What You Can - and Cannot - Say About Your Products - Episode 28

Welcome everybody to this edition of CPG Insiders. I'm your host Marc Young with my co host Justin Gerard and hello. We're keeping our six foot distance. Not really, but we're doing the best we can. Justin, we have a great guest today, someone I've known for a long time. His name is Ashish Taladi. Now Ashish is with a law firm which is Amin Taladi and Wassermans. And these guys are real experts in the FDA FTC advertising laws. We also use them for trademarks and copyrights. So this is going to be a great show with a lot of stuff that people want to hear. So Ashish, welcome to CPG Insiders.

Thank you. Thank you so much. Mark, thanks for inviting me. Happy to be here.

Well, let's jump right in here. Where I want to start, Ashish is so a lot of people know obviously we're in the advertising business and the show is about the consumer packaged goods business. So oftentimes advertisers have advertise a manufacturer comes out to us and they have a product and maybe their products nutritional or it's over the counter or it's a beauty product, cosmetic and it does lots of wonderful things. And sometimes those wonderful things kind of border on sounding like even drug claims. What kind of risks do they involve? How do they determine, where do they start? How do they determine what they can say, what they can't say? How do they get started with it?

Great question. One of the things that we recommend and I think the companies can do is first understand where your product falls into in terms of FDA or any federal agency that regulates that category. So there aren't that many. Majority of times any product that's being used or applied to humans or consumed by humans or animals falls under, you know, either a food, a dietary supplement, cosmetic, drug, medical device. If it's none of that, then it could be a consumer product. But majority of times, you know, those are the categories. So understanding where you fall in is the key and then that will decide the rules that you have to comply with. So you know, a beauty product that is a cosmetic can make cosmetic types of claims but they cannot make any treatment, prevention or cure or disease claims. Food and supplements have some of the requirements as well. Drugs can certainly make disease prevention treatment claims and so can medical devices and depending on how it's being marketed. So I think a lot of it is to answer your question, just understanding the category you are in first.

Okay, so if you would walk us through the different categories because we have what we have Cosmetics, we have supplements and nutrition. We have OTC drugs. Could you kind of break them down for us?

Sure. So first one it would be, let's start with foods. I mean, foods are, you know, yogurt and smoothies and things like that, conventional food products that are used for their nutritive value or roma, you know, they provide some sort of nutrition. But beyond that, you know, foods are not typically marketed, you know, some sort of a prevention of a disease or treatment. You know, that's not what foods are for. So that's the first category, a step up in terms of claims. I would say dietary supplements, which is a subset of foods. But, you know, dietary supplements, you're looking at vitamins, you know, they could be tablets or, you know, pills and gummies, and they could be in powder and bar as well. But typically, dietary supplements are something that you take to supplement your diet. They can make what's called structure function claims. So you can say, you know, calcium helps with healthy bones. You can say fiber helps with digestion. Those types of claims are called structure function claims. And companies can make those. What they can't say is this will treat your inflammation or will help with your some sort of condition.

So even if I have a supplement. Let me stop for a minute. So even if I have a supplement, so let's say my supplement is turmeric, and turmeric is shown to reduce inflammation. But because turmeric is not a drug, I can't really say it reduces inflammation.

That's right, and that's a great example because there is, you know, lots of science, or at least companies claiming that turmeric can help with all of that. But legally speaking, you know, inflammation is one of a, what I would call a gray area claim where there's a lot of controversy. FDA's position has been that inflammation is not normal in the context of someone having it and needing some sort of a turmeric or some drug to help lower it. And therefore any type of inflammation claims would be considered disease claims. The industry has argued that while inflammation is normal and every day you don't have to be sick, you can still experience inflammation. And that could be something that may fall under a pediatric supplement. We do see that. You know, that's something that FDA does not go after companies just for saying that. But yeah, in their opinion, inflammation is not unless qualified. Even then, qualifying is hard, but it would not fall under dietary supplement claims.

Okay, let's go ahead and continue with your next one. I'm going to come back to a couple of things Go ahead.

Sure, sure. So then it would be drugs. And the drugs fall under either OTC monograph, which is basically a recipe book that outlines the ingredients and can companies use and claims that companies can make essentially sunscreen. Sunscreens are drugs. And then if you put in one of the ingredient that's listed in the OTC monograph and make the claims that they tell you and you can, you don't need a pre approval from the agency, you can continue to market, that would be OTC drugs. Then you have prescription drugs, those are, they require FDA approval. And then generic drugs that come off from off patent, they also need FDA approval. So any of those products that fall under drugs, unless you are OTC drug, the others, you need FDA approval.

Now where do the devices come in? So let's say I'm making a device to lower stress levels, or I've got a device that helps you meditate better, or I've got a device that you, that you use to lower your blood pressure.

That's a very good question. You know, so before medical devices, the distinction is that they don't work chemically. Okay. So essentially anything that has some sort of a chemical reaction would fall under the drug path. Medical devices don't act like that, but they do affect structure and function. Historically, you know, the device would fall under different classes that FDA has as a Class 1, Class 2, Class 3. The higher up you go in terms of risk and invasiveness, the it would be in a Class 3 that requires FDA approval. Class 2, and some Class 1 devices require 510 and a majority of the Class ones don't need 510k process. The key though what happened was several years ago, as the technology was changing, companies would come out with what's called the lifestyle devices or health and wellness devices that didn't really treat or make any claims for treating a condition or affecting a condition, but more of a lifestyle. So in your example, stress and meditation, the FDA would keep getting requests for reviews and certainly they decided that those types of devices, what's called wellness devices, they would not consider them to require any approval process or review by the agency. So they would just fall outside of the Class 1, Class 2, Class 3 category. And FDA would just allow those devices to stay and market in the market, assuming they don't make any aggressive disease claims. So they have a guidance on it in terms of what they consider. But a stress or meditation type of device would basically be marketed by companies without any FDA review.

Now what about some of the products like photomodulation, where you have infrared and near infrared light. And the claims might be increased circulation, increased hormonal response, things like that.

Those fda, depending on how it's phrased, and a lot of them are very nuanced, would consider medical devices and they may fall under Class 1 or Class 2. But that's where the distinction is in terms of is this something that I need, gives me some useful information without affecting any structure or function of my body. So if it does, then FDA would say, okay, that's something we want to look at. And companies will have to evaluate. There is an existing list of devices that are in the class once. If it fits into one of those category, then that's what you are. If it doesn't and it's something new, then we'll have to talk to the agency and see where they would categorize it at.

So we've seen a lot of increase in auditory types of devices. You were mentioning more light based, but a lot of auditory. And there's been. That's always been interesting. And you know, we've seen a lot of products lately that have been in that kind of space. So they're trying to make claims that seem structural but not how are you, how is that changing?

So it's not changing in the sense that if it's more as to, you know, like in the example that Mark was giving the blood pressure, you know, any blood, anything that measures blood pressure would be a medical device that FDA regulates. And it's not something that, because it gives information that's critical. Right. If your blood pressure is very low or high, that can really affect someone, but something that shoots out, you know, information that is really not critical in number of steps that I took today, you know, there's nothing to do with medicine and that's not something that FDA would be interested in. So it comes down to what the company is trying to say. And as you know, in advertising there's always this battle. You want to be very concrete in terms of what a consumer can experience and get out of it. But then the more concrete you get, that will run into an FDA issue. Branding it in a way that gets the message across. I think that's where, you know, organizations like yours come into play is understanding the, you know, FDA regulations as well as the marketing and what works and coming up with a plan that kind of minimize your risk at the same time gives the brand the marketing that it needs.

You know, so Ashish, we've talked about the fda. Now let's switch over to the ftc. Now what's different about the FDA versus the ftc.

So FDA regulates the products in the context of like we talked about. Is it a food or a supplement or a cosmetic or a medical device or a drug? That's what they are focused on if FDA is a public health agency. So their primary motive is to make sure products are safe. Ftc, Federal Trade Commission regulates advertising. So they're more in the context of truth in advertising. So you could be, you know, a food or a supplement or a cosmetic. They don't really care in terms of how it's categorized. What they really care is anything that you put out in terms of brand and the efficacy and advertising. Is it truthful? Is it accurate? Does the company have adequate substantiation or backup to support the claims that they're making? So a lot of times that's what most companies get into problems with is FDA is whether you fall into all the categories and you're complying with it. But claims is where a lot of the action is because you not only have the Federal Trade Commission that's pretty active, but you also have the plaintiff lawyers in the consumer protection laws of different states where they have the same truth in advertising laws and regulations that they have to comply with.

So let's expand on that for a minute. We've had several clients who get attacked with what I'm going to call bogus class action suits, all out of California. Most of them are out of 1 out of 3 lawsuits or law firms. And they will attack companies for ridiculous reasons. Is there anything that companies can do to protect themselves from this stuff?

They can. And I think first thing is understanding and having work to work with a lawyer or law firm that specializes in this space. Because we do see that a lot of times when companies get one of those letters, their initial reaction is, what do I do now? And then they work with another lawyer that has no experience, their general counsel or just a corporate lawyer. And it's very important because how you respond and how you handle those letters really gets down to if you're going to pay any money or not. You know, majority of this, like you mentioned, you know, majority of this are coming from law firms, what we call them bottom feeders. And at the end of the day, they're trying to make some amount. It could be five grand, 10,000, 15,000. They're really not interested in pursuing it beyond a quick settlement. And, you know, that's where companies can really save a lot of money. Because, you know, we have had situations where, where we have written back or talked to these companies, law firms, and said, look, you really have no case because we know exactly what FDA says and this is how it is. And many of the times they argue for the sake of arguing, but they're not the true experts in it as well. So that is important. The other thing is sometimes they are too indeed correct in the sense that the type of cases that we see or letters that we see, for example, in the natural space making my product, it's natural, natural this, natural that. And because there is no legal definition by the fda, it is, you know, a very gray area. We see a lot of action in that space. So arguing that this ingredient is natural or it's not natural, you know, takes a long time. No one really has any time to litigate. So you may end up paying some sort of dollar value to that attorney or the law firm. But again, understanding what it really is and what the exposure is makes a huge difference. What people don't recognize is majority of the money goes to the attorneys. You know, so they, you know, they write a letter saying, on behalf of my client, I'm writing this. And you would think that the client is getting, you know, like we have had settlements where, let's say $10,000, their client is getting $200 and $9,800 is going to a law firm. So the motive behind these law firms, obviously they're just trying to, that's their M.O. in terms of business model. But yeah, we deal with those a lot. At any given time, we have 10 or 15 of those letters and they were trying to take care of it on behalf of our clients.

Now the ftc, they control more than just, you know, the food, drug, mass business. They control banks or car dealers and things of that nature also.

Right.

Or would be involved.

That's right, that's right. It's a Federal Trade Commission. Yep. Any type of trade. Yeah, they do. You know, and all of that boils down to they have severe regulations in place in terms of what the trades can do and say and all that. But in the CPG space, their primary, you know, jurisdiction in terms of what they're looking for is truth in advertising and making sure that when companies say that this is fast acting, it works in five days or five hours. All of that is backed up sufficient science and evidence.

So if I wanted to do everything wrong, what would I be doing in order to cause an FTC investigation of my company? What are all the stupid things I can do to get myself investigated by the ftc?

I mean, let's look at the current situation in the marketplace, you know, the virus, right? And then what you see right now is, you know, companies launching products left and right implying or coming out and saying it, that their product will help you with the virus and you may not get it. Or even we see during the flu season companies come up with those types of products. A lot of those products have no science. And you know, that's where FTC and they often work with the FDA together to warn companies not to launch those types of products or make those claims. Their primary objective is, you know, they're targeting population that is kind of desperate or they're looking for something and they may try something. So it's still an economic harm, but at the same time it could prevent someone from using real solution that may have science. So it's something they target. So anyone who wants to launch, to answer your question, at the end of the day, is anything that is too good to be true, right? You know, in the marketing space, you know, saying, hey, this will work now work today as fast or fast acting, 10 days, you lose £50 in one week. You know, any of that that seems really aggressive and those are the companies that are the ones that the FTC wants to go after. The thing that people don't realize though is, you know, as any government agency, they don't move that fast, but when they do move, you are in it. You know, they make sure that they could take it all the way. So, you know, a lot of times we have companies that say, well, what are the chances of me being investigated by the ftc? But when and if it does happen, you essentially are going to go all the way where they will make sure that, you know, if there is some sort of a judgment against you, it will stay with you for a long time. So your cost of defense is high and then any amount that you end up paying is high. So it's, it's not something to mess with. And certainly in the class action space we see that as well. When the FTC is not working or moving as fast, you see these plaintiff lawyers, because this is their business model as well. So it's something companies have to be careful for in terms of making sure there is adequate substantiation and what I call is putting yourself on a higher ground. At the end of the day, you may not have perfect science, you may not have perfect data, but what are the things that you do to make sure that when you do get a letter from plaintiff's lawyer or from the FTC in opening an investigation, you have enough to reply and argue. When you don't have anything, that's when you run into a lot of issues.

Are you noticing with your experience any particular category types that are under more scrutiny from the ftc?

Anything that targets what they call a population that is desperate. So it could be, you know, we see a lot of issues in the brain health, memory space, targeting elderly. We see, you know, flu types of products or kind of the virus up products that again target population that looking for something. Weight loss is another category that always, you know, keeps the agency busy. But basically anything that they feel that someone is being targeted because they are desperate to look for a solution.

Now what gets people on the radar is it I've got a big ad campaign or is it I sold a lot of terrible product and not given refunds and consumers are complaining all of that.

It could be, you know, the more complaints you have, I mean that does, you know, get into, you know, FTC will look into it, the ad campaign and how prominent you are, you know, if you're on TV or radio every day or all the time. And that obviously will increase the chance of someone listening or watching will say okay, this doesn't seem right, we need to look into it. But even when the company is not big nowadays it costs nothing to put up a really fancy website and make you look really much bigger than you really are. So the FTC has no way of knowing if you are a 100,000 brand or you're 100 million brand. They certainly look at it, do their investigation. They cannot opened, you know, cases on everyone. So they have to decide which ones they try to go after. And they try to go after oftentimes the market leader or a prominent company hoping that the message will get across throughout the industry. And then if no one else is doing it, then slowly and slowly they go after companies that are, you know. But we have seen them go after companies small and big all the time.

So I'm curious and with how Amazon has grown to be what it is, how has that changed the landscape in any way, shape or form? Whether it's more access to information because the reviews are more accessible to everyone, anything. How has Amazon affected things?

Amazon is. Yeah, I mean it affected in the context that companies can. There's a lot more direct to consumer, you know, you don't need, any of you don't need to be brick and mortar store. Right. You can have the same type of revenue if your product is really well and especially on Amazon it's all about reviews, you know, so what we do see is not more in terms of FTC or fda, but Amazon policing, you know, the marketers that are on their site. A lot of times, you know, companies do what they can to increase their reviews, but in terms of compliance, yeah, we do get companies asking as well. You know, if I put anything on my Amazon page, I mean, do I have to comply? And the answer is yes, it's still advertising and that you have to comply with. Now the reviews oftentimes can go beyond what companies can say, but because it's a third party website that you really have no control over, you know, the reviews don't have to be monitored. But at the same time, if it's your own website and you get testimonials and that's something that companies need to look out for and not promote. So if someone says, this cured my condition and it's on your website, then we ask our clients to remove those because it's within their control. If it's on Amazon's website, then they can't do anything.

So if somebody goes to Amazon and says product X cured my psoriasis, but it's a, it would be a beauty product, not a drug, right?

Yeah. That's not what you got to do, Right, Right. Right. Well, that's not how much you can do.

But now what if I take that quote from Amazon and I decide to put it in an ad and I decided to say, take a look at our reviews on Amazon, here's a customer that said X.

Which you can't do. Right. Because now you're essentially taking that and you're advertising it. So now you're doing something that you're controlling. So companies have to be careful. It basically the Amazon review just sits on Amazon and you don't do anything in terms of promoting it, advertising around it.

So what does the process look like when the FTC is going to come after me? Do they first send me a cease and desist letter and say, stop saying this and I can change my ads? Do they just come after me and say, we're coming to get you? What does it look like?

It really depends. Majority of the times, you know, they send you what's called cid, civil investigative demand, and that's essentially asking for more information. And it's pretty, you know, it could mean they're asking for everything under the sun in terms of when did you launch this advertising, what else have you done, how many of this and that. So it's a pretty thorough demand and then we respond to it. Oftentimes we can ask them to narrow the scope. That's how it starts. And then that could be also the company's opportunity to show FTC that everything they're doing is fully compliant. So if there's a specific advertising or claim that they're focused on, companies can respond with all the information to show that they're doing everything. They have substantiation, they have basis to make those types of claims. And if FTC were to review all that, then there could be something they can say, okay, we agree and we'll close this so they're not going to pursue it anymore, or they reach out and say, you know, basically that we have looked at this and we feel that there's not adequate substantiation. So then the dialogue continues. That's where having a good attorney helps, because a good attorney can really make the case for the company and minimize the impact. But what can happen is either you continue with this dialogue with the agency and at some point there could be a settlement. And that settlement could be, yes, the company will pay X amount of dollars or the company will stop making this claim. You know, and. But that's. Those settlements are public, but until the settlement sign, a lot of the investigation is not public. So there's also an opportunity for the company to do well and close it out. And that happens too. It's just that having a good attorney or someone that really knows the space helps.

But if there is a settlement, that gets published, right?

That's right, yes.

And those settlements could be, what do I understand that they could be as large as the dollar amount of everything that was sold with the bad information.

That's typically how FTC starts in terms of what they're looking for. And oftentimes that's not what you end up paying. It's just that, you know, they start, if you told sold 10 million, they would say, yes, we want 10 million, because there is no basis for this claim or not to be made. And since that was not the case, they didn't have substantiation that, you know, you need to basically pay back that much. Now, rarely it gets to that. Most of the times you settle out with really a lot less than that. What companies don't realize is just that the process of going through that, you know, is very burdensome and costs a lot of money in terms of attorney fees. So oftentimes it's depending on how much they have sold, it's in their interest to wrap it up as fast as they can.

So If I sold $10 million worth of my vitamins, and I did it wrong. And they asked me for $10 million, and they find me $10 million. Does the $10 million get redistributed to all of the people I sold it to, or does the government keep the $10 million?

It depends on how it's structured. It could be structured in a way that some of the consumers get certain amount of money, but a lot of times you can also structure it where it's not. It's just something that you pay to the FTC, but that amount is not 10 million. Could be 100,000, 500,000. It depends on how aggressive the language was, how many people that were affected and things like that, and how often if the company cooperates with the agency, that also helps. Oftentimes they're more than one party. You know, it could be the supplier and then the brand. So there depends on who's involved as well. But I think that how you structure the settlement with the agency matters. We have had settlements where there is no money exchanged. It's all suspended. And suspended means that the agency will say, well, we will. If you continue to comply and, you know, don't get to an issue five years, seven years, or 10 years, then we will suspend the judgment. And essentially you're not paying anything. So there are different ways to basically do this, but the key is to know that FTC is there as well, but you also have the plaintiffs lawyers as well. So there is much more. And FTC is not. You know, if you have thousand brands, there are way more plaintiffs lawyers out there that are active in the space than just the agency.

So if we can. I'm gonna switch gears for the last couple minutes here, Ashish, and your firm also will do things like trademarks and copyright. So if you would first, would you explain for our listeners what's the difference between a trademark and a copyright?

So the trademarks you're fighting basically is your, you know, brand name and logo and things like that. Copyright is your art or your manuscript or anything like that. You're making sure that no one else copies, you know, so you have movies that have copyrights. Right.

If I asked my company, would that be a copyright?

That would be a trademark? Yeah.

It'd still be a trademark.

Yeah. So the key is, you know, at the end of the day, when you create a new brand or new name or anything like that, you have two things. One, you want to make sure that you're not infringing on someone else's mark. Because if you're going to create media around it, you may get a cease and desist from someone because they claim that you're infringing on their mark. And the other is you want to protect the brand, that you're spending a lot of money creating awareness. So it's important to protect yourself in terms of your trademarks and branding strategy. And nowadays we see it's not just in the us, it's global. So companies that want to have ambitions to go outside the US should have a global IP strategy in terms of how they want to protect their brand.

Now we hear people talk about trademarks and copyrights and patents being violated by other countries like China and stuff. Is there any, is there any protection that's in the, you know, in the horizon or on the horizon to protect companies from that kind of stuff?

I mean, yeah, you have to be, you know, basically in those countries. I mean, you know, if you are not protected in, let's say country a, meaning you didn't file patent there, you didn't do trademarks there, then yeah, someone can, you know, do that. So it's, you know, that's why it's important to have, you know, it can get expensive. At the same time, you know, having a global strategy helps for brands that want to take the footprint, just not within the US but outside the US as well. @ the end of the day, there are some countries where no amount of protection will help you just because their standards are just not there. But what we say to companies is, you know, you want to think about all that because if tomorrow someone in that country starts selling under the same name and they're putting a product that's severely quality is not there or anything like that, it can affect your branding. And not just in that country, in the U.S. so knowing all that really helps. But I think that the trademarks are very important and we definitely do a lot of those.

So. Sheesh. If you could tell us a little bit about your law firm real quick, give us a name again and tell people how they can get in touch with you. And of course we'll put links in the show, notes to your website and everything.

Sure, sure. No, and thank you. You know, thank you for inviting me. We are 24 lawyers where we have two offices where, you know, Chicago office and we also have an office in Washington D.C. and basically we're in a, in a niche practice. Essentially what that means is all of our clients are in the consumer product goods, lament many of them when what's better for you category. So they're coming up with, you know, Better pizza, better popcorn or something innovative.

That your practice by the way mirrors our practice in advertising.

Yeah, that's right.

That's all we do.

Go ahead.

Exactly. And you know, it's just some, a differentiator. And that essentially is what they are doing, you know, so. And that could be foods, supplements, cosmetics, medical devices, drugs, consumer products, cleaning products that are under EPA. And we do that for about, I think 1,000 plus companies from all over the world. They're selling in the US and we have four practice areas. Our compliance group does FDA FTC advertising. We also do, you know, meat products in the USDA and cleaning products in the epa. But we do that every day. So what can you say? You can't say the claims you can make. We review radio shows and TV commercials every day as well. And then on website, social media enforcers, you know, affiliate programming, all that, we do that. And then our IP group does patents, trademarks, copyrights for those companies. Our transactional group does supplier agreements, distribution agreements, licensing agreements, and then our litigation team litigates. So that could be a contract dispute, trademark dispute, could be false advertising, class actions. So it's a pretty niche practice. We don't do computers or corporate law, anything like that. We do M and A on the due diligence side from buy and sell side. So that could be a regulatory IP. And we've been doing it for about 20 plus years. So happy to help. And people can reach us@websites ameentaladi.com and my email is ashish mintaladi.com thank you for having me.

We'll put those in the show notes.

Yes.

And I want to tell folks, by the way, I've worked with Ashish for many years. If you don't have a law firm who understands your advertising and claims and FDA and FTC issues, this is a really good choice. And I will actually say that you guys are incredibly, I shouldn't tell you this because you probably raised my rates. You guys are incredibly reasonably priced too.

Yeah, thank you, Mark. I mean absolutely. And yeah, no, we go back I think 2005, 2006. Long time. So it's been a long journey but we have a lot more years to go as well. So thank you so much. I really appreciate it.

So folks, that's it today on CPG Insiders. If you like the show, leave us five star review, pass it on to other people in the industry that you think can benefit. And Justin, I'll see you on the next episode. If you're looking to greatly increase sales on your CPG product. Don't hesitate to contact us at Jekyll and Hyde Advertising and Marketing. By the way, the only advertising agency with a guaranteed result. Just go to jekyllhideagency.com or feel free to give us a call. Call at 800-542-10.