Nutraceutical products have recently been the subject of a multitude of class-action lawsuits questioning their marketing, efficacy and safety. The often hyperbolic health and nutritional claims touted in labelling and advertising for food and dietary supplements provide fertile ground for “consumer fraud” claims, particularly in states such as California that have plaintiff-friendly laws. As a defence against these actions, nutraceutical companies may assert federal pre-emption — arguing that the federal government controls nutraceutical marketing and pre-empts states from imposing different requirements through civil litigation. By contrast, civil plaintiffs often attempt to bolster their claims for damages by arguing that marketing violates federal law.
The lack of clear guidance not only leaves companies vulnerable to enforcement action by both FDA and FTC
Yet, the regulatory scheme controlling the marketing of nutraceutical products is far from clear. Authority is shared between the US Food and Drug Administration (FDA) and the Federal Trade Commission (FTC), but the explosion of social media and e-commerce into the marketplace has created many unanswered questions about the respective scope of their authority. The lack of clear guidance not only leaves companies vulnerable to enforcement action by both FDA and FTC, but the lack of bright-line federal standards emboldens an aggressive plaintiffs’ bar to file class-actions, may complicate any pre-emption defence the company might have and makes it easier for plaintiffs to argue that a company has violated federal law.
Regulatory authority of FDA versus FTC
Dangers of overlap and falling through the cracks: FDA and FTC operate under a liaison agreement in which FTC possesses primary enforcement responsibility for advertising, whereas FDA has primary enforcement responsibility over labelling and packaging. The line between the two, however, is often blurred. For example, FDA has stated that, in certain circumstances, information about FDA-regulated products disseminated using the Internet can be considered to be labelling, especially when consumers can purchase the product directly from the website. Additionally, some courts have interpreted “labelling” to include any visual, audio or other material that bears a strong contextual relationship to the product and is distributed at the point of sale.
Although the agencies have published guidance regarding the intersection of authority between FDA and FTC, it not only fails to address all areas of the underlying source of uncertainty, but has quickly become outdated by rapidly changing trends in health food development, promotion and methods of communication. In recent years, methods of purchasing nutraceuticals have grown to include infomercials, websites and even mobile phone apps. There are new vehicles for marketing, such as blogs and social media (such as Twitter and Facebook). The social media and Internet boom has amplified the confusion regarding what is labelling and what is advertising.
There are multiple instances of FDA sending warning letters to dietary supplement companies concerning claims made on websites, which most would consider advertising within the purview of FTC
One example of the blurred line involves Phusion Products, makers of Four Loko, a caffeinated alcoholic beverage allegedly linked to injuries and deaths. Both FDA and FTC sent warning letters to Phusion Products on 17 November 2010 stemming from the same alleged acts. Moreover, in 2011, FTC required packaging and label changes for Four Loko drinks regarding the per-can alcohol volume, even though FDA has primary enforcement over labelling and packaging. There are multiple similar instances of FDA sending warning letters to dietary supplement companies concerning claims made on websites, which most would consider advertising within the purview of FTC.
The recent case of Wilson versus Frito-Lay North America Inc involved claims that Frito-Lay’s statements about its snack products — including the description “all-natural” — violated the Food Drug and Cosmetic Act and were civilly actionable under California law. In this context, the court considered whether company websites identified on product labelling themselves constitute “labelling”. Specifically, the court addressed whether the statement “Visit our website @ fritolay.com” printed on a bag of chips transformed every statement on that Frito-Lay website into labelling.
Without discussing the FTC’s authority in the area, the Court concluded it did not because none of the website language explained or supplemented the product, and because consumers were not told the website would inform them of the details of the products’ nutritional facts. But the very fact that the court entertained the argument that referring consumers to a website could turn statements on that website into labelling highlights the confusion in this area, and should raise concerns among nutraceutical manufacturers.
Missing in action
Regulatory guidance for marketing by social media: Both FTC and FDA have treated social media as advertising, and FTC has touched on the issue in its guidance. Despite requests, FDA has yet to release guidance about marketing via social media, opting instead to address the issue on a case-by-case basis.
It has long been a matter of speculation whether a company “liking” statements about its product on Facebook or “retweeting” those statements on Twitter might be construed as an endorsement of the content subject to federal regulation. FDA apparently thinks the answer is “yes,” although in the context of a product FDA considered to be a drug rather than a nutraceutical.
It has long been a matter of speculation whether a company “liking” statements about its product on Facebook or “retweeting” those statements on Twitter might be construed as an endorsement of the content subject to federal regulation
FDA issued a warning letter to AMARC, a dietary supplement company, for “liking” an unapproved claim regarding its product, PolyMVA, on Facebook. The post, by a third party, stated: “PolyMVA has done wonders for me. I take it intravenously two times a week and it has helped me tremendously. It enabled me to keep cancer at bay without the use of chemo and radiation. Thank you AMARC.” FDA’s warning letter suggests that it interprets a Facebook “like” as an endorsement of the statement. Whether FDA or FTC will take the same position with respect to nutraceuticals as opposed to drugs (which are within FDA’s exclusive purview), remains to be seen, but the AMARC warning letter should give companies pause about “endorsing” statements about their products via social media.
FTC issues guidance for social media use
Recently, FTC updated its guidelines regarding e-commerce disclosures, specifically instructing that companies should be mindful that consumers will be reading the content on various types of devices (computer, smart phone and tablet) and that all disclosures need to be clear and conspicuous regardless of the device. Additionally, FTC provided a template for disclosing ads within posts on social media platforms. For instance, a social media post by a paid spokesperson, including space-constrained messages such as Tweets, should disclose that it is a paid endorsement, as well as state typical results if the statement is a testimonial. This will affect advertisers, social media participants, bloggers and start-up companies, to name a few. And it stands to reason that FTC will also expect digital advertising regarding nutraceutical products to contain full disclosure of nutritional facts and any other required information, even under Twitter’s 140 character limit.
One intriguing issue that remains unclear is the extent to which a company might be responsible for posts by third parties regarding results with products. If the claim is made on a page belonging to the company, does the company have to follow up with a statement that results are not typical and may vary? What if a tweet is retweeted? Neither FDA nor FTC have officially weighed in on these issues that are unique to social media.
Litigation trends target nutraceutical marketing claims
The recent influx of nutraceutical marketing litigation seems to centre around two types of product claims: health-related (healthy, nutritious or wholesome); and “natural”.
Healthful, nutritious and wholesome claims: Putative class actions have targeted health-orientated claims regarding products that contain trans fat, high amounts of saturated fat, sugar or sodium, or artificial colours or flavours. Per FDA regulation, the term “healthy” or similar terms (health, healthful, healthfully, healthfulness, healthier, healthiest, healthily and healthiness) can be used in the content labelling if the product meets the conditions for total fat, saturated fat, cholesterol and other nutrients defined by regulation.
Classes have been successful in challenging health claims even when the advertising does not expressly call the product healthy
Classes have been successful in challenging health claims even when the advertising does not expressly call the product healthy. For instance, Nutella hazelnut spread was targeted for its advertising making Nutella seem as though it was part of a healthy, nutritious breakfast. The class plaintiffs alleged that the advertising misled consumers about the healthfulness, implying it was part of a wholesome balanced breakfast, but omitting that the nutritional value claimed was not derived from Nutella. The class plaintiffs asserted that Nutella was more analogous to a dessert topping, with high levels of fat and sugar. The company ended up settling the suit for more than US$3m in 2012.
All natural: Some of the most common consumer actions involve “natural” claims regarding products containing genetically modified organisms (GMOs) or other synthetic or artificial ingredients, even though the packaging truthfully lists all the ingredients. The FDA has declined to promulgate a regulation defining natural, but in non-binding informal policy, FDA has indicated it considers natural to mean that “nothing artificial or synthetic” (including colours regardless of source) is included in, or has been added to, the product that would not normally be expected. FDA applied this meaning in a 2011 warning letter to a manufacturer, stating that a potato product was misbranded as “All Natural” because it contained a synthetic chemical preservative, disodium dihydrogen pyrophosphate. This non-binding guidance, however, does not have enough weight to pre-empt claims by consumers. Accordingly, claims are frequently permitted to proceed under a patchwork of state laws.
Recent putative class-action suits have targeted “natural” claims regarding products containing ingredients such as high fructose corn syrup, alkalised cocoa, factory made ascorbic acid, vegetable glycerin, soybean oil, canola oil, yeast extract and beta-carotene. Many beverage and snack food products claiming to be “all natural” have been targeted with class-action claims.
In July 2013, Naked Juice agreed to pay $9m to settle a consolidated putative class action in California, alleging that product labels and advertising made claims such as “all natural” and non-genetically modified, even though the products contained unnaturally processed and synthetic ingredients, derivatives of genetically modified crops and chemically processed vitamin substitutes. Naked Juice continues to deny the allegations that the product labels were misleading or false, but has also agreed to redesign the labels to address the representations at issue.
Being overly cautious with regard to “natural” claims may be one of the most effective solutions to help mitigate risk
There is no clear answer for avoiding trouble, but being overly cautious with regard to “natural” claims may be one of the most effective solutions to help mitigate risk. Even common plant-derived additives and preservatives, as well as genetically modified corn and soybeans or their derivatives, such as corn starch, have been targeted in litigation. Notably, more than 80% of the US corn and soybean stock are genetically modified, and these products are two of the most common ingredients in food products. Accordingly, manufacturers should closely scrutinize their ingredients and the way those ingredients are processed before making natural claims. And the best solution may be to find alternative marketing strategies to “all natural” claims to avoid being targeted by class-action litigation.
Advice for manufacturers
Until there exists a clear distinction between FDA and FTC authority and what constitutes labelling and advertising in nutraceutical marketing, nutraceutical manufacturers would do well to monitor closely the two agencies’ actions and statements, as well as litigation trends involving nutraceuticals. Companies, their marketing teams and their legal counsel should be proactive in understanding the law and regulatory environment and should consider creating compliance programmes that will help to ensure marketing efforts are regularly evaluated for conformity.
In the meantime, manufacturers and marketers of nutraceuticals should strive for compliance with both FDA and FTC regulations and guidelines, and should expect product websites and social media pages to continue to receive heighted scrutiny by one or both agencies. When in doubt, the manufacturer should follow a “double dose” of precaution by anticipating overlap between the FDA and FTC.
