FTC Orders Marketers of “Cancer Cures” to Stop Deceptive Claims

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

A unanimous Federal Trade Commission (FTC) has concluded that Daniel Chapter One, an herbal products company, and its executive violated the FTC Act while marketing four dietary supplements—BioShark, 7 Herb Formula, GDU, and BioMixx—as cancer cures and treatments.

Chief Administrative Law Judge D. Michael Chappell’s August 2009 initial decision, finding against the marketers, was upheld in an opinion written by Commissioner J. Thomas Rosch.

Jurisdiction

At the outset, the Commission explained the FTC's jurisdiction over the respondents. The marketers contended that the agency lacked jurisdiction because they were a religious ministry organized and operated for charitable purposes.

The FTC's jurisdiction extended to a corporation organized to carry on business for its own profit or that of its members. By engaging in commercial activities, the marketers operated a commercial enterprise. They were not a business organized or engaged in only charitable purposes outside the FTC's jurisdiction, the Commission explained.

Constitutional Challenges

In upholding the ALJ's decision, the Commission rejected a number of arguments raised by the marketers under the Due Process Clause and the First Amendment of the U.S. Constitution. The marketers contended that the ALJ improperly shifted the burden of proof to them and banned truthful statements about dietary supplements.

Attorneys for the FTC were not required to produce evidence that consumers were actually misled by the marketer's promotional efforts and representations in order to assess the “overall net impression” of the advertising. Therefore, the Commission rejected the marketers' contention that the ALJ's failure to require the FTC attorneys to do so amounted to resorting to “presumptions” or “shifting the burden of proof” to the marketers in violation of the Due Process Clause and the First Amendment.

The ALJ and the Commission determined the “overall net impressions” of the representations, based not only on the text of the advertisements itself, but also on the interaction of other factors that operated to create that impression, such as testimonials, bold type, visual images, and mutually reinforcing language.

The Commission also rejected the argument that the marketers' representations about the efficacy of the supplements were merely ideas, opinions, beliefs, or theories, protected by the First Amendment. Rather, the advertising included representations of fact.

The marketers made assertions not just about what they believed those products might do, but represented that the supplements would treat or cure cancer, prevent or shrink tumors, and ameliorate the side effects of radiation and chemotherapy, the Commission concluded. The representations were commercial speech, which was accorded less protection than other constitutionally protected forms of speech.

Moreover, any disclaimers made by the marketers did not dispel the overall net impressions that the products would treat or cure cancer.

The ALJ did not violate Due Process in reaching his findings of fact under a “preponderance of evidence” standard instead of a “clear and convincing evidence” standard, it was noted. Under both the Administrative Procedure Act and the Commission’s rules, the proper standard to be applied in FTC Act cases challenging deceptive practices was the preponderance of evidence standard.

Substantiation

The challenged representations were not substantiated, the Commission also concluded. The representations needed to be substantiated by “competent and reliable scientific evidence.” However, the marketers did not possess or rely on any competent and reliable scientific evidence to support the overall net impressions conveyed by the advertisements at issue.

Remedies

The Commission upheld the ALJ's order that prohibited the marketers from making any representation about the efficacy, performance, or health-related benefits of any dietary supplement, food, drug, or other health-related product, service, or program, unless the representation was true, non-misleading, and, at the time it was made, substantiated by competent and reliable scientific evidence. However, the order was modified in the interest of brevity to the extent that it required notice of the agency's determination to customers.

The Commission rejected the marketers' contentions that the remedy would violate the Religious Freedom Restoration Act of 1993 or would unconstitutionally encroach on their rights under the religious guarantees of the First Amendment.

The order imposed no burden on the exercise of religion. It only applied to the marketers' commercial advertising, according to the Commission.

The Commission’s decision and final order, issued December 18, 2009, and announced on December 24, 2009, In the Matter of Daniel Chapter One, a corporation, and James Feijo, FTC Docket No. 9329, will appear at 2009-2 Trade Cases ¶76,853.