FTC Targets Spam, False Claims by Weight Loss Products
Alleging violations of the Federal Trade Commission Act and the CAN-SPAM Act, the Federal Trade Commission filed suit in Florida federal court against a pair of individuals and their companies in connection with weight loss products they marketed.
Hoping to entice recipients to click on a link leading to websites promoting weight loss products such as Original White Kidney Bean and Original Pure Forskolin, Tachht, Inc. and Teqqi LLC, along with related defendants, paid to have emails sent to consumers from hacked accounts to make it appear as if the messages came from family members or friends, the FTC said. Designed to give the impression of a brief note from a friend, the emails read "Hi! CNN says this is one of the best [link]" and "Hi! Have you already seen it? [link]."
The sites themselves—often styled to look like news sites, with a purportedly independent anchor discussing the products—contained deceptive marketing, the FTC added. False and unsubstantiated claims about the effectiveness of the weight loss products (such as "Burn Fat Quicker Without Dieting or Exercise") were combined with fake testimonials that users lost "4 lbs/week of belly fat" and "41.7 lbs in 2.5 months." The defendants also misrepresented that the products had been featured or endorsed by celebrities including Oprah Winfrey and the hosts of the TV show The Doctors.
To further encourage purchase of the products, the sites would feature messages, like: "ATTENTION: Due to recently being featured on TV we cannot guarantee supply. As of [date website visited] we currently have product IN STOCK and ship within 24 hours of purchase." From the fake news websites, consumers could link to other sites in order to purchase the weight loss products.
According to the complaint, the defendants paid affiliate marketers a commission for each consumer who clicked through from the fake news website to the defendants' website and purchased a product. CAN-SPAM violations occurred because the defendants paid for spam email with deceptive header information and subject lines, the agency said, and they failed to provide an opt-out notice, an effective opt-out mechanism, and a physical postal address as required by the statute.
To read the complaint in FTC v. Tachht, Inc., click here.
Why it matters: The Commission accused the Florida-based defendants of a host of violations, from deceptive advertising claims to false testimonials and endorsements to spam emails. "These defendants used a variety of deceptive tactics to sell their bogus diet pills," Jessica Rich, Director of the FTC's Bureau of Consumer Protection, said in a statement about the case. "But we have a clear message for them—we want their illegal practices to stop and we want to give people back the money they took." The case also serves as a reminder to advertisers that they can be liable for CAN-SPAM violations even where they don't push the "send" button on an email marketing campaign.
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FTC Weighs in on Mop Maker's "Made in USA" Claims
The Federal Trade Commission issued a closing letter in its latest "Made in USA" investigation, deciding not to pursue enforcement action against mop manufacturer J.W. Manufacturing.
J.W. Manufacturing made unqualified U.S. national origin claims on marketing materials for its mops despite the fact that the products incorporated a "significant" amount of imported fibers, the agency said. Such claims "likely suggest to consumers that all products advertised in those materials are 'all or virtually all' made in the United States," Julia Solomon Ensor, a staff attorney with the FTC's Bureau of Consumer Protection, wrote to the company.
The "all or virtually all" standard has been enforced by the Commission since its 1997 U.S. Origin Claims Enforcement Policy Statement, which made clear that "Made in USA" claims can only be made when all significant parts and processing are of U.S. origin, with negligible or zero foreign content. In recent years, the agency has vigorously enforced the standard in cases ranging from jeans to accessories.
J.W. Manufacturing managed to avoid further action, as the FTC decided not to pursue the matter after the company proposed a remedial action plan to clarify its representations.
"This plan includes: (1) updating the company's website to clarify that some mops incorporate imported fibers; (2) placing stickers that read 'Made in USA with US and Foreign Materials' over unqualified claims on affected packaging; (3) ordering new packaging with qualified claims; and (4) contacting third-party distributors to provide updated claims and product descriptions," according to the agency's closing letter.
To read the FTC's letter to J.W. Manufacturing, click here.
Why it matters: To avoid being on the receiving end of a similar letter from the Commission, advertisers should ensure that when making "Made in USA" claims, the products at issue are "all or virtually all" made in the United States, with negligible or nonexistent foreign content.
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Potato Chip False Advertising Suit Proceeds in the Ninth Circuit
A plaintiff's suit against 7-Eleven over the labeling of potato chips will move forward after a panel of the Ninth Circuit Court of Appeals reversed dismissal of the claims.
A fan of the chain's private label potato chips, Scott Bishop, sued over the differences found on the front and the back of the chip bag. On the front of the package, the chips were touted as having "0g trans fat" and "no cholesterol," while on the back, the nutrition information for fat content revealed a different story.
A federal court judge tossed the suit, determining that Bishop's complaint failed to allege sufficient facts to establish statutory standing under California's unfair competition law, false advertising law, and Consumer Legal Remedies Act. But a three-judge panel of the Ninth Circuit reversed in an unpublished memorandum.
"At this preliminary stage of the action, Bishop sufficiently alleged actual reliance, which he was required to do under each of his theories because his claims sound in fraud," the court wrote. "Bishop adequately alleged that he relied on 7-Eleven's potato chips' front of package '0g trans fat' and 'no cholesterol' representations, and that he would not have purchased the chips had 7-Eleven included on the front of the package the 'See nutrition information for fat content' disclosure required by the U.S. Food and Drug Administration."
The reasonable consumer standard, unlike the individual reliance requirement, is not relevant to the standing inquiry, the panel noted.
"California's consumer protection statutes render statements actionable which, although not technically false, have a tendency to mislead consumers because the statements fail to disclose or direct the consumer's attention to other relevant information," the court said, reversing dismissal of Bishop's complaint.
To read the memorandum in Bishop v. 7-Eleven, Inc., click here.
Why it matters: Although unpublished, the Ninth Circuit memorandum emphasized two consumer-friendly points for advertisers to keep in mind: California law permits consumers to sue even if a statement is not "technically false," but is truly misleading, and the reasonable consumer standard is not a standing requirement, as long as the consumer can establish individual reliance.
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News and Views
NutraIngredients-USA turned to Ivan Wasserman, partner in Manatt's Advertising, Marketing and Media practice, for insight into an FDA warning letter to Ultimate Weight Loss Co. about including sibutramine, which was banned by the FDA in 2010, in its products. These weight loss products were the subject of an FDA public warning issued in December 2015, which was followed up—four months later—by the formal letter in April 2016. Wasserman said that the slowness of FDA's response in such cases can sometimes be frustrating to industry critics. "It is somewhat surprising in this case that there was such a lapse of time between the public notifications and the issuance of the warning letters. It may be that FDA wanted to protect the public immediately without waiting for the warning letter to go through its channels," he said. To read "Sibutramine Cited in FDA Warning Letter on Weight Loss Products" click here.
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