Are Pre-Launch Statements Now Within the Range of the National Advertising Division?

In a bold departure from its focus on allegedly misleading and deceptive statements in commerce, the National Advertising Division’s (“NAD”) decision in PLx Pharma, Inc. (Vazalore), Report #6912, NAD/CARU Case Reports (December 2020), arguably stretches its jurisdictional scope to include certain pre-national launch investor statements.

Background of the Decision. Bayer HealthCare LLC, the entity that developed the first modern products to use the active ingredient in aspirin, challenged several superiority and performance claims made by PLx Pharma, Inc. in connection with its pre-launch aspirin product, Vazalore. While the assessment of PLx’s substantiation in the form of competent and reliable scientific evidence proceeded without special note, PLx, as an initial matter, challenged the jurisdiction of the NAD to render a decision on this challenge. According to PLx, the challenged claims were not part of a national advertising campaign and indeed related to a product that was not yet available. In fact, the challenged claims were made on what PLx described as an investor-focused website and its corporate website. PLx raised the procedural challenge that the NAD’s own description of its jurisdiction in its NAD/NARB Procedures limited the scope of review to “national advertising” a term defined as “any paid commercial message, in any medium (including labeling), if it has the purpose of inducing a sale or other commercial transaction or persuading the audience of the value or usefulness of a company, product or service; if it is disseminated nationally or to a substantial portion of the United States, or is test market advertising prepared for national campaigns; and if the content is controlled by the advertiser.” The NAD did not agree, concluding that even though Vazalore is not yet available for sale, its advertising had the purpose of “persuading the audience of the value or usefulness of a company, product or service” and thus was within the scope of challenge. Nothing particularly that consumers could access the investor-focused website and several of the challenged claims spoke directly to consumers (e.g. “If recommended by your doctor…”), the fact that the product was not yet for sale did not preclude NAD’s review.

Potential Gates on the Scope of the NAD’s Position. In reaching its jurisdictional decision, the NAD nodded to several facts that supported NAD review, namely that the statements were accessible by the general public and that they appeared to speak directly or solicit the enticement of consumers. It leaves open the question of whether claims made within the bounds of a closed investor meeting or confidential investor documentation would not be subject to inclusion.

Could this Decision have broader impact? The NAD has long since been a popular forum for competitors to assert objections particularly because it is viewed as a challenger-friendly venue in which the advertiser bears the burden of providing evidence to substantiate the claims made. The NAD’s decisions, while not granting injunctive or monetary relief, are no less potent, as they are published and sent to various government enforcement agencies.  If a company declines to change advertising deemed to be misleading by the NAD, a special notice is sent to the FTC about the case and advertiser, and the FTC may take action based on that notice. Expansion of the purview of the NAD could thus raise interest and potential action taken by these downstream agencies.

Takeaways and Best Practices. While cautious entities certainly take care with the contents of their investor materials, this Decision raises questions as to a necessary extra level of rigor in ensuring that the materials and statements are not open or available to potential consumers. Advertisers may seek to run investor materials through marketing legal clearance regularly going forward, recalibrating the scope internal and external specialist approvals required. Of course, this is not the first time that the NAD has opined on the metes and bounds of its jurisdiction without seismic impact. While advertisers may now be more aware of the dissemination sphere of its pre-launch claims, whether December’s PLx decision will signal a new avenue of challenges remains to be seen.

By Katherine L. Staba

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