| WILLIAM E. KOVACIC General Counsel JANET M. EVANS LOCAL COUNSEL Attorneys for Plaintiff, UNITED STATES DISTRICT COURT FEDERAL TRADE COMMISSION, Plaintiff, v. LIVERITE PRODUCTS, INC., 15405 Redhill Ave., Suite C Tustin, California 92780 CORINNE JACOBSON, 15405 Redhill Ave., Suite C Tustin, California 92780 individually and as an officer of Liverite Products, Inc.; STEVEN JACOBSON, 15405 Redhill Ave., Suite C Tustin, California 92780 individually and as an officer of Liverite Products, Inc.; SHERI GRANT, 615 San Leon Irvine, California 92606 individually and d/b/a DIGIPRO and HEALTHY LIFE MARKETING; and JAMES GRANT, 615 San Leon Irvine, California 92606 individually and d/b/a DIGIPRO and HEALTHY LIFE MARKETING, Defendants. Hon. Civil Action No. COMPLAINT FOR PERMANENT INJUNCTION AND OTHER EQUITABLE RELIEF Plaintiff, the Federal Trade Commission ("FTC" or "Commission") through its undersigned attorneys, for its Complaint alleges: 1. Plaintiff FTC brings this action under Section 13(b) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. § 53(b), to secure a permanent injunction, restitution, disgorgement, and other equitable relief against defendants for engaging in deceptive acts or practices in connection with the advertising, marketing and sale of alleged liver treatments, Liverite the Ultimate Liver Aid, Liverite 3 in 1 for Women, Liverite 3 in 1 for Men, and Liverite Sports, in violation of Sections 5(a) and 12 of the FTC Act, 15 U.S.C. §§ 45(a) and 52. JURISDICTION AND VENUE 2. This Court has jurisdiction over this matter pursuant to 15 U.S.C. §§ 45(a), 52, 53(b) and 28 U.S.C. §§ 1331, 1337(a) and 1345. 3. Venue in this District is proper under 15 U.S.C. § 53(b) and 28 U.S.C. § 1391(b) and (c). THE PARTIES 4. Plaintiff, the Federal Trade Commission, is an independent agency of the United States Government created by statute. 15 U.S.C. §§ 41-58. The Commission enforces Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), which prohibits unfair or deceptive acts or practices in or affecting commerce. The Commission also enforces Section 12 of the FTC Act, 15 U.S.C. § 52, which prohibits false advertisements for food, drugs, devices, services or cosmetics in or affecting commerce. The Commission may initiate federal district court proceedings to enjoin violations of the FTC Act and to secure such equitable relief, including consumer redress, as may be appropriate in each case. 15 U.S.C. § 53(b). 5. Defendant Liverite Products, Inc. ("LPI") is a California corporation with its principal office or place of business at 15405 Redhill Avenue, Suite C, Tustin, California 92780. Since approximately 1998, LPI has been engaged in the sale of the Liverite products. LPI transacts business in the Central District of California. 6. Defendant Corinne Jacobson is an officer of LPI. At all times relevant to the complaint, acting individually or in concert with others, she has formulated, directed, or controlled the policies, acts, or practices of LPI, including the acts or practices alleged in this complaint. She resides or transacts business in this district. 7. Defendant Steven Jacobson is an officer of LPI. At all times relevant to the complaint, acting individually or in concert with others, he has formulated, directed, or controlled the policies, acts, or practices of LPI, including the acts or practices alleged in this complaint. He resides or transacts business in this district. 8. Defendant Sheri Grant is a website developer and an online product marketer. Her office or principal place of business is 615 San Leon, Irvine, California 92606. Doing business under the trade name DigiPro, she, along with defendant James Grant, prepared LPI's websites, including metatags. Doing business under the trade name Healthy Life Marketing, she, along with respondent James Grant, sold LPI's products online. Sheri Grant resides or transacts business in this district. 9. Defendant James Grant also is a website developer and an online product marketer. His office or principal place of business is 615 San Leon, Irvine, California 92606. Doing business under the trade name DigiPro, he, along with defendant Sheri Grant, prepared LPI's websites, including metatags. Doing business under the trade name Healthy Life Marketing, he, along with defendant Sheri Grant, sold LPI's products online. James Grant resides or transacts business in this district. COMMERCE 10. The acts and practices of defendants alleged in this complaint have been in or affecting commerce, as "commerce" is defined in Section 4 of the Federal Trade Commission Act. DEFENDANTS' COURSE OF BUSINESS 11. Since at least 1998, defendants have manufactured, labeled, advertised, offered for sale, sold, and distributed products to the public, including Liverite the Ultimate Liver Aid, Liverite 3 in 1 for Women, Liverite 3 in 1 for Men, and Liverite Sports (together, "the Liverite products") by means of radio and magazine advertisements and three Internet sites. Consumers may purchase the Liverite products through retail outlets, over the Internet, or by calling a toll-free telephone number. 12. The Liverite products contain hydrolyzed extract of beef liver, sold either alone or in combination with additional vitamins and minerals. 13. To induce consumers to purchase the Liverite products, defendants have operated three Internet sites. The first two sites, www.liverite.com and www.liveriteproducts.com, were identical. Consumers who clicked an "order online" button on either of these sites would be connected directly to the third site, www.healthylifemarketing.com, which contained additional information about the products as well as an online ordering capability. The Internet sites feature numerous pages describing the purported benefits of the Liverite products. In addition, they feature letters from consumers purporting to recite the personal experiences with the Liverite products (hereinafter, "testimonials"). Exhibits A and B hereto contain pages from these sites as of September 7, 2000. The Internet sites include, among other things, the following statements or depictions:
14. In addition to the representations detailed above, defendants have embedded specific disease references in the "metatags" of defendants' Internet websites. A metatag is a word or words embedded in an Internet website, which are not normally displayed visually to the consumer, that may be used by an Internet search engine for the purpose of selecting sites in response to an Internet user's search request. These metatags include, but are not limited to, references to AIDS, hepatitis A, B & C, liver problems, liver disease, liver detoxification, alcohol, hangover, cirrhosis, hepatatoxicity, anabolic steroids, interferon, and hepatatoxicity. Defendants' use of these metatag references increased the likelihood that consumers who researched the topics of hepatitis, liver disease, liver enzymes, cirrhosis, liver detoxification, hepatotoxicity, anabolic steroids, or hangover on the Internet would be directed to defendants' websites. Exh. C. 15. Defendants also have advertised, promoted and marketed the Liverite products via radio advertisements. Exhibits D and E are copies of the transcripts of these ads. These radio ads include, among others, the following statements:
16. Defendants also have advertised, promoted and marketed the Liverite products via magazine advertisements. Exhibit F is a copy of one of these ads. This magazine ad includes, among others, the following statements:
17. Defendants also have advertised, promoted and marketed the Liverite products via the labeling on the Liverite products. Exhibit G is a copy of the label for Liverite the Ultimate Liver Aid. The label includes, among others, the following statement: "Liverite® with its special combination of amino acids, lipotropic factors, phospholipids and vitamin B12 detoxifies and protects the liver from toxins." 18. Defendants charge approximately $16.99 for 60 tablets of Liverite the Ultimate Liver Aid, $21.99 for 60 tablets of Liverite 3 in 1 for Men (or Women), and $23.99 for 60 tablets of Liverite Sports. Defendants represent on their product labels that 60 tablets of Liverite the Ultimate Liver Aid constitutes a 10 to 15-day supply, that 60 tablets of Liverite 3 in 1 constitutes a 30-day supply, and that 60 tablets of Liverite Sports constitutes a 15 to 30-day supply. THE FTC ACT 19. Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), provides that "unfair or deceptive acts or practices in or affecting commerce are hereby declared unlawful." Section 12 of the FTC Act, 15 U.S.C. § 52(a)(2), provides that it shall be "unlawful for any person, partnership, or corporation to disseminate, or cause to be disseminated, any false advertisement . . .[b]y any means, for the purpose of inducing, or which is likely to induce, directly or indirectly, the purchase in or having an effect upon commerce, of food, drugs, devices, services, or cosmetics." 20. The Liverite products are either a "food" or a "drug" within the meaning of Sections 12 and 15 of the Federal Trade Commission Act. DECEPTIVE ACTS OR PRACTICES COUNT I 21. Through the means described in Paragraphs 13 through 17, defendants have represented, expressly or by implication, that:
22. Defendants did not possess and rely upon a reasonable basis that substantiated the representations set forth in Paragraph 21 at the time the representations were made. Among other reasons, the studies upon which defendants relied lacked a protocol; the patients in the human studies upon which defendants relied were not randomly assigned to treatments and control groups; those studies were not placebo controlled or blinded; or there was no showing that the patients' purported improvement was statistically significant as compared to the control group. For example, one study on which defendants rely, authored by K. Fujisawa et al. and entitled Therapeutic Effects of Liver Hydrolysate Preparations on Chronic Hepatitis, 26 Asian Med. J. 497 (1983), demonstrated no statistical difference in liver enzyme levels between the patients and the control group at the end of the study. Therefore, the making of the representations set forth in Paragraph 21 is a deceptive practice and constitutes false advertising for a food or drug, in violation of the FTC Act, 15 U.S.C. §§ 45(a) and 52. COUNT II 23. Through the statements and depictions described in Paragraphs 13 through 17, defendants have represented, expressly or by implication, that clinical tests prove that Liverite is effective for treatment of liver disease. 24. In truth and in fact, clinical tests do not prove that Liverite is effective for treatment of liver disease. 25. Therefore, the representation set forth in Paragraph 23 was, and is, false or misleading. 26. The acts and practices of defendants as alleged in this complaint constitute unfair or deceptive acts or practices, and the making of false advertisements, in or affecting commerce in violation of Sections 5(a) and 12 of the Federal Trade Commission Act. 15 U.S.C. §§ 45(a), 52. INJURY 27. Consumers throughout the United States have suffered and continue to suffer substantial monetary loss as a result of defendants' unlawful acts or practices. In addition, defendants have been unjustly enriched as a result of their unlawful practices. Absent injunctive relief by this Court, defendants are likely to continue to injure consumers, reap unjust enrichment, and harm the public interest. THIS COURT'S POWER TO GRANT RELIEF 28. Section 13(b) of the FTC Act, 15 U.S.C. § 53(b), empowers this Court to grant injunctive and such other relief as the Court may deem appropriate to halt and redress violations of the FTC Act. The Court, in the exercise of its equitable jurisdiction, may award other ancillary relief, including consumer redress, disgorgement, and restitution, to prevent and remedy injury caused by Defendants' law violations. PRAYER FOR RELIEF Wherefore, Plaintiff requests that this Court, as authorized by Section 13(b) of the FTC Act, 15 U.S.C. § 53(b), and pursuant to its own equitable powers:
Respectfully submitted, WILLIAM E. KOVACIC _____________________________ THOMAS SYTA Attorneys for PLAINTIFF FEDERAL TRADE COMMISSION |