD found that SlimFast had provided a reasonable basis for its sustained energy claims ("energy for hours"). NAD further recommended that the performance claims "4-hour hunger control" and "satisfies hunger" be modified with a clear, conspicuous disclosure in close proximity to the main claim that informs consumers of the limitations of the study, e.g., that satiety was measured in laboratory-controlled setting.

Key Takeaways

NAD precedent suggests that companies relying on "clinically proven" claims must generally show that the clinical testing involved the claimed product and not simply other products within the same category. SlimFast has elected to appeal NAD's decision, arguing that NAD failed to give sufficient weight to the opinions of its experts. This would certainly not be the first time that NARB and NAD reached different conclusions as to the appropriate level of support.

For Diabetic-Friendly Supplement Claim, How Sweet It Is to Be Supported by NAD

Diet supplement maker Almased sells weight loss and diet shakes marketed to "fix the metabolism," which were billed as "diabetic friendly." Concerned about the veracity of the company's claims, supplement industry trade group Council for Responsible Nutrition (CRN) challenged Almased's claims.

NAD found the claim–that Almased is "…so safe that even people with diabetes can use it"–was supported by the evidence provided by the advertiser. This evidence comprised multiple studies on the efficacy of Almased on "weight loss, glucose reduction" and "insulin resistance."

Noting that it was only considering studies relevant to the claim at issue, NAD focused on the evidence "which addressed whether the product was safe for use by diabetics." It found that the studies provided showed no reported adverse effects referencing the product's safety, and determined that the safety claim for supplement use by diabetes sufferers was supported. So long as no adverse effect is reported by the studies, the safety claim is supported.

Notably (and uncharacteristically), NAD did not reveal its analysis of the studies but presented a list provided by Almased, as evidenced by a long footnote to the decision. However, NAD cited two cases in which it had reached similar conclusions about safety claims in dietary supplements.

In Prelief Dietary Supplements, Case #5991, NAD determined that Prelief supplement's claim–that it is "safe and effective"–was supported by studies showing that a key ingredient in the product was tolerated well in foods including infant formula. In Omega XL Dietary Supplements, Case #5870, NAD likewise held that advertiser studies showed "no serious health conditions were reported among the Omega XL participants."

Aside from the safety claim, NAD said Almased had voluntarily discontinued a number of other claims about the efficacy of the product prior to the pendency of the proceedings, including that it will have "positive effects on body weight and overall health" and "reset the metabolism from day one."

Key Takeaways

Taken at face value, the decision reveals a fairly easy bar for dietary supplement advertisers to prove that a "soft" safety claim is supported. It should be stated that there is a vast difference between a claim that a product is safe for use by someone with diabetes or another serious disease, and one that claims it is either "clinically proven" to be safe, or is effective in the treatment of that disease, claims Almased did not make.

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