The “before” photo showed a silver-haired lady in a wheelchair with a hand on her furrowed brow. “24 hours after” and she’s smiling and knitting on the sofa, thanks to a dietary supplement proven in a 1200-person clinical study to reduce or eliminate the symptoms of joint pain, hypertension, diabetes, and depression. And how’s this for a bonus? Users can “easily lose between 8-13 lbs. per week.”
Then there’s the pill that “protects brain against the ravages of Alzheimer’s & Dementia” – representations purportedly backed by solid scientific proof.
Amazed? Don’t be. Those are just a few of the deceptive claims and practices challenged in a complaint filed by the FTC and the Maine Attorney General’s Office against Health Research Laboratories, LLC and its president, Kramer Duhon.
The defendants used direct mail campaigns and websites to pitch BioTherapex and NeuroPlus. The FTC and Maine AG charge that Health Research Laboratories didn’t have appropriate proof to support its claims. What about that 1200-person clinical study presented at “a notable San Diego Hepatology Conference” attended by “200 specialists from 14 countries”? A fabrication, according to the lawsuit. The complaint also alleges that the dramatic consumer testimonials and expert endorsements by white-coated medical professionals posed with the obligatory stethoscopes around their necks were false.
You’ll want to read the complaint to see the breadth of health claims made in the ads, but the case also centers on the defendants’ “free” offers. The FTC and Maine AG allege that people who responded to the promotions were pitched “risk-free trial offers” that came with undisclosed strings attached. For example, the defendants required consumers to pay the non-refundable cost of the initial shipment and the cost of returning the products if they weren’t satisfied. In addition, the complaint alleges that many consumers were offered BioTherapex or NeuroPlus “free” for 30 or 60 days, but weren’t told that the defendants started the clock on the day of the order, which was often 10-14 days before the product arrived in consumers’ hands. The defendants also interpreted their “risk-free trial offer” to mean that the company had to have received any returned merchandise from consumers before the end of the trial period.
What’s more, the FTC and Maine AG allege that the defendants enrolled consumers in auto-renewal programs without adequately disclosing what was going on and then billed their credit or debit cards without their express informed consent, a practice that violates the FTC Act, the Electronic Fund Transfer Act, Reg E, and Maine law.
In addition, the complaint charges that the defendants used deceptive upsells to pitch merchandise from other companies – deals for which Health Research Laboratories pocketed a tidy commission. Often those were club memberships for which the defendants failed to identify the name of the third-party seller and didn’t clearly and conspicuously disclose information regarding cancellations or refunds.
As the complaint reminds other businesses, the Telemarketing Sales Rule mandates specific requirements for companies using upsells, a practice defined as “soliciting of the purchase of goods or services following an initial transaction during a single telephone call.” Among other things, the company must identify the name of the third-party seller and clearly disclose the total cost of the offer. And if it makes any claims about refunds or cancellation, it must clearly disclose all material terms. The complaint alleges that Health Research Laboratories’ upsell practices violated the Telemarketing Sales Rule, the FTC Act, and Maine law.
The proposed settlement bans the defendants from making any of the FTC’s seven gut check weight loss claims. The order also requires human clinical testing to support future weight loss representations; a host of claims related to arthritis, pain relief, Alzheimer’s disease, dementia, and memory loss; and claims that a product cures or treats any disease. The defendants will need competent and reliable scientific evidence to support other representations about the health benefits or efficacy of any dietary supplement, food, or drug. The order also prohibits misrepresentations about consumer or expert endorsers.
In addition, the order puts provisions in place to protect consumers from certain practices related to trial offers, refunds, negative options, unauthorized charges, and the like. (Part IX includes specific disclosures the defendants must make regarding “free” or “risk-free” offers and Part X details the procedures they must follow to get consumers’ express informed consent for enrollment in negative options.) The $3.7 million judgment will be suspended upon the payment of $800,000.
The case suggests four takeaway points.
- Companies need serious science to support claims about serious medical conditions. Exercise extreme caution before making treatment or prevention promises about intractable medical conditions like arthritis, dementia, or Alzheimer’s disease. Dramatic representations that attract consumers’ attention are likely to draw state and federal law enforcement scrutiny, too.
- When using endorsements, keep it real. If your ads claim expressly or by implication that depicted consumers are real people who have successfully used the product, that has to be true. Ditto for anyone represented to be a medical professional or other expert. Read the FTC’s Endorsement Guides for a compliance recap.
- Reduce your legal risk when making “risk-free” trial offers. One key to a clean trial offer is clear, conspicuous, and upfront disclosures. Explain material terms in a way that’s easy for consumers to understand. The same holds true for negative options and automatic shipment programs. And don’t charge consumers’ credit or debit cards without their express informed consent. (Of course, web-based offers of that sort are subject to ROSCA, the Restore Online Shoppers’ Confidence Act.)
- Keep your upsells upstanding. If it’s been awhile since you’ve reviewed the Telemarketing Sales Rule, pay particular attention to what the TSR has to say about upsells and modify your practices accordingly.