Unfair and Deceptive Marketing: A Shift Away From Federal Hearings?

March 13, 2019

The Third Circuit Court of Appeals made a decision that will affect “past conduct” cases currently in the Federal Trade Commission’s pipeline. In FTC v. Shire Viropharma, Inc., the court ruled that the commission can only bring cases under Section 13(b) of the FTC Act if it can clearly demonstrate that defendants “are violating” or are “about to violate” the law.

FTC Shire Case: Unfair and Deceptive Marketing Claim over Past Conduct

What is the FTC?

First, a little background. The Federal Trade Commission is the nation’s “consumer watchdog” and charged with uprooting “unfair and deceptive” marketing practices in the marketplace. In service of this mission, the FTC pursues federal court injunctions “[w]henever the Commission has reason to believe . . . that any person, partnership, or corporation is violating or is about to violate, any provision of law enforced by the [FTC].”

Company Accused of Using Citizen Petition Process to Thwart Generic Drug Makers

Enter the Shire case. Back in 2017, the FTC requested an injunction against the company over suspicions that it was using the FDA’s citizen petition process to hamstring generic drug makers unlawfully. In its initial motion, the FTC argued that failure to secure an injunction immediately presented “a cognizable danger that Shire will engage in similar conduct.”

Shire Argues Against FTC: We Haven’t Done Anything In Years

But Shire shot back. It argued that the injunction request didn’t meet legal muster because the company wasn’t on the verge of violating regulations. In fact, the conduct at issue ceased five years before the commission filed the complaint.

Ultimately, the court agreed with Shire, and the FTC appealed.

FTC Appeal: Use “Likelihood of Recurrence” As Standard

The commission reasoned that “likelihood of recurrence” — the common law standard — should be synonymous with “about to violate.” Lawyers also argued that the current interpretation allowed companies to skirt regulations by simply shuttering and when faced with an FTC action.

Court: We Side With Shire

The court, however, disagreed. It ruled that “likelihood of recurrence” isn’t the same as “is about to violate.” Moreover, the bench reasoned that the FTC  could use other available regulatory tools to punish past wrongdoings.

FTC Shire Case: Impact on FTC Unfair and Deceptive Marketing Cases

The Federal Trade Commission will likely appeal to the Supreme Court of the United States; however, it’s unlikely to be green lit. Instead, the bulk of past conduct claims will probably move to administrative courts if this ruling sticks.

Connect With An FTC Defense Lawyer

The Gordon Law Group regularly works with businesses on FTC compliance and investigation matters. Whether you need a marketing compliance audit or the FTC has opened an investigation, we’re here to help.

To read more about FTC legalities and compliance, click here. If you’re ready to seek advice on an issue, get in touch today. We look forward to chatting and determining if we’re the right fit for your needs. And if not, we’ll point you in the direction of someone who is.

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