FTC puts nearly 700 companies on notice of product claim civil penalties

FTC puts nearly 700 companies on notice of product claim civil penalties

substantiation reports dossiers FTC regulations

Introduction:

On April 13th, the Federal Trade Commission sent letters to warn hundreds of marketers to refrain from misleading customers with product claims in their marketing material that cannot be supported or substantiated. The FTC issued notifications to the businesses warning that it would not hold back in using its power to pursue offenders with severe civil penalties.

Companies must follow FTC regulations to provide solid evidence for any claims made regarding the capabilities of their products. Any health or safety benefits praised by a firm for a product must be backed-up by scientific data. A business must provide evidence to support any claims that a product can support general well-being and prevent nutrient deficiency or disease through scientific testing. Furthermore, general health products and dietary supplements should not be making any claims to “diagnose, treat, cure or prevent any disease,” because only a drug can legally make such a claim.  As the FTC authority continues to take enforcement action your business can face serious penalties.

In our blog, we’ll break down everything you should know about the FTC regulations and how to act if your company is on the warning list.

Why is a substantiation report important due to the new FTC regulations?

To sell your dietary supplement in the U.S.A the label must meet FDA regulations and any health claims they make (structure-function claims) need to be substantiated. Most companies in the past have chosen not to have a substantiation report but with this update we anticipate this changing significantly with the increased risks.

Who is the Federal Trade Commission (FTC) and what does the FTC do?

The Federal Trade Commission (FTC) is an independent, bipartisan agency of the U.S. government tasked with protecting consumers and ensuring a strong competitive market. The FTC works to prevent fraudulent, deceptive, and unfair business practices and marketing. FTC activities include investigating fraud or false advertising, congressional inquiries, and pre-merger notification. The FTC also oversees frauds and unfair or predatory business practices.

Is the FDA the same as FTC?

No. The FDA (Food and Drug Administration) is the United States’ regulatory agency for food, medical, and an array of other products. The FDA is responsible for ensuring the safety and efficacy of regulated products and acting against any adulterated or misbranded health products, devices, foods, or other regulated product after they reach the market. The FTC (Federal Trade Commission) regulates the advertising of all health products, dietary supplements, and most other products sold to consumers.

Which businesses will be receiving a notice from the FTC? Did yours make the list?

full list of the businesses receiving the notice from the FTC is available on the Commission’s website. The fact that a receiver is on the list in no way implies that they have behaved dishonestly or unfairly. The warning used to be distributed to individuals who were making or were likely to make health claims. However, it is applicable to any marketer who makes claims about the performance or efficacy of their products.

The letter to the recipients also provides them with a copy of a previously approved notice of penalty offenses regarding the use of endorsement and testimonials. “In that notice, it is discussed what constitutes falsely claiming an endorsement by a third party, misrepresenting whether a third party endorser is an actual, recent, or recent user, misrepresenting whether a third party endorser is a user, using an endorsement to make false claims about performance, failing to disclose an unexpected material connection with a third party endorser, and misrepresenting that an endorser’s experience is typical or ordinary for consumers.

Lastly, the letters advised the recipients to review the FTC staff’s recently released Health Products Compliance Guidance.”

What should you do if you received a letter from the FTC?

If you received the notice, you should move quickly to prepare your claims and supporting documentation because you will be on the front lines of an impending wave of enforcement. We would still advise the same thing even though you might be a little more anonymous if you did not receive a letter.

Compliance is important, but most people have labels with regulatory infractions that they are unaware of and do not care about. A lot of your competitors likely have their products made in factories that advertise that they are “cGMP-compliant” and “GMP-Certified,” even though they frequently begin by falling short of the requirements as soon as they receive raw materials. Your product should make no unsubstantiated claims.

What is the FTC product substantiation penalty offense authority doing?

To remind advertisers of the legal duty to have a reasonable basis for objective product claims and to discourage them from making false claims in the future, the FTC is currently employing its penalty offence authority.

Approximately 670 businesses that market over-the-counter medications, homoeopathic remedies, dietary supplements, or functional foods have received notices of penalty offences.  The FTC is warning them that failure to adequately substantiate their product claims in ways that are inconsistent with the litigated decisions of prior FTC administrative cases could result in serious civil penalties.

Notices of penalty offenses by the FTC:

A corporation that participates in conduct that has been ruled illegal in a prior FTC administrative decision, other than a consent order, may be subject to civil penalties from the agency, which can reach a charge of $50,120 per violation. This is possible using notices of penalty offences.

The warnings list particular illegal acts and behaviors, such as failing to have:

1) a reasonable basis consisting of competent and reliable evidence for objective product claims.

2) competent and reliable scientific evidence to support health or safety claims; and

3) at least one well-controlled human clinical trial to support claims that a product is effective in curing, mitigating, or treating a serious disease.

Misrepresenting a claim’s level or type of substantiation is another example of an unlawful act or practice, along with misrepresenting that a claim’s been clinically or scientifically proven.

What are the benefits of ensuring your products claims are substantiated?

Did you know that we have done about 5,000 substantiation dossiers for dietary supplements making it a very popular service of ours.  Additionally, US substantiation dossiers can also be used for Canada for Natural Health Product (NHP) licensing or vice versa.  We have experience in creating strategy around avoiding regulatory disruptions and distractions. Other benefits of substantiating your claims are avoiding legal civil suits and product development.

Sources:

https://www.ftc.gov/news-events/news/press-releases/2023/04/ftc-warns-almost-700-marketing-companies-they-could-face-civil-penalties-if-they-cant-back-their?utm_source=govdelivery

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