Statement of Commissioner Orson Swindle
Concurring in Part and Dissenting in Part
The proposed complaint in this case alleges that Lane Labs made the unsubstantiated claim that BeneFin, a shark cartilage product in the form of powder or caplets, is effective in preventing, treating, and curing cancer. Among other things, the settlement agreement with Lane Labs (Section VIII) would require that the company pay a $1 million judgment. Of the total amount to be paid, Lane Labs would be allowed to pay $450,000 for a National Cancer Institute ("NCI") clinical trial to determine whether shark cartilage is effective in treating cancer (Section VIII.B. of the proposed order). I do not support allowing Lane Labs to use its assets to fund a clinical trial of shark cartilage.
Lane Labs did not conduct clinical tests of BeneFin prior to making its claim that the product is effective in preventing, treating, and curing cancer.1 It is well established that advertisers are required to have adequate substantiation for their claims before disseminating advertising with those claims. FTC Policy Statement Regarding Advertising Substantiation, reprinted in Thompson Medical Co., Inc., 104 F.T.C. 648, 839 (1984), aff'd, 791 F.2d 189 (D.C. Cir. 1986). Lane Labs's failure to obtain adequate substantiation before making its efficacy claims thus was a clear violation of the law.
Lane Labs raked in substantial sums from Benefin sales while it was making its unsubstantiated efficacy claims. Instead of requiring that Lane Labs pay the entire $1,000,000 judgment into a fund for consumer redress, the Commission allows Lane Labs to use $450,000 of the judgment to pay for a clinical trial that could help substantiate its efficacy claims. In other words, the Commission is permitting Lane Labs to use some of the proceeds from its deceptive efficacy claims to pay for clinical trials that it was legally obligated to conduct before it ever made its efficacy claims.2 If the Commission allows advertisers that do not engage in necessary pre-dissemination testing to use the proceeds of their deception to pay for post-dissemination testing, it creates an incentive for advertisers not to test products prior to disseminating their claims. In my view, it is not in the public interest for the Commission to create an incentive for advertisers to violate the law.
My colleagues may support allowing Lane Labs to pay for the NCI clinical trial based on their good-faith belief that the public interest would be well-served by a clinical trial of the efficacy of shark cartilage as a cancer treatment. I agree that spending money on cancer research promotes the general welfare. But a consumer redress provision is not the appropriate vehicle for the government to use for funding cancer research, especially where the provision would effectively allow an advertiser that abused consumers to use the proceeds of its abuse to pay for a study that it should have paid for itself.
Accordingly, I dissent from Section VIII of the proposed order to the extent that it allows Lane Labs to pay $450,000 for the NO (or a comparable) clinical trial.
1 Before entering into the proposed consent agreement, Lane Labs agreed to fund the NCI clinical trial. Lane Labs, however, is not simply paying off a pre-existing "debt." If that were the case, the money that would be spent on the NCI clinical trial would be paid into a consumer redress fund in the event that the NCI clinical trial were canceled. The proposed order, however, provides that the Commission can require Lane Labs to pay $450,000 toward a comparable trial if the NCI clinical trial is canceled (Section VIII.C. of the proposed order).
2 Lane Labs will receive a significant economic benefit from fluiding the NCI clinical trial. Because Lane Labs agreed to pay $450,000 for the clinical trial before entering into the proposed consent agreement, the company (as a profit-maximizing firm) must have believed that the clinical trial would be worth at least $450,000 to it. Under the proposed order, Lane Labs would be able to continue to realize this significant benefit.