Novartis Corporation

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IN THE MA HER OF NOVARTIS CORPORATION, ET AL.

MODIFYING ORDER, ETe. , IN REGARD TO ALLEGED VIOLA non OF SECS. 5 AND 12 OF THE FEDERAL TRADE COMMISSION ACT Docket 9279. Final Order, May 13, 1999-Modifing Order, July 1999 This order modifies the final order, issued in 1999, by revising Part IV ofthe order concerning the corrective advertising notice for Doan s. Part IV of the order, as modified, will remain in effect for five additional years. ORDER MODIFYING ORDER DENYING PETITION FOR RECONSIDERATION AND DENYING AS MOOT APPLICATION FOR STAY Respondent N ovartis Corporation and N ovaris Conswner Health Inc. (collectively "Novartis ) have petitioned the Commission pursuant to Rule 3. 55 of the Commission s Rules of Practice, 16 CFR , to reconsider and to stay Part IV of our final order in this matter. Rule 3. 55 requires that such a petition "must be confined to new questions raised by the decision or final order and upon which the petitioner had no opportunity to argue before the Commission. " 16 CFR 3. 55. N ovartis argues that reconsideration is appropriate because factual developments since the record has been closed undermine certain factual predicates of our corrective advertising order, and because the contours of the corrective advertising requirements imposed in the order raises issues not addressed by the parties. We are not entirely satisfied that reliefpursuant to Rule 3.55 is warranted here. Novartis could have introduced the recent factual developments upon which it now relies before this late stage. Moreover, while the parties in their briefs primarily addressed the propriety of the performance-based standard for the duration of corrective advertising urged by complaint counsel, the durational requirements of prior corrective advertising orders might have alerted Novartis that the information it only now adduces would be relevant here. See FTC Warner-Lambert Co. 562 F. 2d 749 , 753 , 764 (D. C. Cir. 1977) Modifying Order 128 FTC (imposing durational requirement based upon extent of prior expenditures), cert. denied 435 U. S. 950 (1978). Despite these reservations, we have, in any event, the power to modify our order on our own initiative pursuant to Rule 3. 72(a) of our Rules of Practice. 16 CFR 3.72(a). In light of the issues raised in Novartis' petition, we have determined to exercise our discretion to modify the order.

The corrective advertising requirements imposed in our order of May 13, 1999 were to continue until Novartis expended on Doan advertising a sum equal to the average spent annually during the eight years of the deceptive advertising campaign, and in any event for no less than one year. Novartis now contends that, in light of its current business plans, the existing order may have the practical effect of imposing requirements lasting many years. Relying upon the declaration of Barr Cohen, Director of Analgesics, Novartis asserts that it has substantially reduced its adverting and other promotional expenditures for Doan s products and plans greatly to reduce, or to stop altogether, such expenditures in the future. Cohen Dee!. '15- The result of these changed circumstances, claims N ovartis, is that our corrective advertising requircment, including the rcquirement of placing corrective messages on the product label, may remain in effect for a long and indefinitc period.

Some ofNovartis' other argumcnts appcar to be premised upon a simplc misreading of our final order. Novartis seems to believe that only expenditures on advertising containing the corrective message wil count toward the minimum expenditure requirement imposed by that order. Pet. at 4 (asserting that the order requires Novartis to include the correetivc notice on all advertising until it has spent $8 million on advertising containing the notice (emphasis added)). Thus, Novartis concludes that fifteen-second television advertisements, which it has used exclusively in the past and which are exempted from the corrective requirements of the order, would not count toward that minimum. Novaris argues that the use of such commercials would thereby be deterred. Pet. at 5 (arguing that the order "for all practical purposes forces Novartis to use" thirt-second television advertisements). In fact, the terms of the order plainly count all expenditures for the purpose of " Do an s advertising" toward the minimum, regardless of whether such advertising is or is not required to contain the corrective message. Thus, the ordcr will not pcnalize Novartis for using fifteen-second television advertisements NOVARTIS CORPORATION, ET AL.

Modifying Order if it chooses to do so. To the contrary, the exception of such advertisements from the corrective advertising requirement was dcsigned precisely to permit the use of the fifteen-second advertisement form at that Novartis has historically favored. Op. at 35 37.

We also reject Novartis' claim that the mere facts that they have reduced advertising expenditures for Doan s and that sales of Do an products have decreased undermine the need for corrective advertising as a general matter. Pet. at 9- 10. The likelihood of lingering consumer misbeliefs based upon Novartis past conduct is what is relevant in order to determine whether corrective advertising is required. Doan s current sales and advertising budget are not directly relevant to that issue.

We turn now to the question of the duration of the order. A corrective advertising order should not outlast the lingering misconceptions that it is designed to correct. See Warner-Lambert Co. 562 F.2d at 764. In order to ensure that the corrective advertising requirements we impose in this case will not remain in effect beyond the period during which the misbeliefs caused or substantially reinforced by Novartis' deceptive advertising campaign are likely to linger, we will modify the durational provision of the order. Specifically, because Novartis' deceptive advertising campaign lasted for eight years, the corrective advertising order should last no longer than an equivalent number of years after that campaign ended. Three years have already elapsed since June 1996, when Novartis stoppcd airing the challenged advertisements. Thus, Part IV of the order, as modified, will remain in effect for five additional years. If, as it claims, Novartis will cease its media advertising and consumer promotion expenditures, the order will nonetheless require the corrective message to appear on the product packaging for five years. Accordingly, It is ordered That the final order in this matter dated May 13 , 1999 be, and it hereby is, modified to revise Part IV to read as follows:

It is further ordered That respondents Novartis Corporation and Novartis Consumer Health, Inc. , corporations, their successors and assigns, and their officers, agents, representatives and employees, directly or through any corporation, subsidiary, division or any device, do forthwith cease and desist from Statement 128 FT. disseminating or causing the dissemination of any advertisement for Doan s in or affecting commerce, as "commerce" is defined in the Federal Trade Commission Act, unless the advertising includes thc following corrective notice, clearly and prominently, in the exact language that follows:

Although Doan s is an effective pain reliever, there is no evidence that Doan s is more effective than other pain relievers for back pain. Provided, that respondents' obligation to include the corrective notice shall not be required for any television or radio advertisement of 15 seconds or less in duration; Provided further, that respondents' obligation to include the corrective notice in all advertising shall continue until respondents have expended on Doan s advertising a sum equal to the average spent annually during the eight years of the challenged campaign, except the obligation shall continue for at least one year and for no longer that five years after this order becomes effective.

It is further ordered That Part IV of the final order shall not be effective until the sixtieth day after service of this Order Modifying Order.

It is further ordered That respondents' petition for reconsideration is denied.

It is further ordered That Novartis' petition for a stay pending appeal is denied as moot. I Commissioner Swindle dissenting.

STATEMENT OF CO'vMISSIONER ORSON SWINDLE CONCURRING IN PART AND DISSENTING IN PART The Commission recently issued a dccision in this case in which it concluded that the respondents made the unsubstantiated claim that Doan s is superior to other over-the-counter analgesics in treating back pain. To remedy this deception, the Commission ordered the respondents to make a specified corrective statement in Doan 1 Novartis' stay motion was directed solely to Par IV of the original final order, which the Commission has now replaced with the revised Par IV. Novaris may, if it chooses, timely fie a motion to stay the effect of this revised Part IV of the final order pending appeal. NOVARTIS CORPORATION, ET AL Statement advertising (except radio and television ads of 15 seconds or less in duration), including on product packages. The Order requires that the corrective statement be made "for one year and until respondent has expended on Doan s advertising a sum equal to the average amount spent annually during the eight years of the challenged campaign. " I dissented from the imposition of this corrective advertising remedy because, among other things, the evidence did not prove that any false belief created by the deceptive advertising had lingered and was likely to continue to linger until July 2000, that is, until the end of the oneyear period during which corrective advertising was required. Novartis Corporation, et aI. Dkt. No. 9279 (May 13 , 1999) (Statement of Commissioner Orson Swindle, concurring in part and dissenting in part).

The respondents have petitioned the Commission to reconsider the corrective advertising requirement, arguing that basing the duration of the requirement on both a fixed one-year period and the amount of Doan s advertising expenditures will have unintended adverse consequences. The respondents have submitted a declaration stating that they spent only $30 000 in 1998 on Doan s advertising and plan to spend nothing in 1999 on such advertising. Given these minimal advertising expenditures, the respondents argue that it will be a very long time until they have spent on Doan s advertising an amount equal to the average amount spent annually during the campaign ($8 million), especially since the annual sales of the product have declined to only about $11 million. The respondents claim that they are likely to be required to place the corrective statement on packaging for many years to come -- a corrective requirement that will last far longer than the one year that the Commission originally intended. The Commission has denied the petition for reconsideration, and I concur in the denial because the petition does not raise any new questions about the decision and final order that the respondents did not have an opportunity to address in their appeal to the Commission.

The majority, however, has also decided sua sponte to reopcn the Order and place a five year limitation on the duration ofthe corrective advertising requirement. The majority concludes that a modification is needed to ensure that the corrective advertising requirement will not outlast whatever lingering false belief the deceptive advertising campaign created. The majority specifically reasons that because the Statement 128 F. deceptive advertising campaign lasted for eight years, the corrective advertising order should last no longer than an equivalent number of years after that campaign ended. Novartis Corporation, et aI. Dkt. No. 9279 Order Modifying Order. Denving Petition for Reconsideration, and Denving as Moot Application for Stay at 2 (July 2, 1999). Because the respondents have not run their deceptive advertisements since May 1996, that is, three years ago, the corrective advertising provision "will remain in effect for five additional years. Id The practical effect of the modification is that the respondents very likely will have to make the corrective statement on Doan packages until five years after the modified Order becomes effective that is, until September 2004.

In support of the conclusion that the false superior efficacy belief is likely to linger until September 2004, the majority has relied exclusively on the general proposition that a false belief is likely to linger for the same period of time after the deceptive advertising has stopped as the period during which the advertising ran. The majority cites nothing in support of this general proposition, nor am I aware of any extrinsic evidence, expert testimony, case law, or other authority that supports it.

The Commission s adoption of this general proposition raises a serious policy question as to how frequently the Commission wil order corrective advertising in the future. If false bcliefs are to be assumed likely to linger for the same period of time after the deceptive advertising has stopped as the period during which the advertising ran, corrective advertising could be ordered in most deceptive advertising cases. It does not serve the public interest to adopt a new principle for determining lingering effect that could be used to transform corrective advertising from an extraordinary remedy into a commonplace remedy.

The majority deserves credit for its willingness to recognize that the original Order imposed broaderreliefthan intended and to modify the original Order to limit the relief. But the modified Order still imposes what is likely to be a fivc-year corrective advertising requirement. The evidence in the record does not prove that any false belief is likely to linger in the minds of consumers through the 1 Absent a stay, the modified Order will take effect in September 1999 sixty days after it is served on the respondents NOVARTIS CORPORATION, ET AL.

Statement duration of the requirement ' which extends more than eight years after the respondents discontinued making their implied deceptive claim. Without proof that any false belief is likely to last this long period oftime, the corrective advertising requirement contained in the modified Order serves no remedial purpose and cannot be justified. I therefore dissent as to the corrective advertising provision included in the modified Order 2 My separate statement in this case, accompanying the majority s principal opinion, contains a comprehensive discussion of the reasons why the evidence in the record does not prove that a false beIiefis likely to linger until July 2000 , much less September 2004. Novartis Corporation, eta!. Okt No. 9279 (May 13, 1999) (Statement of Commissioner Orson Swindle, conculTing in par and dissenting in part).

3 Because the Commission has modified the original Order, I support the Commission s decision to deny the respondents' motion to stay the original Order since the motion IS moot. Complaint 128 FTC.