The FTC’s multimillion dollar settlement involving the Ab Circle Pro exercise device is great news for consumers. But what does it say to businesses?
Inc.-orporate compliance. Yes, there are good reasons why business people incorporate their ventures, but that “Inc.” after a company’s name doesn’t shield you from individual liability under the FTC Act. In appropriate cases, the FTC will name key players to make sure an order will be effective in protecting future customers. The FTC's lawsuit names not only the corporate entities behind the Ab Circle Pro promotion, but corporate officers, too. For savvy marketers, that’s one more reason to exercise care when your company makes claims.
Liable to be liable? These days it’s rare for a successful promotion to be the sole product of one creative entrepreneur. The FTC Act may be nearing its 100th birthday, but when necessary, it’s limber enough to reach the “cast of thousands” who may be involved in an allegedly deceptive campaign. For example, in the Ab Circle Pro case, the FTC named the infomercial host, who touted her own 80-pound weight loss using the product — a claim the FTC challenged as false. Who else was named? The infomercial producer and two companies she controls. For perceptive promoters, the case serves as a mental sticky note not to assume that substantiation is someone else’s responsibility.
Weight and see. Whether it’s pills, creams, devices, or those shimmying belt machines you see in old movies that claimed to shake fat off the waistline, we’re all looking for a shortcut to weight loss and washboards. Over the years the FTC has brought hundreds of cases challenging misleading diet and fitness representations. Companies can’t claim surprise when the FTC insists on solid science to support promises like that.
Refund-amentals. The financial settlements in this case offer between 15 million and 25 million reasons why compliance counts. Simply put, deceptive practices can cost you. In case you're wondering where that money goes, it's returned to people who bought the product.
How do you spell relief? As pleadings watchers have noticed, the FTC’s complaint and order name The Readers Digest Association, Inc., as a relief defendant. Why? Two of the companies sued for their role in the promotion were subsidiaries of The Readers Digest Association and Readers Digest received money traceable as proceeds from acts the complaint says were illegal. Therefore, according to the FTC, Readers Digest was “unjustly enriched” and it would be “unjust, inequitable, or unconscionable for it to retain those funds.” Where does that money justly, equitably, and conscionably belong? Back in buyers' wallets. The message for marketers: Keep tabs on what’s going on with subsidiaries and affiliates.
Know someone who bought the device? Let them know they can apply for a refund online.