The following consumer protection actions made headlines this week:
Mylan Reaches $465 Million Settlement Over Medicaid Classification
On October 7, 2016, Mylan Inc. announced that it had agreed to pay $465 million to resolve a DOJ investigation into Mylan’s classification of EpiPen as a generic drug that resulted in Medicaid and Medicare receiving a significantly smaller rebate on every prescription since 2007. The DOJ, on behalf of the Centers for Medicare & Medicaid Services (“CMS”), investigated whether EpiPen should have been classified as a “branded” drug, which would have given CMS at least a 23.1 percent rebate, as compared to the 13.1 percent rebate CMS received for Mylan’s self-classification of EpiPen as a generic drug. Mylan believed that although the injector pen device was patented, the relevant consideration for CMS classification is that the active ingredient in EpiPen is off-patent. The DOJ agreement resolves the government’s classification concerns, but does not address potential private class action litigation.
FTC Finalizes Amendments to Hobby Protection Rules
On October 11, 2016, the FTC announced its final amendments to the Hobby Protection Rules. The rules conform 2014 changes to the Hobby Act, covering sellers of imitation coins and paper money and barring anyone from providing substantive assistance to manufacturers, importers or sellers who they know or should have known were or are violating the law’s marking requirements.
FTC Blocks Tech Support Services Company’s Pop-Up Ads
On October 12, 2016, the FTC announced that it had won a temporary restraining order to freeze assets and stop Global Access Technical Support from tricking customers into buying unnecessary tech support services through its harassing and deceptive online pop-up advertisements. The ads issue loud alarms or recorded messages warning of the impending doom to the user’s computer, open dozens of pop-up windows that cannot be easily closed or avoided, and prompt consumers to call a toll-free number. Operators falsely claimed to be affiliated with major technology companies such as Apple or Microsoft to swindle customers out of $200 to $400 for pointless (and in some cases, harmful) “repairs.” The FTC’s complaint seeks a permanent injunction, refunds for consumers and disgorgement of any ill-gotten funds.
FTC Burns Deceptive Skincare Marketers
On October 13, 2016, the FTC obtained court orders against 29 defendants for tricking people into buying Auravie, Dellure, LéOR Skincare and Miracle Face Kit branded skincare products and parleying the deception into recurring, unauthorized credit card charges for products consumers did not purchase – up to $97 per month for some consumers. The FTC’s complaint charged the defendants with violations of the FTC Act, the Restore Online Shoppers’ Confidence Act and the Electronic Funds Transfer Act. The orders ban the defendants from employing the “negative option” to sell products to consumers, (i.e., when the consumer’s silence is interpreted as consent to a purchase). The orders also include monetary judgments of $72.7 million, but are almost entirely suspended due to the defendants’ inability to pay, so the agency expects the defendants’ to surrender all of their assets amounting to a payment of approximately $2.7 million.
NAD Refers Solar D Sunscreen Ads to FTC and FDA
On October 11, 2016, the National Advertising Division referred Solar D Sunscreen advertising claims made by Solar D Skincare, LLC (“Solar D”), to federal authorities after Solar D refused to substantiate claims that its sunscreen promotes vitamin D absorption. Solar D stated on its website, on social media and in a broader PR campaign that its sunscreen product includes “vitamin D promoting technology” that allows the sun’s “vitamin D activating rays” through to promote “up to 50 percent more vitamin D production,” but still achieve an SPF 30 rating. The NAD challenged these claims, noting that it was concerned that the claims may have overstated the benefits of the sunscreen. The NAD’s requests that Solar D substantiate its claims were refused, so pursuant to NAD procedure, it referred the matter for potential investigation.
CARU: Dory Can’t Keep Swimming without Adult Supervision
On October 12, 2016, Zuru, Inc., agreed to modify its swim toy television ads by including depictions of adult supervision to the scenes of the children swimming underwater with the swim toys, in response to an investigation and recommendation from the Children’s Advertising Review Unit (“CARU”). CARU, a division of the Better Business Bureau, recommended the added adult supervision to conform with CARU’s guidelines providing that when a children’s activity would be unsafe without supervision, the supervision must be depicted in the advertisement. Zuru agreed to the modifications without incident.