Washington, DC - “No need to be fat. No need to diet or go through unpleasant exercise.”...“Your thin friends can tell you the right way to fight fat.”...“Men avoided me. I was too fat.” Sounds like a lot of the bogus diet promotions the FTC has gone to court to shut down. But there are two things different about this false advertising case.
First, it went to the Supreme Court. And second, the year was 1931.
For the first two decades of the FTC’s existence, there was little challenge to the agency’s consumer protection mission. Section 5 of the FTC Act outlawed “unfair methods of competition.” Luring buyers in with false claims surely was unfair to competitors who were playing by the rules. Right? Not so fast, said the Supreme Court in FTC v. Raladam Co., 283 U.S. 643 (1931).
Strange as it now seems, what teed up the statutory showdown at the Supreme Court was a change in fashion. Thanks to the willowy Gibson Girl and lissome Flapper, the pages of women’s magazines were filled with ads for pills and potions promising easy weight loss. “You must be slender to have bobbed hair,” one ad dictated.
Decrying the rise of “anti-fat fraud,” one Commissioner observed in a 1926 editorial that “Fabulous sums are spent on these fakes since the female skeleton became the fashion.” He also noted the difficulty of prosecuting weight loss fly-by-nighters: “They are usually fleet and cunning crooks that engage in the business. When located, they fold their tents and silently vanish, and commence business again in some new locality, under some new name.”
Against that backdrop came Marmola, a purported weight loss miracle made of a little desiccated thyroid and a lot of laxatives. The campaign used the trifecta still seen in the marketing of diet products: claims of scientific substantiation, testimonials from supposedly satisfied customers, and endorsements by Hollywood celebrities – in this case, Constance Talmadge, star of films like Virtuous Vamp, The Moonstone of Fez, and Mrs. Leffingwell’s Boots.
Finding Marmola to be ineffective and possibly dangerous, the Commission ruled that “the acts and practices of the respondent are all to the prejudice of the public and of competitors.” The Supreme Court, however, framed the issue differently: “If the necessity of protecting the public against dangerously misleading advertisements of a remedy sold in interstate commerce were all that is necessary to give the Commission jurisdiction, the order could not be successfully assailed. But that is not all.”
At that time, the plain language of Section 5 outlawed only “unfair methods of competition,” and the Supreme Court wasn’t persuaded that the trial record sufficiently demonstrated that competitors were injured by the company’s practices. “None of the supposed competitors was called upon to show what, if any, effect the misleading advertisements had . . . upon his business.” Absent that proof, “It is impossible to say whether, as a result of respondent’s advertisements, any business was diverted . . . from others engaged in like trade.”
The Court noted the irony: “Certainly, it is hard to see why Congress would set itself to the task of devising means and creating administrative machinery for the purpose of preserving the business of one knave from the unfair competition of another.” Nonetheless, it ruled against the Commission, concluding that proof of “the existence of competition” was necessary for an exercise of jurisdiction under Section 5.
Two important post-scripts helped shape the FTC’s modern consumer protection mission. First, the staff went back to the drawing board and in 1935 sued the company again for additional deceptive ads. “This time,” Justice Hugo Black wrote for the unanimous Court in FTC v. Raladam Co., 316 U.S. 149 (1942), “the Commission found with meticulous particularity” that the sellers of Marmola “had made many misleading and deceptive statements to further sales,” that the company had “many active rivals for the trade of those who were interested in fat-reducing remedies,” and that the claims would mislead consumers and “divert trade” from competitors. Thus, the FTC was successful in meeting its burden that the company had engaged in unfair methods of competition – the limit of Section 5’s scope when the second lawsuit was filed in 1935.
More far reaching, however, was the 1938 passage of the Wheeler-Lea Act, which amended Section 5 to prohibit not just unfair methods of competition, but also “unfair or deceptive acts or practices.” Of course, competitive considerations remain a relevant factor in the Commission’s exercise of its consumer protection authority. But Wheeler-Lea put the focus on consumer injury, relieving the FTC of the burden of proving that the practices on one scammer harmed the business of other shady sellers.
Although Marmola is long gone, it left a host of questionable successors. As long as advertisers continue to sing the siren song of easy weight loss, the FTC will challenge deceptive practices under the consumer protection provisions of Section 5.