On May 5, 2015, the Federal Trade Commission (the “FTC” or “Commission”) filed a federal lawsuit in California against Lunada Biomedical, Inc. (“Lunada”) – marketer of the dietary supplement Amberen – and the business’ CEO, CFO and CMO (Chief Marketing Officer). As announced earlier this month, the Commission has accused the defendants of deceptive and unfair practices in connection with their dietary supplement marketing and sale of Amberen.
Why is the FTC putting its full weight behind analyzing the marketing practices of dietary supplement companies and their officers?
Lunada’s Dietary Supplement Marketing Practices
The story goes that Amberen’s formula was developed by Russian scientists to treat the adverse pathological symptoms of menopause. After acquiring the supplement’s U.S. rights, Lunada labeled, marketed, distributed and sold Amberen in the United States. The business reportedly brought in almost $65 million in revenue from 2010 to 2013 alone.
Over the years, Lunada has allegedly advertised Amberen through television and radio commercials, websites, email and other promotional media. According to the FTC, the defendants have represented that:
- Amberen causes substantial weight loss, loss of belly fat and an increase in metabolism in women over age 40 who are perimenopausal or menopausal;
- Amberen is clinically proven to cause substantial weight loss in these women; and
- consumers could obtain a free one-month supply of Amberen and try the dietary supplement for a full 30 days without incurring any financial risk or obligation.
After a 2010 review of the Russian clinical evidence called into question the accuracy of Lunada’s weight loss claims, the company hired a research laboratory to conduct independent, placebo-controlled clinical trials. The Commission alleges that differences found in the studies between the weight loss, body fat, body mass index (BMI), waist circumference, hip circumference and resting metabolic rate of women taking Amberen and placebos were statistically insignificant.
FTC’s Deceptive Marketing Claims
In its complaint, filed earlier this month with a federal district court in California, the Commission claims that Lunada, Roman Trunin (CEO), Donna Kasseinova (CFO) and Emil Arutyunov (CMO) each, respectively, violated Sections 5(a) and 12 of the FTC Act. Among other things, the FTC alleges that the defendants’ claims about the dietary supplement’s effect on menopausal women’s weight loss, loss of belly fat, and metabolism are unsubstantiated. The Commission also contends that the defendants did not offer the dietary supplement “Risk Free” because consumers were required to return unopened boxes within 30 days and were not reimbursed for the cost of shipping and handling charges.
The Commission has asked the court to ban all of the parties from conducting similar activities in the future and is considering stripping the business of all of its Amberen-related profits.
Companies Can Pay a Heavy Price for Deceptive Marketing Practices
Lunada’s run-in with the Commission – the second FTC case this month to target weight-loss supplement companies and their business owners and officers personally – further substantiates the need for marketers in this space to adopt hyper-diligent compliance practices and remain abreast of applicable regulations.