FTC’s Substantiation Standards Take Center Stage in Basic Research Case9 Jul, 2012 By: Jeffrey D. Knowles, Venable LLP’s Advertising, Randal M. Shaheen
It has been a busy couple of months in court for the Federal Trade Commission (FTC). Recently, the FTC won on the merits but saw an Administrative Law Judge reject its proposed substantiation standard in the Pom Wonderful case. In another contempt case (Daniel Chapter One) filed in the federal District Court for the District of Columbia, the FTC also won on the merits but the judge then gave the defendants two weeks to purge their order violations before imposing any civil penalty. Not surprisingly, the defendants availed themselves of that opportunity.
There is yet another declaratory judgment/contempt battle unfolding in federal district court in Utah, Basic Research, et al. v. Federal Trade Commission. In that case, the judge’s recent ruling on Basic Research’s motion for partial summary judgment helps demonstrate why the FTC is so eager to modify its definition of “competent and reliable scientific evidence.” The case may also help determine whether the decision in POM is merely a bump in the road or the beginning of a substantial roadblock for the FTC’s efforts to tighten its substantiation standards.
Basic Research was subject to a consent order with the traditional definition of “competent and reliable scientific evidence” and asked the judge to determine what standard the company would be held to under that order. Consistent with the order’s language, the judge held that any representation is satisfied by “competent and reliable scientific evidence” if it is:
• Based upon expertise of professionals in the relevant area
• Conducted and evaluated in an objective manner
• Conducted by a person qualified to do so
• And uses procedures generally accepted in the profession to yield accurate and reliable results
None of those requirements, by themselves, should give the FTC heartburn as they come directly from the language in the order. However, the judge also held that any study proffered by the FTC reaching a conclusion contrary to the supporting evidence offered by Basic Research does not prove that the defendants lacked a reasonable basis for its claims unless the FTC’s study proves that one of the four bullet points above has not been met.
The judge made this point in oral argument, as well. He suggested that the FTC’s burden was to disprove that the defendant’s experts and/or science qualified under each of the elements above. It was not, the judge suggested, sufficient for the FTC’s experts to simply testify about what quality or quantity of substantiation they would consider reasonable for the claims at issue.
The judge’s ruling, of course, does not resolve the underlying merits of the case, but it is yet another sign that the courts may not be fully aligned with the Commission’s views on substantiation.
Jeffrey D. Knowles and Randal M. Shaheen are partners in Venable LLP’s Advertising, Marketing and New Media Group. Knowles is the chair of the group. They can be reached at (202) 344-4000, or via E-mail at email@example.com and firstname.lastname@example.org.