August 25, 2017

ftc-lawsuit
Dietary Supplement FTC Lawsuit

The Federal Trade Commission (“FTC”) has announced that dietary supplement marketer Synergixx, LLC (“Synergixx”), its owner, Charlie Fusco, and a naturopathic physician named Ronald Jahner have agreed to settle claims brought by the FTC and the State of Maine (the “FTC lawsuit”) alleging violations of the FTC Act, the Telemarketing and Consumer Fraud and Abuse Prevention Act, the Electronic Fund Transfer Act and the Maine Unfair Trade Practices Act.  The FTC lawsuit arose out of the defendants’ alleged use and participation in deceptive radio and print advertisements to market the dietary supplements CogniPrin and FlexiPrin.  The settlements prohibit the defendants from engaging in similar marketing practices in the future, and impose a suspended $6.5 million judgment against Synergixx and Fusco.

What Type of Advertising Did the FTC Lawsuit Target?

Marketing Dietary Supplements and FTC Lawsuit

The complaint in the FTC lawsuit alleged, among other things, that the defendants’ 30-minute radio advertisements were falsely presented as educational programs, and that the defendants “[did] not disclose that the show is actually an advertisement paid for by” certain co-defendants.  Moreover, the complaint alleged that in the radio programs, the defendants falsely represented that FlexiPrin relieves pain in as little as two hours, and that CogniPrin “can help restore up to twelve years of memory loss” and “can improve your memory by up to 44%.”

The FTC lawsuit further alleged that the defendants deceptively claimed that consumers could try the products “risk-free” for 90 days, but failed to mention numerous conditions affecting the money-back guarantee:

Consumers who call to order FlexiPrin and CogniPrin are told that there is an unconditional, 90 Day MONEY BACK GUARANTEE on their orders.  However, in order to receive these products customers must pay for a 90-day supply, accept a 90-day continuity plan, and pay an initial shipping charge of $9.95.

*            *            *

Typically, consumers receive their products between 7 and 10 days after placing the order.  Many consumers believe that the 90-day money-back guarantee starts when they receive the product, giving them 90 days to try it.  The [Defendants] do not disclose, either before or after the initial offer, that [the Defendants] compute the 90-day money-back guarantee to begin on the date of the initial sales call, nor do they disclose that the continuity shipment is sent on or before 90 days after the date of the initial sales call.

The FTC lawsuit also alleged that Jahner failed to examine the CogniPrin and FlexiPrin products or disclose that he was paid a percentage of revenues from associated sales, and that the “purported scientific proof for the representations” made by Jahner and the other defendants was insufficient.

FTC Lawsuit Settlement

On August 23, 2017, the FTC announced a proposed settlement with Synergixx, Fusco and Jahner, respectively, which:

  • Bars the defendants from making health-related claims regarding any dietary supplement, food or drug without scientific testing that is “randomized, double-blind, and placebo-controlled” and that is “conducted by researchers qualified by training and experience to conduct such testing;”
  • Requires the defendants to disclose, within the first 30 seconds of any radio advertisement longer than 15 minutes, that “the program you are listening to is a paid advertisement for [the product, program or service];”
  • Requires the defendants to clearly disclose the compensation paid to product endorsers;
  • Requires Synergixx and Fusco to obtain customers’ express informed consent prior to enrolling them in continuity programs; and
  • Imposes a $6.5 million fine on Synergixx and Fusco, that is suspended if they comply with the terms of the settlement.

Are Your Marketing Practices Compliant?

As demonstrated by this FTC lawsuit, the FTC and state attorneys general alike continue to aggressively prosecute claims of allegedly deceptive marketing practices.  Accordingly, any potentially misleading advertising may place marketers at serious risk of legal action.  As such, marketers should consult with experienced counsel regarding their marketing practices and procedures to help avoid a potential lawsuit by the FTC or a state regulator.  If you are interested in learning more about this topic, or need to review your marketing practices, please email us at info@kleinmoynihan.com, or call us at (212) 246-0900.

The material contained herein is provided for informational purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney.  Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.

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