- About Us
- Practice Areas
- Our Clients
- Law Library
- Contact Us
The FTC’s charges against three people and two companies charged with deceptive advertising of hoodia as a weight loss has resulted in a settlement where one defendant is banned from making any weight-loss claims related to foods, drugs, or dietary supplements and must turn over a vacation home and other assets to the FTC; another is banned from the dietary supplement business altogether; and all defendants are barred from making any more deceptive claims.
The FTC’s 2009 complaint alleged that the defendants made false and deceptive claims about hoodia and its effectiveness as a treatment for obesity, and falsely claimed that their ingredient was hoodia when it was not. The complaint also alleged that they falsely and deceptively claimed their product was, among other things, scientifically proven to suppress appetite, resulting in weight loss and was clinically proven to reduce caloric intake by 1,000 to 2,000 calories per day.
- David J. Romeo, and two companies he controlled, Nutraceuticals International LLC and Stella Labs LLC, are banned from making any weight-loss claims while marketing foods, drugs, and dietary supplements. The settlement imposes a $22.5 million judgment against Romeo and the two companies, which will be suspended when Romeo forfeits his vacation home in Vermont, and assigns to the FTC the right to collect on $635,000 in business loans owed to him. If it is later determined that the financial information Romeo gave the FTC was false, the full amount of the judgment will become due.
- Nutraceuticals International principal Craig Payton is banned from marketing any foods, drugs, or dietary supplements.
- Nutraceuticals International marketing executive Deborah B. Vickery is required to pay a $4 million judgment, which has been suspended due to her inability to pay..
- All five defendants are prohibited from making any false or unsupported claims about foods, drugs, or dietary supplements, and from helping others to make these claims. They also are barred from misrepresenting the results of any scientific study.
The Federal Trade Commission (“FTC”) announced on September 28, 2011 that it has entered into a stipulated judgment with Reebok to settle false advertising claims brought against the company by the FTC. In the settlement, Reebok agreed to cease making muscle toning and other claims for its toning shoes and agreed to pay $25,000,000 into a fund administered by the FTC for the compensation of consumers. Although Reebok admits no wrong-doing in the settlement, in addition to agreeing to deposit the $25,000,000 into the fund, the company also agreed that it would not:
- make claims that toning shoes and other toning apparel are effective in strengthening muscles, or that using the footwear will result in a specific percentage or amount of muscle toning or strengthening, unless the claims are true and backed by scientific evidence;
- make any health or fitness-related efficacy claims for toning shoes and other toning apparel unless the claims are true and backed by scientific evidence; and
- misrepresent any tests, studies, or research results regarding toning shoes and other toning apparel.
Among the claims that the FTC took issue with were advertisements for Reebok’s EasyTone walking shoes, RunTone running shoes, and EasyTone flip flops that stated that the soles of the shoes feature pockets of moving air to create “micro instability” that tones and strengthens muscles as you walk or run. According to the FTC Complaint, the company made unsupported claims that walking or running in its shoes would strengthen and tone key leg and buttock muscles more effectively than walking or running in regular shoes. The FTC’s complaint also alleges that Reebok falsely claimed that walking in EasyTone footwear had been proven to lead to 28 percent more strength and tone in the buttock muscles, 11 percent more strength and tone in the hamstring muscles, and 11 percent more strength and tone in the calf muscles than regular walking shoes.
Although Reebok denies any wrong-doing, it is clear from the terms of the settlement that the company did not possess the necessary evidence to substantiate the advertising claims that it was making for its products. As such, this case serves as a timely reminder to all marketers of health related products, whether they be nutritional supplements, weight loss products, or toning footwear, that they must have “competent and reliable scientific evidence” in their files to support the claims that are made in advertising materials for their products. Bear in mind that anecdotal evidence such as customer testimonials does not satisfy this standard. Nor do purported scientific studies that are of dubious quality. Competent and reliable scientific evidence is defined in FTC cases as “tests, analyses, research, studies, or other evidence based on the expertise of professionals in the relevant area, that have been conducted and evaluated in an objective manner by persons qualified to do so, using procedures generally accepted in the profession to yield accurate and reliable results.”
To view the FTC’s complaint and the stipulated judgment, go to http://www.ftc.gov/os/caselist/1023070/index.shtm.
In a relatively rare joint-agency action, the Federal Trade Commission and the Food and Drug Administration have launched the “Fraudulent STD Products Initiative,” to identify and remove over-the-counter products that make unproven claims to prevent, cure, and/or treat sexually transmitted diseases (STDs).
The products targeted have not been evaluated by the FDA for safety and effectiveness and may pose significant public health risk since they could delay proper medical treatment and help spread disease.
In the first step of the initiative, FDA and FTC have “co-signed” warning letters to manufacturers and others involved in the marketing of the fraudulent STD products. The letters list specific violations of FDA and FTC regulations, and the two agencies will monitor the responses and take additional action as needed to ensure enforcement. Among the products targeted are Medavir, Herpaflor, Viruxo, C-Cure, and Never An Outbreak.
The companies that received the warning letters claim that their products treat a range of STDs, including herpes, chlamydia, genital warts, HIV, and AIDS. Some of the products are marketed as dietary supplements, but since they are being sold to treat disease, the FDA considers them all drug products that fall under the jurisdiction of the Federal Food, Drug, and Cosmetic Act (FD&C Act) and cannot be sold through interstate commerce without an FDA-approved new drug application.
On the FTC side of the initiative, FTC considers the marketing of the products a “scam” utilizing deceptive advertising practices. They are being advertised as offering health benefits that are not supported by scientific evidence and thus violate the FTC act.
The Federal Trade Commission has asked to federal courts to issue temporary restraining orders to stop 10 alleged “fake news” operations from using their Web sites to market acai berry weight-loss products. The FTC seeks to permanently stop these practices and has asked courts to freeze the operations’ assets pending trial.
According to the FTC, the websites that are intended to appear as if they belong to legitimate news organizations. However, the FTC maintains that the sites are simply advertisements using deceptive practices to entice consumers to buy the featured acai berry weight-loss products from other merchants.
The FTC complaints allege that the fake news sites have titles such as “News 6 News Alerts,” “Health News Health Alerts,” or “Health 5 Beat Health News.” They often include the names and logos of major media outlets such as ABC, Fox News, CBS, CNN, USA Today, and Consumer Reports and falsely represent that the reports on the sites have been seen on these networks.
The FTC is asking the courts to permanently bar the allegedly deceptive claims, and to require the companies to provide money for refunds to consumers who purchased the supplements and other products. The FTC charges that the defendants:
- make false and unsupported claims that acai berry supplements will cause rapid and substantial weight loss;
- deceptively represent that their websites are objective news reporters, that independent tests demonstrate the effectiveness of the product, and that the comments following the “articles” on their websites reflect the views of independent consumers; and
- fail to disclose their financial relationships to the merchants selling the products.
While the FTC settlement with Legacy Learning may seem unrelated to the direct selling indusry, the case actually is extremely relevant to MLM and direct selling companies.
Although you don’t typically see paid reviewers compensated for posting positive comments about direct selling companies’ products, it is common in the direct selling industry for companies to use testimonials to promote the sale of their products and services.
Oftentimes, those testimonials come from their distributors. Just as the Legacy “affiliates” benefited financially from their reviews, MLM distributors have a direct financial interest in the sale of the products.
As the Legacy Learning case clearly illustrates, whenever a direct selling company does this, it is extremely important that the company disclose the relationship between the company and the person providing the testimonial if that person is a distributor for the company. This can be accomplished by adding the title ‘Independent Company X Distributor’ to the identification of the person giving the testimonial.
Legacy Learning to Pay FTC $250,000 to Settle Charges Stemming from Compensated Reviews and Endorsements
The FTC’s enforcement of its rule against the use of deceptive or misleading endorsements or reviews has resulted in a $250,000 settlement agreement with Legacy Learning Systems Inc. and its owner, Lester Gabriel Smith, marketer of a series of guitar-lesson DVDs.
According to the FTC’s complaint, Legacy Learning advertised using an online affiliate program, through which it recruited “Review Ad” affiliates to promote its courses through endorsements in articles, blog posts and other online editorial material. According to the FTC, these endorsements generated more than $5 million in sales of Legacy’s courses.
The FTC charged Legacy and Smith with deceptive advertising because they represented these online endorsements as the views of ordinary consumers or “independent” reviewers, without clearly disclosing that the affiliates were paid for every sale they generated .
Under the proposed administrative settlement, Legacy Learning and Smith will pay $250,000. In addition, they have to monitor and submit monthly reports about their top 50 revenue-generating affiliate marketers, and make sure that they are disclosing that they earn commissions for sales and are not misrepresenting themselves as independent users or ordinary consumers.
Legacy Learning and Smith also must monitor a random sampling of another 50 of their affiliate marketers, and submit monthly reports to the FTC about the same criteria.
Following a public comment period, the Federal Trade Commission voted 5-0 to finalize the order settling charges that Dannon exaggerated the health benefits of its Activia yogurt and DanActive dairy drink, two products that contain beneficial bacteria known as probiotics.
Under the settlement, Dannon agreed to stop claiming that Activia relieves temporary irregularity, unless the representation is non-misleading and the ad conveys that eating three servings a day is required to benefit, or unless Dannon has competent and reliable scientific evidence that the benefit can be achieved from eating less than three servings a day.
Dannon also agreed to stop claiming that DanActive or any yogurt, dairy drink or probiotic food helps people avoid catching colds or flu, unless the claim is approved by the FDA.
Dietary supplement marketers need to be on the look-out not only for the FDA and the FTC, but for consumer protection organizations as well. Most recently, the National Consumers League sent a letter to the FTC urging the agency to take action against VitaminWater.
The NCL calls VitaminWater advertising and labelling claims “deceptive” and “dangerously misleading” and is urging the FTC to stop the manufacturer’s continued use of them.
The complaint cites VitaminWater promotions that say “flu shots are so last year,” implying, the NCL believes, that VitaminWater is being promoted as product that can replace flu shots or prevent illness.
In a television ad, a woman is shown at home watching TV instead of at work because VitaminWater helped her become healthier so that she can use unused sick days to play hooky instead of being ill.
The NCL complaint also wants the FTC to stop label statements for VitaminWater that describe the product as a “nutrient enhanced water beverage” and that claim “vitamins + water = all you need.”
According to NCL, the statements are deceptive because VitaminWater is more than just vitamins and water, but also are made with crystalline fructose or other forms of sugar, and contain 125 calories per bottle.
The FTC has not yet responded to NCL’s complaint.
While the FTC has settled part of its case against POM Wonderful with the consent order with Mark Dreher, the former POM Wonderful LLC Vice President of Science and Regulatory Affairs, the company itself continues to fight the FTC with its lawsuit claiming the regulator is violating POM Wonderful’s First Amendment rights.
The latest salvo came mid-January when POM Wonderful’s lawyers filed a request that the federal district court in Washington DC dismiss the FTC’s suit. The company’s position is that it does not make any specific health claims. Rather, it is only communicating the promising results of its research.
According to a POM Wonderful statement, “We believe the commission is acting beyond its jurisdiction, exceeding its authority, and creating a new regulatory scheme that attempts to treat our juice as a drug, which it is not. The FTC is violating POM’s constitutional rights to share useful and important information with the public, and therefore we have initiated a separate lawsuit to preserve these rights.”
POM Wonderful’s belief is that their product is a food about which they are reporting the promising results of research studies. The FTC contends they are misrepresenting the studies to make claims about the health benefits of their products.
In that, the FTC has the support of the FDA, which in February, 2010, sent a warning letter to POM Wonderful stating that that the FDA found “serious violations of the Federal Food, Drug, and Cosmetic Act” and “determined that your POM Wonderful 100% Pomegranate Juice product is promoted for conditions that cause the product to be a drug.”
POM Wonderful’s response to that is the same as to the FTC complaint: “We believe that the manner of which we have communicated the results of our scientific research is both truthful and appropriate.”
The Dannon Company, Inc. has agreed to settle Federal Trade Commission charges of deceptive advertising and drop claims that allegedly exaggerated the health benefits of its Activia yogurt and DanActive dairy drink.
While the two products contain beneficial bacteria known as probiotics, the FTC alleged that Dannon’s advertising claims that the DanActive helps prevent colds and flu and Activia relieves temporary irregularity were not substantiated, even though Dannon’s ads and packaging claimed there was scientific evidence backing the claims. In fact, the FTC charged, the claim that there was clinical proof was false.
The FTC worked with 39 state attorneys general with their own inquiries into Dannon’s advertising of DanActive and Activia. They simultaneously announced the resolution of their inquiries, with Dannon agreeing to pay the states $21 million to resolve these investigations.
Under the proposed FTC settlement:
- Dannon is prohibited from claiming that any yogurt, dairy drink, or probiotic food or drink reduces the likelihood of getting a cold or the flu, unless the claim is approved by the Food and Drug Administration. Generally, companies do not need FDA approval of their health claims to meet FTC compliance standards, however the FTC said that requiring FDA approval will give Dannon clearer guidance going forward.
- Dannon may not claim that Activia yogurt will relieve temporary irregularity or help with slow intestinal transit time, unless the claim is not misleading and the ad conveys that three servings of Activia yogurt must be eaten each day to obtain these benefits. Dannon may claim that eating fewer than three servings a day provides these benefits only if the company is relying on two well-designed human clinical studies substantiating that the claim is true.
- Dannon may not claim that any other yogurt, dairy drink, or probiotic food or drink will relieve temporary irregularity or help with slow intestinal transit time unless the claim is not misleading and the company has two well-designed human clinical studies that substantiate the claim.
- Dannon may not make any other claims about the health benefits, performance, or efficacy of any yogurt, dairy drink, or probiotic food or drink, unless the claims are true and backed by competent and reliable scientific evidence. Dannon also is prohibited from misrepresenting the results of any tests or studies.