Settlement Provides Up To $20 Million In Consumer Redress
Two Florida businesses have agreed to a federal court order requiring them to pay up to $20 million in consumer redress – the largest monetary judgment ever obtained in an FTC health fraud case – to settle charges that they deceptively claimed that their pills and sprays would increase consumers’ human growth hormone (HGH) levels and provide anti-aging benefits, including weight loss and increased cognitive function. In addition, the Commission has issued warning letters to more than 90 Internet marketers making similar claims.
“Early explorers searched without success for a fountain of youth, and modern marketers promise that it can be found in pills and sprays,” said Lydia Parnes, Director of the FTC’s Bureau of Consumer Protection. “Those promises are illusory. Unfortunately, no pill or spray can turn back the hands of time.”
The defendants named in the FTC’s complaint are two Destin, Florida, corporations, Great American Products, Inc. (GAP) and Physician’s Choice, Inc. (PCI); and two individuals, Stephan Karian and Michael Teplitsky, M.D., also known as Michael Teplisky. Karian is an officer of both corporations and Teplitsky formulated PCI’s product line and appears in its advertising.
According to the FTC, the defendants’ advertising deceptively claimed that two dietary supplements and two sublingual (under-the-tongue) sprays would increase blood levels of HGH and provide a wide variety of anti-aging benefits. The defendants’ HGH enhancers typically sold for $100 for a three-month supply; total sales exceeded $70 million. The complaint also challenges health benefit claims for four additional products and alleges that the defendant’s radio and television infomercials had deceptive formats. In addition, the complaint alleges that the defendants violated the Telemarketing Sales Rule (TSR) when they sold additional products to consumers who called to order the defendants’ products.
The complaint alleges that ads for the dietary supplements Ultimate HGH and Super HGH Booster and the sublingual sprays Master HGH and Super HGH promise that these products will significantly increase growth hormone levels; provide the benefits purportedly shown in various studies involving prescription-only HGH injections; and provide physical benefits including reduced fat, cholesterol, and blood pressure, increased muscle mass, and improved cognitive, immune, and sexual function. According to the FTC, these claims are false or unsubstantiated.
The FTC’s complaint also alleges that GAP, PCI, Karian, and Teplitsky made deceptive claims that Fat Blaster and Super Carbo Blocker cause weight loss by suppressing appetite, reducing the conversion of carbohydrates to fats, and enhancing metabolism; and that Ultimate Wild Oregano Oil and Super Wild Oregano Oil prevent colds and flu and, when taken orally, treat and relieve bacterial and viral infections and their symptoms. The complaint further alleges that defendants GAP, PCI, Karian, and Teplitsky falsely represented that programs for their products are independent radio or television shows when, in fact, they are paid-for commercials. Finally, the complaint alleges that the defendants violated the TSR by failing to obtain express, informed consent to charge consumers’ credit cards when “upselling” additional products after a first telemarketing sale was completed.
The FTC and the defendants have agreed to an order to settle the complaint allegations. It requires that future claims for HGH supplements, HGH sprays, Fat Blaster/Super Carbo Blocker, wild oregano oil products, or any dietary supplement, food, or drug, or any service purporting to provide health-related benefits, be true, non-misleading, and substantiated. It further prohibits the defendants from misrepresenting test results; prohibits the defendants from misrepresenting that an ad is not paid-for; and requires disclosures regarding the paid-for nature of long-form radio and television advertisements. The settlement prohibits the defendants from violating the TSR, including TSR provisions requiring express informed consent of the consumer when “upselling” additional products after a first telemarketing sale has been completed.
The order requires the defendants to pay up to $20 million in consumer redress. It requires an immediate payment of $6.5 million and provides for establishment of a consumer redress program to be operated by the FTC. The order requires that the defendants pay as much as an additional $13.5 million, depending upon how many eligible purchasers submit redress requests.
Consumers who are eligible for redress will be contacted by the FTC within the next 45 days.
The settlement also contains two separate avalanche clauses providing for a total potential liability of $80 million – an amount representing total product sales – in the event that the defendants misrepresented their finances. Finally, it contains various record-keeping requirements to assist the FTC in monitoring compliance with the order.
The FTC has set up a hotline number, 202-326-2141, for consumers with questions about the court’s order or the refund program in this case.
The defendants' practices were the subject of a referral to the FTC from the Electronic Retailing Self-Regulation Program.
FTC Warning Letters
In addition to the settlement, the FTC has begun sending warning letters to more than 90 Internet operators that are selling alleged HGH enhancers for anti-aging benefits. In its warning letters, the FTC states that it is not aware of any competent and reliable scientific evidence to support claims that pills and sprays can increase the body’s HGH levels and provide anti-aging benefits. It warns that unsupported claims are unlawful under the FTC Act, and instructs the recipients of the letters to discontinue any deceptive claims immediately.
FTC Consumer Brochure
The FTC also has published a new consumer brochure about so-called HGH enhancers. HGH is a hormone released by the pituitary gland that plays a role in human development. The new FTC brochure, entitled “‘HGH’ Pills and Sprays: Human Growth Hype?,” warns that neither the FTC nor the Food and Drug Administration is aware of any reliable evidence that pills and sprays described as containing HGH or as HGH “boosters” or “releasers” provide anti-aging benefits. The brochure cautions that if consumers are tempted to buy any non-prescription product that:
- claims to contain HGH or to boost the body’s production of it,
- promises easy weight loss, an effortless increase in muscle mass, or other “too-good-to-be-true” benefits, or
- touts itself as an “anti-aging” shortcut to health and vitality,they should exercise doubt, and check it out with their health care provider.
NOTE: The stipulated order is for settlement purposes only and does not constitute an admission by the defendants of a law violation.
The Commission vote authorizing staff to file the complaint and proposed stipulated orders was 5-0. The complaint and stipulated order was entered by the U.S. District Court for the Northern District of Florida on May 20, 2005.
Copies of the complaint and stipulated order 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.
(FTC File No. 032-3247)
(Civil Action No. 3:05CV170-RV-MD)
Office of Public Affairs
Heather Hippsley or Janet Evans
Bureau of Consumer Protection
202-326-3285 or 202-326-212