Antitrust Law Daily Wrap Up, ADVERTISING NEWS: POM Wonderful challenges FTC decision, seeks High Court review, (Oct 27, 2015)

By Greg Hammond, J.D.

POM Wonderful, LLC is seeking Supreme Court review of a decision by the U.S. Court of Appeals in Washington, D.C., which affirmed an FTC determination that a series of ads touting the benefit of POM’s pomegranate-based products were deceptive. In its petition for certiorari, POM argues that the First Amendment entitles the beverage company to de novo review, and therefore reversal, of the Commission’s January 2013 determination (POM Wonderful v. FTC, October 23, 2015).

The Commission, in 2013, affirmed an administrative law judge’s (ALJ’s) finding of liability under the FTC Act. While the ALJ found that 19 of POM’s advertisements and promotional materials contained implied claims that POM products treat, prevent, or reduce the risk of heart disease, prostate cancer, or erectile dysfunction and that those claims were unsubstantiated, the majority of the commissioners found that 36 of POM’s ads and promotional items made false or misleading claims.

The appellate court determined that the Commission properly found POM’s efficacy and establishment claims to be deceptive due to inadequate substantiation. In particular, the Commission had examined the studies put forth by POM to substantiate the ads and concluded that the studies failed to qualify as randomized controlled clinical trials (RCTs) of the kind that could afford adequate substantiation. The court acknowledged that RCTs might be costly, but noted that an advertiser can always assert a health-related claim backed by medical evidence falling short of an RCT if it includes an effective disclaimer disclosing the limitations of the supporting research. The court additionally rejected POM’s argument that the substantiation standard applied by the FTC to POM’s establishment and efficacy claims amounted to a new legal rule adopted in violation of the Administrative Procedure Act’s (APA’s) notice-and-comment requirements for rulemaking, reasoning that the FTC did not amend a regulation, but “validly proceeded by adjudication.”

“The decision that the FTC’s ban can be upheld without de novo First Amendment review is a plain and critical error of law,” POM argues, noting that the Supreme Court has “expressly held that the very kind of predicate finding the FTC made here—namely, that a particular instance of commercial speech implies a misleading message—must be reviewed de novo in order to give compass to First Amendment protections.” Otherwise, according to POM, “the scope of the First Amendment would be essentially left to the censor’s discretion, because it would always be free to decide that truthful speech implied some misleading message—and to ban it on that theory—subject only to highly deferential, APA review.”

Attorneys: Thomas C. Goldstein (Goldstein & Russell, P.C.), Kristina M. Diaz (Roll Law Group P.C.), Bertram Fields (Greenberg, Glusker, Fields, Claman & Machtinger LLP), and John D. Graubert (Covington & Burling LLP) for POM Wonderful LLC.

Companies: POM Wonderful LLC; Federal Trade Commission

News: Advertising FederalTradeCommissionNews