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Paul Zimmerman
pzimmerman@mrllp.com
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Advertising Agencies Beware: Your Clients Aren’t The Only Ones On The Hook For FTC Violations

In what amounts to one of the largest judgments ever obtained by the FTC against an ad agency, one such company (the “Agency”) has agreed to pay $2 million to resolve a complaint arising from its creation and dissemination of deceptive radio spots for weight-loss products marketed by one of its clients. The complaint, which was made on behalf of the FTC and State of Maine, alleges that between 2006 and 2015, the Agency made false or unsubstantiated weight-loss claims for two separate products; this on the heels of creating similarly misleading ads for another client’s product – one that was the subject of an FTC complaint filed in 2014. In that matter, the Agency’s client agreed to refund in excess of $25 million to defrauded consumers.

The complaint against the Agency maintained that it knew the health claims made in the advertisements it created required reliable scientific support – they didn't. Likewise, the FTC and State of Maine alleged that the weight-loss testimonials and radio ads that the Agency was responsible for were falsely disguised as news stories (so-called native advertisement). They also claimed that the Agency failed to adequately disclose that consumers would be automatically enrolled in negative-option (auto-ship) continuity plans.

Taken together, the Agency’s conduct cost it seven figures . . . not an easy pill to swallow. In addition, the FTC’s order requires the Agency to have competent and reliable scientific evidence to support any other claims going forward about the health benefits or efficacy of weight-loss products (the Agency is also prohibited from misrepresenting the existence or outcome of tests or studies). There is more. The Agency may not misrepresent either the experience of consumer testimonialists or that paid commercial advertising is independent programming.

The takeaway: advertising agencies creating content must make sure substantiation claims are vetted, and that they follow all FTC and state law guidelines regarding false and misleading advertising. Indeed, ad agencies, and not just their clients, must be mindful to avoid potentially deceptive practices, all the while paying heed to the expanding reach of the FTC.

This blog post is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.