Consumer Law

The Seventh Circuit has upheld a district court ruling requiring marketers of the "Q-Ray Ionized Bracelet"€ť to give up almost $16 million in net profits.  The ten-page decision is entertaining and includes some points on advertising substantiation that are worth reading. 

-    The Federal Trade Commission Act does not require that advertisers support all claims of therapeutic benefit with double-blind studies.  This simply affirms decades of precedent that the level of substantiation required to support an advertising claim depends on a number of factors, including the (1) product, (2) claim, (3) benefits of a true claim, (4) consequences of a false claim, (5) cost of developing substantiation, and (6) what expert in the field would consider adequate.  This analysis was set out in Pfizer, Inc., 81 F.T.C. 23 (1972).

-    Testimonials cannot substantiate advertising claims.  Again, nothing controversial here, but worth remembering.  As the Court put it, "most testimonials represent a logical fallacy:  post hoc ergo propter hoc. (A person who experiences a reduction in pain after donning the bracelet may have enjoyed the same reduction without it. That's why the '€śtestimonial' of someone who keeps elephants off the streets of a large city by snapping his fingers is the basis of a joke rather than proof of cause and effect.)"

-    The Court recognized that the placebo effect -- a product alleviates pain even though there is no apparent medical reason -- is well established.  It noted (I believe to the Commission's dismay) "the possibility that a "vague claim along the lines of 'this bracelet will reduce your pain without the side effects of drugs' -- could be rendered true by the placebo effect" and expressed skepticism "about language [in an earlier decision] FTC v. Pantron I Corp., 33 F.3d 1088 (9th Cir. 1994), suggesting that placebo effects always are worthless to consumers."  (I believe that the Commission would find the placebo effect insufficient to support even a vague claim).  The Court did go on to state, however, that "if a condition responds to treatment, then selling a placebo as if it had therapeutic effect directly injures the consumer."

Notwithstanding the language on the placebo effect, this is a significant decision for the Commission.