FTC Settlement Requires the Defendants to Pay More Than $1 Million
Marketers of the "Peel Away the Pounds" patch, which was widely advertised in infomercials, have agreed to settle Federal Trade Commission charges that they made false and unsubstantiated weight loss claims in violation of the FTC Act. The FTC complaint alleges that the defendants falsely claimed that the seaweed-based skin patch causes as much as three to five pounds of weight loss per week, and made other false and unsubstantiated claims. The proposed settlement, which requires court approval, requires the defendants collectively to pay more than $1 million in consumer redress, to stop making certain false weight loss claims, and to possess scientific substantiation before making other claims for any product, program or service that purportedly provides health benefits.
"No non-prescription product will cause meaningful weight loss without diet or exercise," said Howard Beales, Director of the FTC's Bureau of Consumer Protection. "Claims that patches, creams, and wraps can cause substantial weight loss are a ‘red flag' for falsity. Marketers should not make those claims; the media should not run them; and consumers should not buy them."
The FTC's complaint names patch manufacturer Advanced Patch Technologies, Inc. (APT) and its principal, Salomon Btesh; marketers PAP Systems, LLC, Buckhead Marketing & Distribution LLC (BMD), and their principals, Ralf Leszinski and Nancy Duitch; and expert endorser, Jesse Starkman. The FTC complaint also names two "relief defendants" – APT principal Bernard Silverfarb, and BMD affiliate Buckhead Marketing Group, LLC. Relief defendants are individuals or entities that did not participate in the alleged deceptive practices, but financially benefitted as a result. The APT defendants are based in Opa Locka, Florida; BMD is based in Los Angeles, California; PAP and BMG are based in Atlanta, Georgia; and Starkman resides in Weston, Florida.
According to the FTC complaint, the defendants advertised Peel Away the Pounds in an infomercial that aired from June 2002 to January 2003, on several websites and in a print ad. The ads claimed that Peel Away was a remarkable new way to shed excess pounds without strenuous exercise and without being hungry. The ads contained statements such as:
"Simply follow our system: Place Pound A Patch on your upper body. Then carry on with your everyday lifestyle. Every three days peel off the patch and watch as you take off the pounds. Replace with a new patch and drop more pounds. It's that easy."
Throughout the infomercial, individuals who purportedly used the Peel Away patch gave glowing testimonials that attributed their purported success in losing weight to wearing the patch. The infomercial also featured defendant Jesse Starkman, a chemist, who allegedly described the patch's purported ability to deliver its ingredients into the bloodstream and to increase metabolism, suppress appetite, and reduce fat cell production.
The FTC complaint alleges that the defendants (except Starkman) falsely claimed that the patch causes substantial weight loss, including as much as three to five pounds per week; that the patch causes substantial weight loss in all users; and that the patch is scientifically proven to cause weight loss. The FTC complaint further alleges that the defendants (except Starkman) made unsubstantiated claims that the patch: causes weight loss; boosts metabolism; suppresses appetite; causes users to burn substantial calories, including as much as 4,000 calories in three days; causes fat loss; reduces fat cell production; and delivers its ingredients into the bloodstream more quickly and efficiently than pills. In addition, the FTC complaint alleges that defendant Starkman, appearing as an expert endorser, made certain of these alleged unsubstantiated claims without exercising his purported expertise in evaluating the product.
The FTC has obtained two stipulated final judgments and orders that together require the defendants to pay $1,175,000. One of the stipulated final orders settles charges against marketers PAP, BMD, Ralf Leszinski, Nancy Duitch, and BMG, and requires a $1 million consumer redress payment. It contains a $24.4 million judgment, which is suspended except for the $1 million payment, with an "avalanche clause" that requires the defendants to pay the full $24.4 million if they made material misrepresentations on their financial disclosure statements. The other stipulated final order settles charges against the APT defendants and expert endorser Starkman, and requires a $175,000 payment.
Both stipulated final orders prohibit all false or misleading weight-loss claims, including claims that the Peel Away patch, or any transdermal product, causes substantial weight loss. The orders also prohibit the defendants from representing that the Peel Away patch, or any other product, causes substantial weight loss in all users. The orders further prohibit the defendants from making the unsubstantiated claims challenged in the FTC's complaint. The orders require the defendants to possess competent and reliable scientific evidence to substantiate future claims about the benefits, performance, efficacy, safety, or side effects of any product, service, or program that purportedly provides health benefits, including weight loss or fitness benefits. Finally, the orders prohibit the defendants from misrepresenting any test, study, or research for any such product, service, or program.
The stipulated orders also contain various recordkeeping requirements to assist the FTC in monitoring the defendants' compliance.
The Commission vote to authorize staff to file the complaint and the two stipulated final orders was 5-0. The complaint and stipulated final orders were filed in the U.S. District Court for the Northern District of Georgia, Atlanta Division on March 9, 2004. The stipulated final orders require the court's approval.
NOTE: The stipulated final judgments and orders are for settlement purposes only and do not constitute an admission by the defendants of a law violation. Stipulated final judgments and orders have the force of law when signed by the judge.
Copies of the complaint and the proposed settlements 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. 032 3043)
(Civil Action No, 1:04-CV-0670)
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