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August 15, 2008
David Takes Aim at FTC
David just took aim at
the Goliath that is the Federal Trade Commission in a lawsuit that could
have repercussions for how the feds approach their role as civil law
enforcers. The FTC is the federal agency that regulates advertising
Truth in advertising is
important. For that very reason, I will state up front that I believe in
the healing properties of herbs, and often take them to alleviate
allergies and other chronic conditions. They have worked well and
cost-effectively for me.
It all started last
spring when the FTC mailed a letter to the owners of a New Mexico herb
store that threatened to file a civil lawsuit against them in U.S.
District Court if they didn’t sign an enclosed consent agreement, cough
up the entire earnings of Native Essence Herb Company over its 15 years
in business, and open their financial statements to regulators to help
calculate the “damages” they owed.
Damages? What damages?
The FTC cited no consumer complaints against Native Essence. Nor did it
document any evidence that anyone had contacted the FTC with claims of
being defrauded or misled by Native Essence.
Apparently, the FTC’s
problem was the company’s web site because it reprinted articles about
government-sponsored studies of the medicinal properties of certain
herbs. These studies came from federal government web sites like the
National Center for Complementary Medicine, the National Institutes of
Health and the National Academy of Sciences.
The FTC apparently
takes the position that it is misleading for a company to provide
information about clinical studies that have not been approved by the
Food and Drug Administration or have not been reported in mainstream
U.S. medical journals.
We all know about the
unassailable accuracy the FDA’s OK. There’s Vioxx, later found to kill
via heart attacks, FenPhen, the late 1980s diet combo also shown to
promote heart failure, and hormone replacement therapy, revealed to
elevate the risk of certain cancers and heart attacks. The FDA nod is
obviously the gold standard for accurate drug claims.
Instead of signing away
their business, Mark and Marianne Hershiser filed a lawsuit against the
FTC, seeking a preliminary injunction against the federal agency on
grounds that its advertising content guideline is unconstitutional, and
asking the courts to prohibit the FTC from using this guideline against
Native Essence or any other herb seller. The lawsuit also wants the
court to declare that Native Essence and all herb sellers are entitled
to use any information about herbs contained in any federal government
web site so long as the information is truthful, complete and not
The FTC has filed a
motion to dismiss the lawsuit, arguing that it never really intended to
sue the Hershisers and that they are not entitled to sue in federal
court because the issue is not “live,” so they must use the FTC’s
“This conduct is
outrageous,” Houston attorney Richard Jaffe, representing the Hershisers,
says of the FTC. “It’s a deceptive enforcement practice to threaten a
lawsuit unless the defendants sign an injunction, and then to say they
didn’t really mean it.” He points out that this is a civil issue, not a
criminal case for which prosecutors have a lot more leeway in their
Jaffe says that by
threatening a federal lawsuit in its initial letter to the Native
Essence owners, the FTC has made the issue of its own enforcement
tactics very much alive, along with the ongoing issue of First Amendment
Over the past decade,
Jaffe says, the U.S. Supreme Court has evolved its rulings on commercial
free speech to use the least restrictive standard possible. “Speech with
disclaimers is the first choice unless it is inherently misleading,” he
Do we really need to be
safeguarded from herb sellers wanting to quote the federal government’s
own information? Where was this same zeal to protect when unscrupulous
lenders were offering deceptive/unrealistic loans to would-be homeowners
whose eyes were far bigger than their pocketbooks?
Let’s hope the courts
finally put a leash on federal regulators who seem to be acting not out
of any concern for the public good, but to throw their weight around
just because no one has ever challenged them before.
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