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I went to a Grateful Dead concert in 1976. The band was at the height of cool at the time as they represented the counter-culture movement from the Haight-Ashbury district of San Francisco. Although I had been to a number of concerts before seeing the Dead, this concert was different because it was the first (and to this day the only) concert where I witnessed security personnel hauling stoned audience members out throughout the show like it was a revolving door, and I saw medical personnel take at least six overdosed people out on stretchers.
This was obviously a common occurrence at Dead concerts. I vividly recall that right after their first number (Truckin’), Jerry Garcia (lead singer for those of you not old enough to have a touch of grey) announced “Hey people, have a great time, but don’t do any stupid sh**!” Such profound wisdom in such a simple statement!
I don’t think Jerry Garcia’s admonition resonated with the audience that night (shocking, right?), but it should resonate loudly with direct sellers. I look back on the FTC’s last four pyramid actions, Vemma, Fortune Hi-Tech, Burnlounge and Trek Alliance, and in each case we can point to stupid things that that landed the defendants in the FTC’s cross-hairs. We can (and will) closely analyze compensation plans, compliance and marketing nuances that the FTC charges render MLMs pyramid schemes. But there’s a place for analysis, and a place for common sense. Let’s put common sense first, because it’s unquestionably the first and best defense against finding your business in the line of regulatory fire.
John Matthew Dwyer III, the former CEO of HealthyLife Sciences, LLC, has agreed to be banned from manufacturing or marketing weight loss products as part of a settlement of FTC charges of deceptive advertising. A separate settlement bans HealthyLife Sciences from advertising that its products cause weight loss.
U.S. District Senior Judge Charles Pannell Jr. has ordered the CEO and senior vice president of Hi-Tech Pharmaceuticals, Inc. be jailed for contempt of court for failing to recall four dietary supplements as directed by a May, 2014 judgment that found them in violation of a 2008 court order. The May, 2014 judgment also ordered them to pay more than $40 million for violating the 2008 order.
The May order directed an immediate recall of four dietary supplement products, Fastin, Lipodrene, Benzedrine and Stimerex-ES. However, the Judge Pannell found that the defendants, CEO Jared Wheat and Stephen Smith, senior vice president in charge of sales, have not complied with the recall order.
i-Health, Inc. and Martek Biosciences Corporation have settled Federal Trade Commission charges that they used deceptive advertising in marketing their BrainStrong Adult dietary supplement. The FTC complaint alleged that the supplement makers claimed BrainStrong improves adult memory and prevents cognitive decline, and that they falsely claimed they had clinical proof for the claims.
Television commercials for BrainStrong Adult showed a forgetful woman and a voiceover saying, “Need a memory boost? Introducing BrainStrong…Clinically shown to improve adult memory.” In addition to television, the product was advertised on Twitter and brainstrongdha.com.
The marketers of the fruit drink Nopalea have agreed to pay $3.5 million in consumer refunds to settle FTC charges that they deceptively marketed the product as scientifically proven to reduce various ailments, including pain. The marketers named in the FTC complaint are dietary supplement maker TriVita, Inc., Ellison Media Company, and Michael R. and Susan R. Ellison, who control both companies.
The FTC’s complaint alleged that TruVita did not have the clinical studies to support the claims they were making about the health benefits of Nopalea, a fruit drink derived the nopal cactus, also know as the prickly pear. Nopalea cost up to $39.99 for a 32-ounce bottle.
The Attorneys General of Oregon, Washington and Vermont each have filed suit against Living Essentials, LLC, and Innovation Ventures, LLC, the makers of 5-Hour Energy drink, alleging that advertising for the product violates their states’ consumer protection laws by making deceptive and misleading claims.
The FTC has approved the final consent order settling charges that L’Occitane, Inc. deceptively claimed that two of skin creams have body slimming capabilities and are clinically proven. The settlement requires L’Occitane to pay $450,000 for consumer redress, as well as prohibiting it from making future false and deceptive weight-loss claims.
The two products are Almond Shaping Delight, which sold for $48 for 7 ounces, and of Almond Beautiful Shape, which cost $44 for 6.7 ounces. L’Occitane claimed that the skin creams would slim users’ bodies, even though they had no scientific evidence to support the claim.
The FTC has won a $2.2 million judgment against Wellness Support Network, Inc. as the U.S. District Court for the Northern District of California found that WSN’s marketing of dietary supplements to treat and prevent diabetes violated Section 5 of the FTC Act. The FTC said that any money recovered will be used to reimburse consumers.
The court also prohibited WSN and its two principals from claiming that their supplements would treat and prevent diabetes without rigorous proof to support the claims, as well as from making other deceptive claims.
Kevin Trudeau, who in 2010 was ordered by a federal judge to pay more than $37 million for violating a 2004 stipulated order by misrepresenting in infomercials the content of his book, “The Weight Loss Cure They Don’t Want You to Know About,” was found guilty of criminal contempt for violating that order. The jury took less than an hour to reach its verdict, which was read in a Chicago courtroom Nov. 12.
Prosecutors argued Trudeau knowingly violated the order when he used infomercials to tout the book’s plan that would “cure” obesity without requiring a special diet or needing to exercise, even though the book called for limiting calories to 500 a day and required walking an hour a day.
The defense argued that there was no violation, since the statements made in the infomercials were presented as opinions, and thus were protected speech under the First Amendment. In addition, because nothing was said in the infomercials that did not appear in the book, the defense maintained that a Trudeau was not misrepresenting the content of the book.
The FTC has filed a complaint against the marketers of the HCG Platinum dietary supplements, charging them with deceptive advertising for claiming that using the product will result in substantial weight loss.
The complaint filed in the U.S. District Court for the District of Arizona, names two corporate defendants, HCG Platinum, LLC and Right Way Nutrition, LLC, company president Kevin Wright, and seven relief defendants the FTC says received money from sales of the HGC products.