Notices of Penalty Offenses

Notices of Penalty Offenses are a highly aggressive legal mechanism utilized by the ftc to enforce advertising and marketing standards, particularly against companies making unsubstantiated health claims in the functional beverage and dietary supplement sectors.

Strategic Shift in Enforcement

The FTC’s reliance on this mechanism surged following a ruling by the supreme-court-of-the-united-states (AMG Capital Management v. FTC), which stripped the agency of its ability to easily seek equitable monetary relief under Section 13(b) of the FTC Act. To bypass this new legal hurdle, the FTC pivoted its strategy. In April 2023, the agency issued Notices of Penalty Offenses to nearly 700 companies marketing OTC drugs, homeopathic products, dietary supplements, and functional foods.

Mechanism of Action

While receiving a notice does not constitute a formal accusation of ongoing wrongdoing, it serves a critical legal function: it establishes that the receiving company has “actual knowledge” of what the FTC considers deceptive conduct.

If a notified company subsequently violates these standards—such as failing to bridge the clinical-substantiation-gap with “competent and reliable scientific evidence”—the FTC can immediately seek severe civil penalties. Because the “actual knowledge” prerequisite has been met, the agency can pursue fines of up to $50,120 per violation. This creates a massive financial liability for brands operating in the gray areas of structure-function-vs-drug-claims.