Patron I Corp

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Patron I Corp. sold a shampoo and conditioner known as the Helsinki Formula. Patron promoted the Helsinki Formula as an aid in fighting male pattern baldness. According to Patron, polysorbate was the main ingredient that made the Helsinki Formula effective in arresting hair loss and stimulating hair growth. The Federal Trade Commission fi led suit against Patron on the theory that Pantron’s advertisements made deceptive representations about the effectiveness of the Helsinki Formula, as well as deceptive representations that scientific evidence supported the effectiveness claims. The FTC sought injunctive and monetary relief. The evidence showed that the Helsinki Formula was effective for some users with male pattern baldness but that this effectiveness was probably due to the “placebo effect” (i.e., the effectiveness for some users stemmed from psychological reasons rather than from the inherent merit of the product). Because there was no scientifically valid evidence indicating that polysorbate is effective in treating hair loss or in inducing hair growth, the district court concluded that Pantron’s advertisements were deceptive in representing that scientific evidence supported a conclusion that the Helsinki Formula was effective. The district court therefore issued an injunction that barred Patron from representing, in its advertisements, that scientific evidence supports the alleged effectiveness of the Helsinki Formula in treating baldness or hair loss. However, because the Helsinki Formula did work for some users some of the time (whatever the reason), the district court concluded that the FTC had failed to carry its burden of proving that Patron engaged in deceptive advertising when it represented that the Helsinki Formula was effective for persons with male pattern baldness. The court therefore refused to enjoin Patron from making such a representation of effectiveness (i.e., a representation of effectiveness that did not go on to make the false claim of supporting scientific evidence). The court also refused to order monetary relief. In its appeal to the U.S. Court of Appeals for the Ninth Circuit, the FTC argued that when a product’s effectiveness is due only to the placebo effect, an advertising claim of effectiveness is false and deceptive for purposes of the FTC Act. Was this FTC argument legally correct? Which party—the FTC or Patron—was entitled to win the appeal?