FTC Gives Itself High Marks for 2013; Begins 2014 With a Bang14 Jan, 2014 By: William I. Rothbard
The Federal Trade Commission (FTC) has looked back on its accomplishments in 2013 and pronounced itself pleased. And it has ushered in 2014 – its centennial year – with a bang, announcing a new round of weight-loss claim initiatives that signals its intention to maintain an extremely aggressive approach to enforcement in the Obama Era.
In its annual “Performance and Accountability Report,” a dry but revealing look at the year just passed, the FTC evaluates its output against established measures and targets in its current “Five-Year Strategic Plan.” For its two missions – Consumer Protection and Maintaining Competition – the FTC states that it met or exceeded 85 percent of its performance benchmarks.
In consumer protection, the FTC says it outperformed several key targets. Among them were:
- Consumer complaints collected: target – 3 million; actual – 5.7 million
- Percentage of actions aimed at subject of consumer complaints: target – 70 percent; actual – 90.9 percent
- Percentage of resolved cases (through litigation or settlement): target – 80-90 percent; actual – 98.6 percent
- Percentage of redress cases with distribution to consumers within six months: target – 90 percent; actual – 94.7 percent
In her introduction, FTC Chairwoman Edith Ramirez notes that the FTC continued to give priority to: protecting consumer privacy; improving data security; policing harmful uses of new technology (i.e., mobile cramming, text message spam, app misrepresentations); and safeguarding vulnerable “Great Recession” consumers from financial fraud (in mortgage/debt services, debt collection, payday lending, prize promotion scams, and “free” grants). The report says these areas will continue to be top enforcement objectives for 2014, along with:
- Identity theft
- Compliance with FTC advertising principles in new media (such as text messaging, viral marketing and affiliate marketing)
- Protection of children under the recently revised Children’s Online Privacy Protection Act Rule (COPPA)
- Environmental marketing claims under the FTC’s “Green Guides”
- Health claims (i.e., weight-loss/disease claims and health insurance fraud under Obamacare)
Additionally, the FTC kicked off consumer protection enforcement in the new year with “Operation Failed Resolution”: four cases targeting so-called “fad” weight-loss products, from food additives and skin cream to dietary supplements. The big catch is Sensa Products, marketer of the innovative “sprinkle diet” that generated sales of more than $364 million from 2008-2012.
Sensa claimed that its sprinkle additive enhances food’s smell and taste, enabling users to feel full and thus eat less and lose weight without dieting or exercise. The FTC disagreed, alleging there was no “competent and reliable scientific evidence” to support the claims. In a settlement, Sensa has agreed to pay $26.5 million in consumer redress and to support future weight-loss claims with at least two controlled clinical human studies – the FTC’s now standard substantiation requirement for weight loss claims. The settlement also covers the CEO of Sensa and the creator of the Sensa product, a doctor who was accused of offering scientifically unsupported expert endorsements.
Simultaneously, the FTC announced an update to its “Red Flag” Media Guide for weight-loss claims. As weight-loss marketers aim to cash in on Americans’ perennial New Year’s diet resolutions, and as all direct response marketers gear up for 2014, they should understand that the FTC’s aim is to achieve even higher enforcement marks in the year ahead than in the year just past. Be both creative and smart. Don’t become a statistic in the FTC’s next annual performance report.
William I. Rothbard is a former FTC attorney and practices in Los Angeles, specializing in advertising and marketing law. He can be reached at (310) 453-8713, Rothbard@FTCAdLaw.com, and www.ftcadlaw.com.