Telemarketers Settle FTC Charges of Costly Free Samples, Do Not Call Violations, and Worthless Weight-Loss Patches

A telemarketing operation selling tooth whitening kits and weight-loss patches will pay $463,000 in consumer redress and $11,000 in civil penalties to settle Federal Trade Commission charges. The FTC alleged that the defendants promised “free” samples of the tooth whitening kits, then debited consumers’ accounts without their authorization. The FTC further alleged that the defendants made false and unsubstantiated claims about their weight-loss patches and called consumers listed on the National Do Not Call Registry.

The FTC’s amended complaint included seven counts of law violations against defendants Conversion Marketing, Inc. and Adam Tyler MacDonald. The FTC alleged that the defendants falsely represented that consumers would get free samples of the Fast White tooth whitening kit, but instead enrolled them in programs where consumers would continue to receive monthly shipments. The defendants then billed consumers without their express, informed consent. The FTC also charged the defendants with making false and unsubstantiated claims that their weight-loss patches, Pounds Off Patch and Carbs Off Patch, cause substantial weight loss: in all users; when applied to skin; and by blocking the absorption of carbohydrates. The Commission has referred a second complaint to the Department of Justice for filing, charging that the defendants called numbers listed on the National Do Not Call (DNC) Registry, abandoned calls placed to consumers, and did not pay the required annual fee to access numbers on the Registry.

To settle the charges in the complaint filed by the FTC, the defendants are prohibited from misrepresenting any material fact in connection with the sale of a product or service, including: that consumers can obtain a free product or service; that products or services are offered at no obligation; the existence, amount, or manner of assessment of any charge; the length of any trial period; the terms of any refund program; that defendants do or do not possess consumers’ billing information; or that consumers agreed to a purchase. Also, the defendants must clearly and conspicuously disclose all fees, costs, cancellation terms, material conditions, limitations, and refund terms, and the material terms of any negative option offer before they ask
consumers to disclose billing information. Before submitting billing information for payment, the defendants must have the express, informed consent of the consumers. The settlement prohibits the weight-loss misrepresentations alleged in the Commission’s complaint as well as violations of the Telemarketing Sales Rule. The settlement contains a $979,204 judgment, which is suspended based on inability to pay, except for $463,000.

To settle charges in the Do Not Call complaint, the defendants are prohibited from calling consumers who have placed their numbers on the DNC Registry or who placed themselves on the defendants’ company-specific DNC list. They also are prohibited from abandoning telemarketing calls and from calling a telephone number in any area code without first paying the DNC access fee.

The settlement, which has been referred to the Department of Justice for filing, contains a $580,056 civil penalty, which is suspended except for $11,000.

The Commission vote to amend the FTC complaint and approve the settlement and to refer the complaint to the Department of Justice for filing and approve a consent in settlement was 4-0.

The amended complaint and stipulated final judgment and order were entered in the U.S. District Court for the Central District of California on January 12, 2006. The FTC has requested that the Department of Justice file the complaint for civil penalties and stipulated judgment and order in the U.S. District Court for the Central District of California.

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.

NOTE: This judgment is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Judgments have the force of law when signed by the judge.

Copies of the complaints and final judgments are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint in English or Spanish (bilingual counselors are available to take complaints), or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.