FTC Commissioners Fight Over Free Speech and Dr. Oz as Court Settles RCT Debate

In a major win for the dietary supplements industry and the Republican minority on the Federal Trade Commission, the D.C. Circuit Court of Appeal has reversed the FTC’s split decision in POM Wonderful that imposed a rigid requirement of two randomized controlled human trials (“RCTs”) on disease treatment claims. While ruling that POM Wonderful made deceptive disease claims and that an RCT is needed to support them, the Court held that a 2-RCT requirement could suppress useful consumer information in violation of the “commercial speech” doctrine which grants First Amendment protection to truthful advertising of a lawful product. The Court also limited its approval of an RCT requirement to disease claims and indicated that the traditional, more flexible standard of “competent and reliable scientific evidence” still applied to other health claims. It also indicated that an effective disclaimer that the science behind a health claim is not conclusive could help to ensure that the claim would not be interpreted as an “establishment” (i.e., “clinically proven”) claim that would have to be supported by at least one RCT or other definitive scientific proof to meet FTC substantiation standards for such a claim.

As the Court was rocking the FTC landscape by overruling the Democratic majority that had favored the 2-RCT requirement, another equally spirited disagreement with their Republican counterparts was erupting over the parameters of commercial speech: specifically, whether it includes statements made in the seemingly 1st Amendment protected “free speech” zone of a television talk show. The dispute flared in the open in warring statements between the majority and minority in connection with a settlement last month in FTC v. Genesis Today, Inc. et al. over weight loss claims made for a green coffee bean supplement and the amount of consumer redress ordered ($9 million).

In a joint dissenting statement, Commissioners Maureen Ohlhausen and Joshua Wright said the amount was excessive because it was based in part on the appearance of defendant Lindsay Duncan on The Dr. Oz Show in which he touted the weight loss benefits of green coffee, and on Dr. Oz’ own promotion which boosted not only defendants’ sales but the whole green coffee market (the so-called “Dr. Oz” effect). They argue that Duncan’s appearance was not commercial but fully protected speech under the First Amendment. In a separate majority statement, Chairperson Edith Ramirez and Commissioners Julie Brill and Terrell McSweeney vigorously disagreed, contending that his appearance had a clear commercial purpose and effect and thus was advertising subject to FTC regulation. Who is right depends on how commercial speech is defined.

The majority argue that commercial speech is more than just the offer of a specific product but can encompass broader promotional expression. In deciding what speech is commercial, they consider: (1) is it promotional; (2) does it mention a specific product; (3) does it include information about product attributes; (4) is it paid advertising; and (5) the speaker’s economic or commercial motivation. Applying these factors, they said Duncan’s appearance on Dr. Oz was clearly commercial. They note that defendants had begun selling green coffee bean before Duncan went on the show, intended to use his appearance to promote their product, and used video clips of it to exploit the “Dr Oz effect” in their advertising afterward. On the show, he recommended that consumers use green coffee bean to lose weight, explained why, and told them how to find the product online, allegedly in a way that would lead them to his brand. All of this, the majority said, constituted “overwhelming” evidence of Duncan’s economic motivation in going on Dr. Oz. The fact that the appearance wasn’t paid for and that Duncan didn’t identify his product by name wasn’t enough to make it non-commercial. The Commission’s job, they said, is to protect consumers from such “manipulative” commercial speech.

Applying the same five-factor test, the minority argue that Duncan’s Dr. Oz appearance was not commercial speech because he did not pay to appear on the program, did not mention price or ever propose a commercial transaction, and did not mention any specific product. Further, the biggest driver of sales was not Duncan’s appearance but Dr. Oz’ fully protected speech promoting green coffee bean. Defendants, the minority say, should not be held liable for his effect on their sales.

The minority accuse the majority of overreaching to label Duncan’s statements on Dr. Oz as commercial, when defendants’ paid advertising was more than enough to support the allegations against them. They admonished the Commission to:

refrain from attempting to classify as advertising protected non-commercial speech,
including non-product-specific statements on independent news and talk outlets. Such
venues are today’s town square, and as such they must remain open to wide-ranging
debate about emerging areas of science or other areas of public concern, free from the
threat of government control and censure.

They also voice concern that such a high amount of redress could:

chill the speech of future speakers on television news or talk shows. Food industry
representatives who would otherwise discuss health or nutrition topics and mention
generic substances or ingredients in a news or talk venue may fear being held liable
for failing to meet the FTC’s rigorous advertising substantiation requirements. The
majority’s ultimate goal in imposing such an expansive interpretation of advertising
and high level of redress may be to chill the speech of Dr. Oz’ future guests. But the
First Amendment forbids this objective.

Their warning should not go unheeded. The majority’s position ventures into uncharted and dangerous territory. Beyond determining if it’s paid for, the factors for deciding whether speech is commercial are far from a bright-line test. What is promotional? What constitutes discussion of product attributes and how in-depth must it be? What is a “specific” product? (The majority says it can be a generic product category, not just a specific brand.) How clearly can a speaker’s motivation be determined to be economic? Once the barn door is open to such subjective, interpretive analysis, then, indeed, how will a nutritional industry representative be able to know that something he or she says about an ingredient on television or an independent blog could be commercial speech challengeable by the FTC and subject to stiff financial penalties?

Before the barn door opens any further, it’s better that the FTC slam it shut right now. Let’s hope its obsession with the “Dr. Oz effect” is passing and that the “Duncan Affair” is a one-off. Let’s hope its propensity for regulatory overreach is tempered by the D.C. Circuit’s “slap on the wrist” in POM Wonderful, not only on excessive substantiation demands but on an over-expansive, speech-chilling definition of commercial advertising.

Talking about Direct Response, FTC, Online Marketing

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