December 21, 2018

FTC Can’t Stop Every Deceptive Ad Or Trade Practice

Competitors Can Step In To Enforce The Law

In my previous article, “You Can Sue Your Competitor For False Advertising,” I point out that the FTC can’t possibly enforce false advertising laws against every company violating these laws in the marketplace. The agency just doesn’t have the budget or the expertise to do so. Therefore competitors are often left to police the market themselves, with a focus on protecting their legitimate revenues from being diminished by shady operators generating revenue from false claims.

A recent case filed in Arizona federal court illustrates this sort of policing of competitors. Dietary supplement firm ThermoLife International LLC accused its rival American Fitness Wholesalers LLC of false advertising and unfair competition, alleging that the company has improperly labeled its products,” and that the company did not disclose that their products contain illegal ingredients, including steroids. Thermolife accused their competitor of selling products that contain ingredients that the FDA has determined are drugs, all the while telling consumers that the products were safe, natural dietary supplements.

This case demonstrates the limits of FTC enforcement capabilities on a broad scale. Here are a few of my observations about the efficacy of competitors enforcing the law.

  • The FTC has limited budget to perform its policing activities. They can’t test every product, and they often don’t have the expertise to engage in the type of testing that is straightforward for other players in the marketplace.
  • Well-established industry players are often in an advantageous position to clean up the marketplace. Companies that have competed in an industry for years know the nuances of marketing claims and the extent of scientific studies on a particular topic.
  • Industry players are often more deft at detecting false claims by competitors because they understand price points and the ease or difficulty of producing certain types of products. For example, industry players may be able to detect inferior ingredients or the absence of disclosed ingredients merely by observing a competitor’s pricing structure.
  • A false advertising or unfair competition lawsuit launched by a major competitor in the marketplace can often serve as much more of a disincentive for deceptive marketers compared to the FTC. Industry players can be relentless in enforcing the law in niche industries over the course of years, where the FTC may not have the resources to monitor for deceptive advertising over long periods of time.
  • FTC investigations are often triggered by large numbers of consumer complaints to the FTC or BBB. However, industry players can launch lawsuits addressing deceptive conduct that is unknown to consumers and thus not generating any consumer complaints.

You have the right to sue a competitor for false or deceptive advertising or for unfair competition, even though it may be an area where the FTC could theoretically also bring an enforcement action. Feel free to contact me if you are considering legal action against a competitor that is engaging in deceptive practices or unfair competition.

Karl Kronenberg, Partner
415-955-1155, Ext. 114

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    This entry was posted on Friday, December 21, 2018 and is filed under Resources & Self-Education, Internet Law News.

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