The Federal Trade Commission (FTC) has issued a warning to advertisers, urging them to back up their product claims or face steep civil penalties. In notices sent to 670 companies, the FTC stated that companies are required to provide “reliable evidence” to back up their product claims, a requirement that has been in place for some time. However, many advertisers continue to make unsupported statements and false claims about the evidence they have.
The requirement for advertisers to have adequate support for their advertising claims at the time they’re made is a bedrock principle of FTC law,” said Sam Levine, director of the FTC’s Bureau of Consumer Protection. “The prospect of steep civil penalties will help ensure that advertisers don’t play fast and loose with the truth.”
The notices were sent to companies involved in marketing over-the-counter drugs, dietary supplements, homeopathic products, and functional foods. The list of companies includes some big names, such as Bausch + Lomb, Bayer, CVS Pharmacies, Coca-Cola, and even Gwyneth Paltrow’s Goop. However, the FTC emphasized that inclusion on the list does not suggest that a company has engaged in deceptive or unfair conduct.
The FTC has long tried to guide companies on how to substantiate their claims, but many sellers continue to make unsupported statements and false claims. “Consequently, the FTC is now using its penalty offense authority to remind advertisers of the legal requirement to have a reasonable basis to support objective product claims and to deter them from making deceptive claims in the future,” the release said.
If companies fail to back up their claims, they could face fines of up to $50,120 per violation. This news has left many marketers feeling a bit like they’re walking on eggshells, as the prospect of steep civil penalties is enough to make any marketer think twice before running an ad that makes bold promises.
It seems that the FTC is cracking down on advertisers in a variety of sectors. The agency has expressed concerns about companies in the artificial intelligence (AI) sector overstating claims about their products. Because machine learning requires a significant amount of data and storage, there is the possibility that this demand could cause “big companies to become bigger,” according to FTC Chair Lina Khan.
And the FTC is also investigating cryptocurrency firms to determine if they have run deceptive or misleading advertisements. Last year brought the news that the FTC was investigating a number of cryptocurrency firms, including Nexo, BlockFi, and Celsius, to determine if they were making false claims about their products or services.
It remains to be seen how companies will respond to the FTC’s warning, but it’s clear that advertisers need to be careful about making claims they cannot back up. Perhaps this will be a turning point for the advertising industry, and we’ll see a renewed focus on providing reliable evidence to support product claims. Until then, advertisers beware: the FTC is watching.
