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FTC Wins Round 3 in Lane Labs Battle

10 Jan, 2012 By: Linda A. Goldstein


The Federal Trade Commission (FTC) has won a third and decisive round in its ongoing battle with Lane Labs and Andrew Lane (its president), convincing a federal district court to reverse its earlier ruling and hold the defendants in contempt of their previous consent order with the FTC.

Lane Labs’ troubles with the FTC date back to 2000, when the commission charged it with making unsubstantiated claims for a shark cartilage product and a skin cream, including claims that the products were clinically proven to treat and cure cancer. Lane Labs settled that case with the FTC by entering into a consent order prohibiting them from making false and misleading health claims in the future.

In 2007, the FTC again filed suit against the defendants based on marketing for AdvaCal, a calcium supplement touted as superior to other calcium products and prescription drugs for the treatment of osteoporosis. At that time, a U.S. District Court ruled against the FTC. While the district court acknowledged that the substantiation upon which Lane Labs was relying may not have been perfect, it found that the company had acted substantially in good faith and made a good faith effort to comply with the original consent order by retaining experts in the field on whose opinions Lane Labs reasonably relied.

The FTC’s initial loss in the case is largely responsible for its shift to a new, more rigorous substantiation standard in subsequent orders. The Lane Labs Consent Decree contained the traditional “competent and reliable scientific evidence” standard — then the general standard for substantiation used by the FTC in consent orders. After this defeat, the FTC issued a number of consent orders with a more specific and rigorous requirement that certain claims be supported by two independent double-blind clinical studies.

In 2010, the Third Circuit Court of Appeals overturned the district court’s decision noting that the court erred in considering whether the defendants acted in good faith and had been in substantial compliance, but should only have considered whether the claims were properly substantiated as required under the consent order. This same district court has now reversed its earlier ruling.

The court’s ruling underscores the need to be certain that the substantiation upon which the advertiser is relying is consistent with the claims being made. One of the core claims was that AdvaCal is three to four times more absorbable than other calcium supplements. The defendants relied upon testing that showed that AdvaCal was more absorbable among post-menopausal women and argued that AdvaCal was being marketed primarily to these women. The court agreed with the FTC that the marketing was not targeted to post-menopausal women.

Most significantly, the court ruled that even though the defendants acted in good faith and took reasonable steps to comply with the order, that was not sufficient to protect them from a contempt action. The court said the defendants would have to show that the violations were either technical or inadvertent to avoid a contempt action.

This latest victory will likely embolden the FTC in its enforcement efforts and should serve as a strong warning to any marketers currently operating under an FTC consent order that good faith efforts to comply will not be enough.

Linda Goldstein is chair of the Advertising, Marketing and Media division of Manatt, Phelps & Phillips LLP, based in the firm’s New York office. She can be reached at lgoldstein@manatt.com.


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