Stay ADvised: What's New This Week, June 13
In This Issue:
- Air Purification Co. Can Breathe Easier About Making Some Claims After NAD OK But Must Discontinue Others
- NAD Has a "Gut" Feeling That IBS Probiotic Claims Aren't Substantiated
- The "Income" May Have Been an "Illusion," But Now the FTC's Returning Some of the $$$
- Plaintiffs Send CVS Homeopathic False Ad Suit Back to State Court
Air Purification Co. Can Breathe Easier About Making Some Claims After NAD OK But Must Discontinue Others
Hoping to clear the air of what it asserts are unsupported claims about the efficacy of several air purification devices made by RFG Environmental Group, competitor Synexis LLC challenged at the National Advertising Division (NAD) the claims about the RFG products' efficacy, health benefits, and safety.
Examining RGF's claims, NAD drew a clear distinction between "total" purification claims and "whole home" purification claims. Considering statements that the REME HALO air purifier provides "total indoor air purification," NAD found the evidence did not support the broad message conveyed by the claim that the product can purify the "totality of a home." That's because although RFG did submit evidence going to the general efficacy of its products, it did not demonstrate the REME HALO can provide a "continuous, complete and 100% pollutant-free environment." NAD also asked RFG to discontinue implied claims that its test results mirror real-world scenarios showing its products purify an entire home of all its contaminants.
NAD came to a different conclusion, however, regarding RFG claims that REME HALO provides "whole home…purification" that "kills bacteria and viruses on surfaces and in the air." According to NAD, this claim conveyed a more narrow message that the purifiers are "generally effective" at reducing the amount of indoor contaminants, and not that the product "effectively purifies every home space of all contaminants on all surfaces."
NAD found that the evidence provided by RFG did provide a reasonable basis to support this more narrowly drawn claim. The company submitted "extensive testing and analyses of its products through well-credentialed third-party" labs that "yielded consistent results." These studies were conducted in a range of real-world environments and showed that the products were effective at improving indoor air quality and reducing some surface bacteria.
Finally, Synexis also challenged safety claims made by RFG that all its emissions are "friendly oxidizers" and that "there is no known case of hydroperoxides [emitted by RFG purifiers] ever creating a health risk." Although NAD found that the advertising conveyed a broad and supported message about the safety of RFG's devices, it still concluded that the claims "may reasonably convey broader messages about the proven safety of RGF's devices than what has been proven about the safety of the devices." Further, because RGF hadn't shown that its devices were "ozone-free," NAD recommended the company discontinue the claim about "friendly oxidizers." Finally, NAD had some trouble with the sheer certainty conveyed in the claim about hydroperoxides' safety. Though it was true that nothing in the evidence suggested they caused health issues, neither had they been studied "to the point of ruling out any single adverse health effect."
We all know that NAD takes particular interest in health and safety claims and examines related support closely. This case further illustrates NAD's consistent wariness with claims it considers promise "total" or "absolute" or "complete" or "100 percent" anything. More often than not, such claims to NAD are not puffery and require absolute support, a very difficult burden to meet.
NAD Has a "Gut" Feeling That IBS Probiotic Claims Aren't Substantiated
The National Advertising Division (NAD) concluded that health claims made by a manufacturer of a probiotic medical food called Culturelle, marketed to improve symptoms of irritable bowel syndrome (IBS), were not supported by the evidence.
NAD reviewed a challenge by The Procter & Gamble Company (P&G) regarding claims made by advertiser i-Health that its Culturelle IBS Complete Support ("Culturelle IBS") product is "clinically shown to help relieve the intensity & reduce the frequency of symptoms associated with IBS" and "…relieve your IBS symptoms." P&G also challenged implied claims that Culturelle IBS treats, mitigates, and prevents IBS.
When considering whether the advertiser had shown a reasonable basis for its health claims, NAD noted that the advertiser must provide "competent and reliable scientific" evidence for its claims. The level of such support differs subtly for an establishment or "clinically proven" claim and more general efficacy claims. In NAD's view, the studies provided by the advertiser fell short and so were not a "good fit" for either type of claim.
Regarding the advertiser's "clinically proven" claims, NAD reasoned that the claims conveyed a message for IBS sufferers more generally, not just that a clinical trial existed. Further, NAD explained that "clinically proven" claims in the context of a health establishment claim must be supported by randomized controlled trials (RCTs) which provide "controlled, consistent and reproducible conditions." Here, the lack of blinding and a placebo control in the relevant Culturelle study meant that the advertiser couldn't rely on that study to call the product "clinically shown" to reduce these symptoms.
Moving on to more general product efficacy claims, NAD explained that competent and reliable evidence in this context enjoys a somewhat more flexible standard than overtly establishment ("tests prove") claims. Nonetheless, i-Health markets Culturelle as a "medical food" (NAD left to the FDA consideration of whether the term itself is appropriately applied), and its claims were clearly health-related—requiring a level of competent and reliable scientific evidence both the FTC and NAD have described before, even if an RCT is not strictly necessary. NAD was looking for a "reliable and methodologically sound study that Culturelle IBS…provides meaningful relief from IBS symptoms." Instead, i-Health submitted a study with multiple flaws (the same study relied on for its establishment claims), including lack of a placebo control and blinding. NAD made its recommendation, even as it acknowledged that a placebo control is not an absolute requirement for all studies. NAD noted, however, that these markers of a well-designed study are "particularly important" when a study measures pain relief, which enjoys a notoriously high placebo effect. Accordingly, NAD determined that the study did not support that "Culturelle IBS, when used as directed, provides meaningful relief to consumer suffering from IBS symptoms."
NAD further noted that in cases where the advertiser relies on emerging research, as i-Health also did here, the advertiser should indicate the "emerging and limited nature of the research" in the claims themselves.
Even when it came to the product name, on which NAD typically defers to the advertiser in the absence of perception evidence that consumers are misled, NAD in this case recommended "IBS Complete Support" be discontinued. NAD will generally recommend a name change in the absence of perception evidence only when the name conveys an expressly deceptive claim. Here, NAD said although the product name states the product will provide "complete support" for IBS, the only evidence provided to support what it considered to be an express efficacy claim was the aforementioned deeply flawed study.
This case presents a primer for how NAD reviews support for establishment claims, health claims more generally, requests for a name change and when it will (and won't) defer to a federal agency, here the FDA. It is worth a close and careful read.
The "Income" May Have Been an "Illusion," But Now the FTC's Returning Some of the $$$
The Federal Trade Commission (FTC) announced it will return more than a half-million dollars to consumers allegedly defrauded by Digital Income System (DIS) and its money-making scheme that made off with consumers' money after making grandiose (and false) promises of earnings.
As part of its Operation Income Illusion, which targeted companies enticing consumers with work-from-home and employment programs, the FTC in 2020 sued DIS, alleging that the company falsely promised customers thousands of dollars in commissions for selling its memberships but that participants often earned little to nothing.
The company made claims such as "Every time one of our professionals closes a sale on your behalf, we will send you a huge commission check straight to your doorstep." Instead, consumers shelled out anywhere from $500 to $25,000 to take part.
The FTC alleged DIS and its principals and promoters peddled the "fully-automatic" sales process whereby consumers would not need to do any work to earn hefty commissions. The complaint alleged that these representations were false, misleading, unsubstantiated, and in violation of the FTC Act.
In 2021, the company agreed to settle the allegations in exchange for a $3.6 million judgment, which was scaled back due to the company's inability to pay in full. Still, the FTC is now returning some of the money it did collect to consumers harmed by the scam.
In addition to the monetary component, DIS and its principals and promoters are permanently barred from advertising, promoting or offering for sale any business or investment opportunity or misrepresenting potential earnings from such opportunities. They are also prohibited from owning a financial interest in such a business.
The FTC's case against DIS was one of several matters filed by the FTC against companies running deceptive earnings schemes, all of which came before the Supreme Court ruled in AMG Capital Management that Section 13(b) of the FTC Act does not permit the FTC, in federal court, to seek equitable monetary relief—a fact highlighted by the FTC in its press release announcing the monetary remuneration. In response to AMG, the FTC specifically targeted earnings schemes with Notice of Penalty Offense letters sent to more than 1000 companies in late 2021. The FTC has also proposed rulemaking giving it more power to seek monetary penalties against companies making these types of deceptive earnings claims. Bottom line, the FTC has the will and continues to look for the way of getting relief to consumers.
Plaintiffs Send CVS Homeopathic False Ad Suit Back to State Court
Plaintiffs in a lawsuit alleging that CVS misled them about the curative powers of homeopathic products have garnered a temporary win, as a court granted their request to remand the matter back to state court (and in the process denied CVS's motion to dismiss as moot in light of remand). In a procedurally dense order for remand, the court held that plaintiffs do not have standing to sue in federal court.
Calling CVS's marketing and labeling of homeopathic products a "health fraud," four California plaintiffs filed the suit in California state court, alleging that CVS misbrands homeopathic products as drugs sold to alleviate things such as cold and flu symptoms. According to plaintiffs, CVS sold these homeopathic products "designed to entice consumers to purchase what are labeled as natural side-effect free treatments usually associated with self-limiting conditions like the cold and flu," despite a lack of scientific evidence that the medicines are effective.
Plaintiffs' complaint alleged violations of California's Unfair Competition Law and the Sherman Food, Drug, and Cosmetic Law (Sherman Law), and they sought an injunction to prevent CVS from marketing homeopathic products they say are labeled as drugs meant to treat or prevent disease.
CVS removed the matter to federal court and subsequently filed a motion to dismiss. Just about a week later, plaintiffs filed a motion to remand the case back to state court, arguing that they had not met the standard for having standing to bring a claim in federal court.
The court agreed that plaintiffs do not have standing in federal court on their claim for injunctive relief because plaintiffs alleged no interest in purchasing the product in the future, which is necessary to show standing. Indeed, plaintiffs explicitly stated that they believe the CVS homeopathic products are a "health fraud" and that they have no intention of ever purchasing them.
The court was unmoved by CVS's arguments to discredit plaintiffs' intent to not purchase the homeopathic products in the future as a sham. In response, the court stated categorically "A desire not to purchase a product a person believes is fraudulent…. Hardly seems like a sham."
In its order for remand, the court reasoned that without the claim for injunctive relief, the court would not be hearing a case with an amount in controversy of at least $75,000 and thus did not have diversity jurisdiction over the matter. Given that restitution for the plaintiffs would amount to less than $100 (this not being a class action matter), only the inclusion of attorneys' fees would potentially raise the amount at issue to more than $75,000, and the court could not say with certainty whether these fees would even be awarded.
Finally, the court quickly disposed of CVS's argument that the plaintiffs were forum shopping, though "it appears that Plaintiffs have indeed crafted their complaint that way," given that they were California plaintiffs, enforcing California law, in California state court.
Not everyone is interesting in reliving civil procedure, but fundamentals matter. Removing this action to federal court would theoretically have given CVS some advantage, but by not paying attention to the fundamentals of civil procedure, this strategic move crashed and burned pretty quickly. It turns out that lawyers do learn some pretty important and fundamental aspects of litigation that first semester in law school.