What do Bill Gates, Elon Musk, Anderson Cooper and Stephen Hawking have in common? They’re all really smart men whose names were used to promote a dietary supplement touted as “Viagra For the Brain.” Indeed, not only were their names (and likenesses) used in the ads, but they were cited as the sources of testimonial claims about the product.
And what do the marketers of these products have in common? They’ve all settled FTC charges that they deceptively marketed “cognitive improvement” supplements using fake news websites containing false and unsubstantiated efficacy claims, references to non-existent clinical studies, and fraudulent consumer and celebrity endorsements.
The FTC’s complaint against the companies and their individual owners alleged that the claims that the products improve short and long term memory, increase focus and concentration, increase users’ IQ (and more) were all false and unsubstantiated. In addition, the complaint alleges that although the advertising claimed that the product was backed by clinical studies, the defendants in fact had none. Moreover, all those celebrity testimonials and supposed news stories were fake too. One example cited in the complaint is an advertorial featuring an image of Bill Gates with this endorsement: “‘The results were unbelievable. Every aspect of my mental performance accelerated from day 1. A must try.’ – Bill Gates’ Last Interview with CNN.”
According to the complaint, the defendants also engineered a massive affiliate marketing effort, incentivizing affiliate marketers to disseminate Internet and email advertisements to lure consumers to defendants’ websites where the consumers could purchase the supplements. The websites were made to look like news websites, but were in fact advertisements.
And if these practices weren’t enough to get the FTC’s attention, the defendants also engaged in deceptive marketing practices. According to the complaint, and contrary to defendants’ express representations of a “100% money back guarantee” and a “full refund,” the defendants did not, in fact, provide a full – or any -- refund to consumers who requested one. And, in other instances, the defendants charged consumers who ordered the products but never fulfilled the orders.
You know how this outrageous story ends. The FTC’s proposed orders bar the defendants from making certain disease claims and several cognitive performance claims related to the covered products, unless they have competent and scientific evidence to support the claims when they are made. They also prohibit the defendants from misrepresenting clinical evidence. In addition, the orders prohibit specific misrepresentations related to endorsements and other misleading representations related to fake news. They also require the defendants to monitor their affiliate networks to ensure that their advertising complies with the terms of the orders, and to clearly and conspicuously disclose the total cost, billing information, and refund terms and conditions before asking for consumers’ billing information. The orders also bar the defendants from failing to honor refund requests and from refusing to allow returns or order cancellations.
And the money shot? One order imposes a $14.5 million judgment, which will be partially suspended after the defendants pay $523,000. The second order includes an $11.5 million financial remedy, which will be partially suspended when one defendant pays $100,000.
As always with cases like this, you have to wonder what lessons there are for legit marketers. Who would do this crazy stuff? But there are important principles to keep in mind (even without the help of cognition boosters). First, this is not the first case where the FTC has taken aim at a marketer making strong claims about the cognitive benefits from its product. With an aging population, such claims are becoming more common and the FTC and state regulators are watching. Second, advertising shouldn’t be disguised as something it's not (like news). Finally, as we’ve blogged about before, companies using affiliate networks to market their products and send them traffic must implement policies and procedures – including monitoring -- to ensure that the affiliates market the product appropriately and compliantly.
Now, THAT’s smart.