A recent federal Court of Appeals decision striking some of the Food and Drug Administration's health product claims requirements demonstrates the courts' willingness to reign in unreasonable governmental restrictions on truthful advertising. It also demonstrates recognition of disclaimers.
Truthful advertising for lawful conduct is protected by the First Amendment to the Constitution. Depending on the level of legitimate governmental interest, the government can restrict commercial speech. Under federal law, the FDA exercises almost complete control over labeling of items such as foods, drugs and dietary supplements.
The agency had previously barred marketers from including disease or health condition claims on products not approved by the FDA. After the enactment of the Nutritional Labeling and Education Act of 1990, a marketer could include a disease or health claim on its label after obtaining preapproval from the agency.
Pearson v. Shalala concerned a challenge to the preapproval regulations promulgated by the FDA. Under the challenged regulations, marketers of dietary supplements were to submit the health claim to the agency for approval.
The FDA regulations provided that a claim would only be approved if the agency found “significant scientific agreement” among experts, and definition of this standard was left to the discretion of the FDA. Notably, the standard is different than the typical degree of substantiation in the form of competent tests or studies required by the Federal Trade Commission for performance claims of nonhealth products.
In the Pearson case, the claims were rejected by the agency apparently on the grounds that the evidence failed to meet the agency's undefined proof threshold. The marketers sued on various statutory and constitutional grounds. Although the federal trial court denied the marketers' claims and supported the agency's determination and interpretation of the regulations, the D.C. Circuit Court of Appeals struck down the agency's regulations as being in violation of the governing Administrative Procedure Act.
The appellate court decision establishes important limitations on a government agency's discretion, which may apply outside the context of the FDA.
An agency does not have unfettered discretion. Rejecting the agency's approach, the court struck down the regulations premised on the significant scientific agreement standard. The Court of Appeals agreed with the marketers that the FDA was required to explain why it rejects their proposed health claims and to define “significant scientific agreement.”
Agency should permit disclaimers. As part of the FDA's denial of the labeling claims, the agency refused to permit the marketers to include a disclaimer to alleviate the agency's concerns.
The Court noted that the government cannot place an absolute prohibition on potentially misleading information if it can be presented in a way that is not deceptive. The agency asserted that disclaimers were never appropriate, because claims that lacked the support of significant scientific agreement were inherently misleading and consumers were not smart enough to evaluate the efficacy of the product. The Court rejected this argument as frivolous and urged that disclaimers be considered as a method to balance the First Amendment issues and the agency's concerns. The Court said that more disclosure was preferred over outright suppression.
This case is an important victory for all marketers, not just those with health claims. Requiring a governmental agency to define the requirements that a marketer must meet enables marketers to comply with regulated substantiation standards. Too often, regulators assume that they are empowered with unlimited discretion to determine what constitutes permissible advertising. Moreover, most courts are unwilling to consider challenges to that discretion even if it means that consumers will not be exposed to legitimate truthful advertising.
The Pearson decision demonstrates that courts will not tolerate unlimited agency discretion, but will require the government to spell out what will be considered adequate substantiation. The court's recognition that an agency's concerns might be alleviated with disclosures and appropriate disclaimers also may provide marketers with additional means to promote an otherwise unsubstantiated claim or sell a controversial product.
Andrew B. Lustigman is a partner in The Lustigman Firm, New York, a law firm specializing in direct marketing law.