Round 3: Lane Labs in Contempt of FTC Order

NEWARK, NJA federal judge ruled last month Lane Labs' marketing claims for AdvaCal product places the company in contempt of an FTC order, issued in 2000, barring the company from making unsubstantiated health claims  for foods or supplements.  Hon. Dennis M. Cavanaugh, U.S. District Court of New Jersey,  ruled the company's claims AdvaCal is three- to four-times more absorbable than other calcium products, including pharmaceuticals, were in contempt and that the company was not in substantial compliance with the order.

The final order stems from a case brought in 2000 against Lane labs and its founder, Andrew Lane, who were charged with making unsubstantiated (drug and disease) claims for several products including Benefin, MGN-3 and SkinAnswer.  The courts ruled in favor of FTC, and the final order required the defendants have "competent and reliable scientific evidence" to substantiate any health claims for a food or dietary supplement; it also prohibited them from misrepresenting any tests or research.

In 2007, FTC filed charges alleging the defendants were in contempt of this final order with its marketing and advertising for AdvaCal, which claimed to be substantially more absorbable than other supplements and prescription drugs. A the time, the district court ruled against FTC, citing concerns about fundamental fairness and noting FTC did not consider defense compliance reports in a timely manner. Lane called this ruling, "a clean sweep." However, a Third Circuit Court of Appeals overturned this ruling in 2010, rejecting the defendants' claims  of substantial compliance and remanding the case back to the district court for reconsideration whether the claims made for AdvaCal violated the final order.

Specifically, the court and Judge Cavanaugh looked at whether:

Cavanaugh wrote, while Lane Labs argued AdvaCal was marketed primarily post-menopausal women at risk of or suffering from achlorhydria, a condition featuring the deficiency of hydrochloric acid from gastric secretionspatients tend to have calcium absorption problems.  Therefore, Lane Labs argued it did not marketed to a wider audience and , therefore, did not promise unattainable results to a wider population. On the other side, FTC produced evidence AdvaCal was marketed to a wider audience via an infomercial, Lane Labs catalogue, a letter to consumers, the Lane Labs website, direct mailings, a Health Sciences Institute newsletter, communications to retailers, telemarketing scripts, marketing plans, mailing lists, and outside publications.

"While this testimony creates the impression that Defendants may have believed they were marketing primarily to older women at risk of achlorhydria, the factual evidence related to Defendants actual advertising practices makes it clear that AdvaCal was marketed to men and women of all ages," Cavanaugh stated, in his ruling. He further noted, "... even if AdvaCal was in fact three to four times more absorbable amongst elderly achlorhydric women, Defendants still would have promised unattainable results to large portions of their marketing audience."

FTC also argued Lane Labs misrepresented research, claiming AdvaCal "has been clinically shown to increase bone density by as much as 10 percent per year.  The agency said the use of "per year" in the claim indicates an increase by ten percent over multiple years, which is not substantiated.  FTC noted testimony from two experts who said such per year results were unlikely. However, Cavanaugh ruled the claim also used the phrase "as much as," which means the it did not violate the order. Despite this small victory, Lane Labs was ruled to have misrepresented research and studies when it used a Two Year Spinal Bone Density Changes Graph" in its AdvaCal marketing.  Cavanaugh stated the graph is in violation because it compares spinal and radial bone density changes, but does not indicate the use of radial bone density information.  Another graph, Bone Density Increase with AdvaCAL," was deemed violative due to similar reasoning.

The bigger issue might be that of substantial compliance.  , "The Court has no doubt that Defendants acted in good faith, and took all reasonable steps to comply with the Final Order," Cavanaugh wrote, but noted this does not necessarily mean they are not in contempt on this issue. He explained the defendants had to show they acted in good faith and their violations were technical an inadvertent. The defense argued disclosures made to the FTC, substantiation for their claims and their practice of marketing AdvaCal as an adjunct to prescription osteoporosis medications were all evidence of good faith and inadvertent violations.  Cavanaugh did not agree. He did, however, note FTC's substantial delay in filing the contempt suit (2007)many of the violating statements were made in 2001might have given the defendants the impression it was in compliance.

Despite the potential impact of FTC's delay, Cavanaugh said the issue still rested on Lane's actions. "Defendants cannot simply rest on their good faith efforts in answering this question, and as such, the issue of the FTCs delay is irrelevant," he wrote. He said the arguments the defendants had substantiation for bone density increases is irrelevant, because the issue of substantiation was already decidedthe Third Circuit already ruled the defendants did not have such substantiation.  Cavanaugh further noted the defendants' argument the product was marketed as an adjunct was not sufficient, because the Third Circuit ruled the claim AdvaCal was comparable to prescription medications was in violation.

In the end, he ruled the argument of substantial compliance does not apply to the remaining violations in this case. He ruled the violations were not due to delay in response, mistake in form or simple oversight. "Rather, this was a consistent, substantive violation of Section III of the Final Order, and as such, was a violation unprotected by the defense of substantial compliance," he wrote.  Likewise, he ruled substantial compliance did not apply to the Section IV violations (misrepresentations), as both violations "went tot he core of Section IV." He explained while the violations appear to be minor compared to those of Section III, they were not the result of oversight or neglect. "Defendants chose to make the claims at issue, and chose to widely distribute those claims," he stated. "The Court cannot find a violation under those circumstances to be either technical or inadvertent.

FTC reported the district court will rule later on monetary damages required by the defendants.

See Judge Cavanaugh's ruling here.