Here’s one to watch. On Wednesday, June 18, Utah-based nasal spray company Xlear, Inc. – a company that’s been doing battle with the Federal Trade Commission (FTC) since at least 2021 – filed an action against the FTC asking a federal court to declare that the FTC Act does not authorize the FTC to bring cases alleging that defendants lack substantiation for their claims. Instead, Xlear argues, the language of the Act only prohibits marketing statements that are either “objectively false” or constitute “unfair or deceptive acts.”

This is big news. If the court goes for this argument, it’ll turn FTC law on its head. For 50+ years, substantiation has been the beating heart of advertising law: you can’t make a claim about your product unless you have a reasonable basis – substantiation – for the claim at the time you make it. See In re Pfizer Inc., 81 FTC 23, 30 (1972); FTC Policy Statement Regarding Advertising Substantiation, appended to Thompson Med. Co., 104 F.T.C. 648, 839 (1984), aff’d, 791 F.2d 189 (D.C. Cir. 1986), cert. denied, 479 U.S. 1086 (1987).

Arguing that the substantiation requirement’s chilling effect is “injuring [the company’s] First Amendment rights, as well as causing them to lose business opportunities,” Xlear relies on the Supreme Court decisions in Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024) and West Virginia v. EPA, 597 U.S. 697, 735 (2022) to open the door to a brand-new, close read of the FTC Act. According to Xlear, now that courts need not defer to the agency’s long-standing interpretation of its statute, a reexamination reveals that the FTC has gotten it wrong all along. In fact, according to Xlear, the portions of the FTC Act making unfair or deceptive claims illegal “do[] not require substantiation because the word ‘substantiation’ never appears in these provisions.” Thus, requiring marketers to substantiate their claims is not the “best” reading of the statute as required under Loper.

Xlear’s complaint wraps up this argument with a nice little zinger, proclaiming that the FTC’s interpretation “isn’t a reading of the law, it is a fiction of FTC’s own invention. Were it a standalone book it should be called ‘The World According to the FTC.’” BOOM.

The complaint goes on to argue that by requiring marketers to demonstrate that their claims are substantiated, the FTC has impermissibly shifted the burden of proof, requiring defendants to “prove their innocence (the affirmative defense) before the FTC has to prove anything.” 

Will this strategy work? Who’s to say. It wouldn’t be the first time in recent history that courts went back to the FTC Act and did a fresh read. In 2021, the Supreme Court upended decades of what we all thought was established FTC law by finding that Section 13(b) of the FTC Act does not authorize the agency to seek monetary relief for violations of Section 5(a) of the Act in federal court. AMG Capital Mgmt., LLC v. FTC, 593 U.S. 67 (2021). Maybe this is the next blow. We’ll be watching.