July 9, 2015
Last Wednesday, a group of supplement marketers agreed to pay $1.4 million to the Federal Trade Commission (the “FTC” or “Commission”) and the Santa Cruz County District Attorney’s Office (the “Santa Cruz DA”). The settlements follow allegations that two Delaware companies, three California businesses and the entities’ two individual principals (the “Defendants”) engaged in false advertising and unfair trade practices in connection with Procera AVH, a dietary supplement promoted as a solution to memory loss and cognitive decline.
What do these supplement marketers need to do to avoid over $150 million in liability?
FTC and Santa Cruz DA Target Supplement Marketers
According to the FTC, the Defendants sold Procera AVH directly to consumers for as much as $79 per bottle of 60 tablets, plus shipping and handling. The subject supplement marketers purportedly advertised Procera AVH via television, radio, newspaper, direct-mail and online. The Defendants reportedly amassed approximately $100 million from net sales of Procera AVH in the United States between 2006 and 2014.
On July 1, 2015, the Commission brought three separate claims in the U.S. District Court for the Central District of California against the defendant supplement marketers for making allegedly false representations that:
- Procera AVH improves memory, reverses mental decline and prevents memory loss;
- These purported results were clinically proven; and
- One of the individual defendants – who touted the effectiveness of Procera AVH – is “a renowned clinical research scientist in brain health and fitness.”
The FTC has requested that the court disgorge the supplement marketers’ profits from the sale of Procera AVH and permanently ban the Defendants from promoting dietary supplements in such a manner in the future.
$1.4 Million Settlement
The FTC submitted signed settlements contemporaneously with the filing of its complaint against the Defendants. Pursuant to the parties’ agreements, the supplement marketers are required to pay $1 million to the Commission, as well as $400,000 to the Santa Cruz DA. Additionally, the Defendants are prohibited from engaging in future marketing tactics similar to those alleged in the complaint.
Should the Defendants fail to pay the full $1.4 million within the established timeframe, the supplement marketers will be required to pay the FTC a staggering $152 million pursuant to an avalanche clause contained in the settlement agreements.
For Supplement Marketers, Compliance Is Key
As this case demonstrates, supplement marketers must adopt comprehensive compliance practices and remain abreast of applicable regulations, or else risk tremendous liability. If you are a marketer of dietary supplements with questions about legal compliance, or if you have been served with legal process relating to your marketing practices, please e-mail 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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