On April 13, 2013, the Federal Trade Commission (“FTC”) announced that it had sent a Notice of Penalty Offenses Concerning Substantiation of Product Claims and a Notice of Penalty Offenses Concerning Deceptive or Unfair Conduct around Endorsements and Testimonials letter to almost 700 marketing companies.

The purpose of a Notice of Penalty Offense (“NPO”) is to put firms on notice about deceptive or unfair acts or practices the FTC has previously fully litigated.  After the FTC issues an NPO, any recipient of the NPO is considered to be on notice of the prohibitions against those acts or practices.  After it issues an NPO, the FTC may seek civil penalties against a recipient who engages in the acts or practices that were the subject of the NPO.

The NPO concerning Substantiation of Product Claims lists the following as unfair and unlawful practices that could prompt FTC action:

• It is an unfair or deceptive act or practice for an advertiser to make an objective product claim without having a reasonable basis, at the time the claim is made, consisting of competent and reliable evidence.
• It is an unfair or deceptive act or practice for an advertiser to make a claim relating to the health benefits or safety features of a product without possessing and relying upon competent and reliable scientific evidence that has been conducted and evaluated in an objective manner by qualified persons and that is generally accepted in the profession to yield accurate and reliable results, to substantiate that the claim is true.
• It is an unfair or deceptive act or practice for an advertiser to represent expressly or by implication that a product is effective in the cure, mitigation, or treatment of any serious disease, including heart disease, cancer, arthritis, and erectile dysfunction, without possessing and relying upon at least one human clinical trial of the product that (1) is randomized, (2) is well controlled, (3) is double-blinded (unless the marketer can demonstrate that blinding cannot be effectively implemented given the nature of the intervention), (4) is conducted by persons qualified by training and experience to conduct such studies, (5) measures disease end points or validated surrogate markers, and (6) yields statistically significant results.
• It is an unfair or deceptive act or practice for an advertiser to misrepresent the level or type of substantiation for a claim.
• It is an unfair or deceptive act or practice to represent that a product claim has been scientifically or clinically proven unless, at the time the representation is disseminated, the advertiser possesses and relies upon evidence sufficient to satisfy the relevant scientific community of the claim’s truth.

The NPO concerning Unfair Conduct around Endorsements and Testimonials lists the following as unfair and unlawful practices:

• It is an unfair or deceptive trade practice to make claims which represent, expressly or by implication, that a third party has endorsed a product or its performance when such third party has not in fact endorsed such product or its performance.
• It is an unfair or deceptive trade practice for an advertiser to misrepresent that an endorsement represents the experience, views, or opinions of users or purported users of the product.
• It is an unfair or deceptive trade practice to misrepresent an endorser as an actual user, a current user, or a recent user of a product or service. It is an unfair or deceptive trade practice for an advertiser to continue to advertise an endorsement unless the advertiser has good reason to believe that the endorser continues to subscribe to the views presented in the endorsement.
• It is an unfair or deceptive trade practice for an advertiser to use testimonials to make unsubstantiated or otherwise deceptive performance claims even if such testimonials are genuine
• It is an unfair or deceptive trade practice to fail to disclose a connection between an endorser and the seller of an advertised product or service, if such a connection might materially affect the weight or credibility of the endorsement and if the connection would not be reasonably expected by consumers.
• It is an unfair or deceptive trade practice to misrepresent explicitly or implicitly through the use of testimonials that the experience described by endorsers of a product or service represents the typical or ordinary experience of users of the product or service.

The FTC voted 3-1 on March 31, 2023 to distribute the notices.  A statement by the three commissioners who voted in favor of distributing the notice states: “The principles behind our substantiation program are simple. If a company makes a claim about what its product can do, it must back that claim up with reliable evidence. If a company makes a claim about the health and safety benefits of a product, that claim must be based on scientific evidence. If a company claims that its product can cure, mitigate, or treat a serious disease such as cancer or heart disease, it must back up that claim through the accepted standards of scientific testing, including randomized control trials.”

Both the recipients of the NPO and other companies who make health-related product claims or use endorsements and testimonials should be paying close attention to the NPOs and the examples of prohibited practices.