False Advertising Costs Dannon $21M

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NEW YORK (MainStreet) – The Dannon Company will pay $21 million to settle Federal Trade Commission (FTC) charges that it exaggerated the health benefits of some of its yogurt and dairy products, the Commission announced Wednesday.

The settlement requires that Dannon pay the sum to the 39 states whose attorneys general originally filed the charges. According to their complaint, Dannon claimed in nationwide advertising campaigns that its DanActive dairy drink helps prevent cold and flu, and that one daily serving of Activia relieves temporary digestive irregularity and helps with “slow intestinal transit time.”

Under state and federal law, companies are prohibited from making claims about the health benefits of a product without backing them up with competent and reliable scientific evidence. The FTC said that it was unable to find sufficient evidence that either product actually possessed the medical benefits that were advertised, which ultimately led to the lawsuit.

The settlement, which, according to Pennslyvania attorney general Tom Corbett is ”is the largest multi-state settlement to date involving a food producer,” sends a message to other manufacturers advertising health benefits with their products.

“Consumers want, and are entitled to, accurate information when it comes to their health,” FTC Chairman Jon Leibowitz said in a written statement. “Companies like Dannon shouldn’t exaggerate the strength of scientific support for their products.”

In addition to paying the fines, the settlement terms limit the statements Dannon can make about Activia and DanActive and prohibit the company from making any claims about the health benefits, efficacy or safety of its probiotic food products unless they are substantiated by the Food and Drug Administration.

While companies do not typically need final FDA approval to make health claims, the FTC felt that it would “give Dannon clearer guidance going forward, and help ensure that it complies with the settlement order.”

Dannon issued a statement confirming the settlement, while simultaneously reaffirming the products’ value.

“Millions of people firmly believe in, benefit from and enjoy these products, and Dannon will continue to research, educate and communicate about the benefits of probiotics on the digestive and immune systems,” the company said. “The essence of Dannon’s advertising remains unchanged and will continue to be truthful and in compliance with all laws and regulations.”

This is not the first time that the food manufacturer has run into problems due to its advertising. In September 2009, Dannon settled a class-action lawsuit that required the company to reimburse consumers a total of $35 million to for the faulty claims. At the time, it also agreed to adjust its marketing campaigns for Activia and DanActive.

What can other companies learn from Dannon’s woes? Find out in MainStreet’s round up of health product frauds.

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