Basic Research, LLC's Motion to Compel, Slides of Law

Download Basic Research, LLC's Motion to Compel and more Slides Law in PDF only on Docsity! UNITED STATES OF AMERICA BEFORE FEDERAL TRADE COMMISSION OFFICE OF ADMINISTRATIVE LAW JUDGES ". In the Matter of BASIC RESEARCH, L.L.C, A.G. WATERHOUSE, L.L.C., KLEIN-BECKER USA, L.L.C., NUTRASPORT, L.L.C., SOVAGE DERMALOGIC LABORATORIES, L.L.C., d/b/a BASIC RESEARCH, L.L.C., OLD BASIC RESEARCH, L.L.C., BASIC RESEARCH, A.G. WATERHOUSE, BAN, L.L.C., d/b/a KLEIN-BECKER USA, NUTRA SPORT, and SOVAGE DERMALOGIC LABORATORIES, DENNIS GAY, DANIEL B. MOWREY, d/b/a AMERICAN PHYTOTHERAPY RESEARCH LABORATORY, and MITCHELL K. FRIEDLANDER, Respondents. BASIC RESEARCH, LLC'S MOTION TO COMPEL Respondents Basic Research, LLC ("Basic Research" or "Respondent"), by and through undersigned counsel and pursuant to 16 C.F.R. 53.32 and 16 C.F.R. 53.38, seek an order compelling the Federal Trade Commission ("FTC") to provide answers or clearer answers to Basic Research's First Requests for Admission and in support state as follows: I. BACKGROUND On June 15,2004, the FTC filed an administrative complaint against Respondent alleging that certain of its dietary supplement advertising violated Sections 5 and 12 of the FTC Act (Complaint). According to the FTC's Complaint, the Commission (1) interpreted the challenged advertisements as making express and/or implied claims; (2) determined that Respondent DOCKET NO. 9318 represented that it relied and possessed a "reasonable basis" that substantiated those claims; and (3) asserted that Respondent did not rely upon or possess the "reasonable basis" it purported to .. . have. See, Complaint. The Complaint, however, failed to define key terms including what constituted a "reasonable basis".' diven the complaint's indefiniteness, Respondent filed a motion for a more definite statement on June 28, 2004.' ("Motion for More Definite Statement"). On July 8, 2004, Complaint Counsel filed an Opposition to the Motion for More Definite Statement ("Opposition") arguing that any ambiguity in the Complaint could be "remedied easily by discovery." See, Opposition, page 4. In support of its positions, Complaint Counsel cited several cases holding that notice pleading relies on liberal discovery rules to provide information not contained in the complaint. Id. at page 5, citing, Swierkiewicz v. Sorenia N.A., 534 U.S. 506, 512 (2002) ("notice pleading relies on liberal discovery rules ... to define disputed fact^").^ Following the logic of those cited cases, on July 20,2004, Administrative Law Judge D. Michael Chappell denied the Motion for More Definite Statement because any necessary clarification of the disputed terms "may be obtained during the normal course of discovery."4 See, ALJ's Order ' These subjective terms included "rapid," "substantial," "visibly obvious," and "causes." 2 On July 6,2004, Respondent Mitchell K. Friedlander filed a motion to dismiss asserting that the complaint was fatally defective in this regard. ' Complaint Counsel also cited Textil RVv. Italuomo, Inc., No. 92 Civ. 526, 1993 U.S. Dist. LEXIS 4663, at *6 (S.D.N.Y. Apr. 13, 1993) (more definite statement adds "little that discovery could not provide") andNew Balance and Athletic Shoe, Inc., No. 9268, 1994 F.T.C. LEXIS 213 (Oct. 20, 1994) ("discovery will add detail later':). . , On July 27, 2004, Respondents' filed a motion for an interlocutory appeal of the decision on the motion for more definite statement. Plaintiff Mitchell K. Friedlander also requested certification to the Commission on the question of whether the Commission has given fair notice of the legal standard as to which Respondents' conduct will be judged as it touched upon the Commission's administrative discretion. . .On August 17, 2004, Respondents' motion for interlocutory appeal and for certification were denied. Following the denial of these collective , . (continued.. .) . , 2 ' ,. r , DOCKET NO. 9318 11. ARGUMENT A. Complaint Counsel Must Provide Better and Clearer Responses To Respondent's First Set Requests for Admission ., . The core of the FTC's Complaint against Respondent focuses on (1) the interpretation of the challenged advertisements; (2) the level of substantiation necessary to support the claims made therein; and (3) why Respondent's substantiation allegedly fell short. Respondent has a right to conduct meaningful discovery on these issues and attempt to narrow issues in controversy as well as to flesh out the bare bones of the FTC's notice pleading. See, 16 C.F.R. 83.35; Complaint Counsel's Opposition to Motion for More Definite Statement; and ALJ's Order, dated July 20, 2004. However, as the following discussion demonstrates, Complaint Counsel has failed to provide meaningful responses to Respondent's Request for Admissions. B. The FTC Provides Evasive Answers and Improper Objections to Respondents' Specific Requests In response to the Respondent's Requests for Admission, the FTC provided evasive and incomplete responses as more specifically discussed below. For the reasons addressed, because Respondent's Requests constitute legitimate discovery, the FTC should be required to provide better, more complete responses. a. Requests for Admission 8 and 9 Requests 8 and 9 respectively requested the FTC to admit that the terms "rapid" and "substantial" could "mean different things to different reasonable consumers". In response, the FTC refused to answer arguing that a party may be held liable for violation where only one of several possible reasonable readings of an advertisement are deceptive. I11 the Matter of American Home Products Corp., 98 F.T.C. 136 (1981). Of course, the Commission provided no insight into which particular definitions of "rapid" and "substantial" are in play in its case. DOCKET NO. 9318 Moreover, the Request fundamentally seeks different information. The Admission seeks the obvious; that the words "rapid" and "substantial", like the words quick or best, do not denote any .. . particular measurement and are therefore capable of meaning different things to different people. The relevancy of these admissions is self-apparent. Immeasurable terms do not require substantiation. In the Matter of Bristol-Meyers, 102 F.T.C. 21, 321 (1983); In the Matter of Sterling Dmg, Inc., 102 F.T.C. 395, 749 (1983), affd, 741 F.2d 1146 (9th Cir.1984). cert. denied, 470 US. 1084 (1985). Therefore, unless the Commission is able to prove that the net impression of the challenged ads communicated a yet to be defined level of definiteness, there would be no need for a "reasonable basis" in this case. Requests 8 and 9 directly address the inherent lack of definiteness associated with the tenns rapid and substantial and the Commission should be compelled to admit the obvious, that is, that the words rapid and substantial lack singular meaning and are indefinite in the absence of further definition. The Commission cannot seriously contend otherwise. In its Seventh Interrogatory, the Commission requested certain information relating to companies in which the individual Respondents were "significant" shareholders. In parentheses immediately following the word "significant," Complaint Counsel indicated that "significant" meant greater than 25%' of ownership. Without this clarification, as the Commission apparently recognized, the word "significant" had no particular meaning and Respondents would have been left speculating as to their contextual meaning which is, of course, the very position the I Respondents are currently in with respect to the Commission's use of the words "substantial" . . and "rapid" in its Complaint. There is no meaningful difference in clarity between the word "significant" and the words "substantial" and "rapid." To be understood in a particular context, these three words need additional definition otherwise they are immeasurable and cannot be DOCKET NO. 9318 relied on to denote any particular message. The Commission recognized the certainty of this uncertainty at least with respect to the word "significant." How can the Commission sincerely .. . argue otherwise with respect to the words "rapid" and "substantial"? Whether "rapid" and "substantial" have one of several meanings that can support an FTC prosecution of the Respondents is not the point. Requests 8 and 9 seek a concession that the FTC has already unknowingly made in this case and Complaint Counsel's continued refusal to acknowledge that the words "rapid" and "substantial," are, on their face, capable of meaning different things to different people is purely sophomoric. Complaint Counsel simply wants to protect their litigation position by denying the obvious. Accordingly, Complaint Counsel should be compelled to answer Requests 8 and 9. The FTC objections are thus without merit and this Court should require a response. b. Request for Admission no. 22,23 and 24 Request for Admission 22 seeks an admission that the "Federal Trade Commission defines, in each case, the substantiation needed to constitute a reasonable basis for the Challenged Advertising". The FTC has refused to provide even qualified response. Instead, it has asserted that the request was irrelevant and did not "seek an admission of the truth of any matters relevant to the pending proceeding". The Commission further objected asserting that the request sought "an admission as to a matter of law". But Complaint Counsel's objections are unfounded and do not justify the failure to answer. The question of whether the Federal Trade Commission, some other body or so called independent experts determined the standard of substantiation that the FTC seeks to impose against the Respondent is relevant so that Respondent can know how to prepare its defenses. Respondent's Request seeks to narrow the scope of trial by clarifying who determined the standard applied against the Challenged I I DOCKET NO. 9318 1 violation of s.5 and s.12 of the FTC Act. Both defenses are legitimate and have been raised previously in other actions. The law is clear that "the Commission's reason to believe . . determination may be reviewed for abuse of discretion or in extraordinary circumstance^."^ In re Hoechst Marion Roussel, Inc., 2000 WL 33944047 F.T.C. (Sept. 14,2000). See also Standard i Oil Co. of Cal. v. FTC, 596 F.2d 1381, 1386 (gth Cir. 1979) rev'd on other grounds 449 U.S. 232 (1980) (court found that issue of whether the Commission in fact made a determination that there was a reason to believe a violation of law had occurred was subject to review). Similarly, the Commission's supposed determination that this proceeding is in the public interest can be reviewed in "extraordinary circumstances." In re Brake Guard Products, Inc., 125 F.T.C. 138, 247 (1998). Respondents have attempted through discovery to develop these defenses and confirm that other factors including Congressional agendas may have in fact been the driving force to proceed against Respondents. Requests 25 and 26 specifically seek to uncover facts concerning coordination of the filing of the Complaint with Congress and requests by Congress to delay filing the Complaint. The requests pertain to Congressional or other influence on the timing and filing of the FTC Complaint. Accordingly they relate to facts at issue in this case and are accordingly discoverable. The FTC also objected ofi the basis that Request 25 was vague as to the term "coordinated" and with respect to Request 26 vague as to the term "Congressional In FTC v. Standard Oil Co. of Cal., 449 US. 232 (1980), the Supreme Court held that the Commission's denial of the respondent's motion to dismiss the conlplaint on grounds that the Commission had not made a determination on the issue of "reason to believe" was not a final ruling and that, therefore, the respondent had not exhausted its administrative remedies and could not collaterally attack the FTC proceeding. Id. at 245. As discussed below, the Supreme Court went on to make it clear that the respondent was entitled to raise, in the FTC proceeding, the issue of whether the Commission had complied with the statutory requirement that the Commission make a determination as to whether there was a reason to believe a violation of law had occurred. Id. Respondents are following this procedure. DOCKET NO. 9318 representatives". That these objections were without merit or substance was confirmed in discussion between respective counsels. When Counsel for the Respondents suggested .. . furnishing fiuther definition as to the terms at issue, the FTC clarified that those terms were not the heart of the objection and that the FTC would still refuse to respond should additional definitions be provided. Because the objections of the FTC are insubstantial and improper, this Court should require the FTC to furnish an appropriate response. d. Requests 27,28,29 and 34 Requests 27, 28 and 29 seek clarification concerning an episode that, ironically, underscores the major themes in this case. The Requests seek confirmation that J. Howard Beales, I11 was not in fact a medical doctor but was referred to as Dr. in the Hearing before Congress on June 16, 2004 ("Hearing"). Request 27 asks for confirmation that Beales was not a medical doctor. Request 28 seeks confirmation that Beales was referred to as Dr. during the Hearing and Request 29 asks for confirmation that Beales did not correct anyone as to his title. For each Request, the FTC objected on the basis of relevance. This Court is well aware that one of the major issues in this case surrounds one allegation of what the FTC considers deceptive advertising, i.e. Dr. Daniel B. Mowrey's, a Ph.D in Psychology, use of the title "Dr." in advertising. These Requests for Admission focus on the circumstances of when a Ph.D may refer to himself as Dr. by reference to specific instances of what the FTC contends constitutes deception in advertising concerning the use of the honorific title "Dr.". Thus the Requests are related to both the FTC's allegations and, more generally, the application of the FTC's regulatory scheme to a particular sort of claim. With respect to Request for Admission 34, asking that the FTC confirm there is no rule that prohibits a Ph.D from referring to himself or herself as a Dr., Complaint Counsel has agreed DOCKET NO. 9318 to supplement its response but has yet to do so. Respondent therefore requests that the Complaint Counsel be ordered to Respond in order to reserve its right to compel a l l l e r response if necessary pending supplementation. e. Request 38 and 39 Requests 38 and 39 seek confirmation that the FTC has failed to define "competent and reliable substantial evidence" as requiring specific kinds, types, amounts of scientific studies or testing or research protocols or controls. In response to the Requests, the FTC raised objections as to relevance and asserted that the requests sought admission of a matter of law. The answer than admitted both Requests "to the extent that the Federal Trade Commission has defined "competent and reliable scientific evidence" in a proposed Order attached to the Complaint." Furthermore, when asked for clarification none was forthcoming. Given the issues currently in litigation, factual detail concerning the FTC's implementation of its substantiation is relevant to both the specific charges against Respondent as well as their defenses. Respondent is entitled to the source and scope of the standards against which its ads are being judged. These Requests properly further that legitimate objective by seeking a definitive statement for purposes of this litigation as to whether the FTC would seek to judge their ads against a firm and fixed standard of scientific testing. Most significantly, the limited "admission" the FTC made is not an admission related to the matter posed by the Requests. Conzmission Rule of Practice 3,32(b)(requiring that the answer be "addressed to the matter" raised in the request). ~ n d in fact the answer is ambiguous because at one and the same time it appears as both an admission, albeit . . an unclear one, but also a denial. DOCKET NO. 9318 CERTIFICATION FOR ELECTRONIC PILING I HEREBY CERTIFY that the electronic version of the foregoing is a true and correct copy ofthe original document being filed this same day of 'dd ~.y';in, JW! %"; 2004 via Federal Express with the Office of the Secretary, Room 1-1-159, Federal Trade Commission, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. I:\basic research\Hc\pleadings\rnotion to compel responses to rfa.doc UNITED STATES OF AMXRICA BEFORE EEDERAL TRADE COMMISSION ORRICE OF ADMWISTRATlVE LAW JUDGES 1 In the Matter of ) BASIC RESEARCH, L.L.C, A.G. WATERI3OUSE, L.L.C., 1 ISLEIN-BECKER USA, L.L.C., 1 NUTRASPORT, L.L.c:, 1 SOVAGE DERMALOGIC LABOMTORIES, L.L.C., d/b/a BASIC R E S E A ~ H , L.L.C., OLD BASIC RESEARCII, L.L.C., BASIC RESEARCH, A.G: WATERHOUSE, 1 BAN, L.L.C., 1 DOCKET NO. 9318 d/b/a KLEIN-BECKER USA, NUTRA SPORT, and ) SOVAGE DERMALOGIC LABOMTORIES, 1 DENNIS GAY, 1 DAMEL B. MOWREY, 1 dh/a AMERICAN PI-IYTOTHERAPY RESEARCH ) LABORATORY, and 1 MITCHELL K. FRIEDLANDER ) ', Respondents. j \ BASIC RESEARCH, LLC'S FIRST REOUEST FOR ADMISSIONS Respondent, Basic Research, LLC, by and through its undersigned counsel and pursuant to 16 CFR $3.32 hereby requests that tbe Federal Trade Commission admit the following within jifteen (15) days of service hereof 1. "Comnlission" or "FTC" slAl mean the Federal Trade Commission, its employees, agents, attorneys, consultants, representatives, officers, and all other persons acting or purporting to act on its behalf Docket No. 931 8 3. Admit that the Federal Trade Colmnission bas not conducted consumer sweys or other research relating to what types of substantiation reasonable consumers would expect the Respondents to possess in order to ]lave a reasonable basis for die Challenged Claim in the Challenged Advertisements. 4. Admit that at the time lhe Complaint was filed, the Federal Trade Cormnission had no expert opinion as to what express andor implied claim were made in lhe Challenged Advertisements. 5. Admit tllai at the time the Complaint was me4 the Federal Trade Co~nmission had no expert opinion that Respondents lacked a "reasonable basis" f o ~ the Challenged Advertisements. 6. Adinit that at the t h e the Complaint was filed, the Federal Trade Commission had no expert opinion to support the allegations in paragraphs 24, 26, 32, and 41 of the Complaint. 7. Admit that the interpretation of Challenged Advertisements used to support the filing of the Complaint was performed by Staff Counsel for the Federal Trade Commission. 8. Admit that the term "Rapid" can mean different things to different reasonable consumers. 9. Admit that the term "Substantial" can mean different things to different reasonable consumers. 10. Admit that at the time the Challenged Advertisements were published, the Federal Trade Commission had no prescreening protocol for the approval of the Challenged Advertisements. Docket No. 93 18 11. Admit that at the h e the Challenged Advertisements were published, the Federal Trade Commission had no pre-s,creening protocol for dete&ling the adequacy of the substantiation supporting the claims made in the Challenged Advertisements. 12. Adinit that the Federal Trade Commissioii will not give advertisers definitive answers on t l ~ adequacy of their claim substantiation before advertisements are dissemiuated. 13. Admit that 16 C.F.R. 51.1 does not provide a pre-screening protocol for advertisers to receive approval of theu advertising. 14. Admit that advice provided by the Federal Trade Commission under 16 C.F.R 51.1 is not binding on the Federal Trade Commission. 15. Admit that the Federal Trade Commission is under no obligation to issue warning letters if it changes its position regarding advice previously provided under 16 C.PR $1.1. 16. Admit that in 2000, the Federal Trade Commission received a petition to adopt a rule forthe pre-screening of dietary supplement advertisements. 17. Admit that in 2000, the Federal Trade Commission denied a petition to adopt a rule for the pre-screening of dietary supplement advertisements. 18. Admit that in 2000, the Federal Trade Commission denied a petition to adopt a rule for pre-screening of dietary supplement advertisements because it was inlpracticable. 19. Admit that the Federal Trade Commission, at one time, had a pre-screening protocol for approving advertisements piior to dissemination. 20. Admit that the Federal Trade Commission abolished its pre-screening protocol for approving adveitisements prior to dissemination. 21. Admit that the Federal Trade Commission would pre-screen Respondents' advertisements in the event that a cease and desist order is issued against them. 5 Docket No. 93 18 22. Admit that the Federal Trade C o n ~ s s i o u defines, in each case, the substantiation needed to constitute a reasouable basis for the Challenged Adverlising. 23. Admit t l ~ t iu the case of specific establislvnent claims, the only substantiation required of the adveltiser is the substantiation specifically refemced by the advertiser in the advertisement. 24. Admit tllat what constitutes a "reasonable basis" clmuges &om case to case. 25. Admit that the Federal Trade Commission coordinated fhe sing of the Complaint with the Congressional hearings held on June 16, 2004 before the Committee on Energy and Commerce, Subcommittee on Oversight and Investigations, United States House of Representatives ("the Hearings"). 26. Adnit that the Federal Trade Commission was asked by Congressional representatives to delay f h g of the Complaint until the colnmencement of the Hearings. 27. Admit that J. Howard BeaIes III is not a medical doctor. 28. Admit that at the Hearings J. Howard Beales III was addressed as '731. Beales." 29. Admit that at the Hearings, when addressed as "Dr. Beales," Dr. BeaIes did not correct any member of Congress that lie was not a medical doctor. 30. Admit &it Dr. Wexler is not a medical doctor. 31. Admit that the Federal Trade Commission deems Dr. Wexler to be an expelt on child obesity. 32. Admit that at the Hearings Dr. Wexler was addressed as "Dr. Wexler." 33. Admit that at the Hearings, when addressed as "Dr. Wexler," Dr. Wexler did not correct any member of Congess that he was not a medical doctor. Docket No. 9318 I IBREBY CERTIFY h t a true and conect copy of ?he foregoing was provided to the following pariies this q" day of September, 2004 as follows: (1) One (1) copy via e-mail attachment in dob be' ".pdf' format to Cornmission Complaint Counsel, Laween Kapin, Joshua S. Millard, and Laura Schueider, all care of Ikapi&fic.~ov, imillardti?fto.eov; Irichardson(iilStc.rrov; lschneider~,ftc.rov with one (1) paper coutesy copy via U. S. Postal Service to Laurem Kapin, Bureau of Consumer Protection, Federal Trade Commission, Suite NJ-2122, 600 Pennsylvania Avenue, N.W., Washington, D.C., 20580; (2) One (1) copy via United States Postal Service to Stephen Nagin, Esq., Nagin Gallop & Figueredo, 3225 Aviation Avenue, Suite 301, Miami, Florida 33131. ! (3) One (1) copy via United States Postal Service to Richard Burbidge, Esq., Jefferson W. Gross, Esq. and Andrew J. Dymek, Esq., Burbidge & Mitchell, 215 South State Street, Suite 920, Salt Lalce City, Utah 841 11, Counsel for Dennis Gay. (4) One (1) copy via United States Postal Service to Ronald F. Price, Esq., Peters Scofield Price, A Professional Corporation, 340 Broadway Centre, 11 1 East Broadway, Salt 1 I . Lake City, Utah 841 11, Counsel for Daniel B. Mowrey. I 1 I (5) One (1) copy via United States Postal Service to Mitchell K. Friedlander, 5742 West Harold Gatty Drive, Salt Lake City, Utah 84111,pro sc. UNITED STATES OF AMERICA BEFORE THE FEDERAL TRADE COMMISSION In the Matter of ) 1 BASIC RESEARCH, L.L.C., 1 A.G. WATERHOUSE, L.L.C., ) KLEIN-BECKER USA, L.L.C., 1 NUTRASPORT, L.L.C., 1 SOVAGE DERNLALOGIC 1 LABORATORIES, L.L.C., ) BAN, L.L.C., ) DENNIS GAY, 1 DANIEL B. MOWREY, and ) MITCHELL K FREDLANDER, 1 ) Respondents. 1 1 Docket No. 9318 PUBLIC DOCUMENT COMPLAINT COUNSEL'S RESPONSE TO BASIC RESEARCH LLC'S PIRST REQUEST FOR ADMISSIONS - Pursuant to Rule 3.32 of the Comnlission's Rules of Practice, Complaint Counsel seme . . . . ~ ,. ., , . . .. ~ ~ . . . ~ . . .: the following answers to Respondent Basic Research LLC's First Request For Admissions ("Respondent's Adnlissions"). Complaint Cou~sel's provisio~l of a respollse to ;u~y request for ad~nission shall not constit~te a waiver of any applicable objection, privilege, or other right. Where required in order to respoud to these Requests For Admissions, Cornplaint Counsel I-epresents that it has undertaken good faith efforts to identify the infomation that would allow it to admit or deny such requests. GENERAL OBJECTIONS I . Complaint Counsel object to Respondent's requests Tor ad~~~issions t the extent they fail to seek an admission ofthe tmth of matters relevant to the pendillg proceedings. Rule 3.32, Admissions. ! 5 . As used herein, " ~ e s ~ o n d e n t ' ~ requests for adnlission" shall mean the requests,for admission and all applicable instructions and definitions as set forth in Basic Research, LLC's First Request For ~d&sions. . - Reciuests For Admission and Responses 1. Admit that the Federal Trade Commission bas no1 conducted ally studies regarding the Efficacy of the Challenged Products. Response: Conlplaint Counsel objects to this request because it does not seek "an admission of the truth of any matters relevant to the pending proceeding." R. 3.32, Admissions. Complaint Coui~sel admit that they have not conducted any studies regardingthe Efficacy of the Challenged Products. . .. 2. Admit that the Federal Trade Commission has not conducted consumer surveys or other research relating to how reasouable consumers would interpret or understand the Challenged Advertisenlents. Response: Complaiiit Counsel objects to this request because it does not seek "an admission of the truth of any matters relevant to the pending proceeding." R. 3.32, Admissions. Complaint . : .. . . . . . Counsel objects to this request as vague and overbroad as it pertains to "other research." . . . . ~ . . Complaint Counsel fxuther objects to this request because it seeks premature disclosure of Complaint Counsel's expert discovery contrary lo the tinling established in the Court's . . Scheduling Order and disclosure of information from Complaint Counsel's non-testifying witness[es] whicli is pmtected from disclosure under the work product doctrine. Subject to and without waiving these objections, Complaint Counsel admits this req~lest o tlle extent that they . : have not, as of this date, conducted "consunler surveys" relating to %ow reasonable consumers . . :~:. . ~ . : . .: Wo~dd interpret or understand the Challenged Advertisenlents" and denies this request as to "other research." 3. Admit that the Federal Trade Commission has not conducted consumer surveys or other research relating to what types of substantiation reasonable consumers would expect the Respondents to possess in order to have a reasonable basis for the Challenged Claims Response: Complainl Counsel objects to tlis request because it does not seek "a11 admission of the truth of any matters relevaut to the pending proceeding." R. 3.32, Admissio~~s. Complaint , Counsel objects to this request as vague and overbroad as it pertains "other research." Complaint C,ounsel iitrther objects to this request because it seeks premature disclosure of Complaint Counsel's expert discovery contrary to the timing established in the court's Scheduling Order. and disclosure of inf6rrnation from Complaint Counsel's non-testifying witness[es] whicli is protected from disclosure under the work product doct~ine. Subject to and without waiving these objections, Complaint Counsel admits this request to the extent that they have not, as of this date, conducted "consumer surveys" relating to "what types o i substantiation reasonable consumers would expect the Respondents to possess in order to have a reasonable basis for the Cballei~ged Claims in the Challenged Advertisenlents" and denies thus request as to "other research." 4. Admit that at the time the Complaint was iiled, the Federal Trade Commission had no expert opinion as to what express andlor implied claims were made in the Challenged ~dvertisements. : ,. Response: Complaint Counsel objects to this request becanse it does not seek "an adnlission of tbe truth of any matters relevant to the pending proceeding." R. 3.32, Admissions. Complaint Counsel further objects to ihis request because it seelcs premature disclosure of Complaint Counsel's expert discovery contrxy to the tilning established in the Co~lrt's Scheduling Order and disclosure of information from Coinplaint Counsel's non-testifying witness[es] w11ich is protected from disclosure under the worlc product doctrine. Subject to and without waiving these objections, Con~plaint Counsel denies. 5 . Admit that at the time the Complaint was filed, the Federal Trade Cornn~ission had no expert opinion that Respondel~ts lacked a "reasonable basis" for the Challenged . . ~ .. . . ~ . . ~ . . . . Advertisements. Response: Complaint Counsel objects to this request because it does not see1c''an admission of the trut11 of any matters relevant to the pending proceeding." R. 3.32, Admissions Coinplaint Counsel fiuther objects to this request because it seeks premature disclosure of Complaint Counsel's expert discovery contrary to t11e timing established in the Court's , . . . . Scheduling Order and disclosure of infornation fiom Coinplaint Counsel's non-testifying . . . . & . . witness[es] wllicll is protected from disclosure q d e r the worlc product doctrine. Subject to and without waiving these objections, Conlplaint Counsel denies. 6 . Admit that at the time the Colnplaint was filed, the Federal Trade Coininission had no expert opinion to support the allegations in paragraplls 24,26,32, and 41 of the Coinplaint. Response: Complaint Counsel objects to this request because it does not seek "a11 admission ofthe truth of any matiers relevml to the pending proceeding." R. 3.32, Admissions. Complaint Counsel Curlher obiects to this request because it seeks premature disclosure of ~om&int Counsel's expert discovery contrary to the timing estabiish~d in the Court's Schedulinlg Order and disclosure of information fiom Con~plaint Counsel's non-testifying witness[es] which is protected from disclosure under the work product doctrine. ~ubject io and without waiving these objectioi~s,'Coi~~plai~~t Counsel denies. course of action talcen pursuant to the Conunission's advice. The Commission will not proceed against the requesting party with respect to any action taken in good faith reliance up011 the Comnission's.advice under this section, where all the relevant facts were fully, completely, and acc~rrately-lfrese~~ted to the Commission and where such action was promptly discontinued up011 notification of rescission or revocation of the Conunission's approval." 15. Admit that the Federal Trade Conunission is under no obligation to issue wanling letters if it changes its position regarding advice previously provided under 16 C.F.R. S: I. 1. Response: Complaint Counsel objects to this request because it does not seek "an admission of the truth of any matters relevant to the' pending proceeding." R. 3.32, Admissions. Complaint Cou~~sel also objects to this request as vague as it fails to deilne ''warning letters" and 'rchanges its position." Subject to and without waiving these objections, Complaint Counsel asserts that the text of 16 C.F.R. 5 1.1 spealcs for itself and that the regulatory framework , governing Advisory Opinions cannot properly be understood except by reference to the f~mIew0rk as a whole which includes not only but 81.1 but $5 1.2-1.4. Conlplaint Counsel notes that the text of 5 5 1.3(b) and (c) provide that the Commission may reconsider, rescind, or revoke advice given by the Conmission or its staff. Section 1.3(b) goes on to provide that "Notice of such rescission or revocation will be given to the requesting party so that he may discontinue the-:: course of action taken pursuant to the Co~nmission's advice. The Commission will not proceed ; ... against the requesting party wit11 respect to any action taken in good faithreliance upon the . . . - - . . . ~ . . Conmlission's advice under this section, where all the relevant facts were fully, con~pletely, and , . ,~~ ~ accurately presented to the Commissiol~ and where such action was prolnptly discontilued upon - , .-. ' - - . notification of rescission or revocation of the Conin~ission's approval." 16. Admit that ir? 2000, the Federal Trade Commission received z petition to adopt a rule for the pre-screening of dietary supplement advertisementsts. Response: Con~plaint Counsel objects to this request because it does not seek "an admission of the tnith of any matters relevant to the pending proceeding." R. 3.32, Admissions. Complaint Counsel further objects to this request as vague as to "pre-screening." Complaint Counsel had sought clarification of this term from Respondent's Counsel but failed to receive a response. Snbject to and without waiving these objections, Complaint Counsel admits this request to the extent that the Federal Trade Commission received a Petition for Rulemalcing in 2000 from Jonathan W. Emord, Esq. which is attached and speaks for itself. 17. Admit that in 2000, the Federal Trade Conunission denied a petition to adopt a mle for the pre-screening of dietary supplement advertisements. . . Response: Complaint Counsel ob,jects to this request lkcause it does not seek "an adnlission o r the tn1111 of any matters relevant to the pending proceediig." R. 3.32, Admissions. Con~plaint Counsel further objects to this request as vague as to "pre-screening" Coinphint Counsel had sought clanilcation of this ten1 k o n ~ Respondent's Counsel but failed io receive a 'I ! response. Subject to and without waiving these objections, Conlplaint Counsel admits this recluest to the extent that the Federal Trade Conmission denied a Petition for ~ulen~alcillg in 2000 from.Jonathan W. Emord, Esq. and the letter denying the Petition was previously produced to Respondents but is also attached and speaks ior itself. ,. . 18. Admit lhal in 2000, the Federal Trade Conunissioll denied a petition to adopt a rule for the pre-screening of dietary supplement advel-tise~nents because it was iinpracticable. Response: Complaint Coul~sel objects to illis request because it does not seek ''an admission of the truth of any matters relevant to the pending proceeding." R. 3.32, Admissions. Complaint Counsel furlher objects to this request as vague as to "pre-screening." Complaint Counsel had souelit clarification ofthis term from Respondent's Counsel but failed lo receive a - response. Subject to and without waiving these objections, Complaint Counsel admits this recluest to the extent that the ~ederal Trade Cornmissioll denied a Petition lor Ruleinalcing in 2000 from Jonatl~an W. Einord, Esq. and that ihe bases for the Federal Trade Corrnnission's denial cannot properly be understood except by reference to the letter denying the petition as a whole. The letter denying ibe Petition was previously produced to Respondents but is also attached and speaks for itself. 19. Admit that the Federal Trade Comnission, at one time, haa a pre-screening protocol for approving advertisements prior to dissemination. . . ~ . .. . -. . . . . .. .~~ . Response: Complaint Counsel objects to this request because it does not seek ",an ~ ' adinission of the truth of any matters relevant to the pending proceeding." R. 3.32, Admissions. Complaint Counsel fiulher objects to this request as vague as to "at one time" and "pre-screening . : .. ~ protocoi." Complaint Counsel had sought clarification of this term fiom Respondent's Counsel.: .;.. I . ~ . but failed to receive a response. Subject to and without waiving these objections, Complaint Counsel denies this ~ e ~ b e s t to the extent that the coinpliance ordel- procedwes, allowing "any respondent to request advice froin the c om kiss ion as to whether a proposed course of action, if pursued by it, will constitute conlpli~ce" with a Comnission Order, see 16 C.P.R. $2.41 (d), constitute a "pre-screening protocol." Complaint Counsel also denies this. request to the extent that the use of the plvase "at one time" suggests that the procedure set forth in 82.41 (d) is no longer in place. Complaint Counsel lacks sufficient information to either admit or deny the remainder of this request. 20. Admit tlml the Federal Trade Conl~nission abolished its pre-scree~li~lg protocol for approving adve~tisements prior to dissemination. Response: Complaint Counsel objects to this request because it does not seek "an admission of the truth of any matters relevant to the pending proceeding." R. 3.32, Admissions. Complaint Counsel further objects to this request as vague as to "pre-screening protocol." Complaint Cou~lsel had sought clarification of this term from Respondent's Counsel but failed to receive a response. Subject to and without waiving these objections, Complaint Counsel denies this Request to the extent that the comnpliauce order procedures, allowing "any respondent to reqnest advice from the Conmlission as to whether a proposed course of action, if p~~rsued by it, will constitute compliance" with a omm mission Order, see 16 C.F.R. 52.41 (d), constitute a "pre- screening protocol." Complaint Counsel also denies this request to the extent that the use of the phrase "abolisl~ed" suggests that the procedure set forth in $2.41 (d) is no longer in place. Complaint Counsel lacks sufficient information to either admit or deny the remainder of this request. 21. Admit that the Federal Trade Commission would pre-screen Respondents' adveriisements in the event that a cease and desist order is issued against them. Response: Complaint Counsel objects to tlis request because it does not seek "an ~ ~~ ~ . . . admission 01 the hvlh of any matters relevant to the pending proceeding." R. 3.32, Admissions.. .~ ~ ~ . . . Complaint Counsel further objects to tlis request as vague as to "pre-screening." Complaint Counsel had sought clarification of this t em~ from Respondent's Counsel but failed to receive response. Subject to and without waiving these objections, Complaint Counsel admits this Request to the extent that the compliance order procedures; allowing "any respondent to request . . . - . . . - - - . - advice from the Commission as to whetim a proposed course of sction, if pursned by it, will . . constitute compliance" with a Conlnlission Order, 16 C.F.R. $2.41 (d), constitute "pre- screen[ingJn Complaint Counsel denies this Request to the extent that $2.41 (d) provides that such requests for advice are inappropriate under certain circ~nnstances. 22. Admit that the Federal Trade Commission defines, in each case, the substantiation needed to constitute a reasonable basis for the Challenged Adveitising. Response: Complaint Counsel objects to this request to the because it does not seek "an admission of the tmth of any matters relevant to the pending proceeding." R. 3.32, Admissions. Complaint Counsel further objects to this request because it seeks an admission as to a matter of law and hence is not aproper request. 23. Admit that in the case of specific establisluuent claim, the only substantiation required of the adveriiser is the substantiation specifically reI:erenced by the advertiser in the advertisement. 35. Admjt that llle conclusion that Respondents did not possess or rely upon a reasonable basis that substanthted the accused adverlising is prelnised upon the Respondents not having a specific type and amount of substantiation for its claims. Response: Complaint Counsel objects to this request as vague as to "specific type and amount." Complaint C o ~ u ~ e l further objects to this request because it seeks premature disclosure of Complaint Counsel's expert discovely contrary to the timing established in the Court's Scheduling Order and disclosure of information from Complaint Counsel's non- testifying wihless[es] wl~iich is protected from disclosure under the work product doctrine. ;. Snbject to and without waiving these objections, Complaint Counsel admits this Request to the extent that Complaint Counsel contends that its allegations tliat respondents didnot possess and rely upon a reasonable basis that substantiated the claims challengedin the Complaint will be proven at trial. Conlplaint Counsel's allegations are premised upon a review of Respondents' advertising of the Challenged Products and the substantiation proffered by Respondents to support the claims challenged in the Complaint. Complaint Counsel contends that the substantiation proffered does not constitute competent and reliable scientific evidence for the claims challenged in t 1 ~ Conlplaint. 36. Admit that the Federal Trade Commission's authority is limited to determining whether the representations made in the Challenged Advertisements are in accord with the level of substantiation Respondent's possessed. Response: Complaint Counsel objects to this request as vague, ambiguous and overbroad regarding the "Federal Trade Conunission's authority." Conlplaini Counsel further objects to this request because it seelts an admission as to a matter of law and hence is not a proper request and exceeds the scope of Rule 2.32 Admissions. Subject io and without waiving these objections, Con~plaint Co~lnsel admits this request to the extent that Complaint Counsel contends that one of the issues for trial will be whether Respondents' had a reasonable basis for malung the claims challenged in the Conlplaint before the claims were disseminated. 37. Admit that it is the Federal Trade Conmission's position that "comietent and reliable scientific evidence" can mean different types and amounts o f evidence in different cases. Response: Conlplaint Counsel objects to this request to the because it does not seek "an admission ofthe truth of any matters relevant to the pending proceeding." R. 3.32, Admissions. Complaint Counsel further objects to this request because it seeks an admission as to a matter of law and hence is not a proper request and exceeds the scope of ~ u l e 3.32 Admissions. Subject to and without waiving this objection, Complaint Counsel admits this request to the extent that what constitutes competent and reliable scientific evidence may valy depending upon a number of factors including tbe trpe of product, the type of claim being made, and tbe particular field of science involved based upon the claims and the product. 38. Admit that the Federal Trade Commission has not defined "comnpetent and reliable scientific evidence" to require any specific lcinds, types or anlounts of scientific studies. Response: Complaint Counsel objects to this request to th~.because it does not seek "an admission of the truth of any matters relevant to the pending proceeding." R. 3.32, Admissions. Coinplaint Counsel further objects to this request because it seelcs an admission as to .a matter of law and hence is not aproper request and exceeds the scope oER~1le 3.32 Admissions. Subject lo and without waiving this o'l?iection, ~ o r n ~ l a i k Counsel admits this request to the extent that the Federal Trade Commission has defined "competent and reliable scientific evidence" in the Order attached to its Coinplaint as "tests, analyses, research, studies, or otlw evidence based on the expertise of professionals in the relevant area, that has been conducted and evaluated in an objective manner by persons qualified to do so, using procedures generally accepted in the profession to yield accurate and reliable results." 39. Admit that the Federal Trade Commission has not defined "competcnt and reliable scientific evidence" to require any specific testing or research protocol or controls. Response: Complaint counsel objects to this request to the because it does not seelc "an admission of the truth of any matters relevant to the pending proceeding." R. 3.32, Admissions. - - - - - . - - - -. . Conlplaint Connsel f~lrtl~er objects to this request because it seeks an admission as to a matter of law and hence is not a proper request and exceeds the scope of Rule 3.32 Admissions. Subject to; - - - - - ~ .. and without waiving this objection, Complaint Couns.el admits this request to tlle extent that the. ' Federal Trade Commission has defined "competent and reliable scientific evidence" in the Order attached to its Con~plaini as "tests, analyses, research, skdies, or other evidence based on the expertise of professionals in h e relevant area, that has been conducted and evaluated in an objective manner by persans qualified to d~ so, nsing pracedures generally cccepted in the . .. pi:ofession to yield accul-ate and reliable results." 40. Admit that the Federal Trade Coinmission's position is illat the state of the science renders all the representations made in the Challenged Advertisen~enis unsupporled. Response: Complaint Counsel objects to this request as vague as to "the state of the science" and overbroad as to "all the representations." Coinplaint Counsel flirther objects to this request because it seeks premature disclosure of Complaint Counsel's expert discovery contrary' to the timing established in the Court's Scheduling Order and disclosure of infonllation fi-om Coinplaiut Counsel's non-testifying witness[es] wllic11 is protected from disclos~ue under the work product doctrine. ! 41. Admit that it is the Federal Trade Conlmission's position tlmt clailns about the Safety and Efficacy of dietary supplements ~ I , L I S ~ be substiniiated by competent and reliable skentific evidence. . - ., . Response: Complaint Counsel objects to this request because it seeks an admission as to a matter of law and hence is not a proper request and exceeds the scope of Rule 3.32 Admissions. Subject to and without waiving these objections, Complaint Counsel admits this request to the extent that the Federal Trade Coinnlissioil typically requires claims about the efficacy or safety of dieiaj supple~nents to be supported with conlpetent and reliable scientific evidence. 42. Admit that it is the Federal Trade Commission's position that Respondents needed competent and reliable scientific evidence to substantiate the representations made in the Challenged Advertisements. Response: Complaint Counsel objects to tlus request because it seeks an admission as to a matter of law and hence is not a proper request and exceeds the scope of Rule 3.32 ~dinksions. Subject to and without waiving these objections, Complaint Counsel admits this request to the extent that it contends that Respondents needed competent and reliable scientific evidence to . . . support the claims regarding tbe Challenged Products alleged in its Complaint. , ' . . . . ........ ~. - . - . . . . . . . . . . . . . . . . . . . . . . . 43. Admit that the FTC Comnmissione~s have no formal training or expertise in . . . . . . . . . . . . advertising . interpretation. . . . Response: Complaint Counsel objects to this request to the because it does not seek "an admission of the truth of any matters relevant to the pending proceeding." R. 3.32, Admissions. . . ~. Comglaint Counsel further cbjects tc this reqcest because it seeks an admission as to a matter of - - . . ~ law and hence is not aproper request and exceeds the scope of Rule 3.32 Admissions. 44. Admit that the FTC Commissioners are not given any formal training in advertising interpretation prior to being co~nmissioned. Response: Complaint Counsel objects to this request to the because it does not seek "an adinission of the truth of any matters relevant to the pending proceeding." R. 3.32, Admissions. Complaint Counsel fi~iiher objects to this request because it seeks an admission as to a matter of law and hence is not a proper request and exceeds the scope of Rule 3.32 Admissions. 45. Adinit that the FTC Conlmissioners have no Sonnal training or expertise in the interpretation of science and/or medical studies. Response: Complaint Counsel objects to this request to the because it does not seek "an adinissioil ofthe tt-t~th or any matters relevant to the pending proceeding." R. 3.32, Admissions. ATTACHMENTS Before the FEDE- TRADE COMMISSION Washington, D.C. 20580 In Re: Petition for a Rule ) Requiring the Division of ) Enforcement, Bureau of ) Docket NO. Consumer Protection to 1 Abide by the Strictures 1 of the First Amendment 1 in Enforcing the FTCA 1 PETITION FOR RULEMAKING The First Amendment Health Freedom Association("Association"), an industry association comprised of corporate, sole proprietor, and consumer members, by counsel and , ,... : ,. . , ,. ,~ ., . , . .. ,: pursuant to 16 C.F.R. 5 1.9 and Section 18 of the Federal Trade Commission Act ("FTCA"), 15 , . , ~ ,... . ~ . . ~ U.S.C. $ 5j(a)(l)(~), hereby petitiofl the Federal ~ r a d e Commission-("FTC" or "Commission"). - . . - to reformat theearliest possible mdrnent those enforcement practices and procedures identified . ~ . . .. .~~ herein, used in nonp;blic investigations of health benefit advertisers,' that violate the F a t . ..... . . Amendment. This petitbn calls for reform the way FTC communicates with and acts toward, the subjects of access letters and civil investigative demands. FTC staff habitually fail, at the outset and throughout nonpublic investigations of health benefit advertising, to fulfill th& First Amendment duty of informing the subjectsof ' investig&ion of precisely which speech they sdspect is inherently misleading (and, thus, not protected by the First Amendment) and which they suspect is (at worst) only potentially .. misleading (and, thus, by the First Amendment) and which they suspect does not mislead at all (and,,th&, is also protected by the First Amendment). That failure engenders a brbad chilling effect'on protected speechbecause without knowledge of precisely which ad ,. . content FTC suspects is inherently misleading (and, thus, unprotected by the First Amendment), advertisers questionecl tend to favor overbroad self-censorship in order to reduce the risk of ' adverse FTC action. FTC staff habitually fail in resolution of cases (short of trials or hearings on the merits) to informsubjects of nonpublic investigations not only of the precise content they deem inherently misleading but also of the precise scientific grounds they have for suspecting that content is not backed by "competent and reliable scientific evidence." Those failures not only deprive subjects of the process due them in matters as sensitive as pvemment regulation of speech but also constitute an arbitrary and capricious agency practice in violation of the Administrative Procedure Act ("APA"). By not revealing their substantive reasom for suspecting that specific health benefit advertising content lacks supporting competent and . reliable ~ . . . ~ scientific evidence, the .. -:: , . . ~... .. FTC staff fail to achieve that deg~ee of transparency necessary for the subject (and--upon public , . , .. .. , notice of a disposition of the case-all others) to discern precisely why it is that certain speech has been deemed deceptive by the FTC. The absence of that transparency makes it extremely difficult, if not impossible, for both the subject, and others similarly situated, to know with reasonable certainty what ad content on the same subject FTC will in future regard as deceptive, leading prudent advertisers to engage in broad self-censorship (of a categorical nature, e.g., dropping entire ads rather than reform& them in ways that may be unobjectionable to FTC). In particular, the petitioner calls upon the Commission (1) to reauire FTC staff before ". initiating a nonpublic investigation of health benefit advertin!! to ascertain from scientific i . . I experts the comaetence ~ ~ and reliabili* of that advertisin& J2) to require FTC staff in every I 1 I 1 Asused herein, the term "health benefit advertisers" ref&Io all whoadvertise that a food, dietary supplement, or drug conveys a health benefit. incumbent upon the Comkission to ensure that the tools it uses during nonpublic , investigations . , are carehlly and tailored to avoid undue burdens on the eiercise ofprotected speech . .. The ~efbnns the Petiti,oner urgs the Commission toadopt h e r d a r e bbvious, less speech . , , restrictive alternatives to currentpractices and procedures and'comport better with the public interest because they achieve FTC's objective of ridding the market of deception without sacrificing the advertiser's and the public's First Amendment rights (and the value of the free flow of accurate information). The Association and its members find the staffs penchant for commencing nonpublic investigations of health benefit advertisers without first obtaining the counsel of scientific experts as to whether the advertised benefits are backed by scientific evidence unconstitutional because such advance consultation is an obvious, less speech restrictive alternative to cment practices and procedures and may avoid or reduce the scope of burdens placed on advertisers and. .. .... - ::.- their speech. See Thompson~. Western States Medical Center, 122 S. Ct. 1497, 1506 (2002) -. - ~ (the Supreme Court explained that it has "in previous cases addressing. [the] final prong of the Central Hudson test, ,. . . made clear that if the ~overnmentcould achieve its interests in a manner that does not restrict speech, or that restricts less speech, the Government must do so'?). The ~ssocktion wd its members find FTC staffs failure to inform subjects of precisely which ad content it suspects ofbeing inherently misleading (and the reasons therefore, including the scientific justifications), which it suspects of being, at worst, only potentially misleading (and, thus, protected under the Fist Amendment) and which it suspects ofnot being objectionable (1) deniei those subjects, other advertisers, and the public a clear understanding of ' . , legal limits on ad content and (2) leads ineluctably to a pervasive chilling effect, wherein the subject (and others similarly situated who become aware of the action) avoid entire categorjes of . , , advertising content, not abk to discern with reasonable certainty what specific content FTC finds ". objectionable and why. The Association and its members find FTC's failure to rely on warning letters in lieu of compulsory process in nonpublic investigations unnecessarily burdensome when the ad content in issue is, at worst, only potentially misleading and not inhe~ntly misleading. In such circumstances, the obvious, less speech restrictive alternative of a warning letter defining why the speech misleads and what disclaimers could be used to avoid misleadingness is both a necessary and sufficient corsective mechanism that is less speech restrictive than the imposition af the extraordinary costs and speech burdens ordinarily associated with compulsory process in FTC nonpublic investigations. II. STANDING TO PURSUE LEGAL REDRESS The Association and its individual members are adversely affected by the.FTC's failure . . . . - . . . . . . . ...~.. . . ....... . . to ensure adequately that its practices and procedures in nonpublic investigations ofhealth ~.~ . . . ~ . . ~ . . . . benefit advertising avoid the imposition of undue burdens on advertising content protected by the First Amendment. The Association suffers injury because that failure frustrates its purpose. T h e Association's for-profit corporate, norrprofit corporate, and sole practitioner members are also injured because they include health benefit advertisers who fear adverse FTC action if they communicate certain accurate advertising information5 but also because they include consumer members injured by their inability to receive such information which they hnd indispensable to the exercise of informed choice in the market. As the Supreme Court explained, "[tlhere is no question that an association may have standing in its own right to seek judicial relief from injury to itself and to vindicate whatever rights and immunities the association may enjoy. Moreover, in attempting to secure relief from I * injury to itself the association may assert the rights'of its members, at least so long as the challenged infractions adversely affect its members' associational ties." Warthv. Seldin, 422 U.S. 490, 5 1 1 (l975), cirills NAACP v. Alabama, 357 U.S. 499, 51 1 (1958)~ An.organization . .. has standing to pursue legal action for redress of a grievance "if it has been injured as an en*," for example, if the challenged conduct impedes its ability to fulfill its purposes. See. e x . , Association.of Community Orpanizations for Reform Now V. Fowler, 1997 'US. Dist. LEXIS 20237 at *3 (E.D. La 1997) (citing Havens Realty Carp. v. Coleman, 455 US. 363,379 (1982)). When an organization's purpose is frustrated by acts of government such that the organization cannot obtain protection for constitutional or statutory rights of its members and is forced to devote significant resources to that end, it has alleged a sufficient injury to establish standing to sue. See Truckers Union for Safetv, et aI. v. Mead, 251 F.3d 183,188 (D.C. Cir. 2001) (discussing organizational standing and the requirement of cognizable injury to the organization, its activities, or its members). m. TK~E UNCONSTITUTIONAL AGENCY P R A C T I C ~ AND PROCEDURES I N ISSUE A. FTC's Current Practices and Procedures Unconstitutionally Vest Broad Discretion in Lay Commission Staff to Determine Whether Scientific Speech May Be Prohibited The Association understands that the FTC staff's decision whether to initiate compulsory process against health benefit advertisers through either an access letter or a civil investigative . . ~ ~ Tbe fear is profound. They also fear retaliation from the Commission if they inform the Commission of who they are. They believe, in the absence of clear criteria, FTC could~well initiate nonpublic investigations of theircurrent advertising, wiibout good cause, to punish them for challenging the practices and procedures here in issue. . . 'Although standing is not a requirement to bring a ~qti t ion before the FTC (or any administrative agency, see generally Si ra lub 292 F.3d 895, 899 (D.C. Cir. 2002), m P f i z e r . Inc. v, Shalala, 182 F.3d 975, 980 (D.C. Cir. 1999) ("An administrative agency. . . is pot subject to Article I11 of the Constitution of the United States")), it is a requirement for any subsequent suit in federal court for The commercial speech test in Central Hudson Gas & Electric Corn. v. Public Service .,. . . o Comm'n ofNew York, 447U.S. 557, 566 (1980) h& been described as "s~bstantially similar" to the test for time, place, and manner restricticins on protected speech.' Board of Trustees of the State Universihl of New York v. Fox, 492 U.S. 469, 477 (1989) (citine. San Francisco Arts & Athletics, Inc. v. United States Olympic Committee, 483 US. 522, 537 n. 16 (1987). The. substantive First Amendment purposes served by prohibiting the exercise of unbridled discretion over speech by pvernment officials in time, place, and manner regulationwould thus appear to apply equally in the commercial speech regulatory context. See e.p. Lakewood, 486 U.S. at 757 ('9t is not merely the sporadic abuse of power by the censor but the pervasive threat inherent in its very existence that constitutes the danger to keedom of discussion" [citing Thornhill V. . . . . .~ . . .. , . .. .., .~ AlabamaJ10 US. 88,97 (1940)). In either context, it is a fundamental . tenet under general'First ,..... Amendment principles that the exercise of unbridled discretion by government officials is forbidden See, e.g., Lakewood, m; Shuttlesworth v. City of Birmingham, 394 US . 147, 153 ... . . . . . ... (1969) (quoting Kunz V. New York, 340 U.S. 290 (1951); See also, Forsvth Countv V. Nationalist Movement, 505 US. 123 (1992). Central Hudson established a four-part test for analyzing the legalily of restrictions on commercial speech. It held: "At the outset, we must determine whether the expression is protected by the First Amendment. For commercial speech to come within that provision, it must at least concern lawful activity and not he 'misleading. Next, w e ask whether the asserted governmental interest is substantial. If both inquiuies yield positive nnswers, we must determine whether the r~gulation directly advances the governmental interest asserted, and whether it i s not more extensive than is necessary to serve that interest." a 447 US. at 566. The time, place, and manner test has been described as: "We have often approved restrictions of that kind [time, place, manner] provided that they are justified without reference to the content of the regulated speech, that they serve a significant governmental interest, and that i in doing so they leave opm ample alternative channels for communication of the information." Vireinia . . State Board I gf Phaimacv V. Vireinia Citizens Consumer Council, 425 U S . 748,771 (1976). . , 1 ' . 13 : < .. > 2. FTC's Condonationof the Staff's Failure to Require Scientific Assessment of i Health Benefit.Advertising Before Imposing the Costs of Compulsoq Process Violates the First Amendment When FTC staff members decide whether to initiate compulso~y process against a health ! i benefit advertiser without first ascertaining that a qualified scientist regards the claim as . . deceptive, the staff proceeds on supposition, pireconception, or bias, but not on a competently . . 1 informed basis. In such a circumsiance, the staff has not undertaken reasonably prudent steps to ensure a sound scientific basis for the initiation of costly compulsory process against a health I benefit advertisetg That practice directly implicates the major First Amendment risk that the I Supreme Court has associated wiih the exercise of unbridled discretion by government officials: 1 1 I "self censorsliip by speakers in order to avoid being denied a license to speak." Lakewood, 486 I US. at 759. While a license to speak is not at issue here, self-censorship in order to avoid risk of ! future adverse enforcement action is. As explained in the affidavit ofthe Association's President I I . . ~ ~ . (Exhibit A), members of the Association have refrained from making certaintruthful and . . .,. .'; . . ~ ~ .. nonmisleading health benefit claims in advertising because they cannot, from moment to moment, reliably discern in specific circumstances what FTC regards as deceptive. FTC staff members must be limited in the exercise of their discretion by adequate I procedural safeguards that ensure that each initiation of compulsory process against a health benefit advertiseris predicated on a sound and expert scientific foundation rather than on lay supposjtion, preconception, or bias. See, Forsvth C o w v. Nationalist i Movement, 505 U.S. 123 at 132 (1992) (In case of whether a parade-permit fee is constitutional, . . I I the Supreme Court held that "based on the county's implementation and construction of the The point is not that lauyen, the proverbial j x k s of all rrades, who lack formal scienliiic training, cannot be intelligent interpreters oflaw and its rdation to scienc:. It is, ra~her, that they cannot reliably determine in the first ins:ance whethcr an advenisine claim oihcalth benefit is scienti:?call~ rupponel wlthou! consulti~lg a scienrist " . .. appropriately educated and experienced in the study ofthe science in questian. 'I ordinance, it simply 'cannot be said that there are any narrowljr drawn, reasonable and defihite , .' standards guiding the hand of the Forsyth County administrator. ~ i e decision[of] how much to charge for police protection or administrative time--or even whether to dlarge at all--is left to the whim of the administrator. There are no articulated , ., standai-ds.either in the ordinance o r in the . -. county's established practice, ..The First Amendment prohibits the vesting of such unbridled discretion in a gove-ent official"). ~ i k o u t required consults with qualified. scientists as a condition precedent to initiation of nonpublic investigations of health benefit advertising, there exists no reasonable procedural safeguard to protect against unscientific bias, supposition, or preconception by staff in theinitiation of such investigations. Because the safeguards are . . reasonable and obvious less speech restrictive alternatives, tlne Commission violates the First ~ ~ , . . . . . . , . , . . Amendment by not implementing them. Id.; See also Central Hudson, -447 U.S. at 566. . . ~ . ~ . ~ ~ .. . ... . - The Association urges FTC to require its staff to ascertain from scientific experts the .. .. . . . ~ . competence and rtliability of health benefit advertising claims before initiating compulso . . . . . . ,. . . . . , , process against health benefit advertisers, Only when FTC meetsthat preliminary burden may it constitutionally justify imposing the costs of its compulsory 'process o n a health benefit advertiser (whose commercial speech, under our First Amendment, is presumptively protected against state restriction and undue burden absent government fulfillment of its burden to prove the speech in question inheredy rnisleabg). B. FTCys Staff Violates the First Amendment by Failing to Differentiate Between inherently and Potentially Misleading Speech in Nonpublic . Investigations of Health Benefit Advertising The FTC (and its Division of Enforcement rDivision") and its Bureau of Consumer Protection ("Bureau'?) commence nonpublic investigations' ofhealth benefit advertising when the staff suspects that it has discovered evidence of deceptive advertising. That discovery particularly, of which content it suspects is inherently misleading, of which is only potentially misleading and curable by disclaimer, and df which is not rnisleadi& at all), the prudent advertiser often decides to withdraw entire ads from the market (thus suppressing not only 1 content FTC actually suspects is inherently misleading but alsb content protected by the First i : Amendment, i.e., potentially misleading and nonmjsleading . .. content). For an advertiser to . . modify ad contert (but to guess wrongly as to what content FTC suspects is deceptive) entails enormous risks for the advertiser because FTC may well find. failures to correct content it finds deceptive to warrant greater consumer redress and harsher terms for a conskt decree. In sum, in the absence of word from l T C staff specifically identifying which content the . . staff suspects is "inherently misleading," which it suspects .is "potentially misleading," and . . ~ . . . . which it finds not deceptive, an advertiser must guess at its own peril if it wishes to. continue . . ::..~. : :~... : :~ -.. .:.. running the ad without what it presumes is the offending content. The ambiguity present creates~ . . a pervasive chilling effect that induces self-cens~rshi~. '~. The resultipg self-censorshipnot only . . . :. .. - . . . . ~ . . . causes the advertiser to suffer a loss in free speech but also causes the consumerto experience a ~ . . .. loss in actually or potptially usefil informationthat may prove indispensable to the rendering of an informed market selection. . . Variously in its decision to issue access 1etters.and civil investigative demands; in its pursuit of compulso~y process; in its communication with regulatees and their counsel; in the content of its administrative and judicial complaints; and in the content of its consent orders, the l4 See Exhibit B. . . I 5 T e enforcement uncertainty created by FTC'spracticeresults in a chilling effect. As the court stated in Glavned. "uncertain meanings inevitably lead citizens to 'steer far wider of the unlawful zone' ... than if the boundaries ofthe forbidden area were clearly marked." Id. at 109, &.rg Baaeett v. Bullitt, 377 U.S. 360, 372 (1964), &&gStreiser v. Randall, 357 U.S. 513, 526 (195S), -interstate Circuit v. Dallas, 390 U.S. 676, 684 (1968);&hton v. Kentuchx 384 US. 195,200-201 (1966); D-r, 380 U.S. 479,486 (1965); Smith v. California, 361 U.S. 147, 150-152 (1959); Winters v. New Yo1.S 333 U.S. 507 (1948); Strombera v. Califomb, 283 U.S. 359,369 (1931). Commission, the Division, and the Bureau violate the First Amendment: (1) by not requiring its staff to ascertain from scientific experts the competence and reliability of health benefit advertising claims before initiating compulsory process; (2) by not evaluating health benefit advertising to discern and explain whether it is inherently or potentially misleading; (3) by not ~. employing obvious less restrictive altemat.ives .to.use.of compulsory process to protect those who engage in potentially misleading health benefit advertising from the same costs, burdens, and ' ' resbictions imposed on those who engage in inherently misleading advertising; (4) by not informingregulatees of precisely why the content of specific health benefit advertising is deemed inherently or potentially misleading by the Bureau, Division, or Commission; '(5) by not ', informing regulatees that they may.continue to use potentially misleading health benefit ads if .~ . ~ . . :: . . .. they disclaim or qualify themto avoid misleading connotations; and (6) by not excluding ~ ~ ~ , . .~ ~ ..... potentially misleading health benefit advertising from consent decrees and orders thatimpose on.. --... . advertisem often costly consumer redress, disgorgement, effective injunctions against future use . ~. . ... .. *: of statements deemed deceptive, reporting, recordheping, and consumer notification requirements (collectively referred to herein as '$ena~ties'"~). Indeed, the FTC defmes any health benefit advertising that does not satisfy its largely subjective and ambiguous "competent and reliable scientific evidence" standard as deceptive ard I I defines those who communicate such advertising as deserving of compulsory process, I I 1 enforcement, and penalties without any effort to protect potentially misleading health benefit i advertising from the costs, burdens, and restrictions of that process. By hiling to make . . I accommodations to protect potentially misleading health benefit advertising from the burdens it I I I imposes on inherently misleading health benefit adveriising, the FTC's repeated incursions into ! l6 We undersiand that FTC does not regard these requirements as unitive measures but, in point of fact, they affect , .. . subjects in the same negative way, regardless of the nomenclature used. the market generate a clding effect, causing crtire categories of advertising to be viewed by responsible advertisers as too risky and thereby to induce,self-censdrship." in the end the ,. ~ current process redounds to the detriment of consumers, denying them information on the , potential benefits realizable from the use ofhealth enhancing products by unduly restricting what 3.:. , . . . . . . . . , may be said about those products. There is an obvious and less speech restrictive alternative to the current staff practice and procedure. That altemqtive is for the staff: (1) to avoid soliciting or compelling any individual or entity to respond to FTC access letters and/or civil investigative demands concerning allegedly deceptive health benefit advertising until the staffhas @st consulted with a qualified scientist to determine whether the ad claims in question are ones for which supportive publicly available . ~ scientific evidence is lacking; (2) to avoid soliciting or compelling any individual o r entity to. . . . . , .. . . . . . .. .. . respond to FTC access letters andlor civil investigative demands concerning dlcleged deceptive ~ ~ health benefit.advertising until the staff has written to the subject informing that person or entity ~ : ..'..~.. . ~ of: the precise ad content suspected of being "inherently misleading" and the reasons therefore; the precise ad contenl<suspected of bein& at worst, only "potentially misleading" and the reasons therefore; and the precise ad content not questioned by the FTC; (3) to inform the subject of investigation of the precise scientific basis for FTC's conclusion that claims lack "competent anl reliable scientific evidence" at the earliest possible moment during a nonpublic investigation of such adveiitising and, in any event, before entry of a consent decree or commenc'ement of litigation against the subject; and (4) in instances where the content to which FTC objects is potentially, and not inherently, misleadin$ to use a warning letterI8 instead of compulsoxy ' ' " See Exhibit A. ''The warning letter should inform the regulatee ofprecisely why the FTC has iound specific content potentially misleading and inform the regulatee of potential disclaimers or qualifications that could beused to avoid V. FTC'S CURRENT PRACTICES AXD PROCEDURES IN YOS-PUBLIC 1WESTIGATIONS OF HEALTH BENEFIT ADVERTISERS VIOLATE THE ADMINISTRATIVE PROCEDURE ACT The Administrative Procedure Act declares unlawful commission action that is i :. arbitrary, caprjcious'and ti6n&ary'to law. 5 U.S.C. 5 706 (2)(A). In matters of speech regulation, clarity and predictability are indispensable for government compliance with the strictures of the First Amendment. The ,absence of either defu~es arbitrary and capricious enforcement in the context of speech regulation and suggests, if not reveals, reliance on undisclosed motives. Public Citizen, Inc. v. FAA, 988 F.2d 186,197 (D.C. Cir, 1993) ("The requirement that agency action not be arbitrary and capricious includes a requirement that the agency adequately explain .its result"); Dickson v. Secretary of Defense, 68 F. 3d 1396,1404 (D.C. Cir. 1995) . . . .. ('The . . . . . . . .~ . arbitrary and capricious standard of the APA 'mandates that 'an agency take whatever~tepy;.it ... . . . . .. ,, ~. needs to provide an explanation that will enable the court to evaluate the agency's rationale at the time of decision"') (citing Pension Benefit Guaranw Com. v. LTV Corn., 496 U S . 633,654 (1990)); National Treasun, Employees Union v. Homer, 854 F.2d 490,498 (D.C. Cir. 1988) (Agency must examine "the relevant data and articulate a satisfactory explanation for its action including a 'rational connection between the facts found and the choice made"') (citing Motor Vehicle Manufacturer's Ass'n v. State Fann Automobile Ins. Co., 463 U.S. 29,43 (1983); Pearsonv. Shalala, 164 F.3d 650, 660 .@.C. Cir 1999) ("Pearson I;') ("We agree with appellants that the APA requires the agency to explain why it rejects their proposed health claims-to do so . . . . adequately necessarily implies giving some definitional content to the phrase 'significant scientific agreement:. We think this proposition is squarely rooted in the prohibition under the APA that an agency. not. engage in arbitrary and caprjcious action"); Id. ("It simply will not do for a govenunent agency to declare-without explanation, that a proposed course of private action is not approved"); -. The constitutional violations mentioned above are also violations of the Administ~ative Procedure Act, 5 U.S.C. 5 551 et. seq. In addition, the use of enforcement power (including investigatory power) against'advertising content on allegations of deceptiveness without identifying which statements are inherently'n~isleadin~; which are, ai worst, only potentially misleading; and whichare not objectionable, constitutes an arbitrary and capricious action because it fails to take minimum, constitutionally required steps to ensure that protected speech is not unduly burdened. Likewise, the Commission's failure to disclose to the subject of a nonpublic investigation of health benefit advertising the precise scientific reason for its charge that advertising is not backed by "competent and reliable scientific evidence" constitutes arbitmy and ~ ~ ~ r i c i o u s decisionn$4ng because, in matters of speech, recision and clarity in ,., ~~ ~~ ~ , the application of government power is indispensable, a toucl~.tone of constitutionality. See e.v Meehan v. Macx 392 F.2d 822,834 (D.C. Cir. 1968) (There is a particular need for clarjty and specificity when Government officials are engaged in regulating speech"); Kevisluan v. Board of Regents, 385 U.S. 589,603-604 (1967) ("'We emphasize once again that 'precision of regulation must be the touchstone in ag area so closely touching our most precious fkeedoms,' N.A.A.C.P. v. Button, 371 U.S. 415,438 (1963) 'for standards of permissible statutory vagueness are strict in the area o f free expression.. .Because First Amendment freedoms need breathing space to survive, government may regulate in the area only with narrow specificity."' Id. at 432). Finally, the FTC's failure to distinguish potentially misleading ad content from inherently . . . . , . misleading ad content, treating both the same as deceptive advertising and imposing the same I regulatory busdens upon the different speech fonns, violates the APA too because it inexplicably denigrates protected speech. Public Citizen. Inc. v.-F.% 988 F.2d 186 at 197. VI. THE PROPOSED PRACTICE AND PROCEDUREFOR USE IN NONPUBLlC INVESTlGATlONS OF HEALTH BENEFIT ADVERTISING For the ibreioing reasons, the Petitioner respectfully requests that the ~6kn&iision order, without delay, the adoption of the following ~ractices and procedures for FTC staff in the exercise of nonpublic investigations of health benefit advertisers: 1. That FTC staff, before initiating a nonpublic investigation of health benefit advertising, ascertain from scientific experts the competence and reliability of that advertising. 2. That FTC staff in every nonpublic investigation of health benefit advertising, a t the time an access letter or civil investigative demand is served upon the subject.. . . , . (and thereafter upon any change in the staffs position on the point until a final ~. . resolution), notify the subject in unambiguous terms of preci~ely.which ad c the staff suspects is "inherently misleadingy' (i.e., unprotected underthe Fir Amendment) and its reasons (including its scientific justifications) for so concluding; which ad content the staff suspecb'is, at worst, only 6Lpotentially . . ,, ,, ,~ . misleading" {i.e., protecte& under the First Amendment and capable of being rendered nonmisleading through the addition of a disclaimerf and its reasons therefore; and which ad content the staff docs not challenge at all. 3. That ~~C ' s ta f f -a t the earliest possible moment during the course of a nonpublic investigation of health benefit advertising and, in any event, in advance of agreement upon terms of a consent decree or initiation of FTC litigation-inform the subject of investigation of t.he precise scientific grounds it has for suspecting that health benefit advertising is not backed by "competent and reliable scientific cvidence,"i.e., to reveal the stafPs scientific justification for concluding that a health benefit claim is inherently misleading. 4. That FTC staff avoid use of compulsory process, including access letters and civil investigative demands, and instead rely on warning letters and optional disclaimer or qualification language as a primary enforcement mechanism in those instances where the health benefit ad content of an advertiser to which the staff objects is, a t worst, only potentially misleading (and, thus, protected by the First Amendment). - EXHIBITS AFFTDAVIT OF NORMAN ANDERSON I, Norman Anderson, declare under penalty of perjury that WC following is true and . correct to the best of my knowledge, ixformation, and belief: . . 1) I &I the President of the First Amendment Health Freedom Association . . ("Association"). 2) The Association's purpose is to defend the free flow of commercial information protcited by the First Amendment of the United States Constitution necessary for a consumer to exercise fully informed choice in food and dietary supplement markets. 3) The Association's confidential membership base includes both manufacturers and consumers of dietary supplement products. ~ . . . . . . ~ .. ~ 4) In the course ofreview,ing statements made and concerns raisedby several members, the Association has learned that several companies andindividuals routinely engage in self- censorship due to a lack of ascerkinable scientific itandards md xbitrwy enforceme~t przctices .. of the Federal Trade Commission ("FTC"). 5) The Association believes that companies have engaged in self-censorship by refraining from making numerous tr~thful'andnonmisleadin~ claims and refraining from conveying truthful and nonmisleading information concerning their products through television and radio advertising for fear of adverse enforcement action by FTC. 6) The Associationalso believes that members have not entered the dietaiy supplement market due to fear of adverse FTC enforcement action. 7) The ~ssociition believes that FTC's current enforcement practices have a chilling i . . effect on its members' advertising and marketing practices. action. 9) FTC's nrbiirtvy cnforccmmt practicm directly and substanlidly frustrate thc purpose artomeys to Ele and prosecute a mlernaking perition with and before the FTC and, as nwessary, DESCRlPTION OF THE PARTIEE Dr. Julian M. \\'hitaker. Iulian M. ~h i t akc r , M.D. is a ~hysician licensed to pracricc medicine in the states of California and Washington Hc gradua~cd from Dartmouth Collegc in 1966 with a B.S. dcgrec and from Emory University in 1970 with an M.R. dcgrec. He received addirionnl training in surgcv as a resident at the University of California Mcdical School. From 1975 to 1976 hc worked as a ~hysician at the Pritikin ~istitutc in California. Since that time hc his been the Clinical Director of lhc Whitaker'Wdlnesr Institute in Newport Beach, California. He is thc author of five books: Rcversir~gIIenr# Diseuse (19851, Reversing Diuberex [1987). Revcrsin,o Health Risk (19S9), h'nfrlmlHenlir~g (1994), and Whnl YourDocror Won't Tell ...... Yotr About ~ ....... . . .. . Bpnn (1995), Sincc August of 199 1 hc bas been the editor of Henlth R H e n l i ~ g . .. . . . . . , , : . . ~ currentlyjthc nationls largest single iditor health newslertcr.. I n 1996, Henltll a Heuling ~. . .~ . . , . . :. . . had over SD0,ODO subscribers. Dr. Whitakcr sells and promotes the sale of his own brand of dieb j supplement:. He rcccivcs royaltics from thc.ditribution and . . sale ~. of s ~ v d ~. > . ' dietary s&lcments based on formulas he devclrrps and IiccnsS. Dr. Whitaker would disseminate print advertising containing tht following structutc/function claiins in issociation with his sale and promotion of the fol lo~ing dictary aupplcrncnrs blut refrains from doing so in light of uncertainty as to whether the science &pporting the claims (attached hereto as Exhibits A-C) will bc rcgardcd by FTC as compctcnt and reliablr. Product Dcsctiption Omega-? Fatty Acid (EPA (360 mg p'ir serving) and DHA (240 mg pcr serving)) Hce.lth'~encfit Advertising Claim Producr Dcscription .. Vitamin E (400 I.U. per serving) Health BcncfiL Advertising Claim As a part of a healthy diet low in saturated fa1 md cholcstcml4~0 IUIday of Vitamin E promotes cardiovascular hcalth. Produtr Dcscription EPA/DHA (1 000 mg pcr serving) FladF3orngc Oil (600 rng per serving) Consumption of orn+3 fatty acids as found in our EPAlDBA and Fla.-oragc Oil supplement pr~ducts,promote cardiovascular hcalth. ~ ~ .. . . . - . , , - ~, ~ ~~ .. --.- . Imagcnctix, Inc. Irnagcnctix, Inc. (Imagenctix) is a California corporation -- . . . engaged in the business of manufacturimg, distfiutiiig, and selling multiple ~. .~ - .. . . , ~.~ , , pharmaceutical grade dietary supplemtnts for human co~umption. ~ ~ , . . . . . ~ . , , . . - . ~ ~. Imagenerix, Inc, would disseminate print advertising containing thc following st~cture/function claims in assbciation with its salt and promotion of the following dietan supplcrncnts but refrains from doing so in liehe of uncertainty as to whcthcr the science supporting the slaims (attaehod hcrcto as Exhibits B. C. and D) will be rcgardcd by ~ f ~ : a s competent and reliable. Product Dtscri~tion Saw Palrnctto (160 me per serving) Health Bcncfir Adverlising Claim Ssw Palmetto cxtract supports prostate hcalth and hcalthy urinary flow. ' Product Dcscription Vitamin E (50 I.U. per serving) Health Benefit Advenisins Claim- ' , A5.a part of a healthy dicr low in saturated fat and cholcsteml. Vitamin E s~pports cardiovascular heal+. ~ rdduc t Description , F& Acid (400 mcg per serving), Vitamin 86 (1.0 mg per serving), and Vitamin ~ 1 5 (50 mg'per serving) . , Hcalth Bcncfit ~dvenis ing Claim Foiic acid when takcn in combination with vitminB6 and Vitamin B12 supporn vascular health. XCEL Medical Phnrmacy, Ltd.. XCEL Medical Pharmacy. I.TD d/b /a XCEL Health C& (XCEL) is a.California corpoiation engaged in thc business o f ........- . ~ ~~. , : : mmuFncturing,disrributing, and selling phannaccutical grade dictsry supplements for ~ .~ . . . . .......... -- . . . h&m~ eomumption. XCEL. Medical Pharinacy, ttrl. would disseminate print advenising .......... . . . , . . , - . . . . containing the following structureffunction clrims in a~sociation wirh i ts sale and . . . -. - . , . . . . . . . . . . . . promotian of the following dietary suppicmcntr but iefraias isfrom doing so in light .~" of .. ,. . . . . . . . -. -.". . . . . . - - uncertainty as to rvhethcr the science supporting the claims.(artached bercto as Exhibit B, D, and E) will bc regarded by FTC as competent and reliable. Product Description saw Palmetto (325 mg per serving) H&I Bentfit Advcrtisin~ elaim Our saw palmetto product indudcs high ~ualiry saw palmetto and is formulated to , promote prostate health and support healthy urine flow in men. Product Description Vitamin E (400 I.U. per serving) conclusiirc, evidensc of the claimed haalth bcncfits. Lacking legally sufficient guidance, thc Joint Pctitibneri now cngege in sclf-c,gisorship Because thcy cannot discern what, if any, meaningful definition or distinguishing principle FTC applies to delerminc shcther stmcture/function , . claim advertising is backed by "compctcnt and rcli+.ble scientific evidcnce." The kTC hz~s ncvcr revealed precisely what objectivr criteria it uses to evaluats scicntific.cvidcncc submitted to it in response to access letters and civil investigative dcrnands Shat cnll into question scientific corroboration for dietary supplcmcnt str~ct~rc/function claim advertising, In its dietary supplement claim decisions and in its consent agreements concerning those claims, the FTC docs not explain the contcnt of the . . . . . . .. ,.. . .. . . . . , . . staff's scicntific evaluations and never reveals thc contcnt of thc scicntific cvaludons supplied t o i t by independent rcviewca, thereby denying relevant insight into the proccSS . .- that detciminer thc advcrtiitr's f a t ~ , shctn, FTC's criteria for,evaluahg dietary .- - . s~pp!cmint stt-dcturtlfunction claims and its wcighing of thost criteria arc'hiddtn from . . ~ ~ ..-. ~. .. .~ ~ . . ~~ . - . . , . . . ~ . , . . . . advertisers. Consequtntly, neither the Joint Petitioners nor any other rcgulattc can discern, with confldencc, in advancc of advenising what science will prove adcquate to satisfy FTC? The Joint Petitioncts thus pmccivc inherent risk of adverse regulatory action in undertaking advcrtising af this kind. The need for definition is particularly essential in the area of structurelfunction claim advertising becausc dietary supplern~nts, unlike pharmaceutical drugs, yield substant ia~i~ lcss rcvcnuc par unit sold than do drug products. In addition most dictary This problem is compounded by the fact that agency staff actorncys rourintl)'advisc rhar the lcvcl of scientific cvidcner nceded to suppan E stnlchlrdfunction claim ad i s gsncrally lcss rhan that required auppm s hcalrh claim ad. Jn public prc~sntn.ti.lioas. FTC rcprcsmtatiVcr have indicalrd xha~ otmcturelfunctian Flaim ads may not aced to bt supported by wo or mprt double blmd placcbo comr~lled suppiemcnts cannot be patcntcd, unlike drugs, and thus do not enjoy monopoly rents needed to finance costly intcrvcnticn trials. Double bl id placebo controlled clinical trials for drug products frcqucntly require cxpehditurrs of several hundred million dollars to establish, to FDA's satisfaction, the safety and efEkacy of a drug. As a conscqucncc df the forcg&g. . . market realitits, almost all dictnry mppPcrnent companies depend upon ... publicly available scientific evidencc, and not c o ~ m i ~ s i 0 n ~ d clinical trials, to corraboratc. . structurclfunction claim advertising. In;thc absencc of principles to guide them, the Joint Petitiontrs nte entirely at a loss to know whether, if ever, the scientific cvidcncc they possess will satisfy ETC's substantijely undefined standard for structureffmction claim advertising. , . . . . . . . . . . . . . , , ~ . . ....... ; FTC dCFincs "compctcnt and reliable scientific evidcncr" as: .......... .... .... ..:., . . . . . - -. Tests, analyses, research, studim, ofother evidencc based on thc expertise of pmfcssionals in the relevant area, that have bccn conducted and waluatcd in w . . ....... .- aLijtcrivc mamce by persons qualified to do so, using procedures generally . -- - ~ aiccptcd in the ptofession to yield accurate and reliable resuips, ~ ~ .-. . . . . . . . . . . ~. . ~ See, e.g., in' the Matter of Wetern Direct Marketing Group, 1998 FTC LEXUS 78, ijub' 24, 199.8):; h rhe Matter ofArner91, 123 F.T.C 1454, (1997); In the Matter ofK~vc EIahie &/a MEX Internptional, 124 F.T.C. 407 (1997); In the Motter ofMelagenics, 124 F.T.C. 4g3 (1997); and Ih the Matter ofNortu.e's Botmry 130 F.T.C. 206 (July 21,1995). In the context of health claims for drug products and, to some extcnt, of health claims for dietary rupplcmtnts, FTC appears to rcly upon Thompsan Meclical, 104 F.T.C. 1 648 (1986), which indientcs that two well designed cIinical trials will ofien suffice. No I I comparable criteria exist in the preccdcm for dietary supplcmcnt structurc/funclion claim ads. ?he agency's lack of definition for ndequnte corroboration for dietary supplemrnt - - clinical trirlr, x i s the c u r undcr Thomprpn Medical, 104 F.T.C. 648 (1986) for health claims on drug products. structurc/function claim ads begs scvcrill questions, the ansrvcrs for which nre cssetltial requisites to an advertiser's comprehcnrion of the requirements imposed by this agency: What nature, quality, and quantity of tcsta, analyses, research. studics, or other evidence (collcctivcly "scicntific cvidcnce") docs FTC require to support a claim? (e.g., Will animal studies suffice or must thcrc be human clinical rrials? Will onc study suffrcc or must there be a dozen or marc? Will studies on an active ingrcdieht in a product bc sufficient or must a1lingrcdicnts of the product be evaluated? Will studics by indcpcndcnt individuals and entities on the same ingredient used in apmduct suffice or must the product itself be tested? Are studies in pccr-reviewed scientific journals preferred over : unpublished clinical t6als7) (2) Upon the expertise of how many professionals in thc relevant area must the scientific evidence be baed? (c.g., Will two concurring professionals sufficc? Will agrccmcnt among some minority ofprofcrrianalr in the field suffice or must there bc s consensus among a11 professionals in the reLevant area?) (59 What criteria does FTC employ to dctennine whether a test, analysis, ......... research, study or othcr evidence has been condusrcd and evaluated in an . ' .~' ........... . . . . . . . . . . . . . objcctive manner? (4) What criteria docs FTC em$ey to d~terrnkrc whcthcr a test, snalysis, resaarch, study or othcr evidence is wcll-desibed? . ~2 .... .. - ~- . , -. - (5) What criteria does FTC &mploy to d c t c h n e whether a person is qualified lo . ~ - . ~ ~ . : . ~ ... ..... . . . conduct and evaiuate scientific evidence? . ~ .. ........ . . . . . . . . . - (6) What critcria docs FTC employ to detenninq whether prvecdu~cs in testing wed arc generally acccptcd in the profession to yield accurate and reliable results? (7) What factors dots FTC take into account to dctcmine whether scientific . . cvidcnce is accurate? ! I (8) What factors docs FTC take into account to dctcrmine whether scientific cvidenec yields reliable results? To what extent must a study othcrwisc acceptable to FFC bc thc subjcct of redundant scientific studics to be deemed I "rcliablc"'? Without answers to the foregoing questions rcgolat~cs, including thc Joint Petitioners, simply cannot discern what nature, degrce, quality, and quantity of scientific 1 evidence they must possess to satisfy FTC. The Joint Petitioners note that FTC, Dietary supplement structurclfunction claim ndvertising is protected by thc First ~ m t n d m e k t to the United Svates Constitlition as commercial speech so long as it is not '.. , . * inhcre&lymislcading. See Bolger v, Yormgs Drugs Products, corp.463 U.S. 60, 67-68 (1983); ~ g b i n v. Coors Brewing Comp~ny, 514 US. 476 (1995). Under the First Amendment commercial speech standard, only inherently misleading claims may be suppressed ourright: By contrast. patentidly mislcadiig claims must be permitted with rcesaneblC dirclaincrs designed to climinatt the rnislcadig connotation. See In re WJ; 455 US. 191,203 (1982); Ibonez. v. Florida Dep't ofBuslness nnd Prof 1 Regulation, 51 2 US. 136,344-46; Psel v. Attorney Registr~rion rind Disciplinary Comni 'n ofIllinois, 496 U.S. 91. 99-1 11 (1990). Thc claims here in issuc'are ones for which scient'ic evidence provides suppoe. . . . ;; ...; Thus, they convcy information. They rhercfore cannot be inherently misleading but must ....--l::, __:. either be ponmislcsding or misleading. lqiiile the . . Joint . Pctitioncrs believe , ~ . . .. . . . . , ~ them to hc the formsr, FTC may think them the latter, depending . ~ . . upon ~ howitevaluates~ . . . . . . .. . .. .~ . , thc scientific cvidencc supporting them. if it found them potentidly mis!r&db, . i t s . . .. . . .. ~ . . constitutionalrcmcdy would be to cornpcl use of appropriate disclaimers, not to suppress the claims. In re R. M. J., 455 U.S. ,191 (1982). The issue is whrrhcr the scientific evidence supporting thc claim riscs to the levcl of "competent and reliable scientific cvidencr" sufficient to satisfy FTC thatthc claim is not dcceptivc. That standard must be defined by this agency'in a manncr co&istont with existing First Amendment precedent which would not allow suppression or punishment of parties who communicate potentially misleading claims; rather, such claims may only bc rcquircd to carry coacctivc disclaimcn Peel, 496 U.S3 at 110; R,M,f., 455 US. et 206; Shnpero, 486 US. at 478. In the absence of clear criteria for discetning whether a dietary supplement structure/hnction claim is backcd by competent and reliable scientific evidence and in the abscdce of any system for providing FTC advisory opinions on proposed claims, the Joint Petitioners cannot reasonably anticipate whethcr FTC will agrcc with them fiat their science is adcquatc support for a claim and cannot h o w whether any particul~ I dis;laimer could ciiminstc FTC concern that would otherwise srise. Thcy thus refrain I from communicating the stmcturc/function infomation nbovc for fear ihat doing so will I subject &em to advcnc regulatory action. ~ndced, \vhchen FTC calls into ques!ian dre scientific support for a claim, i t commences a process that imposes significant costs on the advtrtiscr .. .~ .. (legal fees, search ~ . , . . . - . ~ ... .~ . . . . . ~ . ~ . I costs, revised marketing nnd advertising costs) including on those, such as the Joint - i I Petitioners, who possess s~ience they reasonably bcllicvc corroborates thcir elaiws. In rhe .~ ~ . . . . . : - - . . . .. . .. . I first instance, agency officials issue either an access letter or a civil invrsfigative demand (rcquestih:: or compelling rhe production of nU con~borative science posscsscd by the advcrtiscr), Then the infomation is evaluated but the agency does not disclosc the critcria used for the cvaluation and docs not disclosc the scientists who havc advised it, the scientific reports it receives from those scientist;, oat even thc precise contcnt of, or reasons for its scientific fuidinss. Thcrcaftrr, if the agcncy's undisclosed cvaluation yields b dstermination that the soicntific evidence is not "competent and rcliablc," it i sends the advertis;; a draft complsink and consent agreement stating that pmposition in a conelusory manncr. It tiitreby comrnenccs the first step in its prosecution 05 the . . I . . 1 I4 advcrtiscr. The complaint and consent agrrcmcnt do not revcal the agency's evaluation or the crir;ria"scd to asscss the ads but include conclusory cb&cs of stahlro~y violations based on a purported lack of "'cornpetcot and rcliablc sci'cntific wideice," defincd only as quoted above. In thc absence of clear criteria that conform with the requircmcnts of the First Amindmcnt. thcsc rcgu]atory acts impose upon those who would. communicate , . .... . ~. dicrary &&dement structurc/function claims significant and unconstitutional burdcns o f a financik a' nd regulatory riatun. FTC causes thoso burdrns to be imposed rcgardlcss of . wht&er the speech in issue is inherently rnislcaduxg or porcntially misleading. If rhe agency's:criteria were rcvcaled and adcquatcly dcfined, and if Phase criteria comported with the rcquiremcnts of the First Amendment, thc Joint Pctitioncrs would bc able to discern the circumstances which FTC would regard their ctjctary supplement . . . ~, . .. . structuretfunction claims as adequately supported and the circumstances in which - . . ~ ~ . .~ ~ .. ...~ . .. . . . . . atherwise inadequately supported ads could bc rendcrcd uaobjcctionablc through us= of ~ ~ . ~ . ~ ~ . . .. -~ appropriate disclaimers, Tht h i m Petitioners arc nol: able to discern those circumstances . . . . - - ~ . ~ ~ . .. . given crment precedent. Thus, in thc abscncc of dcfined criteria. the agcncy's entire system for evduating dietary supplement structurclfunction claim advertising violates tllc First Amcndment's commercial speech standard. Accordingly, to avoid further violation of the Fust Amendment, FTC must explain with paRicularity the critcria it usts in evalualias dietary supplement strueturc/functik claims or, in the altcrnotive, authorize the issuance of advisory opinions to guide the Joint Petitioners and 811 regulatees on a case by casc basis. Thc agency's criteria must distinguish porcntially from inhcrcntly misleading claims and m u r pcrmil usc of disclaimers in association with potentially rnirlcading claims a5 an