FTC Advertising Crackdown Provides Food for Thought

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The Federal Trade Commission has been clamping down on several major food companies regarding health claims in their advertising. Iovate Health Sciences USA and Nestle S.A. subsidiary, Nestle Healthcare Nutrition, Inc., were the first to come under FTC fire, both entering into settlement agreements last summer. Dannon Company, Inc. and POM Wonderful LLC were next. Dannon settled in December, while POM opted to fight the government for imposing what it sees as unreasonably burdensome new standards.

The FTC argued that the companies have not been able to sufficiently substantiate health claims regarding their products, such as reduction in likelihood of cold and flu, digestive improvement, and weight loss. The FTC argued the companies’ ads therefore were deceptive in violation of the Federal Trade Commission Act.

The three companies that settled with the FTC are now subject to new stringent advertising standards that significantly raise the bar on what companies must be able to prove before making health claims. There is some debate whether the settlement agreements are binding on the whole industry. In a lawsuit filed against the FTC last September, POM argues that they are and that this is unreasonable. In fact, a later FTC complaint and proposed consent order against POM support POM’s contentions as the FTC indeed suggests that the same standards should apply to POM.

The three new standards in the agreements between the FTC and Nestle, Iovate and Dannon are problematic in many ways.

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