United States: FTC Issues a $2 Million Reminder to Ad Agencies

The Federal Trade Commission ("FTC") and the State of Maine have announced a $2 million dollar settlement with ad agency Marketing Architects, Inc. ("MAI") for deceptive weight-loss claims. In the last three years, the FTC has brought at least three complaints against ad agencies. The judgment against MAI, however, is among the largest judgments the FTC has sought from an ad agency to date. The case contains important lessons for ad agencies.

Background

According to the FTC, the ads and scripts created by MAI for its client Direct Alternatives' (DA's) weight-loss products were deceptive. These ads included unsubstantiated claims such as "with the metabolism-boosting benefits of AF Plus, you can keep eating your favorite foods and still lose pounds and inches -- in fact we guarantee it" and "try it just once a day for thirty days and if you're not on your way to being thirty pounds thinner, just send it back and risk nothing." MAI also used testimonials that featured fictitious people, like DA company spokesperson, "Jill Moore," who stated, "I got tired of being fat. Being overweight really limited my life because I didn't have any self-confidence. I since lost [all of] the extra pounds and inches with Final Trim." The complaint further charged MAI with creating radio ads falsely disguised as news stories and with creating inbound call scripts that failed to adequately disclose that consumers would be automatically enrolled in negative-option (auto-ship) continuity plans.

FTC Says MAI Knew Weight-Loss Claims Lacked Substantiation

The complaint focuses on the ad agency's knowledge that the advertiser's claims lacked competent and reliable scientific evidence to back up health and weight-loss claims. The FTC imputed knowledge to MAI in three ways.

First, in 2014, the FTC had filed a complaint against another client of MAI, Sensa Products, LLC ("Sensa"), for deceptive weight-loss claims, similar to those at issue here. That complaint resulted in an order requiring Sensa to pay $26,500,000 in restitution. In addition, the final order required Sensa to give a copy of the order to MAI. MAI acknowledged receipt of the order in writing.

Second, according to the FTC, MAI knew DA's counsel had expressed concerns about the weight-loss claims. Counsel for DA wrote: "there are still serious questions regarding [DA's] ability to substantiate certain claims" and "continue to bear in mind that, as [] noted several times in the past, if you use this advertising, regulators expect that you have competent and reliable scientific evidence to substantiate the claims."

Finally, in April of 2011, a radio station notified MAI that the station would not run an advertisement for one of DA's weight-loss products until MAI provided substantiation for the claim. According to the FTC's complaint, MAI's account manager noted in the company's internal database that MAI's advertising team did not have any such substantiation.

Despite having knowledge that the claims in the ads they created lacked the appropriate substantiation, MAI proceeded with their campaign on the client's behalf.

The Take-aways:

  • Ad agencies are not exempt from FTC enforcement action. The MAI order serves as a reminder that ad agencies are not immune from FTC complaints. And as the MAI order and settlement make clear, ads that run afoul of FTC guidelines, and federal or state laws, can be expensive. 
  • Consider yourself warned. The FTC focused on MAI's knowledge that the claims in the ads it created lacked the appropriate substantiation. Knowledge may include being aware of previous FTC complaints concerning deceptive practices. So it's important to stay abreast of relevant federal and state enforcement actions, especially if they involve product categories relevant to your business. As the MAI judgment makes clear, both advertisers and their agencies must ensure that there is competent and reliable substantiation for the claims in their ads.
  • Use the resources that are available to you. The FTC has published guidelines to assist brands and ad agencies in determining what may be an improper ad. The guidelines include a list of "gut check" weight-loss claims that, according to the FTC, cannot be true. These claims include:

    • a product causes weight loss of two pounds or more a week for a month or more without dieting or exercise;
    • a product causes substantial weight loss no matter what or how much the consumer eats;
    • a product causes permanent weight loss even after the consumers stops using the product;
    • a product blocks the absorption of fat or calories to enable consumers to lose substantial weight;
    • a product safely enables consumers to lose more than three pounds per week for more than four weeks;
      a product causes substantial weight loss for all users; or
    • a product causes substantial weight loss by wearing a product on the body or rubbing it into the skin.

www.fkks.com

This alert provides general coverage of its subject area. We provide it with the understanding that Frankfurt Kurnit Klein & Selz is not engaged herein in rendering legal advice, and shall not be liable for any damages resulting from any error, inaccuracy, or omission. Our attorneys practice law only in jurisdictions in which they are properly authorized to do so. We do not seek to represent clients in other jurisdictions.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Terri J. Seligman
Jeffrey A. Greenbaum
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions