The Federal Trade Commission has continued its attack on bogus weight-loss claims by suing a diet patch manufacturer and a retailer that marketed the patch directly to Spanish-speaking consumers. In two separate federal court actions, the FTC charged that the patch manufacturer, Transdermal Products International Marketing Corporation, and the retailer, SG Institute of Health & Education, Inc., falsely claimed that the skin patch causes substantial weight loss. The FTC complaints in both cases also challenge false claims that the patch or its main ingredient, sea kelp, has been approved by the Food and Drug Administration (FDA). The FTC further alleged that Transdermal Products provided retailers with deceptive marketing materials that could be used to mislead consumers.
“We’re determined to pursue deception to its source,” said Lydia B. Parnes, Acting Director of the FTC’s Bureau of Consumer Protection. “Today’s action targets a company that manufactured both an ineffective product and the misleading claims to sell it. These defendants are doubly responsible for the deception.”
The FTC’s case against Transdermal Products and its president, William Newbauer, will proceed to litigation in U.S. District Court for the Eastern District of Pennsylvania. SG Institute and its principals settled with the FTC and agreed to stop making the deceptive claims.
The defendants in both cases allegedly used one or more of the seven bogus weight-loss claims that are part of the FTC’s “Red Flag” education campaign announced in December 2003. The ongoing Red Flag campaign provides guidance to assist media outlets and others in spotting false claims in weight-loss ads. According to the FTC, one of the most common false weight- loss claims is that diet patches, topical creams and gels, body wraps, and other products worn on the body or rubbed into the skin can cause substantial weight loss.
Transdermal Products International Marketing Corporation, based in Bristol, Pennsylvania, and its president, advertised on the Internet to recruit distributors who would purchase patches from Transdermal and sell them at retail. Transdermal sold the purported weight-loss patches to distributors under several brand names, including LePatch, Revo Patch, Svelt Patch, and Z Patch. Transdermal also sold unmarked patches, which retailers could sell under their own brand names. Transdermal allegedly provided its distributors with advertising copy and purported substantiation materials, including a document claiming to be a scientific weight loss study demonstrating the patch’s efficacy. Transdermal’s ads contain statements such as, “Amazing Skin Patch Melts Away Body Fat.”
According to the complaint, Transdermal has sold approximately 381,000 “units” of 30 patches to distributors, for which distributors paid approximately $1.75 million.
The FTC’s complaint alleges that the Transdermal defendants made false claims that the patch causes substantial weight loss, safely enables users to lose more than three pounds per week for more than four weeks, and causes permanent weight loss. In addition, the complaint alleges that the defendants falsely claimed that scientific research demonstrates that the patch causes substantial weight loss and that the FDA approved the product’s main ingredient – Fucus vesiculosus (sea kelp) – for weight loss. The complaint also alleges that the defendants made unsubstantiated claims that the product causes weight loss and “melts away” body fat. Finally, the complaint alleges that by providing their distributors with deceptive advertising and substantiation materials, the defendants provided them with the means and instrumentalities to deceive consumers.
(The Commission vote to authorize staff to file the complaint against the Transdermal defendants was 5-0. The complaint was filed in the U.S. District Court for the Eastern District of Pennsylvania on December 14, 2004.)
SG Institute of Health & Education, Inc., based in Tamarac, Florida, and its owners, Pedro Salas and Vanessa Salas (SGI), settled charges that they made false and unsubstantiated claims in marketing Revopatch Plus, a purported weight-loss and cellulite-reduction skin patch. Revopatch Plus was manufactured by Transdermal (the subject of a separate FTC lawsuit, described above). The FTC’s complaint alleges that SGI falsely claimed that Revopatch Plus causes substantial weight loss in a short time, for example, 15 pounds in four weeks and 20 pounds in six weeks, and has been approved by the FDA. The complaint also alleges that SGI claimed without substantiation that Revopatch Plus causes weight loss, eliminates fat, reduces appetite, regulates metabolism, and reduces or dissolves cellulite. The defendants’ ads claimed, for example, that Revopatch Plus “takes away the urge to eat and the accumulated fat in the body: and best of all, it is 2 products in 1, because it helps you to lose weight and it helps you dissolve cellulite.”
The SGI action is part of the FTC’s Hispanic Law Enforcement and Outreach Initiative – a comprehensive campaign initiated in 2003 to identify and halt fraud targeting Spanish-speaking consumers in the United States. According to the FTC, the SGI defendants advertised their product in major, national Spanish-language magazines, on local radio stations in California and New York City, and on Telemundo in Florida. Consumers purchased the patch by calling a toll-free telephone number listed in the ads. SGI sold the patch in units of 30, 60, and 90 for prices ranging from $60 to $200. It is estimated that SGI sold more than $1 million in patches since September 2001.
To settle the FTC charges, the proposed stipulated final order prohibits the defendants from falsely claiming that Revopatch Plus or any other product applied to the skin causes substantial weight loss in a short period of time or that the FDA has approved sea kelp for controlling weight. The order also prohibits the defendants from misrepresenting that any health-related product, service, or program has been approved by the FDA. In addition, the order requires the defendants to have competent and reliable scientific evidence before making future claims about the benefits, performance, efficacy, safety, or side effects of any health-related product, service, or program.
The order includes an “avalanche clause,” that provides that the defendants will have to pay $1 million if a court finds that they misrepresented their financial condition.
Finally, the proposed order contains various recordkeeping and reporting requirements to assist the FTC in monitoring the defendants’ compliance.
(The Commission vote to authorize staff to file the complaint and proposed stipulated final order against the SGI defendants was 5-0. They were filed in the U.S. District Court for the Southern District of Florida on December 7, 2004. The order requires the court’s approval.)
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 defendants have actually violated the law. The case will be decided by the court.
NOTE: This stipulated final order is for settlement purposes only and does not constitute an admission by the defendants of a law violation. Stipulated final orders have the force of law when signed by the judge.
Copies of the complaints and the stipulated final judgment 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.
(Transdermal Products: FTC File No. 032 3218; Civil Action No. 04-cv-5794)
(SG Institute: FTC File No. 032 3253; Civil Action No. 04-61627)
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