Jack Kemp and the Magnificent Seven are tough acts to follow, but I'll attempt to keep you on the edge of your seats with some tips on how to avoid inquiries by the Federal Trade Commission. First -- as we so often ask you to do -- let me begin with a disclosure. The views that I express are my own and do not necessarily reflect those of the Commission or any other Commissioner.
The infomercial industry has come a long way in the past several years and, as I see it, has been quite responsive to concerns about consumer deception. Groups such as NIMA and efforts at self-regulation like NIMA's Marketing Guidelines have had a real impact, and so has the increased use of infomercials by companies with extensive experience in other forms of advertising. We see, for example, far fewer format violations than we saw several years ago.
As more and more businesses sell products via infomercial, there is still a need to educate newcomers about the standards that apply to advertising. NIMA can play a valuable role here. Its Marketing Guidelines incorporate many of the principles of FTC law that are designed to protect consumers from deception, and following them can help you stay within the bounds of the law.
As many of you know, the FTC is charged with protecting consumers from unfair or deceptive acts or practices. In advertising and marketing, the law requires that objective claims be truthful and substantiated. The FTC does not pursue subjective claims or puffery -- claims like "this is the best hairspray in the world." But if there is an objective component to the claim -- such as "more consumers prefer our hairspray to any other" or "our hairspray lasts longer than the most popular brands" -- then you need to be sure that the claim is not deceptive and that you have adequate substantiation before you make the claim. These requirements apply both to explicit or express claims and to implied claims. Also, a statement that is literally true can have a deceptive implication when considered in the context of the whole advertisement, even if that implication is not the only possible interpretation.
The substantiation requirement exists because every time an advertiser makes an objective claim, the advertiser also implies that there is a reasonable basis for the claim. This reasonable basis is substantiation. What constitutes a reasonable basis for a particular claim can vary, depending upon the nature of the claim, the product, the consequences of a false claim, the benefits of a truthful claim, the cost of developing substantiation for the claim, and the amount of substantiation that experts in the field believe is reasonable. Health and safety claims generally require competent and reliable scientific evidence.(1) And if a marketer makes a representation that a claim has a particular level of support -- for example, "clinical studies prove . . ." -- the law requires at least that level of substantiation.
To help you understand more clearly and comply with the FTC's requirements, I will share with you some of the myths and half-truths that come up time and time again in our enforcement actions. Several of the most persistent myths involve substantiation, and I'll turn to them first.
MYTH # 1 -- If A Couple Of Studies Support Your Claim, It Is Substantiated
Our other name for this one is the "1 Plus 1 Equals 11" myth. In fact, this is more of a half-truth than a myth. If there are no other relevant studies, and you have a couple of scientifically valid, well-controlled studies that support your claim in the view of experts in the field, you probably have substantiated it. If, however, there are other studies that contradict or call into question the findings of your studies, or your studies have design flaws or were conducted by persons who had an incentive to obtain particular results, your claim may not be substantiated. The Commission looks at the totality of the evidence, not just what is submitted by the target of an investigation. Independent studies are much more convincing than studies done by someone in a position to benefit from sales of the product or from your company's success.
Now, let's suppose you have some rigorous, scientifically valid studies that show that your product may have some benefits. At this point, you need to watch out for another marketing myth: so long as the research looks promising, I can claim proven benefits for my product. We've seen many cases where, despite valid scientific research showing likely benefits or indicating benefits for a particular group of individuals under specified conditions, marketers ran afoul of the law because their claims were much broader. If the claim is broader than the substantiation, you have not substantiated the claim.
MYTH # 2 -- If Your Product Has Some Benefits, Your Ads Won't Be Challenged
Or, "The End Justifies the Means" myth. Even claims for products with real benefits must have a reasonable basis. This is illustrated by a Commission consent order issued earlier this year, settling allegations that NordicTrack, Inc. had made unsubstantiated weight loss claims in its "Change Your Life With NordicTrack" infomercial and several print ads.(2) The Commission challenged a number of claims that the company made about the percentage of purchasers of its cross-country ski exerciser who lost weight, the amount of weight they lost, how long they maintained their weight loss, and how much exercise was needed to achieve an average weight loss of eighteen pounds in twelve weeks.
Weight loss claims are health claims that must be substantiated by competent and reliable scientific evidence. Although NordicTrack based its claims on studies, unfortunately the studies had methodological flaws that prevented them from being adequate substantiation. Claims that applied to all purchasers who bought a NordicTrack cross-country ski exerciser to lose weight were based on studies limited to a selected group of purchasers who successfully integrated the cross-country ski exerciser into their regular exercise regimes. The "eighteen pounds in twelve weeks" weight-loss claim was based on the amount of weight loss reported only by persons who completed a rigorous twelve-week exercise program that nearly half the participants failed to complete. Also, the studies failed to take into account changes in purchasers' dietary habits and may have been subject to bias by relying on self-reported body weight.
MYTH # 3 -- Testimonials Are Substantiation
You can think of this as the "Elvis Used It and Loved It" myth. Infomercials rely heavily on consumer testimonials to sell products and services. Frequently companies that we ask to provide substantiation point to the testimonials they used in their ads, send us letters from happy customers, and may even provide affidavits from individuals who used a product or service and found that it did exactly what the advertising promised.
Testimonials, however, are not substantiation. The Commission rarely finds anecdotal evidence like this to be a sufficient basis to support a claim. In fact, we have explicitly rejected it as substantiation for health-related claims.(3) The Commission may consider anecdotal evidence in assessing the scope of injury to consumers and whether the use of Commission resources on a particular case is in the public interest.
The statements of an expert endorser, such as a doctor, require even more substantiation. A person who speaks as an expert shouldbe an expert, and what your expert endorser says about your product should be based on an evaluation or tests that other experts in the field generally would find sufficient to support your expert's conclusions.
When you are creating an infomercial or any other ad that uses testimonials, keep in mind that the testimonials make claims that need to be substantiated -- they are not substantiation themselves.
MYTH # 4 -- So Long As Endorsers Really Use The Product And Really Like It, You Can Safely Use Their Endorsements
This is the "But Elvis Really Used It and Really Loved It" myth. Although you want to be sure that anyone giving a testimonial uses the product and is making truthful statements about his or her experience, opinions, or findings, your efforts to avoid deception should not end there. The use of consumer testimonials not only involves the underlying claims made by the persons giving the testimonials; it also gives rise to a claim that their experience is representative, or typical, of the results that consumers can generally expect to achieve. We call this a "typicality" claim, and, like other claims, it needs to be substantiated. If it is not substantiated, it needs to be qualified by a clear and prominent disclosure of the generally expected results for users of the product or the limited applicability of the endorser's experience to what consumers may generally expect to achieve.
Anyone relying on testimonials -- an almost universal technique in infomercials -- should be familiar with the FTC's Guides Concerning the Use of Endorsements and Testimonials in Advertising. You can find them in Volume 16 of the Code of Federal Regulations, Part 255. The Endorsements and Testimonials Guides give you a plain English description of the FTC's policies, along with clear examples drawn from our enforcement experience. I have touched on only a few aspects of testimonials, and it is in your interest to be informed about other possible pitfalls.
MYTH # 5 -- If You Contradict A Deceptive Claim With A Disclosure, You Immunize Yourself From Liability
Or, the "Say It Isn't So" myth. The Commission looks at the net impression created by an advertisement. Disclosures that flatly contradict a deceptive claim, or that purport not to make the claim, are generally ineffective. The best advice is not to make a claim so broad that you cannot substantiate it. Instead, narrow the claim to what you have substantiation for so that you do not need a separate disclosure about how narrow the claim is.
MYTH # 6 -- "Results May Vary" Is An Adequate Disclosure
We call this . . . the "Results May Vary" myth. "Results may vary" and variations on that theme are not adequate disclosures, yet we see them again and again, usually in fine print flashed briefly across the bottom of a television screen while a consumer or expert gives a glowing endorsement. If a "results may vary" disclosure is prominent enough to be noticed, consumers are likely to believe that it simply means that not everyone will achieve the promised results. It does not disabuse them of the very powerful claim that the results are typical of what they can expect to achieve if they use your product.
MYTH # 7 -- Dietary Supplement Ads Are Not Regulated
Or, the "Free Bite at the Apple" myth. There appears to be a widespread misunderstanding that claims about dietary supplements do not need to satisfy the same advertising standards as claims about other products. Both the FDA and the FTC regulate claims for dietary supplements. The FDA has responsibility for label claims, and the FTC seeks to ensure that claims made in advertising do not deceive consumers.
Under the Dietary Supplements Health and Education Act of 1994, the FDA preapproves health claims on supplement labels under a "significant scientific agreement" standard. Confusion apparently arises from the Act's exemption from FDA preapproval for all label claims about "nutritional support" -- that is, claims about the structure or function of the human body. The Act does, however, require the manufacturer to have substantiation that structure and function claims are truthful and not misleading. This substantiation requirement for labels is similar to the FTC's substantiation requirement for advertising generally. A special Commission on Dietary Supplement Labels is now evaluating the type of evidence that the FDA will require as substantiation, and has consulted the FTC about its policies for substantiation of advertising claims for dietary supplements.
Meanwhile, keep in mind that the FTC has brought numerous cases involving false or unsubstantiated claims for dietary supplements(4) and is likely to continue to do so. The Dietary Supplements Health and Education Act did not change the FTC's requirements that advertising claims related to safety or health -- including structure and function claims -- must not mislead consumers and must be substantiated by competent and reliable scientific evidence before they are made.
MYTH # 8 -- If All You Do Is Produce The Infomercial, You Are Not Responsible For Deceptive Claims
Wrong. This is also known as "The Dog Ate My Homework" myth. The Commission looks to see whether an infomercial producer actively participated in the preparation of the challenged advertisement and whether the producer knew or should have known that the claims were false or unsubstantiated.(5) The extent of participation is important: simply renting space for the taping of an advertiser's script is unlikely to lead to liability. But creating ad copy, developing a media plan, or buying media time could lead to liability when combined with the requisite degree of knowledge.
Furthermore, just calling yourself a "producer" does not remove the possibility that you may be liable as a principal. Your title is not as important as who actually holds the reins. In many cases, the so-called "producer" had authority over the content, format, and editing of the infomercial and also received the lion's share of the revenue.
Let me emphasize that you cannot safely shut your eyes to an obviously deceptive claim. Anyone involved in the preparation and dissemination of an infomercial that contains blatantly misleading claims -- for example, "lose weight without diet, exercise, or surgery" -- risks an FTC inquiry and a potential enforcement action.
How do you minimize these risks? The NIMA Marketing Guidelines are a good starting point. Screen the ads that you are involved with for possibly deceptive claims. Ask for substantiation. If you think that an ad probably makes false or unsubstantiated claims, change the ad to drop those claims. If you cannot change the ad, end your involvement with its creation and dissemination.
MYTH # 9 -- No Rules Apply To Advertising On The Internet
Not true. Despite this "Wild, Wild West" myth, the FTC's advertising standards are the same on the Internet. As reflected in NIMA's 1996-97 Fact Book, the Internet represents a small but rapidly growing marketing channel. The FTC is committed to vigorous enforcement of consumer protection statutes in the online environment, and we have already brought a dozen cases that primarily or exclusively involve online marketing. So far, these cases mainly have involved fraudulent credit repair schemes, advance fee loan scams, and false and unsubstantiated claims about business opportunities.
We are now starting to see cases in which deceptive ads are placed on web sites in addition to being disseminated through more traditional channels. The Commission recently issued a consent order settling allegations that Zygon International marketed a variety of consumer products -- including dietary supplements and learning devices -- without substantiation for the claims it made about the products' characteristics.(6) For the most part, Zygon marketed its products through traditional channels -- radio and print advertisements and a mail-order catalog -- but it also maintained a web site.
Advertisers on online services and the Internet should not wait for a consumer uproar that could result in overly intrusive regulation. As we have seen with other new forms of marketing -- including infomercials -- there are great benefits to self- regulation and to building consumer confidence.
Online advertising shares many characteristics with infomercials. Like infomercials, online advertising allows companies to provide consumers with more detailed information than they typically would receive in other advertising media. Also, the technology may blur the lines between what is and is not an advertisement. For example, online entertainment may in fact be an advertisement or contain advertisements. Sound familiar? As you know, the FTC requires infomercials to disclose that they are paid advertisements. This raises the question whether online entertainment that is also advertising ought to contain similar disclosures.
Conclusion
At the FTC we have been trying to stay on top of the new developments in technology and marketing. We have held hearings and conferences with industry representatives, consumer advocacy groups, and other members of the public to better comprehend the changing global marketplace. We understand the positive effects of new technologies on marketing: many consumers are likely to have access to potentially unlimited amounts of information, a global marketplace, and more convenient shopping. On the other hand, these new technologies create new opportunities for deceptive marketing.
Clearly, the most dramatic development is the convergence of rapidly evolving communications technologies. NIMA has recognized this trend, as illustrated by the panel you have scheduled this afternoon on interactive television.
The Commission's hearings and our law enforcement experience indicate that the private sector can and should play a valuable role in protecting consumers and encouraging the use of new technologies for marketing. NIMA's self-regulatory initiatives are a prime example of this. I encourage you to keep up the good work and to avoid being led astray by myths and half-truths.
[footnotes]
1. Competent and reliable scientific evidence consists of tests, analyses, research, studies or other evidence based on the expertise of professionals in the relevant area. Such tests or studies need to be conducted and evaluated in an objective manner by qualified persons, using procedures generally accepted in the relevant profession to yield accurate and reliable results.
2. NordicTrack, Inc., Docket No. C-3675 (June 17, 1996) (consent order).
3. Removatron Int'l Corp., 111 F.T.C. 206, 304 (1988), aff'd, 884 F.2d 1489 (1st Cir. 1989) (anecdotal evidence insufficient to substantiate claims for hair removal device). See also FTC v. Pantron I Corp., 33 F.3d 1088 (9th Cir. 1994), cert. denied, 115 S. Ct. 1794 (1995) (baldness cure infomercial).
4. See, e.g., Home Shopping Network, Inc., Docket No. 9272 (Sept. 26, 1996) (consent order); Live-Lee Productions, Inc., Docket No. C-3620 (Oct. 10, 1995) (consent order) (both involving claims for vitamin sprays).
5. Hawthorne Communications, Inc., Docket No. 9264 (Aug. 9, 1994) (consent order) (issued against advertising agency that produced and wrote script for infomercial promoting home business opportunities in computer consulting).
6. Zygon Int'l, Inc., Docket No. C-3686 (Sept. 24, 1996) (consent order).