Two Hi-Tech Pharmaceuticals directors were arrested after a Georgia federal court found that they failed to comply with an order to recall their weightloss supplements. FTC v. Nat’l Urological Grp. Inc., No. 4-3294 (U.S. Dist. Ct., N.D. Ga., order entered September 2, 2014). The court previously ordered the company to pay $40 million to the U.S. Federal Trade Commission (FTC) and recall several of its products, including Fastin, Lipodrene, Benzedrine, and Stimerex-ES . Additional information about the sanctions appears in Issue 25 of this Report.
The court assessed the company’s recall efforts following its previous order and found several deficiencies. Hi-Tech delayed the initiation of the recall—it began drafting a recall notice 41 days after the order, and it mailed the recall notices 50 days after the order was entered. The court also noted that the scope of the recall could not be accurate because the company mailed 2,402 notices but had previously identified to the court that it had more than 3,700 retailers and distributors. In addition, Hi-Tech’s recall notice was insufficient because it closely resembled a legal brief rather than a recall notice, included several paragraphs of unnecessary information and failed to include important information. According to the court, the recall notice’s envelope did not identify its contents as a recall notice but instead featured product advertisements, including one of the recalled products. This could have caused recipients to confuse the notices with an advertisement or general business correspondence, “which may have been by design,” as the court noted.
Further, Hi-Tech’s Website did not feature a prominent notice; it included a small link labeled “Recall,” which notably did not appear on the product purchasing page. The court also took issue with the company’s follow-up contact because the sales department did not keep records of whom they contacted and the sales representatives were not given a script to ensure that accurate and complete information was given to consumers, retailers and distributers. The court also cited the limited participation in the recall as evidence that the recall was deficient, because only eight companies returned products, totaling less than 3,000 bottles. FTC investigators were also apparently able to purchase the products in stores several months after the order was issued. Finally, using expiration dates, the court determined that some of the products in evidence were likely manufactured after the court ordered the recall, so it ordered the defendants to file reports on the date of manufacturing, labeling and packaging of those products.
The defendants will remain in jail until they “1) ensure that the products are not available for purchase from retail stores; 2) send out a proper recall notice for each product; 3) ensure the recall notice has been distributed to all retailers and anyone else associated with the products; and 4) ensure that links to the recall notices are prominently displayed on each page of the company’s website.”