The US Court of Appeals for the First Circuit upheld the lower court’s decision, awarding judgment in favor of the Federal Trade Commission (FTC), in Federal Trade Commission v. Direct Marketing Concepts, Inc. The case involved claims by the FTC that Direct Marketing Concepts and Triad ML Marketing Co. (collectively, “defendants”) received more than $60 million in profits from the sale of their products via infomercials using deceptive claims.
The two products that were the focus of the suit are Supreme Greens and Coral Calcium (see photographs below). In the opinion, Judge Ojetta Rogeriee Thompson wrote that the defendants made millions of dollars by selling “panaceas, products that they claimed cured literally every disease, from cancer to Parkinson’s to obesity.” For example, Coral Calcium claimed that it “helped thousands of people with cancer, diabetes, arthritis, lupus, fibromyalgia, chronic fatigue,” and more.
In upholding the district court verdict, the First Circuit held that the lower court properly used the “reasonable basis” test to judge whether the defendants had substantiation for the statements regarding their products. In bringing an action for deceptive or misleading advertising based on the advertiser’s lack of a reasonable basis, the FTC had the burden to (1) establish what evidence would be required to substantiate an advertiser’s claim in the relevant scientific community and (2) compare the advertiser’s evidence to that required to determine if the advertiser’s claims were substantiated and the advertiser had a reasonable basis for the claims made.
The government presented multiple scientists that had written literature reviews on what types of studies would be required to substantiate the health claims presented by the defendants, including “double-blind, placebo-controlled human studies.” The defendants presented no evidence of having completed any such studies. The FTC experts determined that there was no scientific evidence to support the majority of the claims presented regarding the health effects of Supreme Greens and Coral Calcium. The defendants failed to adequately rebut this finding as well. Additionally, neither defense expert adequately addressed the panacean claims. One of the experts relied purely on his own general knowledge—not on any studies or scientific evidence.
The courts agreed with the FTC’s experts and found that the defendants failed to put forth sufficient evidence to rebut the FTC’s claims. Additionally, the courts found that the products’ general disclaimers were not enough to shield the companies from liability for the specific health claims. The defendants merely stated that the infomercials were “paid advertisings” and did nothing to qualify the straightforward health claims made about the drugs. Despite the courts’ rulings, the defendants maintain that the government failed to meet its burden and that “every consumer who requested a refund received one.”
According to the FTC, it has been bringing “a steady diet of cases against large infomercial purveyors of health products [they] think are being sold deceptively.” Marketers should be very careful about the claims made in infomercials and in any advertisements.