NCPA - National Center for Policy Analysis

FTC Overzealous in Attempts to Combat False Advertising

October 31, 2014

The Federal Trade Commission is overstepping its bounds to combat false advertising, argues Alden F. Abbott of the Heritage Foundation.

Advertising is, in general, a positive, says Abbott: it creates a more informed consumer base and stimulates competition and innovation, which generates market activity and ultimately creates new jobs, goods and services. Research indicates that countries with high advertising rates also have stronger economic growth.

But what about false advertising? It does the opposite, says Abbott, undermining the market by giving consumers unreliable, deceptive information. As a result, the Federal Trade Commission (FTC) is authorized to regulate false advertising. Advertising, however, is speech, meaning that it has First Amendment protection. Regulations on advertising ("commercial speech") must stay within the bounds described by the Supreme Court: non-misleading commercial speech cannot be restricted any more than is necessary to directly advance a legitimate government interest.

But in evaluating potentially deceptive advertising -- often with regard to the health benefits of certain products -- Abbott contends that the FTC has become more and more unreasonable, insisting that businesses comply with costly and expensive demands in order to satisfy agency scrutiny:

  • The FTC insists that advertising claims be "sufficiently substantiated," meaning that there must be a "reasonable basis" for the claims, which the agency has interpreted to require scientific evidence.
  • In 2010, the FTC ordered that reliable scientific evidence mean "at least two adequate and well-controlled human clinical studies," by different, independent researchers. This is very expensive.
  • The agency has started to require some businesses to seek preapproval of any future advertising claims from the Food and Drug Administration.
  • The FTC has begun to seek monetary relief against companies that advertising claims that it believes are not sufficiently substantiated.

Abbott contends that because it has become so burdensome to make health-related claims when it comes to products -- whether marketing the benefits of a cereal or a fruit drink -- firms may stop investing in health-related improvements altogether. If companies cease advertising on health grounds due to the exorbitant costs associated with such advertising, consumers will suffer, both from a lack of new products as well as a lack of substantive product information.   

Source: Alden F. Abbott, "Time to Reform FTC Advertising Regulation," Heritage Foundation, October 29, 2014. 

 

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