The maker of the dietary supplement Mega-T has agreed to pay a $2.5 million settlement in a class action suit that accused the company of making false weight loss claims regarding its product line.
The lawsuit, filed by Denise Wally in California state court last year, alleged that CCA Industries, Inc., made false and misleading claims about its line of Mega-T dietary supplement products. According to the company’s advertising and product packaging, use of the line of products, which includes Meta-T Ultra, Mega-T Plus, Mega-T Effervescent, Mega-T Green Tea Dietary Supplement, and the Mega-T Dietary Supplement, could result in rapid weight loss, up to two pounds per week. However, after the company received a draft complaint of a second lawsuit in New Jersey state court based on similar allegations, it agreed to settle the case, announcing the preliminary settlement agreement as part of a Securities and Exchange Commission filing.
Under the terms of the settlement agreement, CCA Industries will pay out $2.5 million, which will be used to reimburse customers up to $10 for each Mega-T product. Claimants must produce a receipt (or six bottles of a product if they do not have the receipt) in order to be reimbursed. In addition, the company agreed to injunctive relief that prohibits it from making claims without scientific proof and to change Mega-T’s product packaging, although it will continue to sell the line in its current packaging until October 31, 2010. Final court approval of the settlement agreement’s terms is still required.
In a statement, the company stated that it denied all of “the allegations of any wrongdoing and liability in regard to its advertising,” but believed in light of the “costs, risks, and the substantial disruption of its business by the litigation,” it was in the company’s best interest to settle the case.
To read the agreement in Wally v. CCA Industries, Inc., click here.
Why it matters: The makers of dietary supplements face scrutiny not only from consumers and plaintiffs’ lawyers, but also the Federal Trade Commission and Congress, which is considering new legislation that would further implement and enforce the 1994 Dietary Supplement Health and Education Act (DSHEA). The proposed legislation would allocate funds to the Food and Drug Administration to enforce DSHEA and require the FDA to make annual reports on its actions. Increased regulation of dietary supplements was also discussed at a recent hearing of the Senate Special Committee on Aging, where the Government Accountability Office presented a report, noting the prevalence of marketers making impermissible disease treatment claims about dietary supplement products or claims unsupported by current science.