Antitrust Law Daily Wrap Up, CONSUMER PROTECTION—S.D. Fla: Marketers to Spanish-speaking consumers restrained from misrepresenting products, (Jun 23, 2014)

By John W. Arden, J.D., LL.M.

At the FTC’s request, the federal district court in Miami has temporarily restrained Hispanic Global Way Corp., its owners, and related businesses from making misrepresentations regarding weight loss devices, English-language courses, and other products advertised on Spanish-language television; misrepresenting a consumer’s ability to return the product for a full refund; and failing to provide refunds or exchanges (FTC v. Hispanic Global Way, Corp., June 2, 2014, Altonaga, C.). The court also froze the assets of the defendants.

The FTC filed a lawsuit on June 2, seeking to temporarily and permanently halt the alleged unfair practices of the defendants; to obtain rescission, restitution, refund of monies paid by consumers; and to receive disgorgement of ill-gotten monies from the defendants.

According to the complaint, Hispanic Global Way, Hispanic Network Connections, and several other companies offered English-language courses, cell phones, ladies’ garments, exercise equipment, and the “Molding Motion 5” belt, with no mention of refund and exchange policies. Consumers often received incomplete orders, the wrong or defective products, products of the wrong size or color, and products that did not perform as advertised, the complaint alleged. Regarding the purported weight-loss belt, the defendants’ advertising allegedly indicated that consumers could expect rapid and substantial weight-loss, regardless of diet and exercise habits, with no reasonable basis to substantiate such claims.

When consumers called to complain, the defendants routinely placed them on hold for long periods, disconnected them, or otherwise ignored or insulted them, the complaint alleged. If consumers persisted, sales representatives allegedly said they could not return or exchange defective products or products the consumers never ordered, or that consumers would have to pay additional fees, ranging from $20 to $299, to do so. The most persistent consumers received promises of refunds or exchanges that never materialized, according to the FTC.

The defendants were charged with refusing to provide refunds for, or imposing substantial fees to exchange, unwanted or unusable products; misrepresenting that consumers could return products, even after use, for refunds at no additional cost; and making false, unsubstantiated claims about the weight-loss belt, in violation of the FTC Act.

The court found that there was good cause to believe that immediate and irreparable harm would result from the defendants’ ongoing violations of Sections 5(a) and 12 of the FTC Act unless they were temporarily restrained. Moreover, the court found good cause to believe that there could be immediate and irreparable damage to its ability to grant effective final relief for consumers (including monetary restitution, rescission, refunds, or disgorgement) unless the defendants were restrained from selling, transferring, or otherwise disposing of their assets, documents, records, and other evidence. Good cause existed for freezing the assets of all defendants, according to the court.

Weighing the equities and considering the FTC’s likelihood of success on the merits, the court found that the issuance of the temporary restraining order was in the public interest.

The case is No. 14-22018-CV.

Companies: Hispanic Global Way; Hispanic Network Connections

Cases: Advertising ConsumerProtection FloridaNews FederalTradeCommissionNews