Who’s on First: The FDA or the FTC?

Abbott and Costello’s “Who’s on First” comedy routine never gets old – and it is a quintessential example of a circular conversation. But in the context of food, drug, device, and cosmetic lawsuits brought under consumer protection acts, we are faced with a similar, though far less humorous, circular conversation. Because the question these lawsuits raise, or at least should raise, is who is really in charge: the Food and Drug Administration (FDA) or the Federal Trade Commission (FTC).

The FDA is charged with protecting the public by evaluating the safety and efficacy of, among other things, drugs and medical devices before they are put on the market.[1] The FTC is charged with protecting “consumers by stopping unfair, deceptive or fraudulent practices in the marketplace.”[2] Both the FDA and FTC are empowered by Congress through a statutory framework, which gives both organizations the power to enforce their respective regulations.[3]

The FDA has an extensive regulatory framework that provides detailed requirements for pharmaceutical manufacturers to follow with respect to labeling and advertising of prescription drugs, even specifically noting what information must be included in a prescription drug advertisement.[4] The FDA regularly publishes guidance documents to assist companies with compliance. If the FDA believes that labeling or advertising for a prescription drug omits important safety information or is misleading, the statutory framework provides multiple routes the FDA can take to enforce its regulations: warning letters, forced label changes, recalls, asking companies to withdraw advertisements, and even seeking civil penalties.[5] The statutes empowering the FTC also provide methods of oversight including litigation, injunctions, and recovery of civil penalties.[6]

As a natural consequence of oversight in their respective fields, the FDA and FTC have some areas of overlap. Given the broad charge of the FTC, it is understandable that the organization cooperates with other groups and federal agencies. The FTC specifically addresses such cooperation in its regulations, stating: “It is the policy of the Commission to cooperate with other governmental agencies to avoid unnecessary overlapping or duplication of regulatory functions.”[7] The FDA and FTC have both recognized and acknowledged the importance and value of working together in the areas in which they overlap, particularly given limited resources and time demands on both organizations. One effort at clearing up any confusion, particularly with regard to the scope of the powers of the FDA versus the FTC, is in the plain language of the Federal Trade Commission Act (FTCA), which expressly exempts product labeling from the statute’s reach. Specifically, the FTCA defines an “unfair or deceptive act or practice” to include “the dissemination or the causing to be disseminated of any false advertisement”[8] meant to induce the purchase of “food, drugs, devices, services or cosmetics.” The FTCA then goes on to define a false advertisement as “an advertisement, other than labeling, which is misleading in a material respect.”[9]

In an effort to further memorialize this relationship and prevent potential conflict, the FDA and FTC entered into a formal Memorandum of Understanding. The current Memorandum has been in effect since 1971, and it updated and replaced two prior agreements between the organizations enacted in 1954 and 1958.[10] There is no question that the two agencies share a common objective to prevent deception to the public, as the Memorandum states: “It is agreed that the common objective of preventing injury and deception of the consumer requires that the statutory authorities and procedures, and the manpower and other resources available to each agency are so employed as to afford maximum protection to the consumer.”[11]

The Memorandum not only addresses purpose and intention, but it specifically lays out the primary responsibilities of each agency:

  • “With exception of prescription drugs, the Federal Trade Commission has primary responsibility with respect to the regulation of the truth or falsity of all advertising (other than labeling) of foods, drugs, devices, and cosmetics.”
  • The FDA, on the other hand, has the primary responsibility for preventing misbranding (mislabeling) of foods, drugs, devices, and cosmetics and for “regulation of the truth or falsity of prescription drug advertising.”[12]

The Memorandum is particularly deferential to the FDA when it comes to the complicated and scientific areas it is charged with regulating. “In the absence of express agreement between the two agencies to the contrary, the Food and Drug Administration will exercise primary jurisdiction over all matters regulating the labeling of foods, drugs, devices, and cosmetics.”[13] On its face then, when it comes to regulating areas involving prescription drugs, medical devices, food, and cosmetics, the FDA is “on first.” But unfortunately for the pharmaceutical and medical device industry, and even the cosmetics industry, state attorneys general have attempted to circumvent what should be a distinct delineation of responsibility between the FDA and FTC.

As discussed in detail in the 50-State Survey in this issue, 30 states, plus the District of Columbia, have explicitly instructed that their state consumer protection acts be interpreted consistently with the interpretations of Section5(a)(1) of the FTCA by the FTC and federal courts. For example, the Mississippi Consumer Protection Act specifically notes: “It is the intent of the Legislature that in construing what constitutes unfair or deceptive trade practices that the courts will be guided by the interpretations given by the [FTC] and the federal courts to Section 5(a)(1) . . . , as from time to time amended.”[14]

This is plain language of statutory construction and intent: follow the interpretations of the FTCA. Given the plain language in the Memorandum, the FTCA does not extend to the labeling of food, drugs, devices, and cosmetics because such labeling is exempted from the FTCA’s reach. For all states that look to the FTC for guidance, it follows that their “Little FTC Acts” also do not reach the issue of labeling of food, drugs, devices, and cosmetics because labeling claims are outside the scope of those acts.

And when looking at the issue, such deference makes complete sense. Why would the FTC not defer to the agency tasked with overseeing the complex regulatory and scientific arena of prescription drugs and medical devices? It is the FDA, not the FTC, that has scientists, epidemiologists, physicians, and pharmacists on staff to fully delve into the medical issues behind warnings and safety information.

But recently, trends are showing an increase in claims filed by individual states against pharmaceutical and medical device companies under these “little FTC’s.” In these actions, states allege that companies have violated the consumer protection act of that state by failing to disclose a material risk in its prescription drug or device labeling. But as we already discussed, the plain language of the FTC, combined with FTC’s deference to the FDA in the realm of prescription drugs and devices as set out in the Memorandum of Understanding, should make this a dead end. Thus, in states with “little FTC acts,” the state court should defer to the way the FTC has interpreted such claims in deciding what conduct is actionable. And the FTC, for all intents and purposes, would defer to the FDA.

Unfortunately for many companies, however, this seemingly clear directive is being overlooked, underused, and misstated to confuse the issues, making “who’s on first” a mystery. Federal courts have recognized this limitation of the FTCA’s reach.[15] And because many state consumer protection acts specifically rely upon the FTCA in construing what constitutes an unfair or deceptive act, the state consumer protection acts should be similarly constrained. But state courts have so far been less receptive to recognizing the limitation of the statute’s reach. Instead, some cases are surviving initial motions to dismiss in lawsuits where state attorneys general are filing claims for monetary penalties against pharmaceutical and medical device companies for labeling decisions that the FTCA does not cover and that FTC would decline to address.

But it is not enough to be personally armed with the knowledge of who should be on first. This is an issue that, if you have not confronted yet, you are likely to face at some point as long as these types of lawsuits continue to trend. Practically, it is important not to be discouraged just because some courts are not applying the law in the way that seems proper. Instead, keep fighting for the plain language to apply. Raise awareness regarding the relationship between the FDA and the FTC and the Memorandum of Understanding and point out the clear limitations on the reach of the FTCA. Make the arguments every chance you get. Keep repeating that state consumer fraud statutes that defer to the FTC should be interpreted consistently with the FTC’s approach – and thus, that prescription drug, medical device, food, and cosmetic labeling (and advertising of prescription drugs) should not fall within the scope of such acts. And maybe, the argument will fall on sympathetic ears and resolve the “who’s on first” debate once and for all.

[1] U.S. Food and Drug Administration, About FDA, What We Do (November 14, 2018), https://www.fda.gov/AboutFDA/WhatWeDo/default.htm.

[2] Federal Trade Commission, About the FTC, What We Do (November 1, 2018), https://www.ftc.gov/about-ftc/what-wedo.

[3] 21. U.S.C. 301 et seq.; 15 U.S.C. 41 et seq.

[4] 21 U.S.C. § 352(n).

[5] 21 U.S.C. §§ 332-335.

[6] 15 U.S.C. § 45.

[7] 16 C.F.R. § 4.6.

[8] 15 U.S.C. § 52.

[9] 15 U.S.C. § 55(a)(1) (emphasis added).

[10] Memorandum of Understanding Between the Federal Trade Commission and the Food and Drug Administration, 36 Fed Reg. 18539-02 (September 16, 1971).

[11] Memorandum of Understanding, 36 Fed. Reg. 18539-02 (September 16, 1971).

[12] Id.

[13] Id.

[14] Miss. Code Ann. § 75-24-3(c).

[15] See, e.g., Miles Labs., Inc. v. FTC, 50 F. Supp. 434, 437 (D.D.C. 1943) (“The dissemination of a ‘false advertisement’ by a corporation otherwise than on the labels carried by its products is an unfair or deceptive act or practice which is declared unlawful and which the Federal Trade Commission is empowered and directed to prevent.”) (emphasis added).