What Type of Substantiation is Required for Your Claims? The Appellate Court Decision in the Pom Wonderful Case Provides Insight

5 min

On January 30, 2015, the U.S. Court of Appeals for the District of Columbia issued its long-awaited decision in Pom Wonderful, LLC vs. Federal Trade Commission. The case arose after extensive administrative proceedings and a decision by the Federal Trade Commission (FTC) in January 2013 to hold Pom Wonderful, LLC (POM) liable for violating the FTC Act and ordering the Company to cease and desist from making misleading and inadequately supported claims about the health benefits of its products. The FTC also forbade POM from running ads relating to the treatment or prevention of diseases unless the Company possessed at least two randomized, controlled, human clinical studies (RCTs) demonstrating statistically significant results. POM petitioned the Court of Appeals for review of the FTC's decision, arguing that the FTC order violated the FTC Act, the Administrative Procedure Act (APA), and the First Amendment to the U.S. Constitution.

The FTC alleged that POM violated the FTC Act by utilizing deceptive and misleading advertisements. In response, POM argued that the Commission applied overly broad claim interpretation principles and cherry-picked the most egregious advertisements. In deciding this issue, the Court of Appeals highlighted FTC's "special expertise" in determining what sort of substantiation is necessary to avoid consumer deception. The Court agreed with FTC's view and believed that POM's advertisements crossed the line into deceptive advertising.

However, the Court referenced the FTC's determination that if POM had used an effective disclaimer (i.e., that "evidence in support of this claim is inconclusive"), a different result might have been reached. Indeed, the Court stated that "[a]n advertiser thus still may 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." This is an important statement and should not be overlooked. Had POM's claims been appropriately qualified, a different outcome very well could have occurred in the Court of Appeals.

Additionally, the Court agreed with the FTC's view of RCTs, namely, that the need for RCTs is driven by the claims made for products. The Court stated that if the cost of these studies proves to be prohibitive, a company can choose to make claims that require a lower level of substantiation (i.e., claims that do not assert a causal relationship, claims that use an appropriate disclaimer to disclose the limitations of the science, or claims that refrain from reference to "studies").

Finally, the Court upheld the FTC's decision to hold a company executive individually liable for POM's deceptive acts and practices because an individual can be held liable for FTC Act violations if he "participated directly in the deceptive practices or acts or had authority to control them."

POM also argued that the substantiation standard applied by the Commission constituted a new legal rule, which violated the APA's notice-and-comment requirements for rulemaking. The Court disagreed, however, concluding that the FTC "validly proceeded by adjudication" because an order that may affect agency policy does not automatically constitute rulemaking. Additionally, the Court did not believe that FTC's decision constituted a "'major substantive legal addition' to its substantiation standards."

Finally, the Court considered POM's argument that the Commission violated the First Amendment through the Commission's liability determination and remedy. Under the Central Hudson scrutiny test (the general standard applied to commercial speech), the Court evaluated whether the requirement of some RCT substantiation for disease claims "directly advances, and is not more extensive than necessary to serve, the interest in preventing misleading commercial speech." Here, the Court determined that some RCT substantiation was necessary for disease claims. The Court highlighted that because POM's past claims were deceptive in the absence of RCTs, it was acceptable to require RCTs for future claims, as this was "tightly tethered to the goal of preventing deception."

However, the Court believed that the FTC's rigid requirement of two RCTs as an across-the-board requirement for any disease claim that POM might make in the future was unconstitutional. In particular, the Court found that the rigid requirement was not a "reasonable fit" under the Central Hudson test. While two RCTs would provide more certainty than one RCT, three RCTs would provide more certainty than two (and so on). The Court discussed a hypothetical situation where a large-scale RCT demonstrated that a dietary supplement significantly reduced the risk of a specific disease to a very high degree of certainty and where the RCT was reinforced by a wealth of non-RCT medical evidence. The Court believed that in this hypothetical case, there exists a substantial interest in raising awareness in consumers – and that a two-RCT requirement would provide for no exceptions for circumstances such as these. The Court also found it persuasive that FTC's own expert testimony weighed against imposing a categorical, two-RCT requirement for all disease claims. However, the Court warned that this ruling did not bar FTC from ever imposing a two-RCT substantiation requirement.

This decision raises important considerations for advertisers, and in particular those marketing foods and dietary supplements with purported health benefits. The decision demonstrates to marketers of foods and dietary supplements the importance of appropriately qualifying health-related claims. It also emphasizes the importance of possessing at least one RCT for health-related claims – and depending on the extent of claims, potentially more than one RCT (e.g., for claims lacking qualification). Finally, it reminds advertisers that whether claims are properly substantiated is decided on a case-by-case basis.