On July 11, 2014, the Federal Trade Commission (“FTC”) announced a $3.5 million settlement with TriVita, Inc. (“TriVita”), Ellison Media Company (“EMC”) and their respective principals. The FTC filed a complaint against the parties on July 10, 2014 in the United States District Court for the District of Arizona. The FTC alleged that TriVita and EMC had engaged in false advertising and deceptive sales practices in connection with the sale of the “Nopalea” cactus fruit drink, which TriVita and EMC marketed as an effective treatment for inflammation of joints and muscles. In addition to the substantial monetary judgment, TriVita, EMC and their principals agreed to a 20-year injunction, requiring the parties to cease publication of any and all health-related claims unless the products being marketed are Food and Drug Administration (“FDA”) approved or the parties have secured the necessary clinical trial proof to substantiate such claims.
Deceptive Health Claims
In its complaint, the FTC alleged that the defendants’ advertised that Nopalea “relive[s] pain, improve[s] breathing, and treat[s] a variety of health conditions.” The advertisements, which ran in print and over television and radio, claimed that scientific studies supported the defendants’ claims. However, at the time that the representations were made by the defendant, no such scientific studies existed.
Additionally, the FTC claimed that the defendants’ testimonials which touted the benefits of the Nopalea product were all given by “Independent TriVita Business Owners” who received commissions on the sales of the defendants’ products. This fact was never disclosed in the defendants’ advertisements.
Pursuant to the terms of the settlement, the defendants must pay $3.5 million dollars to the FTC. This judgment is not suspended, and will be paid in full by the defendants. The $3.5 million will be used by the FTC to issue refunds to the defendants’ customers. Any of the $3.5 million that is not used to refund defendants’ customers will be retained by the FTC as disgorgement.
In addition, the defendants are permanently enjoined from making any health-related claims associated with their products unless the defendants can produce “reliable scientific evidence” to support the health benefit claims. This prohibition is not limited to the Nopalea product, nor is it limited to other TriVita products. In fact, to the extent that EMC performs marketing services on behalf of any other company, or to the extent that TriVita, EMC and/or any of their principals market any other products, such marketing must be done in compliance with the terms of the settlement.
The FTC has been aggressively targeting advertisers’ health-related marketing claims. In many instances, the result is a substantial settlement in the FTC’s favor. (See Major Supplement Marketers Settle FTC Deceptive Advertising Lawsuit). In other instances, federal courts will find in favor of the FTC and award significant damages. (See FTC Awarded Full Amount of Net Sales in False Advertising Lawsuit). Therefore, it is important that marketers understand the “ins” and “outs” of the FTC Act and other federal and state laws that restrict how products are advertised to consumers. As demonstrated by this settlement, failure to do so may result in significant injunctive and monetary penalties.