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Challenging FTC Findings of Deceptive Practices

Introduction

The Federal Trade Commission (FTC) is tasked with protecting consumers and promoting competition by enforcing laws against unfair or deceptive acts and practices. When the FTC determines a company has engaged in deceptive marketing or advertising, it can take enforcement action ranging from administrative complaints to federal lawsuits. Companies found to have violated the law may face injunctions, fines, and other penalties.
If a company disputes the FTC’s findings, it can challenge the allegations through an administrative process and in court. However, this is often an uphill battle given the FTC’s authority and expertise in consumer protection matters. In order to mount an effective defense, companies need to understand the FTC’s approach, build a compelling case, and advocate zealously on their own behalf.

Understanding the FTC’s Approach

The FTC considers marketing and advertising claims from the perspective of a reasonable consumer. It focuses on the “net impression” created by the totality of the claims rather than analyzing each statement in isolation. The FTC also considers extrinsic evidence beyond just the language used in the ad, including consumer surveys and expert testimony.
When evaluating if a claim is deceptive, the FTC looks at three factors:
Is the claim likely to mislead consumers acting reasonably under the circumstances?
Is the claim material – that is, likely to affect a consumer’s choice or conduct?
Is the claim misleading to the consumer acting reasonably under the circumstances?
If the FTC determines a claim is deceptive under this framework, the advertiser’s intent is irrelevant. The FTC does not need to show the advertiser knowingly set out to deceive consumers.

Building a Strong Defense

A company disputing the FTC’s allegations will need to methodically analyze each claim cited as deceptive and build evidence showing the claims are truthful, not misleading, and substantiated. This requires understanding the FTC’s decision-making process and anticipating their counterarguments.
The company should gather all relevant materials and data supporting the claims in question. Consumer surveys, market research, and expert opinions can all be used to demonstrate the claims are not deceptive from a reasonable consumer perspective.
The company should also review the claims within the full context of the ad, not in isolation. Arguments may be made around the net impression of the ad and how contextual statements cure any deception.
Lastly, the company should look for any extenuating circumstances that may have impacted the claims, like supply chain disruptions, ingredient shortages, or evolving regulatory landscapes. Reasonable justifications may convince the FTC to soften its stance.

Advocating Zealously

Navigating an FTC action can be daunting, but strong advocacy from the outset can pay dividends. Companies should engage experienced regulatory counsel to interface with FTC staff and negotiate where possible. Settlement may be an option if the company commits to discontinuing any claims deemed problematic.
During litigation, the company must aggressively defend its practices while avoiding overly antagonistic tactics. Savvy presentation of evidence and arguments tailored specifically to FTC precedent increase the chances of success. That said, the FTC wins 90% of its cases, so settlement may become the preferable route.
While challenging an FTC deception finding is difficult, companies have prevailed. But it requires a nuanced understanding of the FTC’s approach, meticulous preparation, and zealous advocacy. With the right strategy, it is possible to convince the FTC that claims are not deceptive as alleged.

References

Overview of FTC advertising enforcement: https://www.ftc.gov/news-events/media-resources/truth-advertising
FTC policy statement on deception: https://www.ftc.gov/system/files/documents/public_statements/410531/831014deceptionstmt.pdf
Example of company successfully challenging FTC: https://www.venable.com/insights/publications/2016/04/pom-wonderful-prevails-in-ftc-deception-case
FTC litigation and settlement practices: https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/enforcement
Overview of the FTC’s advertising substantiation doctrine: https://www.venable.com/insights/publications/2009/04/ftcs-revised-endorsement-guides-increase-scrutiny

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