When you walk through a grocery store, you will likely see certain food labeling claims such as “healthy”, “low in sugar”, and “humanely sourced”. A “labeling claim” refers to a term on a label that is not required, but the manufacturer has chosen to include it—usually for marketing purposes. Food manufacturers also tend to include similar claims in their off-label advertisements. Although food labeling claims and advertisements can help consumers who are seeking certain qualities in the food they buy, labeling claims and advertisements can sometimes mislead consumers. To prevent this deception, both the Food and Drug Administration (FDA) and the Food Safety and Inspection Service (FSIS) have promulgated regulations and guidance documents governing food labeling claims. However, these statutes and regulations only govern labeling claims. A separate federal agency, the Federal Trade Commission (FTC), has jurisdiction over false and misleading food advertisements.

This is the fourth post in a series that explains the regulations governing food labeling claims and the potential legal actions brought against food companies whose labeling and advertising is allegedly false and misleading. The first three posts explained the laws and regulations that FDA and USDA enforce. This post explains the role that the Better Business Bureau (BBB) and the Federal Trade Commission (FTC) play in ensuring that food advertisements are not false and misleading.

The National Advertising Division’s Monitoring Program

The BBB is not a federal agency, but a private organization that has set up internal programs to advance truth in advertising among its member companies.  The BBB’s “National Programs” encourage “companies, industry experts, and trade associations [to] work together within a self-regulatory environment to foster industry best practices in truth-in-advertising, child-directed marketing, data privacy, and dispute resolutions.” One of these BBB National Programs is the National Advertising Division (BBB/NAD).

Although a completely voluntary process, BBB/NAD plays a role as the advertising industry’s self-regulatory body. According to the BBB, BBB/NAD “monitors national advertising in all media, enforces high standards of truth and accuracy, and efficiently resolves disputes to build consumer trust and support fair competition.” BBB/NAD hears disputes brought by businesses and consumers and self-initiates proceedings through its monitoring program. The proceedings brought through the monitoring program make up between 20-25% of the proceedings BBB/NAD hears in a year. According to BBB/NAD, the goal of the monitoring program is to “expand the universe of advertising claims that are reviewed for truth and transparency and provide guidance for future advertising.”

NAD is not a government entity and participating in its monitoring program is voluntary. However, if a company fails to respond to BBB/NAD’s “case initiation letter” or refuses to comply with NAD’s recommendations, then NAD will notify the appropriate regulatory agency that the company is question has false or misleading advertising. It is important to note that anyone can notify a federal agency about a false or misleading label or advertising.

The medium on which the false or misleading claim is found will determine which agency the case is referred to. NAD defines advertising as “any paid commercial message, in any medium (including labeling), if it has the purpose of inducing a sale or other commercial transaction or persuading an audience of the value or usefulness of a company, product, or service”. Therefore, NAD defines advertising to include labeling. If the false claim is on a food label, then NAD will refer the claim to either FDA or USDA (depending on which agency regulates the particular food item). If the false or misleading claim is in an off-label advertisement, then NAD will refer the case to the FTC.

The FTC

The FTC is a federal agency whose mission is “to protect consumers and competition by preventing anticompetitive, deceptive, and unfair business practices through law enforcement, advocacy, and education without unduly burdening legitimate business activity.” In addition to the cases that NAD refers, the FTC also allows the public to file reports of fraud or unfair business practices through its website. When someone, usually a consumer or competitor, files a report, the FTC uses the report “to investigate and bring cases against fraud, scams, and bad business practices.”

The Federal Trade Commission Act (FTCA) gives the FTC authority to bring actions against food manufactures who falsely or misleadingly advertise their products. Specifically, “it shall be unlawful for any person, partnership, or corporation to disseminate … any false advertisement … for the purpose of inducing, … the purchase of food, drugs, devices, services, or cosmetics”. 15 U.S.C. § 52(a). The FTCA does not define the term “advertisement”. However, the FTC and FDA have a memorandum of understanding which states that the FTC “has primary responsibility with respect to the regulation of the truth or falsity of all advertising (other than labeling) of foods, drugs, devices, and cosmetics.”

Once the FTC receives a report, such as a referral from NAD, or independently discovers false or misleading advertisements, it initiates an investigation. Most investigations start informally, meaning the FTC seeks information before it determines whether or not to bring a legal action against the company in question. A company will know they are being informally investigated because the FTC usually contacts the company to gather information to determine whether to initiate a formal investigation. An FTC formal investigation is initiated when the FTC sends the company a civil investigative demand (CID) letter. According the FTC, CID letters are a type of subpoena and the FTC sends CID letters to request documents and oral testimony, and to require the company to file written reports or answer questions. 15 U.S.C. § 57b-1(c)(1).

When investigating advertisements, either informally or formally, the FTC focuses on two main questions: (1) whether the advertisement misleads a reasonable consumer, and (2) whether the company can substantiate the advertisement claims.  See Thompson Medical Co. v. FTC, 791 F.2d 189 (D.C. Cir. 1986). According to the FTC, it likely will not take legal action against an advertisement if it complies with the FDA’s or USDA’s regulations. However, the FTC cautions that “some claims that would technically comply with FDA’s labeling regulations might be deceptive in advertising if the context of the ad renders the express message of the claim misleading.” If the FTC has reason to believe that advertising violates a law once concluding a formal investigation, then the FTC may file a complaint with the FTC Administrative Law Judge (ALJ). After the ALJ hears a case, they will decide whether the advertising is false or misleading. If the decision is adverse to the advertiser, then the advertiser can appeal the case to the FTC Commissioners. If the commissioners uphold the ALJ’s adverse decision, then the advertiser can appeal the case to the federal court system.

Case Studies

The following are two case studies that illustrate how the FTC initiates, investigates, and closes cases involving misleading food advertisements.

The a2 Milk Company

The case against a2 Milk originated in 2018 when the National Milk Producers Federation (NMPF) filed a NAD challenge. NMPF’s main concern was with a2 Milk’s use of phrases like “easier on digestion” and “avoid digestive discomfort”. NMPF also claimed that a2 Milk did not have sufficient scientific backing to make these claims. A2 Milk declined to participate because the California Department of Food and Agriculture, Milk and Dairy Food Safety Branch found that a2 Milk’s claims complied with FDA’s food labeling regulations. Because a2 Milk declined to participate in the NAD proceedings, NAD referred the case to the FTC. However, a2 Milk changed its advertising and “removed various challenged graphics, videos, promotional pages, testimonials, and statements from its website during discussions with the NAD.”

In 2019, the FTC sent a letter to a2 Milk stating that the FTC was not going to pursue a formal investigation. Although the FTC did not feel that the California Department of Food and Agriculture’s review of a2 Milk’s advertisement was sufficient evidence that the advertising was not false and misleading, the FTC cited a2 Milk’s changes to its website as the reason it decided not to pursue the case. The FTC also said that it “considered a number of factors including resource allocation and enforcement priorities, the nature of any FTC Act violation, and the type and severity of any consumer injury.”

POM Wonderful LLC v. FTC

The FTC’s case against POM Wonderful (POM) is an example of a case that the FTC decided to litigate. After conducting its investigation, the FTC filed a complaint against POM. The FTC was concerned about POM’s allegedly unsubstantiated health claims that appeared in magazines, billboards, bus stops, and online. For example, one of the health claims in question claimed that POM’s juice could decrease arterial plaque by 30%. After the administrative trial, the ALJ held that some of POM’s advertisements contained implied health claims and that POM failed to obtain sufficient scientific substantiation for these claims. The ALJ entered a cease and desist order to prevent POM from “engaging in deceptive advertising practices in the future”.

POM appealed the ALJ’s decision to the FTC Commissioners, and the Commissioners upheld the ALJ’s decision. POM appealed the Commissioners decision to United States District Court for the District of Columbia (District Court). The District Court held that some of POM’s advertisements were false or misleading because they contained unsubstantiated implied health claims. Overall, this case illustrates how violating an FDA regulations, but in advertising instead of labeling, can lead to an FTC challenge.

Conclusion

Whereas FDA and USDA are in charge of ensuring that food labels are truthful, those agencies do not regulate off-label advertisements.  The FTC is the governmental agency in charge of regulating off-label advertisements. However, NAD, a non-government organization, investigates claims of false and misleading advertisements and often refers cases to the FTC. Although the FTC may choose not to formally investigate claims, as it did in the a2 Milk case, some false and misleading advertisement cases wind up in the federal court system, as did the POM Wonderful case.

To read the first three posts in this series, click here, here, and here.

To learn more about food labeling generally, visit the NALC’s Food Labeling Reading Room, here.

**This article was written by former NALC Staff Attorney Jana Caracciolo.