Crises often bring out the best and worst in people. As many Americans are putting their safety at risk in the fight against COVID-19, fraudsters invariably attempt to exploit fears by hawking ineffective coronavirus “cures” and treatments. We discuss the regulation of health claims, and possible remedies available to parties damaged by false health claims.
The Food and Drug Administration (“FDA”) and Federal Trade Commission (“FTC”) have primary responsibility for overseeing health-related claims for foods and supplements. The FDA permits sellers of food products to make health claims that a product “may reduce the risk of a disease or a health-related condition” (but not make claims about the diagnosis, cure, mitigation or treatment of a disease) provided that they have adequate significant evidence behind the claim.1 The FDA also oversees prescription drug approval and labeling. Prescription drugs and the contents of a drug label are approved after the drug company or sponsor successfully conducts a series of painstaking and expensive trials.2 The FTC also oversees health claims made on products including food, over-the-counter drugs, dietary supplements, and other health-related products.3
On March 9, 2020, the FDA and FTC announced that they had sent joint warning letters to seven companies making unapproved and/or unsupported claims that products can treat or prevent coronavirus.4 As of May 21, 2020, over 120 U.S. companies and individuals have received such letters.5 Companies that sell products with unauthorized health claims about the coronavirus have been warned that they are subject to having their products prohibited from sale and refused importation and that the companies may be subject to fines.6
The FDA and FTC have nearly exclusive powers to enforce regulations regarding food and beverage labelling, and do not permit private enforcement suits.7 The most common enforcement mechanism is injunctive relief, with fines charged for violations of an injunction. Consumer protection laws at the state and federal level also tend to address false and misleading advertising with injunctive relief, not with economic damages.
Individual consumers may be able to sue for damages due to false advertising on the basis of anti-fraud statutes, individually or in a class. Food and supplement companies have often faced class action lawsuits based on claims that their products were misleadingly labeled for allegedly misleading terms such as “natural” or “handmade,” although many of these cases have stumbled on the question of damages.8 Sellers (or others) who made false claims regarding a product’s ability to prevent or fight the coronavirus may face significant product liability damages in the event that a consumer contracted the virus after purchasing their product up to, and including, wrongful death lawsuits.9 The swift action of the FDA/FTC, warning hawkers to withdraw their false claims and/or products before they could make substantial sales of alleged coronavirus cures, may prove to be consequential to both preserve public health and limit the potential liability of potential coronavirus fraudsters.
Businesses who can demonstrate harm as a result of false or misleading claims can seek monetary relief under state and federal laws. False advertising in the context of unfair competition is a federal tort under the Lanham Act.10 Plaintiffs may “allege an injury to a commercial interest in reputation or sales”11 against a party that uses a “false or misleading description of fact, or false or misleading representation of fact, which…in commercial advertising or promotion, misrepresents the nature, characteristics [or] qualities [of]…his or her or another person’s goods.”12 Although false advertising cases under the Lanham Act are often filed between competitors, direct competition is not necessary to collect damages.13
Plaintiffs may recover as damages (a) their own lost profits, (b) defendant’s profits attributable to the false advertising, or (c) corrective advertising expenses.14 For example, with regards to coronavirus, a vendor of colloidal silver dietary supplements may be able to file false advertising claims against a colloidal silver dietary supplement vendor which made unsupported claims about their product’s efficacy against the coronavirus. However, this hypothetical plaintiff would have the burden of proving that its own sales were lost or diverted as a result of the false claim (and not for other reasons) in order to recover damages.15
False claims about coronavirus “cures” and treatments are likely to continue. Careful legal and economic analysis is required to establish and quantify that a competitor, class, or individual has suffered damages attributable to false advertising claims. With the right facts and the right team, however, economic recovery for damages due to false advertising can offer a significant form of relief.
1FDA website, “Questions and Answers on Health Claims in Food Labeling,” at https://www.fda.gov/food/food-labeling-nutrition/questions-and-answers-health-claims-food-labeling.
2FDA website, “Development & Approval Process- Drugs,” at https://www.fda.gov/drugs/development-approval-process-drugs; “Understanding Unapproved Use of Approved Drugs ‘Off Label,” at https://www.fda.gov/patients/learn-about-expanded-access-and-other-treatment-options/understanding-unapproved-use-approved-drugs-label.
3FTC website, “Health Claims,” https://www.ftc.gov/tips-advice/business-center/advertising-and-marketing/health-claims.
4FTC website, “FTC, FDA Send Warning Letters to Seven Companies about Unsupported Claims that Products Can Treat or Prevent Coronavirus,” at https://www.ftc.gov/news-events/press-releases/2020/03/ftc-fda-send-warning-letters-seven-companies-about-unsupported.
5FTC website, “FTC Sends Letters Warning 50 More Marketers to Stop Making Unsupported Claims That Their Products and Therapies Can Effectively Prevent or Treat COVID-19” dated May 21, 2020, at https://www.ftc.gov/news-events/press-releases/2020/05/ftc-sends-letters-warning-50-more-marketers-stop-making; FDA website, "Fraudulent Coronavirus Disease 2019 (COVID-19) Products," https://www.fda.gov/consumers/health-fraud-scams/fraudulent-coronavirus-disease-2019-covid-19-products#Warning%20Letter%20Table.
6See FDA Warning Letter to Jim Bakker and the Jim Bakker Show dated March 6, 2020, at https://www.fda.gov/inspections-compliance-enforcement-and-criminal-investigations/warning-letters/jim-bakker-show-604820-03062020.
7POM Wonderful LLC v. Coca-Cola Co., 573 U.S. (2014).
8Briones, Joshua, et al., “False Labeling Suits Get Hung Up On Faulty Damages Models,” Product Safety Liability Reporter 45 PSLR 25, 1/27/2017.
9Weil, Roman L., et al., Litigation Services Handbook, 5th ed., Chapter 12.
10Lanham Act, 15 U.S.C. § 1125.
11Lexmark International, Inc. v. Static Control Components, Inc., 697 F. 3d 387.
12Lanham Act, 15 U.S.C. § 1125(a)(1)(B).
13In the case of Lexmark International, Inc. v. Static Control Components, Inc., the Supreme Court ruled that plaintiff, Static Control, could sue Lexmark for falsely telling consumers that Static Control’s business (selling components for refurbishing and reselling Lexmark printer toner cartridges) was illegal. See Lexmark International, Inc. v. Static Control Components, Inc., 697 F. 3d 387.
14Lanham Act, 15 U.S.C. § 1117(a); Big O Tire Dealers, Inc. v. Goodyear Tire & Rubber Co., 561 F.2d 1365, 1374–75 (10th Cir. 1977).
15Actual injury is necessary to recover economic damages under the Lanham Act, but injunctive relief is available for a plaintiff that can show threatened injury. See Hearing on Counterfeits and Cluttering: Emerging Threats to the Integrity of the Trademark System and the Impact on American Consumers before the Committee on the Judiciary Subcommittee on Courts, Intellectual Property and the Internet, July 18, 2019, Testimony of Peter M. Brody, at https://docs.house.gov/meetings/JU/JU03/20190718/109812/HHRG-116-JU03-Wstate-BrodyP-20190718.pdf.
