In Defense of the Pfizer Factors

Abstract

Since the Federal Trade Commission’s 1972 Pfizer decision, advertisers have been required to possess and rely on a “reasonable basis” for product claims. From its inception, the requirement was a flexible one, taking into account the costs and benefits of requiring additional substantiating evidence. In particular, the Commission has considered the relative costs of possible errors in setting the level of evidence, evaluating both the costs of mistakenly allowing false claims and the costs of mistakenly prohibiting truthful claims. In contrast to the FTC, the FDA applies a less flexible standard, often requiring elaborate scientific evidence before even non-drug products can make claims about health and nutrition benefits. In a notable clash between these conflicting approaches, the FTC, joined by the National Cancer Institute, overcame the FDA’s objections to Kellogg’s 1984 claims that diets high in fiber could reduce the risks of cancer. Despite previous bipartisan application of the substantiation doctrine, the current FTC is replacing its flexible standard with stringent evidentiary standards similar to those required for new drugs. This approach threatens to deny consumers the benefits of information that enhances the performance of product markets.

Keywords: acai berry products, Advertising Substantiation Policy Statement, Better Business Bureau, cancer, cereal, dietary supplements, education, false, fiber, Firestone, First Amendment, Food Drug Administration, free speech, George Stigler, labeling, Lanham Act, NCI, nutrition, public comment

JEL Classification: I18, K23, L65, L66, Q18