In making the major decision to seek professional help, people battling addiction – and their families, friends, and colleagues – are looking for accurate information about the treatment best suited to the individual. But according to a proposed FTC settlement, R360 LLC, a company that provided marketing services to addiction treatment centers, and its principal, Steven Doumar, ran national ads that used false claims to promote their clients’ facilities. It’s the first case the FTC has brought under the Opioid Addiction Recovery Fraud Prevention Act.
In addition to advertising on its own website and through social media, Florida-based R360 ran an extensive national TV campaign for the R360 Network, which it claimed was a nationwide group of addiction recovery specialists. The ads didn’t mention a particular facility by name. Instead, according to the FTC, R360 promised that people who called their toll-free number would be connected to an addiction treatment specialist who would make a personalized assessment to refer the caller to the best treatment center for that person. But how could a person looking for help possibly evaluate the quality of a particular treatment center? Not to worry, R360 claimed. According to their ads, an expert in substance abuse and addiction treatment selected each member of the R360 Network. What’s more, each R360 Network member was evaluated against tough objective standards.
R360’s ads emphasized the rigorous vetting process that treatment centers went through to become part of the R360 Network, claiming that they had been “handpicked” for “doing things ethically.” Describing them as “the cream of the crop,” R360 further represented that by selecting one of their affiliated facilities, “you’re guaranteeing that the personnel that are delivering the personalized service are qualified.”
That’s what R360 claimed about members of its Network, but according to the complaint, there was a lot more – and a lot less – going on behind the scenes. To become a member of the R360 Network, treatment centers entered into contracts to pay R360 monthly or annual fees. When people called in response to the ads, R360 would route them to one of those facilities. Treatment centers would then pay R360 an additional fee for each call they received in response to an R360 ad.
According to the FTC, calls that responded to R360’s ads were automatically routed to a fee-paying R360 Network member without an initial assessment of the person’s particular needs. In other words, R360 didn’t ask people for the kind of information necessary to make an individualized determination of the treatment facility best suited for that person – for example, whether they were looking for residential or outpatient treatment, whether medical detox was available, whether the facility accepted Medicaid, or whether they were willing to travel to a distant location.
What’s more, the FTC says that the R360 staff responsible for signing facilities up for the R360 network had no educational or professional experience in the fields of substance abuse disorders, addiction treatment, or mental health. You’ll want to read the complaint for details, but the FTC also alleges that the vetting process for prospective members of the R360 Network fell far short of the “hand-selected,” “cream of the crop” system the company touted in its ads.
The complaint charges R360 and owner Steven Doumar with violating the FTC Act. In addition, it’s the first case the FTC has brought under the Opioid Addiction Recovery Fraud Prevention Act. The statute makes it “unlawful to engage in an unfair or deceptive act or practice with respect to any substance use disorder treatment service or substance use disorder treatment product.” The law further provides that a violation “shall be treated as a violation of a rule under section 18 of the Federal Trade Commission Act” – meaning that civil penalties apply.
In addition to injunctive provisions that will change how the defendants do business in the future, the proposed settlement includes a civil penalty of $3.8 million, which is suspended based on the defendants’ inability to pay.
The case suggests two primary messages for other businesses. First, the Opioid Addiction Recovery Fraud Prevention Act – and Congress’ express inclusion of financial remedies – should signal how seriously the FTC takes false or misleading claims about addiction treatment products or services. The FTC will continue to monitor the market closely and take action against those who attempt to profit from addiction, especially companies that exploit the opioid crisis. Second, this is the latest in a growing series of FTC cases that challenge illegal practices by lead generators or referral services. If you make express or implied representations about selection or screening criteria, you need solid evidence to back up those claims.