Nobetes Corp. gets hit with $182,000 fine over alleged unsubstantiated claims
According to the Federal Trade Commission (FTC), this one's got it all: unsubstantiated claims, a false medical endorsement by a paid actor and a negative option enrollment plan with undisclosed fees.
The company that came into the FTC’s crosshairs, Nobetes Corp., along with founders Marvin Silver and Jeffrey Fleitman, were named in an FTC complaint at the beginning of December. Their product, Nobetes, was advertised as a diabetes treatment via television spots, radio ads, YouTube videos and other online avenues. The alleged claims made about the product were significant and likely would have raised the hopes of diabetics who watched or listened to the ads. “When I started taking Nobetes, my blood sugar levels were up to 285,” says a customer in one commercial. “After only one day of taking Nobetes, my blood sugar dropped to 115. Now, I know it seems unbelievable and, quite frankly, when I looked down at my glucometer, I was surprised at what I was seeing as well.”
These claims also surprised the FTC, which concluded that there was no evidence that Nobetes lowered blood sugar, replaced insulin as a necessary therapy or even treated diabetes in general.
I’m Not an Actor, but I Play One on TV
Moreover, the company was accused of misrepresenting the identity and credentials of one of its product endorsers. Mitch Darnell, an endorser on the company's TV and YouTube commercials, was allegedly presented standing in front of “official” framed diplomas, leading consumers to believe that he spoke with medical or professional authority when he told them that “... this is the miracle product you’ve been waiting for.” The FTC maintains that Darnell is an actor. Also, other endorsers in the ad campaign allegedly received free products from the company in exchange for their appearance.
Additionally, the FTC pursued charges related to a negative option enrollment scheme, wherein Nobetes Corp. would charge a nominal fee of $6.95 for “shipping and handling” to deliver an otherwise free offer, and then turn around and auto-enroll the consumer in a continuity plan with undisclosed fees and insufficient notice of how to cancel.
Nobetes Corp. settled with the FTC the day the complaint was filed. Like many similar settlements, the order included prohibitions against all of the alleged illegal activity; it also added a $182,000 fine to provide refunds to customers. This case is another example of the FTC closely scrutinizing unsubstantiated claims and misleading advertising directed toward consumers of health-related products and services, long a hot-button issue for the commission. Importantly, this case also demonstrates the FTC’s ongoing enforcement of the Endorsement and Testimonials Guide and its increased attention to negative option schemes that are likely to greatly mislead consumers and generate unconsented-to financial charges.