978-1285428222 Chapter 19 Lecture Note Part 1

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CHAPTER 19

CONSUMER PROTECTION

THE FDA: FOOD AND DRUG REGULATION—The Food and Drug Administration

monitors food and drug safety; its budget is about $4 billion. The FDA approves new drugs for

sale, inspects food products for safety, and studies medical devices and veterinary products for

safety.

Food Safety—The first federal legislation to deal with the control of safety factors in

commercial food, drink, and drugs was the Pure Food and Drug Act of 1906. Outbreaks of illness

and deaths attributable to tainted food led to a public outcry for greater regulation. Under the

1906 Act the Bureau of Chemistry worked to identify misbranded or contaminated food.

Criminal prosecutions could be pursued, or items could be seized, if a violation of the Act was

found. The FDA was spun off in 1927.

FDA and USDA Standards and Inspections—The Food, Drug, and Cosmetic Act (FDCA) was

passed in 1938, after a catastrophe involving a nonprescription drug. The FDA was given greater

powers to regulate food products, false advertising of products, form inspection systems, and set

safe level of food additives. The USDA has authority over meat, poultry and eggs. The agencies

work with each other, the Centers for Disease Control and the EPA on food safety issues.

Food Quality Protection—Replaces the Food Additives Amendment (Delaney Clause), that

Congress passed in 1958. Delaney required the FDA to ban from the market food additives

(broadly defined) that had any risk of inducing cancer in humans or animals. The Food Quality

Protection Act of 1996 says the standard is a “reasonable certainty of no harm” (1/1 million

lifetime chance of cancer) from any food source (in very high doses); which includes pesticides

and other residuals that end up on foods.

CASE: U.S. v. LaGrou Distribution Systems (7th Cir., 2006)—LaGrou kept foods for different

companies at its Chicago warehouse. The managers knew there was a serious rat infestation

problem, but it was kept hidden from clients. The USDA did a big inspection, joined by FDA and

state public health inspectors. Before they arrived, LaGrou threw out a lot of food and cleaned

up, but employees told what happened. The warehouse was closed, all food thrown away, the

company convicted of a felony, put on probation, ordered to pay $8.2 million restitution plus $2

million in fines. The president and manger were convicted also. The company appealed.

Decision: Affirmed. Inspectors found evidence of rat infestation everywhere and said it was the

Questions: 1. The appeals court affirmed the conviction of the company for violation food

sanitation rules. People, not companies, make decisions, so what sense does it make to convict a

company?

The owners take a hit. This gives them more of an incentive to be critical of management’s

2. Who would restitution be paid to in such a case?

The companies that stored products there, and had been lied to about conditions, had their

Add. Case: U.S. v. Park (S. Ct., 1975)–Defendant Park was CEO of Acme Markets, a

nation-wide grocery chain. Park was charged with violating the FDCA because on several

occasions food in Acme Market warehouses was found contaminated by rats. Both Acme (the

corporation) and Park (the executive) were found guilty at the trial level. Park’s conviction was

overturned by the court of appeals. The government appealed.

Decision: The Court noted that the one reason for having the FDCA is to protect “the public

interest in the purity of its food.” Holding executives and food companies criminally liable for

violations of the Act will help them impose the highest standards of care in their handling of food

Add. Info: Kosher food: A number of states and localities have regulations governing the

labeling of kosher food. The food would violate the law if it did not conform to orthodox Hebrew

dietary rules as determined by a board consisting of rabbis and lay experts on such rules. In

several cases now, the courts have struck down such laws as a violation of the Establishment

Clause of the First Amendment, because it means the power of the state is used to enforce

religious matters.

Nutrition Labeling—Since 1973 the FDA has required nutrition labeling for food products. The

U.S. Department of Agriculture handles the labeling requirements of meat and poultry. The 1990

Nutrition Labeling and Education Act (amended in 1994) expanded labeling requirements.

Add. Case: New York State Restaurant Assn. v. New York City Board of Health (2nd Cir.,

2009)—Concerned about obesity, the NYC Board of Health required all chain restaurants to

publish calorie content for all items on their menus in NYC. Some restaurants already provided

such information, but not on every menu. They requested that alternative sources of calorie

posting be considered to be compliance, but that was rejected. A restaurant association sued the

city, contending that the regulation was in conflict with federal food labeling requirements and

violated the First Amendment right to free speech. The district court held for the city. The

restaurant association appealed.

Decision: Affirmed. The federal Nutrition Labeling Act does not regulate nutrition information

on restaurant food, so states and localities may adopt their own rules, such as calorie count. The

Act does regulate nutrition content claims on restaurant foods, so state and local governments

Nutrients by Serving Size—The FDA requires that certain foods list, on their labels, nutrients on

a per serving size basis. The list includes: total fat and saturated fat; carbohydrates (sugar and

starch); cholesterol; calcium; fiber; iron; total calories and calories from fat; protein; sodium; and

vitamins A and C. Common vitamins (thiamin, niacin and riboflavin) need not be listed since

there is no shortage in American diets. The 1990 Act required the FDA to develop uniform

nutrition labeling requirements for an estimated 250,000 processed food products.

Add. Info: The costs of compliance with the rules were significant. Pillsbury had to redesign

over 2,600 labels. The costs of knowing all the information required on the labels requires

professional food laboratory work. This put a number of small, mostly local, specialty foods

companies out of business, as the testing cost per item was too high relative to sales. FDA

estimated the cost of label compliance to be about $2 billion initially.

Add. Case: People v. Shamrock Foods (Sup. Ct., Calif., 2000)–The Milk and Milk Products

Act of California sets standards and labeling requirements for milk sold there. There are also

FDA standards regarding milk labeling for nutrition, but the Cal. requirements are more

stringent. Federal approval was required to deviate from national standards. The state sued

Shamrock Foods for violating the state standards. Shamrock contended that it complied with

federal standards. The court held for the state. Shamrock was ordered to pay $700,000 in civil

penalties and to comply with state standards. The appeals court reversed, finding that the state

standards could be interpreted to be the same as the federal standards. The state appealed.

Decision: Reversed. The state statute sets its own standards and does not provide for any

alternative federal standard for milk. Sellers must comply with Cal. standards, which go beyond

Standards for Health Claims—To help consumers learn more about the nutritional value of foods

they purchase, the FDA developed standards that food producers must follow when labeling

products. For example, foods may not be labeled “fresh” if they have previously been frozen or

preserved. “Low fat” (3 or fewer grams of fat per serving) and “low calorie” have specific

meanings to the FDA. Health claims must have some basis in fact, otherwise they will be

disallowed. Similarly, “organic” labels must meet regulatory standards.

Drug Safety—Until the mid-20th century, drug control was largely a process of protecting the

public from quacks and from the sale of dangerous drugs. After the Food, Drug and Cosmetics

Act was passed in 1938, the FDA was given expanded powers to regulate drug marketing. New

drugs cannot be marketed until they are approved by the FDA as safe for intended use (efficacy).

Add. Case: FDA v. Brown & Williamson Tobacco (S. Ct., 2000)–The FDA asserted

jurisdiction to regulate tobacco, contending that under the FDCA, nicotine is a “drug” and that

cigarettes and smokeless tobacco are “devices” that deliver nicotine to the body. The FDA

issued regulations to restrict tobacco promotion, labeling, and access. Tobacco makers

challenged FDA jurisdiction. The court upheld the FDA action; the appeals court reversed. The

FDA appealed.

Decision: Affirmed. Reading the FDCA as a whole, and taking into account subsequent tobacco

legislation, it is plain Congress has not given the FDA authority to regulate tobacco as

customarily marketed. The FDA has documented that tobacco is unsafe, dangerous, and cause

illness and death. If tobacco were drug devices under the FDCA, the FDA would be required to

Add. Case: Whitaker v. Thompson (D.C. Cir., 2004)–Whitaker wanted to sell saw palmetto–an

extract from the pulp an seed of the dwarf American palm. It was reputed to have urinary tract

benefits primarily for men. He contended it should be classified as a “health” product. The FDA

said it was a drug since it was supposed to provide benefits for a disease (called BHP). If

classified as a drug, it would require much more costly and time consuming testing before

marketing. Whitaker challenged the FDA classification.

Decision: Affirmed. The FDCA concerns drugs that deal with diseases. The Nutrition Labeling

Act sets standards for products, such as dietary supplements, with health claims. The FDA was

charged by Congress with making distinctions between the two and regulating both. FDA has a

Designation of Prescription Drugs—Before the 1938 Act, drugs were either legal and illegal;

there were no prescription versus non-prescription drugs. Since 1938, many drugs are now

prescription, at FDA determination, i.e., available only with a doctor’s permission.

International Perspective: Global Drug Controls

The FDA and the regulations it enforces have a global effect. Some nations adopt FDA

regulations, rather than create costly administrative agencies. Some nations adopt FDA standards

for drugs they export. FDA requires foreign drug producers to be licensed and inspected by the

agency if they wish to export products to the U.S. Drug regulations in Europe, are, for the most

part, less stringent than U.S. regulations, so drugs get to the market more quickly, and are less

expensive than in the U.S. European Union member nations’ producers only have to be licensed

in their home country, not in each EU nation, also lowering production costs. FDA regulations

result in safer drugs, but drugs generally take much longer to get to market, and cost more than

drugs available in Europe.

Drug Effectiveness Testing—The Kefauver Amendment of 1962 requires the FDA to approve

drugs based on proven effectiveness, not just on their safety, the previous standard. The elaborate

pre-approval testing process for new drugs has raised the average cost of new drugs to about $1

billion per drug and takes an average of 12-15 years for the process. A trivial fraction of new

therapies make it to market, so investment is massive.

Medical Devices—The FDA regulates medical devices, which are in three classes, from 1 for

such things and bandages, to 3 for such things as artificial hearts. The higher the class, the

greater the controls. The products must be approved before marketing and can be ordered off the

market.

Add. Case: Riegel v. Medtronic (S.Ct.. 2008)–Riegel suffered an injury when a catheter made

by Medtronic ruptured during a heart-bypass operation. The catheter is a Class III device that

received FDA approval under the Medical Device Amendments (MDA). Riegal sued Medtronic,

contending that the device was designed, labeled, and made in a manner that violated NY

contract and tort law. The federal district court held that the MDA pre-empted the common law

claims. Suit must be based on a violation of federal law. The federal appeals court affirmed;

Riegel appealed.

Decision: Affirmed. The MDA’s pre-emption clause bars common-law contract and tort claims

challenging the safety or effectiveness of a medical device marketed in a form that received

Issue Spotter: How Much Can You Hype Health Supplements?

The FDA looks for products that cross the line from “health claims” into “drug claims.” Drug

claims assert that a product helps cure a disease. Health claims are more vague and indicate that

there is “evidence” (some witch doctor in Brazil maybe) that the seaweed might help hold off

senility. Those sort of claims are generally safe from direct FDA attack and the individual store

selling such a product is unlikely to be prosecuted. Let the producers handle the FDA process;

your store can stick to direct marketing, not going beyond repeating assertions made in the

media, and legal problems are unlikely. The Nutrition Labeling and Education Act gives sellers

of products that only make health claims pretty broad exemption from tough FDA review.

Liability for Problems–If a drug receives FDA approval, courts give the approval some weight in

liability cases. Strict liability is avoided in some cases because, unlike for other consumer

products, drugs are inherently dangerous and in part because FDA approval indicates safe for

intended use. If an approved drug is improperly administered by a physician or some other

health professional, a manufacturer will be shielded from liability under the learned intermediary

doctrine, assuming proper usage/dosage instructions were provided. But a number of states reject

that doctrine, holding that since the drug companies advertise directly to the public, the opinion

of physicians may not matter.

CASE: Wyeth v. Levine (Sup. Ct., 2009)—Phenergan was approved by the FDA in 1955 for

various uses. It can be administered by the IV-push method into a vein or by IV-drip, where it

goes in via saline solution. Levine had IV-push to reduce nausea but the needed penetrated an

artery, she developed gangrene and had her arm amputated. This is a known risk of IV-push that

is discussed in the warning. She sued Wyeth for failure to warn that the IV-drip method had less

risk. The Vermont supreme court upheld a verdict for Levine. Wyeth appealed contending that

state law claims were barred by compliance with FDA rules.

Decision: Affirmed. FDA is the final authority, but companies have a duty to keep up with all

safety issues involved with their drugs as the FDA’s role is one of review; it does not generate all

Question: 1. The dissent in this case argued that the FDA was far more qualified than a state

court jury to decide what drug warning was adequate. Expert analysis, under a regulatory

scheme, which determined that the instructions were “safe” and “effective” should control, not

the judgment of non-experts. Do you think that position has merit?

The dissent noted that FDA, and drug makers, do continual review. The label on the Phenergan

had been revised numerous times. The dangers were understood—all drugs have dangers—but

the expert judgment was that the IV-push method was safe—if done property. It is not Wyeth’s

Add. Case: Tobin v. Astra Pharmaceutical (6th Cir., 1993)–When Tobin was pregnant she was

put on the drug ritodrine to prevent early labor; she reported side effects, such as racing heart,

but was told that was normal. Before her twins were born, she ended up in the hospital with

congestive heart failure. A month after birth, she needed a heart transplant. She sued the drug

maker, which moved for dismissal because of FDA approval of the drug as effective. The trial

court rejected the move, which was appealed.

Decision: Affirmed. Liability may be established if the drug substantially contributed to the heart

problem. FDA approval does not preclude jury review of the effectiveness of a drug. FDA

Add. Case: McDaniel v. McNeil Labs (S. Ct., Neb., 1976)–McNeil manufactured an anesthetic,

Innovar. The drug was tested on 6,000 patients for five years before it received FDA approval.

Innovar’s package contained information about dosages and how to spot adverse reactions. No

unknown adverse reactions were reported before the plaintiff was given the drug during routine

surgery. Innovar triggered a heart attack and severe brain damage. McDaniel’s guardians sued

McNeil under a theory of strict liability.

Decision: The court referred to the Restatement (2d) of Torts, and quoted from the section

dealing with unavoidably dangerous products. Manufacturers who supply useful pharmaceutical

products should not be held strictly liable for unfortunate consequences following the use of

their product, if they provide proper instructions and warning about the possible ill effects of

Add. Case: Thomas v. Hoffman-LaRoch (5th Cir., 1992)–In 1984, Thomas’ dermatologist

prescribed “Accutane” to treat cystic acne. Later, she complained of dry skin and headaches.

The doctor prescribed a cream to ease her dry skin, but kept her on Accutane because the

treatment appeared successful. Several days later, she became disoriented and confused. The

dermatologist took her off Accutane. She was hospitalized and suffered seizures. The hospital

physician guessed that the cause of Thomas’ problem was “most likely viral.” She suffered

fevers, disorientation, and seizures several times during the next few years. Several physicians

believed that Accutane was not the cause of her seizures. Thomas sued, alleging Accutane was

unreasonably dangerous and that Hoffman-LaRoch (HL) failed to list seizures as a possible side

effect of the drug.

Decision: Accutane was supplied with possible side effects warning. By 1989 over a million

patients had been treated with Accutane and 49 had seizures. HL sent reports of seizures to the

FDA, but did not include seizures on its list of side effects because it was unclear to HL that the

drug was responsible for these reactions. Instead, HL noted, in its warning material, that

Add. Case: Bober v. Glaxo Wellcome (7th Cir., 2001)–Bober brought suit against the firms that

make and market over-the-counter (OTC) and prescription strength forms of a stomach acid

reliever. The OTC drug is one-half the strength of the prescription drug. Bober contends that the

statement by the drug maker that consumers should not substitute two OTC pills for one

prescription pill, unless a physician approves the substitution, is false information. Consumers

are injured because prescription pills are more expensive than the OTC pills. Court dismissed.

Bober appealed.

Decision: Affirmed. The statements about the drugs were not deceptive. Under Illinois law, to

show consumer deception, the plaintiff must show that the defendant engaged in a deceptive

practice, that the defendant intended that the plaintiff rely on the practice, and the practice

Enforcement Activities—In some cases, the FDA is able to force products off the market if new

information shows they are harmful or dangerous, or if claims they make appear to be

misleading. Examples of such FDA enforcement actions include the removal of silicone breast

implants from the market, the seizure of collagen products, and seizure of shipments of

improperly labeled “fresh” orange juice. While the FDA has gotten tougher on the use of

enforcement actions, it has become somewhat more lenient in the approval time of new drugs

designed to aid in life-threatening situations.

Add. Case: U.S. v. Sage Pharmaceuticals (5th Cir., 2000)–The FDA enforces its Current Good

Manufacturing Practices (CGMP) for drug makers by inspecting their facilities for quality

control. FDA conducted six CGMP inspections of a drug manufacturing facility run by Sage and

found numerous violations. FDA sued Sage for violations. The court ordered Sage to stop

distributing certain drugs until FDA was satisfied with their quality, but would not prevent Sage

from distributing one particular drug because the FDA had not set standards for production that

would apply to other makers of the drug. The court held that to be selective prosecution in

violation of equal protection principles. The FDA appealed.

Decision: Reversed. The trial court abused its discretion in preventing the FDA from enforcing

its regulations. Equal protection principles are not violated unless a party shows that others

similarly situated have not been subject to enforcement proceedings by the government and that

THE FTC AND CONSUMER PROTECTION—The Bureau of Consumer Protection is a

division of the FTC. Consumer protection efforts have evolved as the agency interprets the FTC

Act which holds “unfair and deceptive acts or practices” to be illegal. Congress also mandates

other specific actions. The FTC investigates business practices it suspects are unfair and

deceptive to consumers. After an initial investigation, a complaint may be issued by the FTC

Commissioners. Most complaints are settled by means of a consent decree, which typically

contains the terms of settlement, redress for consumers, payment of civil penalties (if any), and a

prohibition of offending practices. If a party does not settle, the case will go before an

administrative law judge for resolution, and may subsequently be appealed to the Commission,

and after that to a federal court, if parties are still unsatisfied.

Unfair and Deceptive Acts or Practices—The terms unfair and deceptive are not clearly

defined by the Act, so the FTC has leeway in determining what actions to bring. The FTC has

focused attention on deceptive practices.

Policy Statement on Deception—The FTC adopted a deception policy statement that provides a

test for determining when an action is deceptive. The test asks if a) there is a representation or

omission of information in a communication to consumers, b) is it likely to be misleading, and c)

is it misleading in a material, or harmful way. Not all omissions are deceptive. The FTC will

examine the context in which a practice occurred to determine deception. Consumer reactions are

judged by a “reasonable person” standard. No proof of injury need be proven if it can be shown

that an injury is likely to occur.

Defining Unfairness—Although the FTC has focused on the prosecution of deceptive trade

practices, the FTC Act also states that unfair practices are unlawful. In an attempt to clarify the

issue, the FTC has developed a test for unfairness. An activity is unfair if a) it causes substantial

harm to consumers, b) that they cannot reasonably avoid, and c) that is harmful in its net effects.

Telemarketing Fraud. The FTC sued five telemarketing firms in connection with water purifiers

and home security systems they sold. These companies would send consumers postcards

informing them they had won valuable awards, when in fact the consumers had to pay substantial

amounts of money to collect these “awards.” Companies also made unauthorized charges to

consumer credit cards.

Oil and Gas Well “Investments.” Companies persuaded people to pay to participate in a lottery

for mineral rights on federal lands. Investors lost most of their money. The FTC sued the

promoters and various other companies that participated in the scam.

Work-at-Home Opportunities. Federal court upheld large judgment against a company and its

officers who were peddling “work-at-home opportunities” that were claimed to generate large

income flows. About 200,000 people were suckered into paying over $13 million for the

information.

Invention-Promotion Scams. FTC sued a number of companies that raked in nearly $100 million

from people who were led to believe they were buying expert advice for how to market new

inventions. As usual, by the time the litigation was completed there was nearly nothing for

redress.

CASE: FTC v. John Beck Amazing Profits (D.C., Calif., 2013)—“Wealth creation” products,

including the “John Beck System” were sold through infomercials—how to buy real estate

cheap. Consumers were charged $39.95 a month on a credit card unless they could cancel the

membership. FTC shut down the operation and sued for injunctive relief and monetary damages

of $300 million for consumers.

Decision: Under the FTC Act, a consumer is misled if advertising is false or the advertiser lacked

a reasonable basis for a claim. Here, buyers of the Beck System were told they could buy houses

cheap and make a lot of money on them. The FTC contends the claims were material and false or

unsubstantiated. The falsity of the System is seen in the details of the information given to buyers

about how they could supposedly profit from property sold for unpaid taxes and other false

representations that led many people to pay money but be unable to earn anything.

Questions: 1. The other schemes that were attacked similar almost never generated revenues for

the buyers. Why would people fall for such get-rich-quick schemes?

The lure of easy riches.

2. Do First Amendment free speech protections apply to such advertisements?

False commercial speech, unlike false political speech, is not protected as we discussed in the

Add. Case: FTC v. Accusearch (10th Cir, 2010)—Accusearch sold personal telephone records—

lists of incoming and outgoing calls to any number—a violation of the Telecommunications Act.

Accu claimed that the sale of records did not violate the law, the improper use of records by

some buyers was the problem. The trial court issued a permanent injunction against Accu and it

had to give up profits made from selling phone records. It appealed.

Decision: Affirmed. If an act violated the FTC Act, the commission had authority to seek

injunctive relief when the act involved causes substantial injury (the release of personal phone

records), consumers cannot protect themselves (Accu’s sophisticated hacking system defeated

Add. Case: FTC v. Cyberspace.com LLC (9th Cir., 2006)—Cyberspace sent 4.4 million

consumers checks for $3.50 along with an offer for internet services. About a quarter million

cashed the check probably not having read the fine print that cashing the check meant

subscribing for the service. FTC sued for unfair and deceptive practice. District court issued a

permanent injunction against the company and ordered redress of $17.7 million. Company

appealed.

Decision: Affirmed. The solicitation was misleading. Only one percent of the people who cashed

Add. Case: FTC v. Gem Merchandising (11th Cir., 1996)–Estfan owned Gem, a company that

telemarketed medical alert devices. The FTC sued for unfair and deceptive marketing. The court

found that Gem lured customers by misrepresenting the value of prizes a consumer would receive

if they bought certain products, the likelihood that a particular prize would be won, and that

cash would have to be paid for certain “prizes.” He was ordered to repay consumers $487,500.

If all consumers could not be found, the remainder of the money would be paid to the U.S.

Treasury. Estfan appealed, claiming the court could not order payment to the Treasury under the

FTC Act because that was not “consumer redress.”

Decision: Affirmed. Although the statute does not mention that particular remedy, it falls within

Add. Case: Orkin Exterminating v. FTC (11th Cir., 1988)–Beginning in 1966, Orkin offered a

contract that promised continuous protection once they had their homes treated for termites.

Customers paid a small annual fee for this “continuous protection guarantee,” and had their

homes treated for free if termites reappeared. Orkin lost money on the deal and, in 1975, notified

customers that they would have to pay an extra $25 or 40% of their fee, whichever was greater.

This increase gave Orkin $7.5 million dollars in additional revenue by 1984. The FTC sued,

claiming the increase was unfair and contrary to the original contracts signed by customers.

Orkin appealed.

Decision: The court first investigated if the Commission had exceeded its authority in finding the

unilateral change in the terms of the contracts unfair. The FTC applied the unfairness standard it

had developed, and, under this standard, Orkin’s breach of over 200,000 contracts was unfair.

Regulating Advertising Claims—The FTC’s advertising substantiation program requires

advertisers and ad agencies have a reasonable basis for claims they make about products. To

determine if a reasonable basis exists for a particular claim, the FTC examines several factors:

product, type of claim, consequences of a false claim, cost of substantiating the claim, and

amount of substantiation that is reasonable.

What Advertising Is Deceptive?—The FTC has leeway in determining what advertising is

deceptive. It will normally not attack ads that most consumers would understand or that will not

cause some significant injury. For example, some bakery products are called “Danish pastry.”

Most consumers know the pastry is not made in Denmark, and those who do not will not be

harmed by their ignorance about the origin of the pastry. If ads reach a small number of people,

most of whom are likely to be deceived, or if ads significantly harm consumers, the FTC is likely

to act against the deception.

Add. Info: States are involved in deceptive advertising matters. E.g., California’s code declares

that unfair competition includes “any unlawful, unfair … untrue or misleading advertising.” In

Mangini v. R.J. Reynolds, 21 Cal.Rptr.2d 232, the court held that Reynolds’ use of a cartoon

character in its cigarette advertising could be challenged as a violation of unfair advertising

under California law, on the theory that the cartoon character was used to attract teenaged

smokers.

Examples of Deceptive Ad Cases—Gateway promised to change its advertising for “Hooked on

Phonics” to stop making claims that were challenged. Häagen-Dazs agreed to meet FDA food

label standards concerning fat and calorie content. Bee-Sweet agreed to stop claiming that its

bee-pollen products could treat a range of diseases. Cereal makers were told to stop making

health benefit claims about their products or risk having them classified as drugs. In most cases,

the FTC only extracts a promise to not make unsubstantiated claims in the future.

CASE: Telebrands Corp. v. FTC (4th Cir., 2006)—Telebrands marketed Ab Force, an electronic

muscle stimulation abdominal belt. It worked as promised. The ads stated it was part of “the

latest fitness craze” and that such belts “promise to get our abs into great shape fast—without

exercise.” Hardbody models were used in the ads. The FTC sued for false and misleading ads as

they implied loss of weight and fat, which was not true. The devices have no impact on either.

The Commission issued an order against the ads for this product and any other fitness or health

product the company peddled. Telebrands appealed.

Decision: Order enforced. Evidence was that, under FTC ad standards, the violation here were

serious. The ads strongly implied that the devices worked when the company knew they did

Questions: 1. The appeals court upheld the FTC order that restricted the advertising practices of

Telebrands for a range of consumer products. Why would it apply to products other than Ab

Force?