May was a banner month for consumers. Skechers agreed to pay $40 million to settle charges the company lied to consumers that its shoes would help them lose weight. And a judge told POM Wonderful to tone down its claims that pomegranate products reduce the risk of heart disease and prostate cancer.
But how well does the government police the advertising marketplace?
The basic standard of advertising law in the United States is simple: you’re not supposed to lie to consumers and you’re not supposed to trick consumers. Robert Weissman, head of consumer group Public Citizen, said that while advertisers aren’t supposed to lie, “there’s an acceptance” among the public “of some degree of puffery.”
In the ad biz, “puffery” means something very specific.
Mary Engle helps oversee advertising practices at the Federal Trade Commission (FTC). She said puffery is generally considered claims that reasonable consumers would not rely on or that are just clearly statements of opinion, “like ‘this is the best pizza in town.’”
Engle said the FTC investigated POM Wonderful and Skechers because they went far beyond puffery. In both cases, she says, the companies were making very specific claims about the health benefits of their products, including facts and figures about percentages and numbers.
“Those claims were not puffery,” she said, because they were presented as results of studies.
The law requires companies to substantiate claims at the time they make them. Engle said the FTC is choosy about when to step in — it tends to go after bigger companies and the most egregious claims, particularly those promising health benefits.
“How big is the gap between what they claimed and the science they had to support it?” she said. “How widespread was the advertising campaign? How many consumers were affected?”
The FTC is selective because deceptive advertising cases are a lot of work. The POM Wonderful investigation and settlement took a year and a half, requiring tens of thousands of documents. Sometimes the FTC partners with a state attorney general and the FDA, which has a slightly different mandate.
Michael Jacobson, head of the consumer advocacy group the Center for Science in the Public Interest, explained that the Federal Trade Commission “deals with advertising; the Food and Drug Administration deals with labeling.”
Jacobson said state and federal agencies don’t have the resources to ensure an honest marketplace. He accuses big business of trying to make consumer protection more difficult.
“When rules get too annoying to big companies, then the companies step in and say ‘no way,’” said Jacobson. “They go to Congress and they get Congress to threaten to withhold funding from the government agencies.”
Jacobson suggests that has made the FTC somewhat timid. A conservative expert on regulation says Jacobson has a point. Christopher DeMuth of the Hudson Institute worked for both presidents Nixon and Reagan.
“I’ve been in the government,” he said, “and I know that the FTC tries not to irritate influential people in the Congress.” But DeMuth said it’s also true that regulatory agencies have larger budgets today than at any other time in history. That could change as Congress tries to trim the federal deficit.
FTC officials say they have a number of deceptive advertising cases in the pipeline. But those deal with just a small fraction of the number of product claims in the marketplace. So Robert Weissman of Public Citizen said consumers still need to heed the old warning: caveat emptor — buyer beware.
“The fact that it is advertised on television doesn’t make it true,” warned Weissman. “The fact that it is claimed on the Internet doesn’t make it true. You have to bring a high degree of skepticism. The snake oil salesmen of the modern day are all around us.”
And those snake oil salesmen are gravitating more and more to the Internet, where false claims can go viral overnight.
Want some tips on how to read the claims on ads better? We marked up our own "ad" with advice from the FTC. Just hover over the dots for more information.