Just when you thought that you heard it all, the FTC announced yesterday that it settled with marketers of caffeine-infused “shapewear” over unsubstantiated weight loss claims. According to the FTC, marketers urged consumers to wear a fabric that was allegedly infused with, among other things, caffeine for metabolizing fat. The caffeine was supposed to dehydrate fat cells, making the wearer appear slimmer and firmer. Claims like “[t]ake up to 2” off hips,” “[i]nstant trimming when you wear them,” and “works with your body to eliminate cellulite” came under attack by the Commission. The FTC was critical of the studies that had been offered as alleged substantiation. Besides being uncontrolled and unblinded, the studies revealed average reported hip reductions of less than of fractions of an inch. Outlier results were not persuasive. In the end, the companies entered into proposed Consent Orders requiring over $1.5 million to be refunded to consumers. Once again, companies have been pursued when the Commission felt that they distorted results and made outlandish claims. Consumers continue to search for quick fixes for weight loss and the FTC continues to hold companies accountable. This sector has been a priority for the Commission for years due to the inherent health-related concerns associated with specious weight loss claims. Any company operating in this domain should err on the side of caution in its advertising.
You’ve always heard about the carbs in alcoholic drinks, but now, you might just learn more than you want to know. At the end of May, the Department of the Treasury’s Alcohol and Tobacco Tax and Trade Bureau approved beer, wine and spirits companies’ use of nutrition labels on their products, which can list, among other things, calories, carbohydrates, protein and fat per serving. Since the labeling is voluntary, it will be at the beverage companies’ discretion as to whether to use them. The labeling regulation is only temporary while the Treasury Department considers final rules on alcohol labels. It has been suggested that the recent labeling regulation is the result of lobbying by hard liquor companies that historically sell products with lower calories and carbohydrates than their beer competitors. As this is a competitive industry, we will probably start to see entire ad campaigns develop around specific amounts of calories and carbohydrates in various beverages. If there is an edge to be had, companies will be sure to highlight it for consumers. So, an after dinner beer or scotch? We may soon learn which one helps us out more with our diets.
Yesterday, the FTC reported that it had filed its 11th case involving the promotion of dietary supplements via fake news sites run by affiliate marketers. Sure, companies need to be concerned about how consumers are driven to their websites. However, it appears that the driving factor for many of the FTC’s complaints involving fake news sites was not the misleading claims on the affiliates’ websites, but rather the undisclosed negative option continuity plans on the defendants’ websites and the inability of consumers to get refunds. Even though technology has improved, it’s the same old story. At the end of the day, consumers complain to their state AG’s offices and the FTC because they claim that they were enrolled in undisclosed continuity plans, not that they lost $1.95 for a sample of a product that did not work. The FTC’s Complaint involving the sale of acai berry/colon cleanse products is yet another example of this common fact pattern. The fact that these products were pitched through allegedly fake new sites is only icing on the cake. If companies honored their 100% money back guarantees, not enough people would complain to give the FTC the incentive to bring an action. The FTC has limited resources so many of its cases are derived from consumers’ complaints. Make no mistake that if you make claims that are on its top hit list (e.g., claims to children or claims directed at curing diseases), you could see an FTC inquiry. However, if everyone is happy, then it’s less likely that your claims will come under scrutiny. Now, it might not be economically feasible to offer 100% refunds because companies pay out commissions to affiliates to drive consumers to their websites before consumers request refunds. This makes it even more important for companies to make sure that they have defensible positions for using any negative option continuity plans. Also, companies need to understand how consumers were pitched to arrive at their websites. If the true “product” is the continuity plan, then companies need to be ready to defend why all of the downstream affiliate marketing as well as the marketing on their own websites focused on the $1.95 product. While companies like to blur the issue, the question is fairly simple. If at the end of the day, the consumer believed that it was just buying the $1.95 product instead of signing up for the $79.95 plan, you could have an issue. Also, failing to investigate how consumers got to your website (i.e., by failing to monitor downstream affiliate marketing) can only lead to further trouble. Be clever in your marketing, but make sure that consumers understand what they are buying.
Earlier this week, the FTC approved a final Order settling charges against Beiersdorf, Inc. relating to marketing claims for its Nivea My Silhouette! skin cream product. The Decision and Order can be found on the FTC’s website along with a copy of the Complaint. What can be learned from this case? First, don’t believe that just because your competitors’ products have not been questioned by the FTC, your products are immune from review. Second, there can be serious financial repercussions for making questionable claims. According to Section V of the Order, Beiersdorf is required to pay $900,000 to the FTC to settle this matter. Third, in addition to being concerned about whether your more traditional types of marketing are compliant, you need to be careful about the types of keywords that you are purchasing to promote your products. As noted in the Beiersdorf matter, the FTC complained about the purchase of terms, such as “stomach fat” and “thin waist.” Finally, while the matter may be over, Beiersdorf is now under Order with the FTC (the violation of which will trigger significant financial penalties) and has agreed to be monitored by the FTC for five years with regard to certain future claims. While such monitoring provisions are not new, companies often forget about how invasive these provisions can be as it allows the FTC, “upon reasonable notice and request” to ask for, among other things, substantiation for the subject claims. In other words, unlike in civil litigation, the matter is far from being over even though a settlement has been reached. Learn from how the FTC settled matters with others in your field and consider the significant disruptions, both financial and otherwise, that can result if your company makes unsupported or questionable claims.
The FTC has put out a short video with 7 simple things to remember about complying with the CAN-SPAM Act. Although very basic, it presents a short checklist to review if your company uses E-mail to market your products or services.
Besides telling the truth, what’s the one thing that a company can do to minimize its chances of getting an inquiry from the FTC? Provide a no questions asked, 100% money back guarantee and honor it. Here’s why. Generally speaking, the FTC brings most of its cases with the goal of getting restitution for consumers. If there are no damages (i.e., everyone has been refunded), then it reduces the incentive for the FTC to bring a case. Further, if everyone is happy, there won’t be any complaints to the FTC. Thus, unless you are making outrageous health claims to children, for example, it is less likely that you will wind up on the FTC’s radar screen. Responding to a FTC investigation will surely cost more than the $39.95 refunded to a consumer. So to sum it up, always tell the truth and provide full refunds. You should have less worries.