In brief

Companies that use paid endorsers or review sites in their advertising and marketing will want to review the validity of their product or service claims, following a Federal Trade Commission (FTC) lawsuit against a wellness brand, resulting in more than USD 536,000 in refunds to consumers deceived by false claims, fake endorsements, and deceptive advertisements.

On November 7, 2024, the FTC announced it will be sending refunds to 536,000 consumers deceived by Rejuvica’s and its owners’ unsupported claims that Sobrenix, a dietary supplement marketed and sold by Rejuvica, could reduce and eliminate alcohol cravings and consumption. In addition to the refunds, the FTC’s proposed order requests a permanent injunction and other relief due to violations under the FTC Act and the Opioid Addiction Recovery Fraud Prevention Act of 2018 (OARFPA).

The FTC filed its complaint on July 18, 2023, alleging that the defendants made numerous unsubstantiated and false claims about Sobrenix, used paid endorsers in deceptively formatted advertising, and published bogus review sites to deceive consumers about their products. As a result of the FTC’s suit, the defendants agreed to a proposed order that permanently bans them from making any unsubstantiated claims about health products or services and requires them to pay USD 650,000 to the FTC to refund consumers.

Section 12 of the FTC Act prohibits the dissemination of any false advertisement in or affecting commerce for the purpose of inducing, or which is likely to induce, the purchase of food, drugs, devices, services, or cosmetics. The OARFPA Act prohibits unfair or deceptive acts or practices specifically with respect to any substance use disorder treatment service or substance use disorder treatment product. The OARFPA Act applies to Sobrenix due to the defendants having marketed it as a substance use disorder treatment product.

The FTC alleged the defendants ran afoul of both the FTC and OARFPA Acts in respect of each of the charges below:

• Deceptive Alcohol Cravings and Consumption Claims: The FTC alleged that Rejuvica and its owners violated both Acts by making false or misleading representations that Sobrenix: a) Reduces or eliminates cravings for alcohol; b) Enables users to substantially reduce or eliminate their consumption of alcohol; c) Assists users to regain control of their problematic drinking; and d) Treats alcohol use disorder or the symptoms of alcohol use disorder. In alleged violation of the FTC and the OARFPA Act, defendants represented that Sobrenix was proven to reduce alcohol cravings and consumption when, in reality, the defendants had no evidence to substantiate their claims.
• Deceptively Formatted Advertising: Defendants engaged in false advertisements by representing statements about Sobrenix that were actually paid advertising as independent opinions by impartial experts. This occurred during a television appearance featuring two public figure health experts discussing Sobrenix that was portrayed as objective news content on local television and news stations. Neither Rejuvica nor the public figures disclosed they were paid by Rejuvica, and Rejuvica highlighted these appearances in their marketing materials as “news” coverage.
• Deceptive Endorsements: The defendants represented that reviewing websites were independent organizations providing objective information when, in fact, the defendants themselves drafted the websites’ content and the products were not reviewed by anyone unconnected with Rejuvica. The review websites all contained identical badges stating the content was “expert review”, fictional names used by Rejuvica’s marketing staff, and content stating that Rejuvica product obtained the highest score of all products.

The FTC is actively expanding its regulation authority over false claims, deceptive advertisements, and non-disclosures of endorsements. We have been tracking the FTC’s long-term and consistent focus on fake reviews, endorsement advertising, and healthcare influencer disclosures.

Companies, especially those with health-related products or services, will want to review their marketing practices to ensure that: 1) all influencers’ disclosures regarding their relationship to the company are clear and conspicuous; 2) all health claims are supported by competent and reliable scientific evidence; and 3) advertisements are truthful and not misleading.

If you have any questions about your advertisement and marketing programs, please contact your Baker McKenzie attorney or the authors below.

The 20-page report looked at existing regulations across a wide range of nutraceuticals, including vitamins, minerals, amino acid supplements, Foods for Special Dietary Uses (FSDU), Foods for Special Medical Purposes (FSMP), pre-, probiotics, and botanicals.

The report was put forth by an inter-ministerial committee consisting of eight experts.

They include heads of both Food Safety and Standards Authority of India (FSSAI) CEO Shri. G. Kamala Vardhana Rao and Central Drugs Standard Control Organisation (CDSCO) Drugs Controller General of India Dr. Rajeev Singh Raghuvanshi.

One of the suggestions was for nutraceuticals making disease risk reduction (DRR) related claims to be regulated by the CDSCO – a point that has sparked discussion from the nutraceutical industry.

The committee also proposed that the FSSAI would regulate only nutritional and health claims listed under the Food and Safety Act FSS (Claims and Advertisement) Regulations, 2018.

It said that this was to address the current situation where food business operators (FBOs) have been making DRR claims without having adequate scientific evidence.

“FBOs are making disease related claims without having adequate scientific evidence. Many FBOs are doing high end claims, and several supplements are marketed with disease management/ disease risk reduction claims…” the committee said in the report.

“DRR claims are more widely used by manufacturer without approvals as well as these claims are manipulated in such a way that mimics treatment, cure, mitigation or prevention of any specific disease, disorder or condition in Nutraceutical products,” it added.

At present, there is an expert committee within the FSSAI to provide recommendations on approving any claims to general health benefits and disease risk reduction, beyond those that are already permitted.

More than 25000 FBOs, including manufactures, re-labeller, re-packer, importer etc, are licensed.

The committee also suggested a separate provision of Good Manufacturing Practices (GMP) requirements for health supplements and nutraceuticals.

How does it affect companies?

If this suggestion was to be taken up by the government, existing products making DRR claims might need to change their label or cut down on their claims, Dr. Vaibhav Kulkarni, honorary secretary and board member of India’s Health Foods and Dietary Supplements Association (HADSA) told NutraIngredients-Asia.

“The product labelling may need to undergo a change; you may have to cut down certain DRR claims if you are stating it on the label. There is probably a pressure on the operation and supply chain,” he said.

However, he agreed that the move could deter against false and exaggerated health claims.

“The purpose of the suggestions is to provide clarity and proper product to the end consumers or patients. We have seen during the COVID period where companies have taken advantage of the system and make exaggerated claims. But once those products enter the market, it becomes very difficult to manage them.

“Some of the claims can be very strong. I have some food companies making claims like 30 per cent reduction in diabetes…If you don’t have clinical study done, how can you claim 30 per cent reduction in diabetes?”

Moving the review of DRR to the drug authority also means that companies would need to submit clinical trial evidence.

In this case, former FSSAI director Pradip Chakraborty said that smaller FBOs would be more affected due to a lack of capability in conducting clinical trials.

“In light of my long experience in food safety and as director at FSSAI, I believe that food business operators will have to submit clinical trial evidence for disease risk reduction claims when the regulatory purview goes to CDSCO.

“And clinical trials are costly, as well as time consuming, and it have to be reviewed by the CDSCO expert committee, so FBOs will suffer from this for getting the claims approval.”

At present, he said that the expert committee within FSSAI would only request for clinical trial evidence from companies making DRR claims on a case-by-case basis.

He also said that the clinical trials submitted for evaluation need to involve the Indian population.

At the same time, involving the CDSCO into nutraceuticals could mean “multiplicity of requirements” for importers, he added.

“The importers will have to get DRR claim approval from the CDSCO, and when the consignment reaches, they have to apply for an import clearance from the FSSAI. This means it will be multiplicity of the authorities, with both CDSCO and the FSSAI involved,” he said.

Clinical evidence evaluation: CDSCO could fill in the shoes

While the industry’s preference is to stick with the existing framework, with the FSSAI continuing to assess clinical evidence for DRR claims, Dr. Kulkarni said that the FSSAI would have to increase their capability for doing so.

This is because comparatively speaking, the FSSAI might not have the bandwidth as compared to the CDSCO in evaluating DRR claims and clinical evidence.

“The FSSAI has to do a lot of work on it, they have to increase their capability even if DRR were to remain with the FSSAI.

“Otherwise, it is a disadvantage to the authority and the industry because there can be good companies with good clinical studies on their products, but just because you don’t have a capable team to evaluate those studies the way it has to be looked into, you may face a rejection or questions on those studies.

“This may cause delays, or companies may be frustrated and never launch the product at all,” he said.

The drug authority, in contrast, would be in a better position when it comes to evaluating clinical evidence.

“The drug authority is capable of validating stronger claims, like those that are about mitigating, curing diseases because day in and out, they are looking at those products…

“And these clinical evidence needs to be evaluated fairly, because people have spent money, time and energy on getting those studies done on their products,” he said.

What’s next?

Nothing is set in stone yet and the committee’s recommendations would need to be debated at the parliament. The existing FSS Act would also need to be amended before the any new changes could take effect.

“You have to first amend the particular sections which you want to amend in the FSS Act. It’s a long-term procedure and the amended Act has to be passed in both the houses of the parliament, both the lower house Lok Sabha and the upper house Rajya Sabha,” said Chakraborty.

It could take one to two years to pass a regulation, he said. In certain cases, the process might be even longer.

He gave the example of the FSS (Health Supplements, Nutraceuticals, Food for Special Dietary Use, Food for Special Medical Purpose, Functional Food and Novel Food) Regulations 2022.

Although it was introduced in 2022, it has not yet been gazetted and had to be re-operationalised for a few times last year and this year because the ministry involved did not give their final approval.

Meanwhile, Dr. Kulkarni suggested that the industry – should they refute any points on the proposal – should back up their points with strong substantiation.

“If the industry view that DRR review should not go to the drug side of the authority, then the ‘why’ question needs to be answered by the industry with a stronger substantiation.”

Photos circulating on social media show tea shops in Tokyo advertising signs advising customers that many matcha products are out of stock or have purchase limits. When shops do have stock, images show lines of people queuing to get their hands on some.

The green tea is only harvested once a year in Japan, and the shortage has not been caused by a low yield, but rather a booming demand around the world that suppliers can’t keep up with.

Speaking to The Guardian, manager of Sydney tea shop Simply Native Megumi Kanaike believes the “unexpected worldwide boom” in the popularity of matcha has led suppliers to put limits on orders, adding her store has seen an increase of 250 per cent in matcha sales over the past six months.

“The brands that have been impacted most are the ones that people overseas like, the ones that have gone viral on social media,” Kanaike said.

Leading Japanese matcha producers such as Marukyu Koyamaen, Ippodo Tea and Ocha no Kanbayashi have all announced limits on the amount customers can order, with the restrictions expected to last until early 2025.

“Due to a sharp and continued increase in demand on matcha products in the past months, the current demand has already exceeded our production capacity. This results in an extremely low stock of all matcha products at this moment,” a statement from Marukyu Koyamaen says.