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Steve Richards will help attendees at the Oct. 19-20 Direct Selling Symposium in Salt Lake City learn about the essential legal bases that new direct selling companies must cover at launch. He will cover what regulators are looking for and how to avoid their unwanted attention, and how to monitor distributors and run a compliance program that will help to shield the company from any negative fallout due to the actions of their distributors.
POM Wonderful lost the latest round in its lawsuit claiming the Federal Trade Commission’s enforcement of advertising rules and regulations exceeds its authority and violates POM Wonderful’s First and Fifth Amendment rights when a Federal district court judge in Washington DC dismissed POM’s suit.
However, U.S. District Judge Richard Roberts did not address those issues in the September 30 decision. Instead, he agreed with the FTC that “declaratory relief is not proper because a declaratory judgment would not fully resolve the controversy between the parties.”
The Federal Trade Commission has released an updated version of the “Green Guides,” also known as 16 CFR Part 260: Guides For the Use of Environmental Marketing Claims. The revision modifies and clarifies sections of the previous Guides, and adds new sections, based on input from both consumers and industry.
The new sections cover carbon offsets, “green” certifications and seals, and claims regarding being “free-of” specific substances, being non-toxic, being made with renewable energy and being made with renewable materials.
Jason Pharmaceuticals, a subsidiary of Medifast Inc., has agreed to pay a $3.7 million civil penalty to settle a Federal Trade Commission complaint alleging that it made unsupported claims about its weight loss program in violation of a 1992 FTC settlement order. The 1992 order barred Jason Pharmaceuticals from making unsupported claims regarding user’s success in losing weight or maintaining weight control using its products.
Jason Pharmaceuticals sells Medifast-brand low-calorie meal substitutes. The FTC complaint alleges that since at least November 2009 the company had been using unsupported claims in radio and print advertising that Medifast programs and products would result in weight loss of two to five pounds each week. They complaint also alleged that the company represented the experience of the consumers featured in the ads as typical, and that users would lose more than 30 pounds using the program.
The FTC has charged two marketers of bed bug treatments using natural ingredients such as cinnamon and cedar oil with making unsubstantiated claims that their products could prevent or eliminate infestations. The FTC also alleged that one of the marketers claimed that its products worked on head lice, as well.
In one of the two cases, RMB Group, LLC and its principals have agreed to settle the charges relating to their “Rest Easy” bed bug products. In the case against Cedarcide Industries, Inc. and others, challenging their marketing of “Best Yet!” bed bug and head lice treatments, the defendants have not settled, and the FTC is beginning litigation against them.
According to the FTC complaint, Cedarcide Industries, Inc. claims that the cedar-oil based products they market under the name BEST Yet!, will treat and prevent bed bug and head lice infestations. The products are sold nationwide to consumers and also to hotels for bed bugs and to school districts for treating head lice.
The FTC complaint charges that the Cedarcide defendants make:
- unsupported claims that Best Yet! is effective at stopping and preventing bed bug infestations and that it is more effective than synthetic pesticides at doing so;
- false claims that scientific studies prove Best Yet!is effective at stopping and preventing bed bug infestations, and that it is more effective than synthetic pesticides at doing so;
- a false claim that the Environmental Protection Agency has warned consumers to avoid all synthetic pesticides for treating bed bug infestations;
- unsupported claims that Best Yet! is effective in stopping and preventing head lice infestations, killing head lice eggs, dissolving the glue that binds head lice eggs (known as nits) to hair, and killing head lice and their eggs in a single treatment; and
- false claims that scientific studies prove Best Yet! is effective in stopping and preventing head lice infestations.
- false claims that Best Yet!was invented for the U.S. Army at the request of the U.S. Department of Agriculture, and that the USDA has acknowledged the product as the number one choice of bio-based pesticides.
According to the FTC, RMB Group, LLC marketed Rest Easy, a liquid containing cinnamon, lemongrass, peppermint, and clove oils for consumer use, primarily when staying in hotel rooms. The FTC complaint charges that the made unsupported claims that Rest Easy kills and repels bed bugs, and that a consumer can create a barrier against them by spraying the product around a bed.
Under the settlement, the defendants are barred from representing that Rest Easy or any other pesticide kills or repels bed bugs or creates a barrier against them, and making any claims about the performance of such a product, unless they are true and backed by competent and reliable scientific evidence.
The Coleadium, Inc. affiliate network, also known as “Ads4Dough,” and its owner will pay $1 million to settle a Federal Trade Commission complaint that they used fake news sites to make deceptive claims to promote acai berry supplements and “colon cleansers” as weight-loss products. In addition, the FTC charged that they used “free trial” offers to trick consumers into signing up for additional shipments that were billed monthly.
The products included the acai berry supplements AcaiOptimum, AcaiBurn-Force Max, Acai Tropic, Acai Fit, and Acai Elite Blast; as well as colon cleansers Natura Cleanse, Smart Colon Flush, Advanced Colon Max, and Colo Flush.
The FTC’s complaint alleges that Coleadium and its owner, Jason Akatiff, acted as intermediaries between online merchants selling the products and affiliate marketers who used fake news Web sites to promote them and funnel consumers to the merchants’ sites. The complaint alleges that through their affiliates, the company and its owner:
- made false or unsupported claims that use of the acai and colon cleanser products would cause rapid and substantial weight loss;
- falsely represented that the stories on the fake news sites were objective news reports written by real reporters who conducted independent tests of the products, and that the comments following were those of independent consumers;
- failed to adequately disclose that the content on the fake news sites was authored by affiliate marketers who, along with the defendants, received payments from the merchants; and
- failed to adequately disclose that consumers who sign up to receive a trial supply of the advertised products but who do not return the products and cancel quickly will be charged for the products, and will be shipped more products and billed on a recurring basis.
In addition to the $1 million payment, the settlement requires Coleadium and Akatiff to monitor the affiliate marketers in their network to ensure that their statements are truthful and in compliance with federal advertising law. In addition, they are barred from making any material deceptive representations, including deceptive claims about weight loss and health, and about relevant studies, tests and research.
They also are barred from failing to disclose any material connection between themselves or others marketing or selling products, and the endorsers of the products; that the content of a “news” website or other publication was not written by an objective reporter but is an advertisement placed for payment; and that consumers may be subject to recurring charges when they sign up for trial supplies of the products.
The FDA has issued warning letters to PruTect Rx, of Highlands Ranch, Colo., and Trinity Sports Group Inc., of Plano, Texas, for promoting dietary supplements with claims that they treat concussions and prevent or treat post-concussion syndrome and other neurological disorders.
The products cited in the warning letters include Trinity Sports Group’s Neuro Impact Concussion Response Formula and PruTect Rx’s NeuroPruTect and Omega3PruTect, in capsule and powder forms.
None of the products have been approved by the FDA for treatment of concussions or for prevention or treatment of post-concussion syndrome or other neurological disorders. In addition, the FDA says that the products have not been shown to be safe and effective for these purposes.
Steve Richards will be a featured speaker at the Direct Selling Symposium, October 19-20, 2012, in Salt Lake City, Utah.
The Symposium is intended for those looking to start a multi-level marketing company, as well as established businesses seeking to expand into the direct selling channel.
For the Direct Selling Symposium, Steve brings his expertise in both Party Plan and MLM, and will share his practical insights into the legal issues facing direct selling companies.
Skechers USA, Inc. will pay $40 million to settle charges made by the FTC that Sketchers deceived consumers when it advertised that its Shape-ups shoes would help people lose weight, strengthen and tone their muscles, and improve their cardiovascular health. The FTC complaint also alleged that Skechers made similar claims about its Resistance Runner, Tones and Tone-ups shoes.
Consumers who bought any of these shoes will be eligible for refunds, either directly from the FTC or through a court-approved class action lawsuit.
The FTC complaint charged that Skechers violated federal law by making deceptive advertising claims, including falsely representing that clinical studies backed up the claims. Under the FTC’s settlement, unless they are true and backed by scientific evidence, Skechers is barred from making any claims about strengthening, weight loss or any other health or fitness benefits, including claims regarding calorie burn, blood circulation, aerobic conditioning, muscle tone and muscle activation. Skechers also is barred from misrepresenting any tests, studies or research results regarding toning shoes.
The final judgment is available here.
The FTC is sending 27,339 checks totaling $698,000 to consumers who purchased Oreck Corporation’s Halo vacuum cleaner or ProShield Plus portable air cleaner. The refunds are the result of the settlement of the FTC complaint alleging that Oreck’s advertising for the products made false and unproven claims for the products.
The Halo is an upright vacuum with an ultraviolet light that shines onto the floor while vacuuming. The ProShield Plus is a portable air cleaner that filters air particles using an electrostatic charge. Oreck’s advertising made a number of claims for the products, including that they could reduce the risk of flu and other illnesses, and eliminate virtually all common germs and allergens.
Under the settlement reached with the FTC, Oreck is barred from making any of the allegedly deceptive claims challenged by the agency unless it has competent and reliable scientific evidence to support the claims.