Eight marketers of self-help and health-related products promoted in radio and television infomercials have agreed to settle Federal Trade Commission charges that ad claims for their products were false or unsubstantiated. The defendants will pay a total of $1.1M to settle the charges and one defendant will be required to establish a $500,000 escrow account, which will be used to repay consumers should he commit similar law violations in the future. A ninth defendant faces trial on FTC charges in federal district court.
Kevin Trudeau developed and hosted radio and TV infomercials for a range of products in conjunction with two infomercial production companies, Mega Systems, Inc. and Tru-Vantage, L.L.C. Many of the infomercials had names such as, "A Closer Look," and were formatted to appear to be commercial radio and TV interview programs or talk shows, not the advertisements they actually were. Five respondents, including Trudeau himself, invented or manufactured the products or services that were featured in the infomercials and appeared in the infomercials promoting them.
Mega Systems International, Inc., and its principal, Jeffrey Salberg, produced the Eden's Secret; Dr. Callahan's Addiction Breaking System; Mega Memory System; Jeanie Eller; and Sable Hair Farming System infomercials. The FTC alleged that through the formatting of those infomercials, Mega Systems; Salberg; and Trudeau deceptively represented that the commercials were independent television and radio programs, not paid commercial advertising.
To settle the FTC charges, Kevin Trudeau, who developed and appeared in all the infomercials, including the one for his "Mega Memory System," will pay $500,000 in consumer redress and will be barred from making false claims for the products in the future. Trudeau will be required to establish a $500,000 escrow account or performance bond to assure compliance. Infomercial producer Mega Systems International, Inc., and its principal, Jeffrey Salberg, also will pay $500,000 for consumer redress. Kenneth Wright, inventor and promoter of "Eden's Secret Nature's Purifying Product," and Roger J. Callahan, promoter of the "addiction breaking system" will each pay $50,000 in consumer redress.
Trudeau, Mega Systems, Salberg, Wright, Callahan, Eller, Berg, and Tru-Vantage will be barred from making the alleged deceptive claims relating to their products in the future. In addition, Trudeau, Salberg, and Mega Systems will be required to have substantiation, which, when appropriate, must be scientific, for claims about the benefits, performance or efficacy of any product or program they advertise; promote; sell; or distribute in the future. They also will be barred from misrepresenting the existence, contents, validity, results, conclusions or interpretations of any test, study or research. Wright, Callahan, Berg, and Tru-Vantage will be required to have substantiation, which, when appropriate, must be scientific, for claims about the benefits, performance or efficacy of any product or program like those they allegedly deceptively promoted.
In addition, both Trudeau, Mega Systems, and Salberg will be required to disclose "THE PROGRAM YOU ARE WATCHING IS A PAID ADVERTISEMENT FOR [THE PRODUCT OR SERVICE]" in television ads that are at least 15 minutes long, and to disclose the same audio message in radio ads that are at least five minutes long.
All the settlement agreements contain recordkeeping and reporting provisions to allow the Commission to monitor compliance.
The Commission votes to accept the proposed consent agreements and to file the complaint were 4-0, with Commissioner Mozelle W. Thompson not participating.
NOTE: Consent agreements are for settlement purposes only and do not constitute admissions of law violations. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.
Summaries of the Mega Systems/Salberg, Callahan, Eller, Berg, and Tru-Vantage consent agreements will be published in the Federal Register shortly and will be subject to public comment for 60 days, after which the Commission will decide whether to make them final. Comments should be addressed to the FTC, Office of the Secretary, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580.
The proposed consent decrees with Trudeau and Wright were filed on January 12. They are subject to court approval. Court filed consent decrees have the force of law when signed by the judge.
The complaint against Jacqueline Sable was not settled and will be tried in federal district court for the Northern District of Illinois in Chicago.
NOTE: The Commission files a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant has actually violated the law. The case will be decided by the court.
Copies of the complaints, consent agreements, and analyses of the agreements to assist in public comment are available on the Internet at the FTC's World Wide Web site at: http://www.ftc.gov or by calling 202-326-3627. Copies also are available from the FTC's Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-3128; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.
(FTC File No. 942 3278)