Pivotal Moments for Ad Law in the 70s: Pfizer Factors and Comparative Advertising

As BBB National Programs’ National Advertising Division (NAD) celebrates its 50th anniversary, we are looking forward while also taking stock of the past, decade by decade. In NAD’s first decade (the 1970s), the industry experienced two pivotal legal developments that continue to impact advertising law and NAD cases today. 

The Pfizer Factors  

Many advertisers are familiar with “the Pfizer factors,” but most would probably say they do not know much about the facts of the case that created them. In 1972, one year after NAD and its appellate body the National Advertising Review Board were founded, the Federal Trade Commission (FTC) issued a seminal decision evaluating advertising for Pfizer, Inc.’s Un Burn, a sunburn product that claimed to anesthetize nerves in sensitive sunburned skin.

Interestingly, the FTC’s complaint did not challenge the truth or falsity of the express representations in the advertising but rather alleged that Pfizer violated Section 5 of the FTC Act because its advertising falsely implied that the claim to “anesthetize nerves” was substantiated by well-controlled scientific studies or tests. Although the FTC did not agree with the precise theory alleged in the complaint, it did agree that Section 5 requires advertisers to have substantiation for their advertising claims.    

In reaching its decision the FTC articulated the prior substantiation doctrine – that advertisers violate Section 5 if they lack a reasonable basis for their advertising claims at the time they disseminate the claims – as well as what have become known as the Pfizer factors, which help determine the appropriate level of substantiation an advertiser must have for objective advertising claims.

The FTC began by noting that consumers are often at a disadvantage concerning the reliability of a product and that it is more economic, rational, and imposes far less cost on society to require a manufacturer to confirm product claims than for consumers to attempt to ascertain a claim’s validity. The FTC concluded that consumers are entitled, as a matter of marketplace fairness, to rely upon the manufacturer to have a “reasonable basis” for making performance claims and that a consumer “should not be compelled to enter into an economic gamble” to determine if a product will or will not perform as represented.  

The FTC then went on to examine what constitutes a “reasonable basis” and determined that it is essentially a factual issue, to be determined on a case-by-case basis, by considering the interplay of overlapping factors that are now referred to as the Pfizer factors.

• Type and specificity of the claim i.e., safety, efficacy, dietary, health medical, 
• Type of product,
• The possible consequences of a false claim i.e. personal injury, property damage,
• The benefits of a truthful claim,
• The cost of developing substantiation for the claim, and
• The amount of substantiation experts in the field believe is reasonable.

The Pfizer factors provided a framework for deciding whether substantiation provided for an advertising claim was reasonable. The FTC’s opinion in the Pfizer case set forth a disciplined yet flexible approach that has strengthened the rigor in evaluating ad claims and the fit between the evidence and claim.  

Whether evaluating a claim that a product relieves pain, prevents odors, cleans better, or smooths skin, applying the Pfizer factors provides guidance on the level of support needed. The standard has been applied universally at the FTC and NAD. The resulting consistency in the standard for reviewing claim substantiation has made advertising industry self-regulation, as embodied by the work of NAD, more effective.    

Comparative Advertising 

In 1979, the FTC issued a one-page Policy Statement on Comparative Advertising. It was issued after the FTC investigated industry trade associations and the advertising media regarding comparative advertising policies and noted that many of these codes and standards contained language that could be interpreted as discouraging the use of comparative advertising.     

The Policy Statement articulated the FTC’s position that:

• Industry self-regulation should not restrain advertisers' use of truthful comparative advertising, 
• Truthful comparative advertising should not be restrained because it benefits both advertisers and consumers,
• Disparaging advertising is permissible so long as it is truthful and not deceptive, and
• Comparative advertising will be evaluated in the same manner as all other advertising.     

It is noteworthy that later in this first decade after NAD was founded, at a time when the two bodies were working out the bounds of their relationship, the FTC sent a strong message about the value of truthful comparative advertising. 

Comparative advertising that is both truthful and not misleading benefits both consumers and competition. Flurries of NAD challenges to comparative advertising follow when technologies evolve or disruptors enter a traditional industry. Other comparative advertising challenges are filed as the result of seasonal marketing, consumer trends, or regulatory gaps. The FTC’s Policy Statement on Comparative Advertising has fostered a healthy competitive advertising landscape that encourages innovation. It has also increased the industry’s reliance on NAD to resolve truth and transparency issues that arise in comparative ads, allowing industries to level the playing field using NAD’s challenge process.