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Staking a Claim: The Basics of FTC Claim Substantiation
Practical Law Legal Update w-005-3095 (Approx. 5 pages)
Staking a Claim: The Basics of FTC Claim Substantiation
by Practical Law Commercial Transactions
| Law stated as of 10 Jan 2017 • USA (National/Federal) |
The Federal Trade Commission (FTC) requires advertisers to provide a reasonable basis for advertising and marketing claims. The process of demonstrating that reasonable basis is called claim substantiation, and it is important for companies marketing and selling consumer products in the US to understand the process of claim substantiation, including how to test claims and use disclosures to qualify claims. This update also discusses substantiation of health claims, comparative advertisements, environmental marketing claims, and US origin (Made in USA) claims.
Companies that market and sell consumer products in the US should be familiar with the Federal Trade Commission's (FTC's) regulation of advertising claims. The FTC requires all advertisers to be able to substantiate advertising claims for a product. Broadly, claim substantiation is simply a requirement that advertisers have a reasonable basis for their claims before they are made.
But claim substantiation is not always a straightforward matter. Advertisers must know how to identify claims in their advertising, determine which claims require substantiation, and understand the FTC's criteria for substantiation. Certain specific claims, such as health or environmental claims may require additional actions.
This update summarizes some of the most important principles in FTC claim substantiation, and points advertisers to additional resources for better understanding the claim substantiation process.
Which Advertising Claims Require Substantiation?
An advertising claim requires substantiation if it makes an objective assertion about a product or service. These claims may appear in marketing and advertising materials, on product packaging, or on the product itself.
Claims requiring substantiation can be express or implied. A claim is implied if 20% or more of reasonable consumers would construe a particular meaning from the claim. In evaluating the existence of an implied claim, the FTC will look beyond the language of the claim to accompanying imagery in order to evaluate the claim in its entirety. For more information on express and implied advertising claims, see Practice Note, FTC Enforcement of Advertising Claims: Advertising Claim Fundamentals.
Subjective claims do not require substantiation, provided it is clear to the consumer that the claim is subjective. For instance, puffery refers to exaggerated advertising and vague, subjective superiority claims ("the world's best!") on which a reasonable consumer is not expected to rely. Puffery is generally understood to be an expression of opinion, not a factual claim. For more information on puffery, see Practice Note, Puffery in Advertising.
Substantiating an Advertising Claim
Once an advertiser has determined that a claim requires substantiation, it must confirm that it has information that supports the claim. The FTC requires an advertiser to have a reasonable basis for making the claim, and has identified the following factors (the Pfizer factors) for establishing a reasonable basis for a claim:
- Type of product.
- Type of claim.
- Consumer benefit from a truthful claim.
- Ease of developing substantiation for the claim.
- Consequences of a false claim.
- Amount of substantiation experts in the relevant field believe is reasonable.
As advertisers go through these factors, they will find that some claims are easier to substantiate than others. If a claim cannot be substantiated with the evidence on hand, advertisers may wish to either revise the claim or test the claim by conducting additional research. Testing may include consumer surveys, scientific studies, or market surveys, among other actions. When testing a claim, advertisers should careful to:
- Conduct and evaluate the test in an objective manner, with qualified persons using procedures generally accepted in the scientific community.
- Consider whether the typical consumer would reasonably be expected to achieve the touted results when using the product as instructed under normal use conditions.
For more considerations for advertisers testing a claim, see Practice Note, Substantiation of Advertising Claims, Testing to Support the Claim.
Qualifying an Advertising Claim
If an advertiser is concerned that a claim may be misinterpreted by consumers, it may choose to include disclosures to qualify the claim. Disclosures are often used to clarify or limit advertising claims, but they must:
- Be clear and conspicuous. The following attributes can help an advertiser determine if the disclosure is clear and conspicuous:
- the prominence of the disclosure;
- the disclosure's proximity to the claim it is qualifying; and
- the overall presentation of the disclosure, including how understandable it is to the intended audience.
For more information on using disclosures to qualify an advertising claim, see Practice Note, Substantiation of Advertising Claims, Consider How the Claim is Being Conveyed to Consumers. Advertisers may also want to review these recent FTC actions regarding disclosures:
Specific Types of Claims
Specific types of advertising claims may require specific kinds of substantiation. For instance:
- Health claims should be supported by competent and reliable scientific evidence. For more information on substantiation of health and other specific claims, see Practice Note, Substantiation of Advertising Claims, Specific Types of Claims.
- Comparative advertisements, which are often closely scrutinized by competitors, should be:
- substantiated with appropriate research, tests, studies, or other relevant evidence;
- appropriately tailored to the substantiation;
- based on current versions or features of the products being compared;
- supported by head-to-head testing; and
- a comparison to the most similar of the competitor's products.
For more information on comparative advertising claims, see Practice Note, Comparative Advertising Law in the US and Challenging a Comparative Advertisement Checklist. - Environmental marketing claims can be difficult to substantiate because consumers may interpret claims about a product's green, eco-friendly, or environmentally friendly qualities broadly. Advertisers should be careful to qualify environmental marketing claims in order to avoid consumer deception or confusion. For more information on environmental marketing claims, see Practice Note, Green Marketing in the US.
- US origin claims must be substantiated whether they are express ("Made in the USA") or implied (the presence of the US flag on a label). For more information on US origin claims, see Practice Note, Made in USA Claims.