| U.S. Federal Trade Commission |
FTC News Release, Mar 9, 2004
National Marketers of Dietary Supplements Settle FTC Charges
Defendants to Pay $2.2 Million in Redress
Direct mail marketers have agreed to pay
$2.2 million in consumer redress and to stop certain deceptive
advertising practices to settle Federal Trade Commission
charges that they made false and unsubstantiated weight loss
and arthritis “cure” claims for dietary supplements in sales
brochures mailed to consumers across the nation.
In June 2003, the Department of Justice, on
behalf of the FTC, filed a federal court complaint against
California residents Michael S. Levey and Gary Ballen; Bentley
Myers International Co., based in Vancouver, Canada; and
Publisher’s Data Services, Inc. and Nutritional Life, Inc.,
both based in Beverly Hills, California. The complaint alleged
that the defendants violated the FTC Act by making false and
unsubstantiated claims that three weight- loss supplements -
Zymax and MillinesES (both containing ephedra), and Serotril
(containing St. John’s wort) - cause rapid and substantial
weight loss without diet or exercise. The complaint also
challenged claims that the ephedra products have no side
effects. The complaint further alleged that the defendants
made unsubstantiated claims that CartazyneDS, a dietary
supplement containing glucosamine, “cures” arthritis and
“rebuilds” cartilage “within days.” The complaint charged that
the defendants’ ads used fictitious expert and consumer
endorsements, and deceptive “before and after” pictures.
In addition, the complaint charged Levey and
the three companies with violating a 1993 FTC order, which
prohibited Levey from making unsubstantiated advertising
claims and from using deceptive endorsements and
demonstrations. The 1993 order was based on Levey’s allegedly
deceptive television infomercials for the EuroTrym Diet Patch,
Foliplexx hair-loss product, Y-Bron impotence treatment, and
Magic Wand kitchen mixer.
Defendant Michael Levey died in August 2003.
The FTC today announced an amended complaint that substitutes
Lisa Levey, in her capacity as personal representative of the
Estate of Michael Levey, for defendant Michael Levey. The
amended complaint was filed along with a consent decree, which
requires the court’s approval.
Under the terms of the consent decree,
Michael Levey’s Estate, as well as Ballen and the three
corporate defendants, jointly agree to pay $2.2 million in
consumer redress. In addition, the consent decree prohibits
the three corporate defendants from violating the 1993 FTC
order. The consent decree also prohibits Ballen and the
corporations from engaging in certain deceptive advertising
practices, including:
- representing that dietary supplements and
certain other products cause substantial weight loss in a
short time without diet or exercise, or that such claim is
proven by clinical studies;
- making any other false or unsubstantiated
claim about the health benefits, performance, safety or
efficacy of any product, service, or program;
- using deceptive pictures and
demonstrations; misrepresenting tests, studies and research;
and
- misrepresenting the identity or
qualifications of any expert or other endorser.
The consent decree includes a provision,
similar to those in earlier FTC orders involving ephedra
products, which requires a prominent warning in advertising
and product labeling to alert consumers that ephedra use can
result in serious injury and even death. On February 11, 2004,
the Food and Drug Administration published a final rule,
effective April 12, 2004, prohibiting the sale of dietary
supplements containing ephedrine alkaloids (ephedra) because
they present an unreasonable risk of illness or injury. The
consent decree’s warning requirement will apply to defendants’
marketing of all ephedra products, including ephedra products
that are not covered by FDA’s rule.
Finally, the consent decree also contains
various recordkeeping and reporting requirements to assist the
FTC in monitoring the defendants’ compliance.
The FTC received assistance from the
Canadian Competition Bureau and the Consumer Services Division
of the British Columbia Ministry of Public Safety and
Solicitor General during the investigation of this matter.
The Commission vote to refer the amended
complaint and the proposed consent decree to the Department of
Justice for filing was 4-1, with Commissioner Orson Swindle
dissenting. In his dissenting
statement, Commissioner Swindle explained that he
thought the amount of monetary relief was woefully inadequate.
Commissioner Swindle stated, “Although $2.2 million is a
sizeable amount of money, this payment is minuscule in
comparison to the amount of the defendants’ gross sales and
consumer harm. In addition, the Levey family and Gary Ballen
are both left with substantial assets. Although anyone can
feel compassion for the Levey family given Michael Levey’s
death, this should not justify allowing the family to keep
money that rightfully belongs to consumers who were deceived
by the defendants’ false health claims. Any settlement that
leaves defendants or their families with substantial
ill-gotten wealth not only sets a bad precedent but also
shows, in a manner of speaking, that ‘crime does pay.’”
The amended complaint and consent decree
were filed in the U.S. District Court for the Central District
of California, Western Division, on March 9, 2004. The consent
decree requires the court’s approval.
The text in this article was prepared by the U.S. Federal Trade Commission.