Earlier this week, the Federal Trade Commission (“FTC” or “Commission”)reached a $9 million settlement agreement with Pure Health LLC, Genesis Today, Inc. and Lindsey Duncan, CEO of Genesis Today, concerning the marketing of their dietary supplement products.
The parties sell a variety of dietary supplements and food products directly to online consumers, as well as through third-party retail stores, such as Wal-Mart and Sam’s Club. The FTC’s complaint, filed in federal district court in Texas, alleges that the defendants used false advertisements and deceptive practices to increase sales of the dietary supplement Green Coffee Bean Extract (“GCBE”).
Unsubstantiated “Secret Weapon” Claims
As part of the subject advertising campaign, Mr. Duncan appeared on nationally televised shows, such as The Dr. Oz Show and The View, where he claimed that GCBE could cause substantial weight loss without consumers having to diet or exercise. Such ads featured claims that customers could lose 17 pounds and 16% of their body fat in 12 weeks. In-store displays labeled GCBE as “The Dieter’s Secret Weapon.”
The FTC contends that the defendants’ health benefit claims were false and unsubstantiated, constituting deceptive acts or practices and the making of false advertisements in or affecting commerce, in violation of Sections 5(a) and 12 of the FTC Act, respectively. The Commission reached a similar conclusion just last month.
Failure to Disclose Ties to Endorsed Dietary Supplement Products
During his television appearances, and on various websites, Mr. Duncan presented himself as an authority on health foods and nutrition—“one of the world’s leading experts on superfoods, herbal medicine, natural remedies and natural health.” When approached by The Dr. Oz Show for an objective GCBE brand recommendation, Mr. Duncan allegedly promoted his own products without disclosing his affiliation with Pure Health and Genesis Today, as required by the FTC’s Product Endorsement and Testimonial Guidelines.
By failing to disclose their financial interest in the sale of Pure Health GCBE, the FTC argues that the defendants’ endorsements amounted to separate violations. “This additional information would be material to consumers in deciding to purchase Defendants’ products,” the Commission noted.
Joint and Several Liability
The FTC alleged that Genesis Today and Pure Health, at the direction of Mr. Duncan, engaged in the purported deceptive acts and practices as a common enterprise. The defendants conducted business through interrelated companies that had common control, officers, business functions, employees and office locations. As a result, the parent company (Genesis Today), its subsidiary (Pure Health) and its CEO will be held jointly and severally responsible for Monday’s $9 million judgment.
As evidenced by this settlement, the FTC continues its offensive against dietary supplement companies for claims made in connection with advertising and marketing campaigns. It is critical that product providers and marketers remain abreast of ever-evolving regulations in the dietary supplement and marketing space, or risk bearing substantial (and perhaps even personal) liability.