Three Introductory Definitions

1. Advertising claim: a statement made about the benefits, characteristics, or performance of a product or service, which is designed to persuade the customer to make a purchase.
2. Representation: a statement of fact—not of opinion. The statement can be express (written or oral) or implied (hinted or suggested). 
3. Substantiation: The obligation of advertisers to maintain documentation that supports their ad claims. This evidence ensures that messaging about products or services is "truthful and not misleading." All reasonable interpretations of an ad’s claims must be substantiated. There are two levels of substantiation: 1) “reasonable basis” for non-scientific clams; or 2) “competent and reliable” evidence (tests, studies, expert) for scientific claims.

FAQs

1) Which federal agencies are empowered to remedy false advertising?

The Federal Trade Commission (FTC), Food and Drug Administration (FDA), and the United States Department of Agriculture (USDA) all have jurisdiction to remedy false advertising.[1] Of all three federal agencies, “the FTC has primary responsibility for advertising in general, while the FDA takes primary responsibility over product labeling.”[2] All are empowered to take action based on tips from consumers, competitors, or animal-advocacy organizations.[3]

The Federal Trade Commission regulates food advertising, while the Food Safety and Inspection Agency (FSIS), an agency of the USDA, and the FDA share responsibility for regulating labels. FSIS regulates meat and poultry product labeling while the FDA regulates other food labels.[4]

2) How does the FTC enforce advertising law?

The FTC has broad statutory authority to target false advertisers.[5]

Should an advertiser fail to provide to the FTC adequate substantiation upon request, the FTC may bring suit under § 13 of the FTC Act (FTCA) to enjoin further advertising until it files a formal complaint under § 5 of the FTCA.[6]

The complaint filing starts a formal administrative procedure that can produce cease-and-desist orders, monetary penalties, corrective advertising, and eventually court review.[7]

False advertising is a subset of “unfair business practices,” prohibited by the FTC’s broad mission. Because each ad is assessed for its “net general impression,” false ads are more likely addressed through enforcement on a case-by-case basis rather than under the agency’s rule-making authority.

By the way, a “representation” means a “statement of fact.” In advertising law, a representation can be express (written or oral) or implied (hinted or suggested). The word “claim” is often used synonymously with “representation.”

The Federal Trade Commission will deem an advertisement deceptive if it contains a representation or omission of fact that is likely to mislead consumers acting reasonably under the circumstances. The representation or omission must be “material,” or significant enough to sway consumer choice.

3) How does the FDA regulate advertising law?

The FDA by comparison operates more like a conventional regulatory agency; It makes its findings through administrative procedure that may influence the Commissioner to prevent advertising.[8]

An FDA warning letter is a formal letter sent to a company or individual that is found to be in violation of federal laws or regulations related to the safety and efficacy of products sold in the United States. The warning letters typically include a description of the violations identified, specific regulations or laws that have been violated, and a request for corrective action. The recipient of the warning letter is expected to respond in writing, outlining the specific steps they will take to address the violations and prevent them from occurring in the future.

The most common types of problems targeted by FDA warning letters:

1. Misleading or false claims about the safety or effectiveness of a product, including drug products, dietary supplements, and medical devices.
2. Violations of current Good Manufacturing Practice (cGMP) regulations, which set standards for the manufacturing, processing, and packaging of drugs, dietary supplements, and medical devices.
3. Adulteration or contamination of products, such as food products that are contaminated with harmful bacteria, or drugs that are contaminated with impurities or foreign substances.
4. Failure to obtain required pre-market approval or clearance for medical devices.
5. Failure to report adverse events or other safety concerns related to a product.
6. Violations of labeling and advertising regulations, including misbranding and failure to provide required information on product labels.

4) What requires FDA “approval”?

The word “approve” denotes a review of safety, quality, and effectiveness by FDA experts before a product may be sold to consumers.

The FDA approves the following substances:

• Food additives in food for people. Although the FDA does not preapprove food products, it has the authority to approve certain additives before it's used in food. Note that GRAS additives (Generally Recognized as Safe) do not require preapproval.
• Color additives used in FDA-regulated products, which includes human food, animal food, dietary supplements, drugs, cosmetics, and some medical devices.
• Medical devices for people using a risk-based tiered approach.
• New human drugs and “biological products” (vaccines, allergenic products, cellular and gene therapies, therapeutic proteins, and products manufactured from plasma).
• Human cells and tissues for use in humans (not transplantation of vascularized human organs).

The FDA has authority to also regulate product-safety issues after products are sold.

5) What does not require FDA “approval” before being marketed?

• Dietary Supplements, many of which are marketed without even notifying the FDA. But “new dietary ingredients” marketed after 1994 requires a premarket safety notification to be sent to the FDA.
• Food labels, including the Nutrition Facts Label.  But the labeling must comply with FDA design requirements, and not be misleading.
• “Structure-function” claims on dietary supplements and on food labeling. Structure-function claims describe the role of a food component, such as a nutrient, that allegedly affect the structure or function of the human body. For example, “calcium builds strong bones.” Conventional food manufacturers are not required to notify the FDA about their structure-function claims or carry a disclaimer. Only dietary supplements that contain structure-function claims must notify the FDA of such claims. The supplements must carry a disclaimer stating that the claim “has not been evaluated by the FDA,” and that the product is “not intended to diagnose, treat, cure, or prevent any disease.” By law, all such claims must be truthful and not misleading.[9]
• Compounded drugs (mixed together to meet the needs of individual patients).
• Tobacco products (although the FDA regulates disclosures of risk since no tobacco product is “safe.”
• Health care facilities, physician offices, or laboratories (but such facilities may be inspected as part of a product application).

6) How broadly does the USDA regulate advertising law?

The USDA’s enforcement authority relates to particular products versus having a broad authority over false advertising or improper labeling. The USDA can levy civil penalties and reject labeling.[10]

The USDA regulates beef, pork, lamb, and poultry, including canned chicken, packaged and powdered eggs, raw produce, and raw vegetables. The FDA regulates seafood, including shellfish fish (except farmed catfish, which is inspected by the USDA), whole eggs, processed fruits, and raw vegetables. Packaged or prepared products containing over 50% meat or poultry are regulated by the USDA.

7) What is the Nutrition Labeling and Education Act (NLEA)?

“The NLEA, together with parallel regulations issued by FSIS, prescribe three aspects of package labeling: nutrient contents, nutrient content claims (such as "low fat"), and diet-disease claims (such as high fiber will reduce risk of cancer). Regulations also prescribe nutrient contents for each claim.”[11]

8) The basic complaint process with the FTC, FDA, and USDA.

The FDA’s complaint process is formalized through a “citizen petition filing” whereas the “FTC is able to receive simple complaints that it then investigates independently.”[12]

The USDA entertains complaints about specific instances of false advertising relating to particular products in question, and is based on section 4(d) of the Administrative Procedure Act.[13]

16) Can the public comment on proposed regulations that affect animal welfare?

Yes. Public notice and comment procedures give animal advocates the chance to influence the regulation of false advertising. Regulatory law allows us to advocate before the ads are even released under this mechanism.

Whether or not our particular comments influence the regulation they still “seed the record” for future administrative suits. Animal advocates are left to private lawsuits if the federal government fails to implement a satisfactory rule. They are forced to “deal with false ads as they find them, ad-hoc, and seek redress from the various agencies in their law enforcement capacities by filing complaints.”[14]

10) Which FTC Policy Statements and federal laws govern false advertising?

• The FTC Policy Statement on Deception (1984)
• The FTC Policy Statement Regarding Advertising Substantiation (1984)
• Enforcement Policy Statement on Food Advertising (1994)
• 15 U.S.C. § 45 - Unfair methods of competition unlawful; prevention by commission (FTC Act)
• 15 U.S.C. § 52 – Dissemination of false advertisements
• 15 U.S.C. § 55 – Additional definitions (False Advertisement, Food, Drug, Device, Cosmetic) (FTC Act).[15]

11) What’s the difference between an express claim and an implied claim?

An express claim is a statement of fact on, or related to, a product or service. An implied claim is a message inferred from the ad. The entire context of an ad is analyzed, including the nature of the claim and the transaction itself.

The claim, “free range” is an example of an express claim. Free range means that a chicken had access to the outdoors. A depiction of a chicken outside may imply that this chicken is also free range.

A seller may not use disclosures that add confusion. A seller may be liable for a deceptive implication for its failure to clarify a reasonable misunderstanding. The “omission of material information” that furthers an affirmative misrepresentation is also actionable.[16] The seller may not conceal a fact that it knows would rectify confusion.[17] But by then, the deceptive message may have already been received. Whether ad claims are express or implied, they may also be considered subjective or objective.[18]

12) The “reasonable-consumer standard” varies depending on the facts

The FTC will consider a representation from the “perspective of a person acting as a reasonable or average consumer would under the circumstances.”[19] This “reasonable consumer” standard varies in different contexts. If the representation is aimed at a particular group, reasonableness is examined from the perspective of that group.[20]

For example, urban populations tend to know less about the common practice of cows spending a significant portion of their existence on feedlots. These urbanites are more likely to interpret a picture of a cow on pasture to mean that it spends most of its time on pasture. That assumption may be reasonable for urbanites. If the picture were portrayed in rural farm country, the reasonableness of that assumption may be less.

Another group targeted is children. Children are more susceptible to false advertising. They are intentionally targeted for that reason. Any advertising aimed at children is argued to be inherently deceptive.[21] Whether in zoos, at circuses, or on cereal boxes, advertisers are responsible for all possible interpretations that children might make from the ads.

13) Must advertising claims be “material” to be deceptive?

Yes. A representation or omission must be “material,” which means “likely to affect a consumer’s choice or use of a product or service.”[22] If the consumer would have chosen differently “but for” the material misrepresentation, a recognizable “injury” may have occurred.[23] In defense, a seller may substantiate an ad claim through a consumer survey showing that the representation had not reasonably influenced consumer decision making.

An interpretation of an ad claim will be presumed reasonable and material if the advertiser meant to convey it in the way interpreted.[24] An ad that produces both misleading and non-misleading interpretations may be deceptive because of that ambiguity.[25] Would a cartoon image of a pig depicted on pasture imply that it lived on pasture? It seems reasonable to interpret it that way.

14) What is “substantiation” and when do ads need it?

Substantiation refers to the obligation of advertisers to ensure that the messages they communicate about their products or services are truthful and not misleading. Here is a slideshow prepared by the FTC that conveys the basics of substantiation.

The FTC requires advertisers to prepare substantiation of their ad claims prior to dissemination. Upon request, advertisers must produce documentary evidence of that substantiation. The FTC will then decide whether in fact it substantiates the claims. If it does not, litigation may ensue. Or the advertiser may agree to a "Consent Order" that compels corrective advertising, restitution, and/or clearance by the FTC of future ads.

Sellers must support all reasonably interpretable claims—whether express or implied. Sellers generally do not substantiate implied claims that they do not believe exist. But they should be aware of all reasonable interpretations, and possess substantiation to back them up.[26]

To avoid being deceptive, sellers can establish an ad’s veracity under the “reasonable basis” standard[27] to support a “net general impression.”[28] Only sometimes do disclaimers clarify a potentially misleading implied claim. For example, a depiction of a pig roaming on pasture may pass muster if a disclaimer near the depiction clarified that the pig was raised indoors.

In animal-raising advertising, third-party endorsers (i.e. “Certified Humane” or “G.A.P.”), which sets guidelines for purported animal treatment, are often offered as substantiation of animal-welfare advertising.[29] Any conflict of interest in a relationship between an endorser and the seller of the advertised product should be disclosed.[30]

In the area of substantiation, advertisers sometimes slyly use Myths and Half-Truths in False Advertising.

15) Can an Advertising Claim be True Yet Still Misleading?

Yes. In a case dealing with the efficacy of hair-loss treatment,[31] the use of a placebo confused consumers as to the inherent effectiveness of the product. The court ruled that efficacy representations based solely on the placebo effect are “misleading in a material respect,” and hence are prohibited as “false advertising” under the Act.[32]

Another example that I view as true but misleading is advertising broiler chickens (raised for meat) as “cage free,” a claim that customarily applies to hens. Broiler chickens are usually not kept in cages but instead are housed in “floor systems” inside of sheds.

In the “true-but-misleading” species of advertising, we see the close cousins in Myths and Half-Truths in False Advertising.

17) What are the elements of the Lanham Act in business false-advertising cases?

The Lanham Act enables civil suits between commercial competitors or anyone within the “zone of interest.” The Lanham Act is a major source of federal substantive law in the area of false advertising.

Under the Lanham Act, courts often apply five statutory elements that a plaintiff must prove:

(1) A false or misleading statement of fact about a product;

(2) Such statement either deceived, or had the capacity to deceive a substantial segment of potential consumers;

(3) The deception is material, or likely to influence the consumer’s purchasing decision;

(4) The product is in interstate commerce; and

(5) The plaintiff has been, or is likely to be, injured as a result of the statement at issue.[33]

The above elements are consistently recognized in courts across the country. But since the Supreme Court has not definitively ruled on all elements of false advertising under the Lanham Act, some difference in application exists among the circuits.[34]

18) What types of cases are brought under the Lanham Act?

Some claims under the Lanham Act involve representations that are literally false, while others involve representations that are literally true but misleading. Both are considered false advertising under the Lanham Act.[35] For example, a television ad depicting a competitor’s plastic zipper storage bag constantly leaking when filled with water was unsupported by tests and therefore deemed literally false.[36] A true-but-misleading ad could cause a reasonable consumer to perceive some important message that differs from the reality of the product.

The nuances of a Lanham-Act deception case is exemplified in Potato Chip Instit. v. General Mills, Inc. After an extensive analysis, the court found that a package, labeled as “Potato Chips,” contained dried potato granules as opposed to raw potatoes. But at that time (1971), consumers expected raw, unprocessed potatoes in "potato chips." The product also lacked clarification of that difference. Perhaps a court would decide differently today.

In Potato Chip Instit. v. General Mills, Inc, survey evidence was produced to show that the phrase “potato chips” conveyed to consumers that raw, unprocessed potatoes were inherent.[37] Calling powdered chips “potato chips” may not have been literally false, but it was enough to show under the Lanham Act that the phrase created a different perception in the consumer.

The law provides relief for ads that are both literally false or literally true but misleading. But the law does not provide relief for vague, subjective assertions known as puffery. An actionable claim must be factual and material. As lawyers, we should think about how to refute a message with objective evidence like surveys, polls, affidavits, dictionaries, or industry usage.

19) What is “puffery” in advertising law?

Mere statements of opinion such as “we’re the best” is puffery. For example, the slogan by Papa John, “Better Ingredients, Better Pizza” was put to the test in Pizza Hut, Inc. v. Papa John’s International, Inc.[38]

Despite the jury’s findings to the contrary, “Better Ingredients, Better Pizza” was ruled as mere opinion rather than an objective statement of fact on which consumers would reasonably rely.[39] The word “better” is a matter of individual taste and is therefore unquantifiable, held the court.

Papa John's did, however, cross a line with its misleading comparisons to Pizza Hut. But it did not matter because the claimed ad violations were not material enough to proceed, held the court.

Like the FTC’s “net impression rule,” ads viewed under the Lanham Act must be viewed in their context. Within that context, the plaintiff must show that the misleading statement influenced their decision to purchase the product over that of the competitor’s. 

In sum, an ad must be a) false or misleading; and b) material to the consumer in that it affects his or her decision to purchase or use the item.[40]

Under the Lanham Act, materiality is presumed in the case of a literally false ad. But materiality must be proven with evidence.[41] For example, although “Better Ingredients, Better Pizza” became misleading when used in conjunction with Pizza Hut’s comparative ads, the plaintiff failed to show that these misleading ads were “material” to the consumer.[42] Even consumers deceived by misleading comparison ads must jump through the last hoop of showing that the deception made them buy Papa John’s pizza over Pizza Hut’s.[43]

20) How many consumers must be deceived to bring a case under the Lanham Act?

As under FTC standards, a plaintiff under the Lanham Act needs a consensus of a “substantial segment” of theoretical consumers versus a “majority” of them.[44] “A properly conducted survey should be given substantial weight,” held the court in Minnesota Specialty Crops v. Minnesota Wild Hockey Club.

For an example in animal-welfare advertising, let’s take two business competitors who both make “humane” claims in their egg advertisements. Business 1 sells eggs laid by hens who had true “free-range.” Business 2 sells eggs from hens that spent their lives in battery cages. Business 2 also advertised that its hens were “humanely raised.” Business 1 could possibly make out a case against Business 2 if Business 1 shows that consumers a) relied on Businesses 1’s “humanely raised” claim, which b) influenced their decision to purchase its eggs over Business 1’s eggs.

21) Does self-regulation, like with “humanely raised” meat, stop false advertising?

No, self-regulation does not solve the problem of false advertising argues scholars.[45] Ever hear about fox guarding the hen house?

Click here for Myths and Half-Truths in False Advertising.

For a comprehensive look at False Advertising under New York Law, click For a comprehensive review of New York law, click The Ultimate Guide to False-Advertising Law in New York: 22 FAQs.

Contact us right away if you feel deceived for any type of advertising claim, or just want to talk about the law. Fill out this form for a free consultation for false advertising.