Advertising Law

In This Issue

SPECIAL FOCUS: Avoiding Potential Pitfalls Associated with Functional Food Claims

Functional foods—​or foods often fortified with nutrients that offer functional benefits—​are among the fastest-growing categories of foods, but as their popularity increases, so, too, does scrutiny over whether these foods truly provide all of the health benefits they claim to do. The U.S. Food and Drug Administration (FDA) and the Federal Trade Commission (FTC) have increased their enforcement efforts against these products, and it seems that nearly every week another food company is challenging its competitors’ claims in court or at the National Advertising Division (NAD).

Amid this flurry of activity over functional foods, our newsletter editors caught up with Ivan Wasserman, a partner in Manatt’s Advertising, Marketing & Media practice who counsels national and international food, dietary supplement and cosmetics companies on the legal and regulatory aspects of marketing, and who has successfully challenged and defended numerous clients in proceedings before the NAD. Ivan provided much-needed clarity on the types of claims that are allowed when marketing functional foods and highlighted the key issues companies should consider before embarking on a new campaign.

Editors: Now, more than ever, we’ve seen the FDA and FTC cracking down on the marketing and advertising of drugs, foods and functional foods. To kick off our discussion today, could you bring us up to speed on the definitions of these three closely related products?

Wasserman: The short answer is that the FDA looks at products’ intended use. If a company claims its product is a food, or its label says so, or oral statements used by a salesperson suggest the product is a food, then it is. However, if a company claims that the product is intended to diagnose, cure, mitigate, treat or prevent disease, or is intended to affect the structure or function of the body and it is not a food, then it is a drug. And a related concept – medical foods – are formulated to be consumed or administered under the supervision of a physician and intended for the specific dietary management of a disease or condition. Functional foods do not actually have a legal definition different than regular food; however, the conventional definition is any food that claims to have an additional “functional” benefit beyond simply supplying nutrition.

Editors: Given the slight variation between these definitions, it almost seems that there could be overlap between how these foods are characterized and marketed. Can companies sell functional foods as medical foods?

Wasserman: Despite how similar these may seem, the definition of “medical foods” is extremely narrowly construed by the FDA. The language about being formulated to be consumed under the supervision of a physician is key. Historically, claims about medical foods flew under the radar, but the new FDA leadership under the Obama Administration is now taking enforcement very seriously. For example, Bioenergy was marketing a food product called Corvalen as a “medical food” to treat conditions including fibromyalgia, chronic fatigue syndrome and cardiovascular disease. In November 2010 the FDA said the company could not make medical claims about this product because a recognized food regime to treat these specific illnesses does not exist. This action again demonstrates that “medical foods” are construed as a very narrow category.

Editors: If you work at a company and are preparing to launch a new functional food product – say, probiotic yogurt or eggs fortified with Omega-3, for example – what types of information must you place on your product’s label, and what information should you omit?

Wasserman: The FDA requires certain mandatory label information – such as the net quantity of contents, ingredient lists, nutrition labeling, allergen labeling, name/address of the manufacturer and the country of origin – and additionally, there are certain types of claims that you may voluntarily include on your label under very specific requirements. Certain health claims – or those that talk about disease risk reduction – are allowed for specific foods. However, the claims must either use the exact language the FDA has permitted for specific foods by regulation (known as “authorized health claims”), or the company must petition the FDA to make a health claim, after which the FDA may decide to issue an “enforcement discretion” letter laying out the specific conditions for making this claim (called “qualified health claims”).

Additionally, the FDA permits foods to use what are known as “structure/function claims.” These are claims about the effect of a food on the structure or function of the body. Such claims are allowed so long as the statement does not claim to diagnose, cure, mitigate, treat or prevent a disease, which would bring it under the classification of a drug. Companies must be careful, however, about implied “drug/disease” claims. For example, pictures of organs could be construed as beyond a structure/function claim and therefore outside of the scope of a functional food.

Editors: It seems that manufacturers and marketers of functional foods are on the defensive as of late. What changed with respect to regulatory enforcement efforts?

Wasserman: You’re correct. The FDA previously hadn’t been that active in going after functional foods. This changed dramatically under the new FDA leadership in the Obama Administration, starting in mid-2009 and continuing through the present time. For example, in February 2010 the FDA sent out 17 Warning Letters regarding label violations for unauthorized drug claims and nutrient content claims. Simultaneously, the agency sent an open letter to the industry stating that they were scrutinizing conventional foods that were making these types of claims.

Editors: Now that we’ve covered food labeling, could you elaborate on how advertising claims involving functional foods are regulated?

Wasserman: The FDA and FTC have joint jurisdiction over claims for food products. The FDA regulates from the labeling perspective, whereas the FTC evaluates advertising claims. These lines are getting blurred, however, particularly as companies increasingly make certain health claims on their websites. Both agencies assert jurisdiction over the Internet, and if you are making a claim on your website, you should worry about both. Further complicating the regulatory landscape impacting functional foods are the FTC’s settlements with Iovate and Nestlé on July 14, 2011. Previously, when advertisers settled with the FTC, they would sign a document agreeing not to make the claims at issue again unless they have competent, reliable scientific evidence. Per the July 14 Orders, if Iovate and Nestlé wish to make certain claims again, they must have competent, reliable scientific evidence and two studies on the same or an equivalent product completed by independent researchers.

Editors: Did this settlement effectively change the level of support required for making advertising claims about functional foods moving forward?

Wasserman: No one knows for sure whether the FTC meant to create a new standard that every company must comply with, or whether the standards articulated in the Orders are applicable just to certain claims made by the companies subject to the Orders. The FTC is on record stating that it has not changed its standard going forward. On the other hand, it would behoove any advertiser to meet this heightened standard, as clearly it is one that the FTC considers to constitute competent, reliable scientific evidence for claims for a functional food or dietary supplement.

Editors: Could you leave us with a final few words of wisdom and takeaways for advertisers and marketers of functional food products?

Wasserman: The No. 1 takeaway is to know the rules. They are complicated and long, but you should be very familiar with them before selling a product as a functional food. Secondly – and this is key – have good science and don’t oversell. Make sure express and implied claims are consistent with what your science shows, and if your studies are limited to populations (for example, age), make sure your claims are so limited. Lastly, extra care and caution should be put into marketing any functional foods specifically marketed to children. Functional foods for kids are in the highest-risk category and are at the top of the enforcement agenda. You must ensure your science is buttoned down.

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NAD Weighs In On Toothbrush Whitening Claims

The National Advertising Division recently recommended that Johnson & Johnson Healthcare Products modify certain performance claims for its REACH Total Care + Whitening Toothbrush, which the NAD found contained misleading statements about its teeth whitening properties.

In an challenge brought as part of the NAD’s routine monitoring program, the NAD examined claims that the REACH toothbrush “whitens and removes stains” and “each time you brush you’re whitening and removing stains.” According to Johnson & Johnson, the bristles in its REACH toothbrush were embedded with calcium carbonate that removed plaque and provided whitening benefits.

Looking to prior decisions discussing tooth bleaching products, the NAD explained the difference between bleaching products, which affect intrinsic changes to the shading and coloring of teeth by removing stains, and whitening toothpastes, which function differently by removing extrinsic stains that affect the perception of whiteness. Because Johnson & Johnson submitted two studies that demonstrated its bristles provide a consumer meaningful difference, the NAD said Johnson & Johnson could support its claim that “Ordinary toothbrushes clean teeth. REACH whitens them.”

However, NAD concluded that claims that the toothbrush “whitens and removes stains” were misleading. “By use of the conjunctive ‘and,’ consumers could reasonably take away the implied message that not only does the advertiser’s REACH toothbrush remove surface (extrinsic) stains for noticeably whiter teeth by the infusion of calcium carbonate into its bristles, but also has the ability to actually whiten the tooth intrinsically by its innovate bristles or by some other means,” the NAD said. “Since it is undisputed that the advertised product removes only extrinsic stains by mechanical means (abrasive action) only,” in order to avoid the potential for consumer confusion, the NAD recommended that the advertiser modify its claims “whitens and removes stains” and “each time you brush you’re whitening and removing stains” by removing the conjunctive ‘and’ “to better reflect the evidence offered in support of these claims.”

In addition, if Johnson & Johnson chooses to discontinue those claims and rely solely on the “Ordinary toothbrushes clean teeth. REACH whitens them” claim, the NAD said that the company must in close proximity clarify the claim that the whitening is achieved through the removal of stains.

Why it matters: “It is well established that an advertiser is obligated to support all reasonable interpretations of claims made in its advertising including messages it may not have intended to convey,” the NAD noted.

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Quarterback’s Suit Against EA Dismissed

A New Jersey federal judge granted summary judgment for video game company Electronic Arts in a suit brought by a former Rutgers University quarterback who claimed that the company misappropriated his likeness as a virtual player in EA’s NCAA Football video game.

Ryan Hart argued that Electronic Arts violated his right of publicity by using his physical attributes like his height and weight, his speed and agility rating, jersey number, and choice of accessories (a helmet visor and left wristband) for a character in four versions of the video game. The video game manufacturer – facing several similar suits – argued that video games are protected expressive works under the First Amendment.

The court agreed, relying in part upon the recent U.S. Supreme Court decision in Brown v. Entertainment Merchants Association, which found that video games deserve the same First Amendment protection as other formats like books, plays, and movies. Applying the transformative test, U.S. District Court Judge Freda Wolfson wrote that there “are sufficient elements of EA’s own expression found in the game that justify the conclusion that its use of Hart’s image is transformative and, therefore, entitled to First Amendment protection.” Viewing the video game as a whole, the court found that NCAA Football includes several creative elements apart from Hart’s image, including virtual stadiums, athletes, coaches and fans, and game commentary.

The court also concluded that, even focusing on Hart’s image alone, the game is transformative. “It is true that the virtual player bears resemblance to Hart and was designed with Hart’s physical attributes, sports statistics, and biographical information in mind. However, as noted, the game permits users to alter Hart’s virtual player, control the player’s throw distance and accuracy, change the team of which the player is part by downloading varying team names and rosters, or engage in ‘Dynasty’ mode, in which the user incorporates players from historical teams into the gameplay,” the court wrote. These additions, in the court’s view, make the game transformative.

In grating summary judgment, the court stated that the “malleability of the player’s image in NCAA Football suggests . . . that the image serves as an art-imitating-life starting point for the game playing experience. On balance, on the facts of this case, [EA’s] First Amendment right to free expression outweighs [Hart’s] right of publicity.”

To read the decision in Hart v. Electronic Arts, Inc., click here.

Why it matters: The court distinguished the decision in a similar California suit where the court denied EA’s motion to dismiss, ruling that because the Hart case had reached the summary judgment stage, it had a more robust factual record than the California court. In addition, the judge found it significant that the California court failed to address that the virtual image may be altered into various formulations: “I find this aspect of the game significant because it suggests that the goal of the game is not for the user to ‘be’ the player.”

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Privacy Groups: Government Should Reject Industry’s Self-Regulatory Program

In a letter sent to the director of the Federal Trade Commission and the chairman of the European Union’s Article 29 Working Party, groups like Consumers Union and the Center for Digital Democracy requested that the officials reject the self-regulatory privacy program instituted by the ad industry.

The self-regulatory principles created by the Digital Advertising Alliance require companies to provide “enhanced notice” to consumers and utilize an icon for interest-based ads that provide a signal to consumers that the site may be used to collect their data. The principles further require that consumers be given the ability to click on the icon, a lower case “i” with a triangle surrounding it, to receive more details about the advertiser’s data collection practices and choose to opt out of future targeted advertising.

But the letter, sent on behalf of the TransAtlantic Consumer Dialogue, a forum of American and European consumer organizations which makes joint policy recommendations to the governments to promote consumer interests, criticized the program. “Consumers in both the US and EU are offered limited options based on principles crafted by the digital marketing industry and ‘enforced’ by groups that do not represent consumers or governments and that are completely lacking in any independence from the industry they are intended to monitor.”

Expressing concerns about the efficacy of the behavioral advertising icon, the groups argue that the icon is “an insufficient means of notice” to users about the wide range of data collection taking place online. According to the letter, research has shown that very few users click on the icon, let alone opt out of being tracked. Even if users choose to opt out, the letter said, the tool is based on cookies, a nonpermanent solution that can be forgotten should the consumer delete the cookies from his or her browser.

The self-regulatory system was “principally designed to enable the expansion of [online behavioral advertising]-related data practices,” the letter said. Instead, the groups advocated that officials take a new path for regulation, that include an investigation of the various threats to consumer privacy, in particular new trends like the growth of real-time tracking, and the development of a global common standard for protecting privacy in the digital marketplace. “We respectfully urge you to reject the current [online behavioral advertising] self-regulatory regime as inadequate, and work with industry and consumer privacy groups to ensure that significant revisions are made to protect consumer privacy,” the letter concluded.

Why it matters: The letter is only the latest battle in the war over regulation of consumer privacy, with several pieces of legislation pending and multiple hearings scheduled on the topic in Washington. In response to the letter, Stuart Ingis, counsel to the DAA, told MediaPost that the Better Business Bureau’s National Advertising Review Council, which will enforce the self-regulatory program, has “100% independence” from the advertising industry. “The Better Business Bureau has done effective self-regulation independent of the industry for years,” he said.

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Noted and Quoted...The New York Times Calls Upon Linda Goldstein on Strategies to Curtail Guerilla Marketing

On September 15, 2011, The New York Times turned to Linda Goldstein, Chair of Manatt’s Advertising, Marketing & Media Division, for insight on guerilla marketing campaigns cropping up during New York’s Fashion Week.

Rather than paying for an official Fashion Week sponsorship, some marketers decided to take their brands to the streets, offering pedestrians and consumers free food, cosmetics samples or mini-makeovers. In light of these tactics, official sponsors are wise to consider defensive strategies. “For companies that we’ve worked with that do multimillion-dollar sponsorship events, there’s a lot of thought that goes into controlling against ambush marketing,” said Ms. Goldstein.

To read the full article, click here.

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