FTC Settlement Requires the Defendants to Pay $3.2 Million in Consumer Redress
Infomercial marketers Wellquest International, Inc. and Tony Hoffman Productions, Inc. (THPI) and others have agreed to settle Federal Trade Commission charges that they made false and unsubstantiated claims for three products - Bloussant, sold for breast enhancement; EnerX, sold for men's virility, and D-Snore, sold to relieve snoring - in violation of the FTC Act. The defendants also have agreed to settle charges that they made misrepresentations and failed to disclose material terms in connection with third-party buying club memberships they "upsold" to consumers after the consumers agreed to purchase Wellquest's products. The proposed settlement requires the defendants to pay $3.2 million in consumer redress and to possess scientific substantiation before making certain claims about dietary supplements, foods, drugs, or cosmetics. The settlement also requires the defendants to comply with the FTC's newly amended Telemarketing Sales Rule.
"Marketers must have rigorous scientific substantiation for the claims they make," said Howard Beales, Director of the FTC's Bureau of Consumer Protection. "In this case, the claims were inflated, but the science just wasn't there."
The defendants named in the FTC complaint are Wellquest and its president, Eddie Mishan, and THPI and its president, Anthony Hoffman. Additionally, the complaint also names five relief defendants: Jeffrey Mishan, Steven Mishan, Isaac Mishan, Morris Mishan, and Al Mishan. Relief defendants are individuals or entities that did not participate in the alleged deceptive practices, but received financial gain as a result. Wellquest has offices in both California and New York. THPI, based in Newbury Park, California, produced many of the challenged ads and provides telemarketing services for Wellquest's products. Finally, the complaint names Dr. Mark Buchfuhrer as a defendant in connection with an expert endorsement that he provided regarding the D-Snore product.
According to the complaint, the defendants' ads state that Bloussant stimulates breast cells to regenerate the growth process, thereby increasing breast size by two cups in most women. The FTC alleges that these claims are unsubstantiated. Additionally, it alleges that the defendants falsely claimed that Bloussant is clinically proven to increase bust size in the majority of women, and is clinically proven to be safe. Bloussant was heavily marketed in magazines, such as Mademoiselle, Elle, and Allure, in monthly direct mailers, and through infomercials that ran on 30 major cable stations and numerous broadcast stations, as well as on the Internet. Consumers responding to these advertisements were directed to call a toll-free telephone number, where the telemarketers often reiterated the challenged claims. Bloussant cost $220 for a two-month supply and $574 for an eight-month supply.
The FTC also challenges claims made about EnerX, an herbal supplement promoted for male potency. The complaint alleges that the defendants' claims that EnerX is safe and lacking in side effects are deceptive because EnerX contains yohimbine, an ingredient known to increase blood pressure and to interact with other medications. A two-month supply of EnerX is sold for $109. EnerX was marketed through magazine and newspaper ads, commercials on approximately 50 cable television stations, direct-mail fliers, and the Internet.
The FTC complaint further challenges that the defendants, including expert endorser Dr. Mark Buchfuhrer, deceptively advertised that D-Snore significantly reduces or eliminates snoring or the sound of snoring and can mitigate the symptoms of sleep apnea, including daytime tiredness and frequent interruptions of deep restorative sleep. D-Snore is a liquid mouth spray containing vegetable oils and vitamins that costs $58 for a one-month supply. It was advertised through 30-minute infomercials and commercials on cable television stations such as Discovery Channel, Nick at Nite, and the Learning Channel; half- and full-page ads in over 350 newspapers nationwide; in magazines such as Prevention, Family Circle, and Vogue; in direct mail inserts; and on the Internet.
The complaint contains two additional sets of allegations, relating to the defendants' marketing practices. It alleges that the defendants engaged in deceptive upselling practices by enrolling consumers in one or more third-party buying services without the consumers' consent. Upselling is soliciting consumers for additional products during the same telephone call after the consumers have provided credit cards to purchase the initially-offered product. According to the complaint, after consumers provided a credit card to purchase one of Wellquest's products, the telemarketer upsold the third-party buying services on a "no obligation" free trial basis. The defendants allegedly did not disclose adequately that they would charge consumers' credit cards if the consumers did not cancel before the end of the trial period. Additionally, the complaint alleges that the defendants falsely represented that refunds were readily available, when, in many instances, they failed to make refunds.
The Commission has entered into two separate orders: one against Dr. Buchfuhrer (the Buchfuhrer order) and one against the other four defendants and the relief defendants (the Wellquest order).
The Wellquest Order
The proposed stipulated final order requires Wellquest, Mishan, THPI, and Hoffman to possess scientific substantiation before making the claims challenged in the complaint, or any other claims about the benefits, performance, efficacy, safety, or side effects of any dietary supplement, food, drug, cosmetic, or any service purporting to provide weight loss benefits. The order further requires that future efficacy, performance, safety or side effect claims for EnerX be accompanied by a safety warning, and that ads for D-Snore or other purported snoring remedies provide disclosures about sleep apnea.
The order also requires the defendants to stop making deceptive refund claims; provide refunds as advertised; stop making deceptive "no obligation" claims for trial offers; and obtain express informed consent for negative option sales.
The Wellquest settlement order requires the four defendants, as well as the relief defendants, to pay $3.2 million to the FTC for consumer redress. The settlement contains "avalanche clauses" that provide for substantially increased monetary relief in the event that the defendants misrepresented their finances in the course of negotiating the settlement amount. The avalanche clause against Wellquest, Mishan, and the relief defendants provides for $20 million in relief; the clause against THPI and Hoffman provides for $902,000 in relief.
The Buchfuhrer Order
The Buchfuhrer order requires Dr. Mark Buchfuhrer to possess substantiation for future claims about D-Snore or any other dietary supplement, food, drug, device, cosmetic, or any service purporting to provide health, cosmetic or physical enhancement benefits. He also must make disclosures about sleep apnea in connection with future representations made in connection with the marketing of snoring products.
The Commission's investigation of the defendants in this matter was substantially assisted by the Better Business Bureau of the Tri-Counties, Santa Barbara, California.
The Commission vote to authorize staff to file the complaint and stipulated final orders was 5-0. The complaint and settlements are being filed today in the U.S. District Court for the Central District of California, Western Division. The stipulated final orders is subject to court approval.
Copies of the complaint and stipulated final orders 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, 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.
(FTC File No. 012 3211)
(Civil Action No.: (Wellquest order- not available at press time)
(Civil Action No.: (Bloussant order -not available at press time)
Office of Public Affairs
Janet Evans or Heather Hippsley
Bureau of Consumer Protection
202-326-2125 or 202-326-3285