Court Opinion

ID: 185245
Source: CourtListenerOpinion
Date Created: 2011-02-05 02:29:37+00
Date Added: 2024-06-11T17:26:14.254014
License: Public Domain

223 F.3d 783 (D.C. Cir. 2000)
Novartis Corporation and Novartis Consumer Health, Inc.,Petitionersv.Federal Trade Commission, Respondent
No. 99-1315
United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued February 8, 2000Decided August 18, 2000

[Copyrighted Material Omitted]
On Petition for Review of an Order of the Federal Trade Commission
Michael L. Denger argued the cause for the petitioners.Miguel A. Estrada was on brief for the petitioners.
Daniel J. Popeo and Gene C. Schaerr were on brief for  amicus curiae Washington Legal Foundation.
Thomas A. Thompson was on the brief for amicus curiae  Grocery Manufacturers of America, Inc.
John F. Daly, Assistant General Counsel, Federal Trade  Commission, argued the cause for the respondent.  Debra A.  Valentine, General Counsel, Federal Trade Commission, was  on brief for the respondent.
Before:  Williams, Henderson and Randolph, Circuit  Judges.
Opinion for the court filed by Circuit Judge Henderson.
Karen LeCraft Henderson, Circuit Judge:

1
Novartis Corporation and Novartis Consumer Health, Inc (collectively  Novartis), subsidiaries of Novartis Holding AG, petition for  review of a Federal Trade Commission (FTC, Commission)  cease-and-desist order.  The Commission found that Novartis's advertisements of its Doan's back pain remedies were  "deceptive" in violation of the Federal Trade Commission Act  (Act), 15 U.S.C. §§ 41 et seq., because they contained an  unsubstantiated implied claim of superior efficacy.  Accordingly, it ordered Novartis to cease the deceptive advertising  and to include in future Doan's advertisements a corrective  disclaimer of superiority.  For the reasons set out below, we  reject Novartis's challenge both to the FTC's finding of  deceptiveness and to the corrective advertising remedy it  provided.

I.

2
Doan's over-the-counter back pain products have been marketed for over ninety years.  After Novartis's predecessor-ininterest Ciba-Geigy Corporation (Ciba), and Ciba's subsidiary, Ciba Self-Medication, Inc.,1 purchased Doan's in 1987,  Ciba conducted a marketing study which concluded:  "Doan's  has a weak image in comparison to the leading brands of  analgesics and would benefit from positioning itself as a more  effective product that is strong enough for the types of  backaches sufferers usually get."  Joint Appendix (JA) 19495.  To strengthen the Doan's image, Ciba undertook two  measures.  First, Ciba instituted an aggressive television and newspaper advertising campaign, which lasted from May 1988  through June 1996.  The new advertisements characterized  Doan's as a remedy effective specifically for back pain and as  containing a special ingredient (magnesium salicylate) not  found in other over-the-counter analgesics.  At least some of  the advertisements displayed images of competing over-thecounter pain remedies.  Second, Ciba expanded the Doan's  product line, introducing "Extra Strength Doan's" in late  1987 (renaming its existing product "Regular Strength  Doan's") and "Doan's P.M." in September 1991.

3
On June 21, 1998 the FTC issued an administrative complaint alleging Ciba's advertisements violated section 5 of the  Act by making an unsubstantiated claim that Doan's products, because of their special ingredients, were more effective  at relieving back pain than other over-the-counter products.Following a trial the administrative law judge (ALJ) issued a  decision dated March 9, 1998 in which he found that the  advertisements were deceptive in violation of sections 5 and  12 of the Act, which prohibit, respectively, unfair methods of  competition and unfair or deceptive acts or practices generally, 15 U.S.C. § 45, and in particular dissemination of false  advertisements, id § 52. Based on these findings the ALJ  issued an order prohibiting Novartis from asserting unsubstantiated claims of superior efficacy for Doan's products.The ALJ rejected the FTC's request for corrective advertising, finding so "drastic" a remedy unjustified.  Novartis  appealed the deceptiveness finding to the Commission and the  FTC's counsel cross-appealed the denial of corrective advertising.

4
In an opinion issued May 13, 1999 the Commission affirmed the ALJ's determination that the advertising claims  were deceptive in violation of sections 5 and 12 of the Act.Like the ALJ, the Commission concluded the advertisements' dual claims--that Doan's products are particularly  effective for relieving back pain and that they contain an  active ingredient not found in other over-the-counter analgesics--while each literally true, in combination implied that  Doan's was superior to other analgesics in relieving back  pain because of its special ingredient, for which claim there was no substantiation.  The Commission reversed the ALJ's  corrective advertising determination, concluding such a remedy was warranted because the Doan's advertisements had  created or reinforced consumer misbelief in Doan's superior  efficacy and the misbelief was likely to continue.  Accordingly, the Commission ordered Novartis to include in future  advertisements the following disclaimer:  "Although Doan's is  an effective pain reliever, there is no evidence that Doan's is  more effective than other pain relievers for back pain."Commission Order at 3.  The Commission ordered that the  remedy "continue for one year and until respondent has  expended on Doan's advertising a sum equal to the average  spent annually during the eight years of the challenged  campaign," subject to an exemption "for any television or  radio advertisement of 15 seconds or less in duration."  Id.2Novartis has petitioned for review of both the deception  finding and the corrective advertising directive.

II.

5
Novartis first challenges the Commission's finding that the  advertisements were "deceptive" in violation of sections 5 and  12 of the Act.  The FTC applies a three-pronged test to  determine deceptive advertising, asking whether "(1) a claim  was made;  (2) the claim was likely to mislead a reasonable  consumer and (3) the claim was material."  Commission  Decision (Comm'n Dec.) at 5 (citing, e.g., In re Cliffdale  Assocs., Inc., 103 F.T.C. 110, 165 (1984));  see generally 1983  FTC Policy Statement on Deception (Deception Statement),  appended to Cliffdale Assocs., 103 F.T.C. at 176-184.  Novartis does not dispute that the Doan's advertisements made the  implied claim charged or that it is likely to deceive but does  contest the Commission's finding that the claim was material.  We conclude the materiality finding is adequately supported.

6
Under the Commission's test, a material claim is one that  "involves information that is important to consumers and, hence, likely to affect their choice of, or conduct regarding, a  product."  Cliffdale Assocs., 103 F.T.C. at 165.  The Commission has historically presumed materiality for certain categories of claims:  (1) all express claims, (2) intentional implied  claims and (3) claims that "significantly involve health, safety,  or other areas with which the reasonable consumer would be  concerned," including a claim that "concerns the purpose,  safety, efficacy, or cost of the product or service," its "durability, performance, warranties or quality" or "a finding by  another agency regarding the product."  Deception Statement, 103 F.T.C. at 182 (footnotes omitted).  The Commission  applied the presumption here because it found the implied  claim was intentional and involved both a health matterand  the products' purpose and efficacy.  Nevertheless, given "the  evidence adduced by Novartis," the Commission deemed it  "necessary to look beyond a simple presumption of materiality" to the particular facts.  Comm'n Dec. 20.  After reviewing  the evidence, the Commission concluded:  "The extensive  record amassed in this proceeding strongly confirms the  common-sense proposition that efficacy is a pivotal consideration for consumers in selecting an analgesic, and that claims  of superior efficacy are highly material to those consumer  choices."  Commission Dec. at 20.  The Commission's finding  of materiality is substantially supported by the evidence it  cited, including the opinions of both sides' experts, see JA 831,  759, 956, and numerous consumer and marketplace studies,  see JA 640, 329, 270, 282.  See Comm'n Dec. 14-15.  Accordingly, we reject Novartis's challenge3 and uphold the Commission's finding of an implied deceptive claim in violation of the  Act.  See Thompson Med. Co. v. FTC, 791 F.2d 189, 196 (D.C. Cir. 1986), cert. denied, 479 U.S. 1086 (1987) (court's "task" is  "to determine if the Commission's finding is supported by  substantial evidence on the record as a whole").4

III.

7
Next, Novartis asserts the corrective advertising remedy is  without sufficient record support.  In Warner-Lambert Co. v.  FTC, 562 F.2d 749, 762 (D.C. Cir. 1977), cert. denied, 435 U.S.  950 (1978), we affirmed the Commission's statutory authority  to impose corrective advertising and approved the standard it  adopted for doing so:

8
(I)f a deceptive advertisement has played a substantialrole in creating or reinforcing in the public's mind a falseand material belief which lives on after the false advertis-ing ceases, there is clear and continuing injury to compe-tition and to the consuming public as consumers continueto make purchasing decisions based on the false belief. Since this injury cannot be averted by merely requiring respondent to cease disseminating the advertisement, wemay appropriately order respondent to take affirmative action designed to terminate the otherwise continuing ill effects of the advertisement.

9
Warner-Lambert, 562 F.2d at 762 (quoting In re Warner Lambert Co., 86 F.T.C. 1398, 1499-1500 (1975)) (alteration in  original).  This language "dictates two factual inquiries:  (1)  did [respondent's] advertisements play a substantial role in  creating or reinforcing in the public's mind a false belief about the product?  and (2) would this belief linger on after  the false advertising ceases?"  Warner-Lambert, 562 F.2d at  762.  While the evidence is thin and somewhat fragmentary,  we have weighed the expert testimony and, taken as a whole,  we find that the record supports the Commission's conclusion.

10
On the standard's first prong, the Commission concluded  the evidence demonstrated that the challenged advertising  played a "substantial role" in creating or reinforcing a false  belief based almost exclusively on the opinion of the FTC  counsel's expert witness Michael B. Mazis that the Doan's  advertising campaign created a continuing belief in the products' superiority.  Mazis, in turn, based his opinion primarily  on two studies:  the "Attitude and Usage Telephone Study"  (A&U Study) commissioned by Ciba in 1987, before the  implied claim advertising campaign, and the study conducted  by NFO Research, Inc. (NFO Study) in 1996, after the  campaign ended.  Relying on Mazis's comparison of the study  results, the Commission found that the A&U Study "showed  that Doan's had a weak image" and that the NFO Study  "show[ed] that in 1996, a disproportionately high percentage  of Doan's users and aware non-users believed that Doan's was  more effective than other OTC pain relievers for back pain  relief."  Comm'n Dec. at 25-26.5  The Commission relied  particularly on Mazis's testimony that a comparison of the  two studies showed that " 'superior efficacy' beliefs for Doan's  relative to Advil, Bayer, and Tylenol increased (between 0.5  and 1.25 scale points on a seven-point scale) between 1987 and  1996 relative to other brands, as did beliefs that Doan's has a 'special ingredient' (between 0.75 and 1.875 points)," while  "[a]t the same time, consumer beliefs that Doan's 'is safe to  use'--a claim not made in its advertising campaign--declined  in rough proportion to the other products."  Comm'n Dec.  26.6  We conclude that Mazis's opinion testimony constitutes  substantial evidence in support of the Commission's holding  that the Doan's advertisements created or reinforced false  beliefs in the products' efficacy.

11
We also believe that the record sufficiently supports the  Commission's finding that the advertisements' effects are  likely to linger.  The Commission rested its finding primarily  on the conclusion of the NFO Study that six months after the  advertising ended in 1996, "77% of Doan's users and 45% of  those who were aware of but did not use Doan's believed that  the product was superior to other brands for the treatment of  back pain."  Comm'n Dec. 29.  Characterizing these percentages as "disproportionately high for both groups relative to  other brands," the Commission concluded that "at least six  months after the challenged ads stopped being aired, their  effect continued to linger."  Comm'n Dec. 29.  We cannot say  this was an irrational inference from the study data on which  the Commission relied.7

IV.

12
Finally, Novartis challenges the corrective remedy on the  ground that it impermissibly restricts Novartis's free speech in violation of the First Amendment.  We perceive no First  Amendment impediment to the remedy.

13
In Central Hudson Gas & Elec. Corp. v. Public Serv.  Comm'n, 447 U.S. 557, 563 (1980), the United States Supreme  Court set out the standards applicable to governmental restrictions on commercial speech:

14
The State must assert a substantial interest to beachieved by restrictions on commercial speech. More-over, the regulatory technique must be in proportion tothat interest.  The limitation on expression must bedesigned carefully to achieve the State's goal.  Compli-ance with this requirement may be measured by twocriteria. First, the restriction must directly advance thestate interest involved;  the regulation may not be sus-tained if it provides only ineffective or remote supportfor the government's purpose.  Second, if the govern-mental interest could be served as well by a more limitedrestriction on commercial speech, the excessive restric-tions cannot survive.

15
447 U.S. at 563.  The remedy here advances precisely the  "interest involved," namely the avoidance of misleading and  deceptive advertising.  Further, as this court noted in  Warner-Lambert, whether a corrective remedy imposes a  restriction "greater than necessary to serve the interest  involved ... goes to the appropriateness of the order" under  the Commission's two-pronged standard addressed above.  Warner-Lambert, 562 F.2d at 758. Because the standard has  been satisfied here, as it was in Warner-Lambert, we conclude the Commission's remedy is not overly broad.

16
For the preceding reasons Novartis's petition for review is

17
Denied.

Notes:

1
 Novartis was formed in 1996 through the merger of Ciba-Geigy  AG and Sandoz AG.

2
 The Commission determined "that the corrective message would  be difficult to communicate in such a short ad without unduly  restricting Respondent's ability to also convey its advertising message."  Comm'n Dec. 35.

3
 In contesting the finding, Novartis argues most vigorously that  materiality of the implied claim is belied by the fact that Doan's  market share grew little or none during the relevant period.  The  FTC's definition of materiality, however, embraces any claim that is  "likely to mislead a reasonable consumer."  There is no requirement of actual deceit.  If a claim is material because likely to  deceive, it is not rendered otherwise simply because it is unsuccessfully advertised.

4
 Novartis contends we should review the Commission's findings  de novo, relying on Bose Corp. v. Consumers Union of United  States, Inc., 466 U.S. 485 (1984), in which the Supreme Court  rejected the "clearly erroneous" standard for appellate review of  the district court's "actual malice" finding in a defamation case in  favor of "independent appellate review" to "determine whether the  record establishes actual malice with convincing clarity."  466 U.S.  at 511.  This court, however, has already concluded that Bose "does  not change the standard of review in deceptive advertising cases."FTC v. Brown & Williamson Tobacco Corp., 778 F.2d 35, 41 n.3  (D.C. Cir. 1985);  accord Kraft, Inc. v. FTC, 970 F.2d 311, 316-18  (7th Cir. 1992).

5
 Based on Mazis's testimony, the Commission also found that the  Brand Equity Study, conducted by Ciba in 1993 (more than halfway  through the 8-year campaign), "provides strong evidence that the  advertising had already influenced consumer beliefs."  Understandably, however, neither Mazis nor the Commission placed much  emphasis on this study.  To determine whether the advertising  campaign produced an increased perception of Doan's superiority  that will continue after its termination, the crucial points to compare  are the start and end of the campaign.  See JA 782-83 (Mazis  explaining that, by comparing A&U and NFO studies, "we can see,  'Did beliefs change?' ").

6
 While Mazis found that the A&U and NFO studies showed only  "a slight increase in beliefs about Doan's from 1987 to 1996," JA  788, he opined that even a slight increase was significant because  consumer belief in the efficacy of the other three pain-reliever  brands studied went down during the same period.

7
 The Commission also relied on three circumstances to infer the  advertising's lingering effect:  "[T]he challenged claims were (1)  very salient to consumers (because superior efficacy is among the  primary considerations for a consumer in selecting a back pain  remedy), (2) clearly and consistently conveyed by the challenged  ads, and (3) an integral part of an eight-year campaign," in which  Novartis "spent approximately $65,000,000 disseminating these  claims."  Comm'n Dec. 30.