Why POM Wonderful Can Celebrate FTC Judge’s Ruling in Advertising Case
Pomegranate juice maker POM Wonderful has declared victory against the FTC . . . in spite of an administrative law judge’s ruling that upholds many claims in the agency’s complaint. But the California company has good reason to celebrate: certain FTC standards, the ones that POM cried foul on, were rejected by the court.
The epic battle between POM Wonderful and the FTC began roughly two years ago during an agency investigation of the company for false advertising. The FTC had approached POM with a proposed requirement of enhanced advertising standards for medical and health claims. These would have required the company to seek FDA approval before making certain claims; the standards would also have required more stringent research requirements for substantiation of such claims.
To support these new standards, the FTC showed POM consent orders it had recently entered into with Nestle U.S.A. and Iovate Health Systems, Inc. That’s when POM cried foul. It saw the FTC’s moves – shifting and enhancing standards through consent orders with other companies, as opposed to traditional notice and hearing procedures – as a major overstepping and defiance of the rulemaking process. The company took its complaint to court, filing a lawsuit in U.S. District Court for D.C. against the FTC for violating its First and Fifth Amendment rights. The FTC within two weeks issued its administrative complaint against POM for false advertising.
Now, two years later, after a voluminous hearing record in the administrative proceeding, the administrative law judge in the FTC’s action has issued an opinion upholding certain false advertising allegations in the FTC’s complaint – based on implied as opposed to express claims – but also siding with POM on the company’s major issues of contention. (Note that POM’s action in the U.S. District Court appears to still be pending as of May 23, 2012.)
POM is touting victory based on rulings by the judge that (1) any FDA pre-approval requirement “would constitute unnecessary overreaching” and that (2) more stringent double-blind, randomized, placebo-controlled studies were not necessary. It appears that these rulings effectively put the kibosh on the FTC’s sliding scale of regulation through settlement agreements … at least in this instance.
An important holding from the court that POM has cited in its press release is that “[t]he greater weight of the persuasive expert testimony in this case leads to the conclusion that where the product is absolutely safe, like POM Products, and where the claim or advertisement does not suggest that the product be used as a substitute for conventional medical care or treatment, then it is appropriate to favor disclosure.”
The court thus addressed some of POM’s concerns over a chilling effect on free speech that could have resulted from the FTC’s attempts to require FDA preapproval for certain health claims. This is a concern we had identified in an earlier post on the matter. While many articles published on the judge’s opinion to date have been headlining POM’s losses, the more important aspect may be the judge’s findings in favor of the company.