A recent FTC settlement with two individuals and over 40 companies that they operated highlights the FTC’s typical tactics in cases where it believes defendants are responsible for egregious violations.  The FTC alleged that the defendants promoted green coffee supplements with “gut check” claims, debited consumers’ bank accounts without authorization, enrolled consumers in negative option programs without authorization, and violated the Telemarketing Sales Rule.  Stipulated orders permanently ban the individuals and companies from selling either negative option programs or dietary supplements.  The orders also require the defendants to forfeit approximately $9.2 million in cash and assets, including a Ferrari, numerous bank accounts, and several college savings accounts.  An “avalanche clause” provides that another roughly $96 million will become due if it is found that the defendants misrepresented their financial status in the course of negotiations.

In many other cases, the FTC has grouped together high dollar settlements, avalanche clauses, marketing bans, and splashy announcements about the forfeiture or sale of luxury cars, vacation homes, art, and jewelry.  Unfortunately, as in the most recent case, many of the past cases have involved dietary supplement sellers, and these cases can influence regulators’ perception of the industry as a whole.  In facing any inquiry from the FTC, the first order of business for many credible companies in the industry is to show that they are not a fly-by-night operations bilking the masses.