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January 20, 2011

How to Sell E-cigarettes and Avoid an FTC Investigation

By: Ifrah Law

Customers are flocking to electronic cigarettes — battery-operated nicotine delivery devices that are meant to replicate the flavor and sensation of smoking a tobacco cigarette. While merchants and advertisers are understandably eager to participate in this growing industry, we predict that the FTC will be watching ads carefully in anticipation of enforcing its advertising rules.

The FTC can regulate advertisements for any product, but it is especially likely to focus on products such as e-cigarettes because of their potential health implications. The FTC will likely be looking for any express or implied health representations in online ads. The agency generally presumes that advertisers don’t have the funds or expertise to fund reliable scientific studies, so we predict that it will investigate and require substantiation for advertising claims that imply that e-cigarettes provide health benefits or advantages over traditional cigarettes.

Health implications aside, the FTC is likely to pursue e-cigarette advertising because of the success the products have had in the marketplace. Because internet advertisements have a national audience, the FTC can presume that many people are being affected by any unfair or deceptive acts or practices used in the sale of the product. Advertisements that make general, subjective claims that can be analyzed by the consumers themselves (such as “Tastes great!”) have historically attracted less FTC attention than those claims that consumers would have difficulty evaluating for themselves, such as “e-cigarettes contain none of the harmful ingredients of tobacco cigarettes.”

While the FTC has yet to file any litigation on e-cigarette matters, the Food and Drug Administration (FDA) tried and was rebuffed by the U.S. Court of Appeals for the D.C. Circuit, which ruled that “tobacco” products are governed by the Family Smoking Prevention and Tobacco Control Act of 2009.

Whether or not the courts ultimately decide that e-cigarettes are drugs, devices or tobacco, the FTC has jurisdiction to regulate advertising for this product. Section 5(a) of the FTC Act provides that “unfair or deceptive acts or practices in or affecting commerce” are unlawful, giving the FTC broad power to regulate advertising. ecommerce websites list . Section 12(a) of the FTC Act specifically prohibits the dissemination of any false advertisement that is likely to induce the purchase of drugs or devices.

And when it comes to e-cigarettes, we feel certain that the FTC will be paying attention.