Antitrust Law Daily Wrap Up, ADVERTISING NEWS: Marketers of weight loss, male enhancement, skin care products settle FTC charges, (May 3, 2016)

By Michael Menzhuber, J.D., LL.M.

The marketers of green coffee bean extract weight-loss supplements, male enhancement products, and skin care products have agreed to forfeit assets totaling $9.2 million in order to settle FTC charges that they violated the Restore Online Shoppers’ Confidence Act, the FTC Act, the FTC’s Telemarketing Sales Rule, and the Electronic Fund Transfer Act, the agency announced today (FTC v. Health Formulas, LLC, Case No. 2:14-cv-01649-JAD-GWF).

The FTC’s action charged that individual defendants Danelle and Jason Miller and the 42 corporations that they controlled (Health Formula defendants):

• used telemarketing, the Internet, print, radio, and television advertisements to deceptively pitch a variety of products, including dietary supplements and other weight-loss, virility, muscle-building, and skin products;

• tricked consumers into disclosing personal financial information through the use of a "free trial" or discount program with undisclosed costs;

• enrolled consumers, often without their knowledge, in a negative option program in which they were automatically charged for monthly shipments;

• failed to provide a way for consumers to stop the automatic charges;

• failed to disclose material facts about their refund and cancellation policy; and

• had no basis for the extreme weight-loss claims that they made for their weight-loss products.

The proposed stipulated final order bars the defendants from:

• advertising or selling weight-loss supplements and negative option sales plans;

• making unsupported health claims for other products;

• debiting consumers’ bank accounts without their consent;

• misrepresenting evidence used to support product claims; and

• committing telemarketing violations alleged in the FTC’s complaint.

The order also requires clear disclosures during any sale regarding material terms and conditions of the transaction and substantiation for any claims made about health benefits or efficacy of any food, drug, or dietary supplement.

The remainder of the $105 million judgment against the defendants will be suspended after they surrender assets totaling $9.2 million, in addition to a Ferrari that has already been turned over.

Chapnik, Smukler & Chapnick, Inc. Following an agreement to settle FTC charges against them, the Chapnik, Smukler & Chapnick defendants are:

• banned from negation option sales (with minor exceptions), advertising, promoting, or selling dietary supplements, and making sales misrepresentations;

• required to provide clear disclosures during any sale regarding material terms and conditions of the transaction, cancellation and refund policies; and

• prohibited from a range of deceptive and abusive telemarketing practices.

A $105 million judgment against Chapnik, Smukler & Chapnick will be suspended upon payments to the FTC totaling $664,000.

News: Advertising ConsumerProtection FederalTradeCommissionNews