Putting Brands in Their Place

FTC's David Vladeck leads the charge in the feds' crackdown on deceptive ads

While it will not comment on the case, POM clearly stated its position in a 2010 press statement: “We do not make claims that our products act as drugs. POM believes very strongly in its First Amendment rights to communicate the promising results of our extensive scientific research program on pomegranates. We believe the commission is acting beyond its jurisdiction, exceeding its authority, and creating a new regulatory scheme that attempts to treat our juice as a drug, which it is not.”

More than any other FTC case, the outcome of POM could impact how health claims in ads are evaluated for years to come. Amid many legal twists and turns, an administrative law judge recently agreed with POM that the company did not need FDA pre-approval for its claims. But the same judge also agreed with regulators that the ads were deceptive.

Even if the commission decides against POM now that it has the case back, no one thinks that will be the end of it. “There’s no question you need scientific evidence to back up claims,” says the ASRC’s Peeler. “The question is: Is the standard being set by the FTC too high?”

If these pioneering FTC settlements defining “reliable and scientific” raise eyebrows in the ad community, the $25 million Reebok settlement had marketers’ heads spinning. In September 2011, Reebok agreed to the big cash payout to fully reimburse consumers who bought EasyTone shoes that promised “better legs and a better butt with every step.”

Less than a year later, the FTC upped the ante by way of a $40 million settlement with Skechers for declaring that its toning shoes promoted weight loss and firmer muscles. The ads relied on an endorsement from chiropractor Steven Gautreau, who is married to a Skechers marketing executive and was paid to conduct a study that was found to be wanting. Ads for Skechers’ Shape-ups, meanwhile, famously featured reality star Kim Kardashian.

In August of this year, the FTC settled with Ab Circle Pro for $15 million to $25 million to reimburse consumers who had purchased the $200 to $250 exercise product promoted as a weight-loss silver bullet. In its TV ads, pitchwoman Jennifer Nicole Lee boasted of losing 80 pounds using the stomach-crunching device, telling viewers: “You can either do 30 minutes of abs and cardio or just three minutes a day. The choice is yours.”

“We try to restore the consumer’s position before the deceptive ad,” says Vladeck. “We wanted to deprive companies of their profits. We don’t want them to profit from misleading the public.”

Requiring full refunds for consumers surprised national advertisers because it was a remedy usually reserved for extreme cases and outright fraud. In the past, the FTC simply required companies to stop making dubious claims but did not require full restitution. “[The FTC] is treating these companies like they were fraudulent. That’s a big step,” says Greenbaum. “It isn’t just going to slap companies on the wrist.”

No longer content with cease and desist agreements, the FTC is seeking deterrents with the pricey settlements. “They want to bring cases that will get more press,” says Mudge. “And they know they’ll get more press if they settle for millions of dollars.”

At year’s end, Vladeck will return to his post at Georgetown, but he remains confident that the BCP will continue to follow his blueprint.

“There is bipartisan support from the commissioners for these measures,” he says. “This is an area where we will continue to be active. We want to make sure we really have persuaded the advertising industry that substantiation is important. I’m not sure we’re there yet. From my perspective, it’s still a target-rich environment.”