The Federal Trade Commission sued Xlear, Inc., a marketer of nasal sprays, for making false and unsubstantiated claims that its products prevent and treat COVID-19. The FTC charged the marketer with violating the COVID-19 Consumer Protection Act, which allows the FTC to seek civil penalties.
In announcing the lawsuit, Samuel Levine, the Director of the FTC's Bureau of Consumer Protection, said, “Companies can’t make unsupported health claims, no matter what form a product takes or what it supposedly prevents or treats. That’s the lesson of this case and many others like it, and it’s why people should continue to rely on medical professionals over ads.”
The FTC alleged that Xlear falsely marketed the therapeutic benefits of its nasal sprays -- which contain purified water, sugar alcohol, saline, and grapefruit seed extract -- on websites, on Facebook, Instagram, and YouTube, and through appearances on podcasts and sponsored segments on local television news. The FTC alleged that Xlear made false claims such as:
- "Social distancing and wearing masks offers some help, but Xlear nasal spray provides additional tested protection for up to four hours, helping keep you and others around you safe";
- "Nasal sprays, like Xlear help subdue the viral load as a simple treatment"; and
- "With the pandemic raging worldwide, we must use every tool we can to fight it. . . . Weighing our 20-year safety record, against the risks of this deadly virus, it’s clear Xlear needs to be in widespread use."
In addition, the FTC alleged that the Xlear falsely claimed that there is scientific evidence to back up the company's claims. The FTC charged that, although there is no competent and reliable scientific evidence that Xlear nasal spray treats or prevents COVID-19, Xlear "repeatedly mischaracterize existing studies and/or ignore their conclusions or limitations."
The FTC sued the company after the company failed to correct its advertising in response to a warning letter that the FTC sent the company more than a year ago. (During the COVID-19 pandemic, the FTC sent warning letters to numerous companies about their COVID-19 claims. The warning letter to Xlear was sent as part of a wave of warning letters that was announced in August 2020.)
What are some important take-aways?
First, if you get a warning letter from the FTC, you should assume that the FTC means business and that it will follow up in order to ensure that you've addressed the concerns that the FTC raised. With the FTC having just sent hundreds of warning letters to marketers -- about endorsements, money-making claims, and education-related claims -- you should expect to see more of these types of cases.
Second, the FTC couldn't be any clearer about the fact that it is prioritizing cases where it can get civil penalties or other damages from marketers when they have engaged in false advertising. While, historically, most typical false advertising cases brought by the FTC didn't involve financial remedies, you should expect to see many more cases where marketers have to pay substantial damages.
Third, the FTC doesn't have any patience for marketers who are cutting corners with their substantiation. Although the marketer here based its claims on some existing research, the FTC said that Xlear didn't come close to having the level of competent and reliable scientific evidence that was required. In this action, the FTC pointed to a number of flaws in the research, including, for example, that it wasn't conducted on people and the exact product wasn't tested. The FTC also said that the marketer misstated the conclusions of the research.
And, finally, the FTC's allegations in this case are largely based on claims made in social media and in non-traditional advertising media, such as appearances on podcasts and local television news segments. Don't ignore the things your social media team and your PR team are doing. Those could just as easily lead to FTC action as the claims you're making in more traditional advertising media.
"Companies can't make unsupported health claims, no matter what form a product takes or what it supposedly prevents or treats" -- Samuel Levine, Director, FTC Bureau of Consumer Protection