Antitrust Law Daily Wrap Up, ADVERTISING NEWS: Commissioner Ohlhausen discusses the FTC’s role in setting boundaries in advertisement enforcement, (Apr 24, 2014)

By Linda O’Brien, J.D., LL.M.

The authority of the FTC over advertising is one of the most important parts of the agency’s mission, said FTC Commissioner Maureen Ohlhausen, speaking on April 23 at the Association of National Advertisers’ annual Advertising Law & Public Policy Conference in Washington, D.C.

Ohlhausen began her remarks in the session, entitled "Back to the Future on 600 Pennsylvania Avenue, " by noting her interest in the interaction between the FTC’s competition and consumer protection missions and how its advertising efforts bring the intersection of those missions to the forefront.

Most people recognize and respect the protection that the First Amendment gives to citizens to speak out on political issues, express their views artistically, and report on the events and issues of the day, all of which may guide the public’s views and lead to a well-informed public, according to Ohlhausen. What fewer people may appreciate is that the First Amendment protects not just political and artistic speech but also commercial speech, which includes most advertising and marketing, as long as it is not misleading. Just as information is crucial to a well-functioning democracy, it is also crucial to a well-functioning market. For the government to restrict commercial speech, it must satisfy the stringent requirement of restricting no more speech than is necessary to advance directly a substantial government interest, Ohlhausen stated.

The FTC has two core missions—promoting competition and protecting consumers. Its two missions are designed to accomplish the same goals: to promote efficiency, prevent consumer harm, and enhance consumer welfare, and to do so without unduly burdening legitimate business. In Ohlhausen’s view, to achieve these goals, the FTC must encourage and defend truthful commercial speech by protecting the marketplace and consumers from false commercial speech. But the FTC must also help to foster an environment that provides consumers access to useful commercial information.

Consumer information. There are several ways that the FTC helps to ensure that consumers get the information they need to make informed choices. The most familiar way is FTC enforcement against deceptive and misleading advertising, a core function of the Commission’s consumer protection mission.

However, in working to eliminate false and deceptive advertising, the FTC must also avoid restricting consumers’ access to truthful marketplace information.

Traditional substantiation standard. Ohlhausen next discussed the FTC’s approach to advertising substantiation. The core of the Commission’s advertising substantiation program is that an advertiser must possess a reasonable basis for making its advertising claims. The FTC has traditionally provided for substantial flexibility regarding what constitutes a reasonable basis, based on how an advertiser presents and qualifies a claim. If the advertiser has not claimed that a particular level of evidence underlies the claim, the Commission will consider a number of factors drawn from the case In re Pfizer, Inc., 81 FTC 23 (1972), to determine the appropriate level of support for a claim. These factors include the type of claim, product, consequences of a false claim, benefits of a truthful claim, cost of developing substantiation for the claim, and amount of substantiation experts in the field believe is reasonable.

Trends in FTC orders. Some of the FTC’s recent orders may have created tension between its substantiation standards and the precedent in Pfizer by requiring two randomized, controlled studies (RCTs) as substantiation for any health or disease related claims, in Ohlhausen’s view. The concern with this series of FTC orders is that they might be read to imply that two RCTs are required to substantiate any health or disease related claims, even for relatively safe products, regardless of the costs of the studies. The Commission should apply the Pfizer balancing test in a more finely calibrated manner than they have in these orders to avoid imposing unduly burdensome restrictions that might chill information useful to consumers in making purchasing decisions.

Although it is important to protect consumers from false and deceptive advertising, the FTC must strive to set the boundaries in the right place in advertising enforcement to ensure that consumers will continue to have access to useful marketplace information, including information about emerging science and nutrition. As the Commission considers future cases involving health- and disease-related claims, the agency will work to advance its agency mission to protect consumers and promote competition by ensuring consumers have access to useful marketplace information, Ohlhausen concluded.

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