Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: E-mail spammers to pay $500,000 to FTC for unproven weight-loss product claims, (Mar 17, 2017)

By Edward L. Puzzo, J.D.

Three Florida-based affiliate marketers charged with using illegal spam e-mail, false weight loss claims, and phony celebrity endorsements to market bogus weight loss products, will pay $500,000 to settle FTC charges, the agency has announced. The court order resolving the FTC’s allegations, issued by the federal district court in Tampa, also prohibits the defendants from the illegal advertising and marketing tactics alleged in the complaint (FTC v. Tachht, Inc., FTC File No. 152 3080, Civil Action No. 8:16-cv-01397-JDW-AEP).

Charges. According to the FTC’s June 2016 complaint, Colby Fox�?¾ his companies, Tachht, Inc. and Teqqi, LLC�?¾ and a fourth defendant paid affiliate marketers to send consumers millions of illegal spam e-mails from hacked e-mail accounts, making it appear that the messages came from the consumers’ family members, friends, or other contacts. The e-mail messages appeared to be a quick note from a family member or friend, passing along a link to an interesting news story. The links in those e-mail messages led to websites deceptively promoting the defendants’ unproven weight loss products, such as Original Pure Forskolin and Original White Kidney Bean. These websites deceptively claimed that the defendants’ products could cause weight loss of 17 pounds in 4 weeks, or "41.7lbs in 2.5 months." The websites also falsely represented that the products for sale had been featured or endorsed by Oprah Winfrey or the hosts of the television show "The Doctors."

The FTC alleges that these weight loss claims were false and unsubstantiated, and that the featured celebrities had no affiliation with the defendants’ products.

These sites then linked to websites where consumers could purchase the defendants’ weight loss products. The defendants paid their affiliate marketers a commission when consumers clicked through to one of their websites and bought their supplements, the FTC charged. In its complaint, the FTC alleged that these email and marketing practices violated both the FTC Act and the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (CAN-SPAM) Act.

Settlement. In setting the Commission’s charges, defendants Fox, Tachht, and Teqqi are prohibited from making the false and unproven weight-loss claims alleged in the complaint, and must have competent and reliable scientific evidence to back up any health of efficacy claims they make in the future. They also are barred from falsely representing that any health claims have been approved by the U.S. Food and Drug Administration, and are required to preserve all scientific evidence used to support health claims made for their products.

Next, the settling defendants are prohibited from misrepresenting, or helping anyone else misrepresent, that a product or program has been endorsed or approved by specific celebrities or featured on "The Doctors" television show, that testimonials reflect typical consumer experience with the product, that any website or other publication is an objective news report when it is actually an ad, and that independent tests demonstrate a product’s effectiveness.

The order further prohibits the defendants from making a range of misrepresentations about their products, including their total cost, as well as claims related to refunds or cancellation terms. The order specifies how the defendants must monitor their affiliate marketers in the future, and bars them from violating the CAN-SPAM Act in the way alleged in the complaint.

Finally, the order imposes a judgment of $1,303,822.98 against the defendants, which will be partially suspended upon payment of $500,000 to the Commission. The full amount will become due if they are later found to have misrepresented their financial condition.

The case is No. 8:16-cv-01397-JDW-AEP.

Attorneys: David C. Shonka, Acting General Counsel, Federal Trade Commission

Companies: Tachht, Inc.; Teqqi LLC

News: ConsumerProtection FederalTradeCommissionNews FloridaNews