Federal Trade Commission v. Precision Patient Outcomes, Inc.

Background

The Federal Trade Commission sued Precision Patient Outcomes, Inc. and other defendants concerning advertising for dietary supplements. The defendants moved to dismiss the case. The opinion addresses four arguments: the FTC’s constitutional authority to bring the action, its authority to regulate advertising for dietary supplements, the allegations involving the names COVID Resist and VIRUS Resist, and the request for injunctive relief.

FTC’s constitutional authority

The defendants argued that the FTC could not constitutionally bring the action because FTC Commissioners may be removed only for cause. The court rejected that argument as clearly foreclosed by Supreme Court precedent, including Humphrey’s Executor v. United States.

FTC authority over dietary-supplement advertising

The defendants argued that the Food and Drug Administration had exclusive authority over dietary supplements. The court found that the defendants cited no authority establishing exclusivity and concluded that Congress had authorized the FTC to bring cases involving false advertisements for food and drugs under the FTC Act.

The defendants also argued that the Dietary Supplement Health and Education Act of 1994, a law specifically addressing dietary supplements, controlled over the FTC Act because the two laws supposedly conflicted. The court found that the defendants had not identified a conflict. It explained that the dietary-supplement law requires support for certain “structure/function” claims to ensure that they are truthful and not misleading, and noted that the FDA has interpreted that support requirement consistently with the standard the FTC seeks to apply. The court further stated that the defendants had not shown that the dietary-supplement law was intended to displace the FTC Act.

COVID Resist and VIRUS Resist allegations

The defendants argued that the FTC could not bring a deception claim based on the name COVID Resist because the vitamins were not sold under that name. They said they changed the name to VIRUS Resist after receiving a letter from the FTC. They also argued that the complaint did not distinguish adequately between the two names and therefore failed to meet Rule 9(b), which requires fraud-based allegations to be stated with particular detail.

The court stated that the FTC was seeking only civil penalties related to COVID Resist and therefore did not need to show that the product had actually been sold. The court also found that the complaint plausibly alleged that the defendants marketed the product under both names. It pointed to a product page that used VIRUS RESIST at the top while telling consumers to take “COVID resist.” The court concluded that the complaint adequately alleged that consumers relied on both names and did not improperly combine allegations concerning the two products. It also found that the complaint’s other allegations met Rule 9(b)’s particularity requirement.

The opinion’s final notation states that the FTC was seeking consumer redress related to VIRUS Resist and that the FTC’s motion for leave to file a supplemental reply clarifying that issue was granted.

Injunctive relief

The defendants argued that the FTC could not seek an injunction under Section 13(b) because they had stopped selling VIRUS Resist. The court found that the complaint plausibly alleged that the challenged misconduct was likely to happen again. It therefore concluded that the FTC could seek injunctive relief.

Disposition

The court denied the defendants’ motion to dismiss. It also granted the FTC’s motion for leave to file a supplemental reply clarifying the consumer-redress issue.