Markets Wired

A Glendale, California-based operation known as Sale Slash will stop using spam emails and fake news websites with phony celebrity endorsements and unsupported efficacy claims to promote its supposed weight-loss products, under a settlement with the Federal Trade Commission.

The court order resolving the FTC’s charges will result in Sale Slash LLC and five other defendants turning over assets that, combined with those already secured by a court-appointed receiver, total approximately $10 million, the bulk of which will be returned to consumers who bought the bogus supplements.

“Sale Slash’s business model was built on lies,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “They used spam email, fake news sites, and phony celebrity endorsements to make their outlandish weight loss claims. The FTC has put an end to all these illegal practices.”

The FTC’s complaint, announced in May 2015, charged Sale Slash, LLC; Purists Choice, LLC; Artur Babayan and Vahe Haroutounian with using millions of illegal spam emails, along with false weight-loss claims and fake, unauthorized endorsements from celebrities like Oprah Winfrey, to market unproven diet pills, including Premium Green Coffee, Pure Garcinia Cambogia, Premium White Kidney Bean Extract, Pure Forskolin Extract, and Pure Caralluma Fimbriata Extract.

In October 2015, the Commission filed an amended complaint adding five additional defendants: Edgar Babayan, Apex Customer Care LLC, Penway LLC, Renvee LLC, and Optim Products LLC.

The court order settling the FTC’s charges contains both conduct and monetary provisions. First, it prohibits the settling defendants from making, or assisting others in making, weight-loss or health-related product claims unless they are not misleading and are supported by competent and reliable scientific evidence. Such evidence specifically includes a human clinical test or study substantiating the claim.

The order also prohibits the defendants from misrepresenting the existence, contents, validity, results, conclusions, or interpretations of any test, study, or research, including in the weight-loss context. In addition, the defendants must preserve documents related to any human clinical test or study they use to support their advertising claims.

Next, the order prohibits the defendants from engaging in a wide range of misrepresentations in connection with the advertising, marketing, promotion, offering for sale, or sale of any goods or services, tailored to the allegations in the complaint. This includes prohibitions on the types of misrepresentations typically found on fake news websites. The order also details what steps the defendants must take to police the activities of their affiliate marketers.

Finally, the order prohibits the defendants from a range of CAN-SPAM Act violations, including sending emails that fail to identify the sender, sending emails with misleading subject headings, and sending emails that lack a proper opt-out option for recipients.

The order imposes a partially suspended $43.4 million judgment against the defendants, reflecting the amount of consumer harm they caused. Under the order, a receiver will take possession of all remaining assets of the settling corporate defendants that total approximately $8.9 million and consist of cash and real estate.

Combined with assets received from the individual defendants and assets already in the receiver’s possession, the settlement is expected to secure approximately $10 million, the majority of which is expected to be returned to defrauded consumers. If the defendants are later found to have misrepresented their financial condition, the full judgment will immediately become due.

Defendants Apex, Penway, and Renvee have not appeared in court and are currently in default.

The Commission vote approving the filing of the proposed stipulated order for permanent injunction and monetary judgment was 4-0. The U.S. District Court for the Central District of California entered it on February 3, 2016.

For consumer information about avoiding fake news websites, see Trusting Your Sources.

The FTC is a member of the National Prevention Council, which provides coordination and leadership at the federal level regarding prevention, wellness, and health promotion practices. This case advances the National Prevention Strategy’s goal of increasing the number of Americans who are healthy at every stage of life.

NOTE: Stipulated final orders have the force of law when approved and signed by the District Court judge.

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