FTC Settles With App Provider Over Unsubstantiated Product Claims | Practical Law

FTC Settles With App Provider Over Unsubstantiated Product Claims | Practical Law

The Federal Trade Commission (FTC) has approved a final consent order with Carrot Neurotechnologies, Inc. to settle allegations that the company made deceptive claims about its app. The FTC charged Carrot Neurotechnologies with making unsubstantiated claims that its app, Ultimeyes, could improve users' vision.

FTC Settles With App Provider Over Unsubstantiated Product Claims

Practical Law Legal Update w-001-4719 (Approx. 5 pages)

FTC Settles With App Provider Over Unsubstantiated Product Claims

by Practical Law Commercial Transactions
Published on 26 Feb 2016 • USA (National/Federal)
The Federal Trade Commission (FTC) has approved a final consent order with Carrot Neurotechnologies, Inc. to settle allegations that the company made deceptive claims about its app. The FTC charged Carrot Neurotechnologies with making unsubstantiated claims that its app, Ultimeyes, could improve users' vision.
On February 23, 2016, the Federal Trade Commission (FTC) announced that it has approved a final consent order with Carrot Neurotechnologies, Inc. and its co-owners (Carrot) to prohibit the company from making deceptive claims that its software app, Ultimeyes, can improve users’ vision.
As part of its advertising campaign for Ultimeyes, Carrot claimed that the app is "scientifically shown to improve vision." When making these claims, Carrot referenced scientific research conducted by Aaron Seitz, the company's co-owner and Chief Scientist. However, Carrot failed to disclose this relationship in its advertisements.
Based on Carrot's vision improvement claims, the FTC filed a complaint against Carrot and accused the company of:
  • Making deceptive efficacy and false establishment claims.
  • Failing to disclose material connections to parties whose scientific research "proved" Carrot's product claims.

Carrot Consent Order

Under this final consent order, the FTC directed Carrot to take various actions to correct its deceptive advertising. For example, the FTC:
  • Prohibited Carrot from making any representation that its product improves users' vision unless:
    • the representation is non-misleading; and
    • at the time it makes the representation, the company possesses and relies on competent and reliable scientific evidence (human clinical testing) to substantiate that the representation is true.
  • Instituted recordkeeping requirements related to any human clinical tests or studies Carrot uses to substantiate its future product claims.
  • Ordered Carrot to clearly and conspicuously disclose all material connections:
    • with any person who has conducted, authored, or participated in a test, study, or research used to substantiate Carrot's product claims; and
    • between Carrot and parties endorsing its products.
  • Fined Carrot $150,000.
The FTC also outlined its rules for determining if a necessary disclosure is clear, conspicuous, and in close proximity to a triggering representation.

Practical Implications

Before making any claim about a product's health benefits, a company must ensure that it has competent and reliable scientific evidence to substantiate that claim. The company should also adequately disclose if any party making or attempting to substantiate these claims is related to the advertiser.
In this final consent order, the FTC notes that reliable scientific evidence can include tests, analyses, research, or studies that are:
  • Conducted and evaluated in an objective manner by qualified persons.
  • Generally accepted in the profession to yield accurate and reliable results.
  • Randomized, double-blind, and adequately controlled.
For more information on substantiating product claims, see Practice Note, Advertising: Overview: The Federal Trade Commission Act. For more information on federal endorsement rules, see Practice Note, Advertising and Promotions in Social Media: Endorsements and Testimonials and Legal Update, FTC Updates Endorsement Guides FAQ.
Finally, advertisers should carefully review the FTC's determination in this consent order of what it considers a clear and conspicuous disclosure in close proximity to a triggering representation. The agency highlights both its requirements and what it considers bad practice. For example, the FTC considers a necessary disclosure inadequate if it is:
  • In an interactive electronic medium and cannot be viewed at the same time and in the same viewable area as the triggering representation.
  • Made through a hyperlink, pop-up, interstitial, or other similar technique.
  • Made on a different printed page than the triggering representation.
For more information on the FTC's disclosure requirements, see Practice Notes, Online Advertising and Marketing: Consumer Protection Laws and Advertising: Overview: Clear and Conspicuous Disclosures.