Last week, the Federal Trade Commission (“FTC”) filed a complaint against Roca Labs, Inc., Roca Labs Nutraceutical USA, Inc., and their respective principals (collectively, “Roca”). In its complaint, the FTC alleges various violations of the FTC Act, including the use of “gag clause” provisions in their website Terms and Conditions intended to intimidate customers from sharing their negative experiences with Roca’s products.

What is the nature of the FTC’s allegations?

The FTC’s complaint contains wide-ranging accusations concerning Roca’s business practices, including:

  • The reliance on non-disparagement clauses in its Terms and Conditions to sue or threaten to sue customers who share their negative experiences online or who file complaints with the Better Business Bureau;
  • The FTC compared the non-disparagement clauses, and Roca’s alleged hyper-aggressive reliance thereon, as being the equivalent of “gag clauses” because Roca would not only use the provisions to threaten to sue their customers, but also relied on the provisions to claim that customers who posted negative reviews would owe the full price of the weight-loss products, which often would amount to hundreds of dollars more than the price advertised and actually paid.
  • Failure to disclose that users who posted positive product reviews were compensated for their testimonials;
  • The use of false and unsubstantiated claims concerning the success that consumers achieved with the weight-loss products;
  • Violation of consumer’s privacy by disclosing personal health information to various third-parties.

Drafting Proper Terms and Conditions to Avoid FTC Scrutiny

While no advertiser wants to see negative reviews of its products, this case illustrates that the FTC considers the aggressive use of non-disparagement provisions to be unfair to consumers’ rights to share truthful, albeit negative, comments concerning their user experiences. Moreover, broadly speaking, the FTC’s guidelines on the use of endorsements and testimonials require that online marketers fully inform consumers of any and all financial interests that their writers or testimonial-providers have in connection with the endorsements that they post online. Given the current regulatory climate, it is critical for businesses to work closely with experienced counsel prior to launching online advertising campaigns in order to implement and maintain compliant marketing practices and procedures, including proper website terms and conditions.