On July 16, 2013, the Federal Trade Commission (“FTC”) announced that it entered into settlement agreements with Chemical Free Solutions LLC and Dave Glassel (collectively “Cedarcide Defendants”), the marketers of bed bug and head lice products. The parties agreed to these settlements after nearly a year of litigation regarding allegedly false and unsubstantiated claims about the ability of the product, BEST Yet!, to stop and prevent head lice and bed bug infestations. (To read more about the FTC’s 2012 complaint, please click here.) The settlements prohibit the use of allegedly deceptive claims and require pre-approval from the U.S. Food and Drug Administration (“FDA”) prior to making any treatment claims.
The settlement orders prohibit the Cedarcide Defendants from claiming that their BEST Yet! products by themselves are effective in stopping or preventing bed bug infestations, more effective than other products or services at stopping and preventing bed bug infestations, or any other representation about the product’s performance or efficacy without “competent and reliable scientific evidence” to support the claim. (To read the full text of the settlement orders, click here and here.) Furthermore, the Cedarcide Defendants are also barred from claiming that the product is effective in treating head lice infestations unless the claims are non-misleading and they obtain FDA’s approval of a new drug application or the product properly conforms to an existing over-the-counter (“OTC”) drug monograph. The settlement orders also prohibit the Cedarcide Defendants from marketing, promoting, or misrepresenting, either expressly or by implication, that the BEST Yet! product is endorsed or approved by a government entity or third-party organization. The agreed-upon settlement orders impose a $4.6 million judgment against Glassel, who is facing bankruptcy, and an $185,206 judgment against Chemical Free Solutions, LLC, which will be suspended due to the party’s inability to pay. By agreeing to the Stipulated Orders for Permanent Injunction and Monetary Judgment, the Cedarcide Defendants are legally obligated to abide by the terms contained therein, and the penalties associated with violating such orders can be severe.
FTC Commissioners’ Statements
At present, the FTC is headed by four Commissioners, who act as the final decision makers in FTC enforcement actions. These Commissioners review and vote on all cases prior to filing suit in federal court or taking any action in an administrative proceeding. After reviewing the case against the Cedarcide Defendants, the Commissioners voted 3-1 to approve the proposed settlements described above. The Commissioners released statements explaining their individual decisions on this matter. In their statements, the Commissioners primarily focused on the provisions in the Stipulated Order requiring FDA pre-approval, and for that reason alone the statements are worthy of further examination.
FTC Chairwoman Edith Ramirez and Commissioner Julie Brill entered a joint statement in support of requiring the Cedarcide Defendants to obtain FDA pre-approval prior to making any representations that the product can stop, prevent, or treat bed bug or head lice infestations. (To read the full text of the Ramirez and Brill joint statement, please click here.) The joint statement supports the FTC’s decision, “notwithstanding the Commission’s recent decision in POM Wonderful, LLC (“POM Wonderful”) in which [the FTC] declined to impose an FDA pre-approval requirement for the food products in question.” The joint statement clarifies that head lice infestation, or “pediculosis,” is a medical condition; therefore, any product that claims to treat it is subject to FDA regulations and the federal Food, Drug, and Cosmetics Act (“FDCA”). The joint statement goes on to explain that “requiring the defendants to have FDA pre-approval as substantiation for future claims is particularly appropriate as it harmonizes their obligations under the FDCA and the FTC Act.” Accordingly, Chairwoman Ramirez and Commissioner Brill’s joint statement asserts that the defendants “should not be permitted to skirt a well-established regulatory scheme for demonstrating the efficacy and safety of head lice treatments,” especially when the cost of complying with the FDA regulatory scheme is not prohibitive for companies seeking to market such treatments.
In a separate opinion, Commissioner Joshua D. Wright wrote that “[a]s a general matter, I believe that FDA pre-approval provisions should play a very limited role in FTC orders and that the conditions under which they are appropriate are fairly narrow.” Nevertheless, Commissioner Wright voted in support of the FTC’s decision to require FDA pre-approval in this settlement. (To read the full text of Commissioner Wright’s statement, please click here.)
Commissioner Maureen K. Ohlhausen issued a dissenting statement that raises thoughtful questions about the boundaries of inter-agency cooperation and each agency’s standards for substantiation. In her dissent, Commissioner Ohlhausen stated that she voted against the settlements in this case because:
the requirement that defendants obtain FDA preapproval prior to making head lice treatment claims is inconsistent with Commission precedent and that imposing such a high bar for these types of claims in general may ultimately prevent useful information from reaching consumers in the marketplace.
(To read the full text of Commissioner Ohlhausen’s statement, please click here.) These settlements, she argued, are a departure from the FTC’s two most recent decisions regarding deceptive health claims, wherein the FTC determined that requiring FDA pre-approval was unnecessary because the FTC’s standard of requiring competent and reliable scientific evidence was sufficient to substantiate that a representation is true.
In a footnote, Commissioner Ohlhausen pointedly explained why she believes requiring FDA pre-approval is at odds with FTC’s policies. An important distinction between the FDA and FTC’s substantiation policies is that the FDA views safety and efficacy as “fundamentally linked” for the purpose of drug approval, meaning that the FDA’s approval standards are “more stringent than FTC substantiation standards.” More specifically:
Under the FTC Act, it is not our mission to police drug safety or efficacy directly. Advertisers are liable to substantiate material claims that products are safe, just as they are liable to substantiate material claims that products are efficacious. But they are not liable to substantiate claims that they do not make or imply. If an advertiser makes an efficacy claim, but not a safety claim, there are two related reasons why FDA approval standards would be more stringent than FTC substantiation standards. First, FDA approval requires testing two properties (efficacy and safety). Second, FDA approval requires sufficient testing to consider each of these two properties in view of the other.
Commissioner Ohlhausen reasoned that requiring defendants to undergo FDA’s review process is unnecessary because the FTC has the capability to “impose directly by order the type of substantiation that experts in the field believe is reasonable.”
In her dissent, Commissioner Ohlhausen also expressed her concern that industry would interpret these settlements as the FTC adopting or aligning with the FDA’s substantiation standard, which would send “the wrong signal to parties trying to ascertain the level of substantiation required to make health-related claims.” Such an interpretation could have a significant impact on regulated industry, as it could “potentially chill health-related claims and deprive consumers of useful information.” Furthermore, her statement emphasized that she dissented from the majority decision because the FTC’s responsibility is “limited to requiring adequate substantiation based on [the FTC's] enabling statute and relevant precedent” and not to ensure that advertisers comply with their obligations under the FDCA.
What This Means
The FTC’s settlements with the Cedarcide Defendants highlight certain issues that can arise as a result of the relationship between the FTC and the FDA. Commissioner Ohlhausen’s dissent offers insight into how the FTC’s regulation of any advertising and promotion of FDA-regulated products can create a complex and oftentimes confusing regulatory framework for industry. Here, it is especially interesting that the FTC required FDA pre-approval for purported head lice and bed bug treatments, when it did not require such a high standard for purported treatments involving cancer or heart disease in its decision in POM Wonderful. (To read our coverage regarding the FTC’s decision in POM Wonderful, please click here, here, here, and here.) From the industry’s perspective, the FTC’s settlement agreements with the Cedarcide Defendants further blurs the line between the FTC and FDA’s substantiation standards. Without clearer guidance regarding the application and interpretation of the FTC and FDA’s separate substantiation standards, industry is forced to guess how its products will be regulated and which standards it must meet to be compliant with federal laws and regulations.