15-Second Advertising Law Alert: Third Circuit Adopts Substantial Compliance Defense

Date: Dec 15, 2010

The good news is that the U.S Court of Appeals for the Third Circuit recognized substantial compliance as a defense in a Federal Trade Commission contempt action against advertisers who allegedly violated a consent judgment.* The Circuit joins the First, Ninth, and D.C. Circuits in having some form of that defense.

The bad news is that the decision may increase confusion surrounding the FTC'S views on scientific substantiation – a subject we'll cover in a larger publication later.


In 2000, Defendants and the FTC stipulated to court-entered orders in which Defendants agreed not to make health or body benefit claims that were not already substantiated by "competent and reliable scientific evidence," defined comprehensively.

In 2007, the FTC accused Defendants of violating that provision in making claims about calcium and male fertility supplements. Many of those claims had been disclosed by Defendants to the FTC as early as 2001, without inquiry by the agency.

A battle of experts ensued in the district court. In the end, that court believed Defendants' experts, found that the claims were supported by competent and reliable evidence and dismissed FTC's contempt motion. But it did not provide a detailed analysis of the challenged claims.

That court further concluded that, even if the orders had been violated, Defendants were entitled to the defense of substantial compliance.


The appeals court vacated and remanded all but one challenged claim to the lower court for a detailed analysis and consideration of its newly articulated criteria for a substantial compliance defense:

[A] party must show that it (1) has taken all reasonable steps to comply with the valid court order, and (2) has violated the order in a manner that is merely "technical" or "inadvertent."

As for that one allowed claim, perhaps to FTC's chagrin, the Circuit accepted substantiation in the form of an extrapolation of the data from tests on calcium generally, not on Defendants' product.

* FTC v. Lane Labs-USA, et al., 09-3909 (3rd Cir. Nov. 11, 2010).