Defendants who used patriotic images to promote their “Grant Connect” products and services as affiliated with the U.S. Government have settled with the Federal Trade Commission by agreeing to a permanent ban from marketing and selling similar products.
The FTC alleged that the defendants used images of American flags and pictures of President Barack Obama and Vice President Joe Biden to deceive consumers into purchasing various products and services, including credit- and grant-related products, work-at-home business opportunities, and weight-loss dietary supplements.
As an example, the agency cited an advertising claim that consumers were likely to obtain government grants: “$15 Billion in Grant Money Available. EASY TO USE PROGRAM: Instantly find the Grant that’s right for you! Receive your government funds!”
“Despite the numerous representations on the site regarding the ease of receiving a grant, in truth and in fact, consumers using Grant Connect are not likely to obtain a grant,” according to the FTC complaint, and the site provided little more than outdated, useless information.
In addition, the Commission maintained that the defendants, without providing adequate disclosures, enrolled consumers in membership programs by debiting their accounts $39.95 on a monthly basis and charged consumers for additional products and services like an identity theft protection program and a health benefits program.
In one settlement, defendant Johnnie Smith marketed and sold products and services using continuity programs or “negative option” sales, the agency alleged. Smith agreed to the ban from marketing or selling products and services using such billing methods, as well as from using testimonials. He will also pay $45,000.
Under the terms of the second settlement, defendant Juliette Kimoto and four companies she owned reached an agreement similar to the Smith settlement, although it also covers the marketing of dietary supplements. The defendants agreed to cease making claims that their products assist in weight loss and related health benefits. Kimoto must also turn over cash and assets totaling $220,000.
The agency said that litigation continues against 7 individual defendants and 18 corporations.
To read the complaint in FTC v. Grant Connect, click here.
To read the settlement with Smith, click here.
To read the settlement with Kimoto, click here.
Why it matters: The settlement serves as a reminder to marketers that the FTC continues its crackdown on continuity programs and negative option sales and that sellers must adequately disclose all terms and conditions when making offers.