Markets Wired

Defendants in an operation that sold bogus weight loss supplements through illegal spam e-mail have settled Federal Trade Commission charges that their operation violated federal laws. The settlement bars them from making false or unsubstantiated claims about health benefits of any food, drug, or dietary supplements; bars violations of the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, known as the CAN-SPAM Act; and requires them to give up $29,000 in ill-gotten gains.

In October 2007, the FTC sued a group of defendants in the United States, Canada, and Australia, who were using spammers to drive traffic to the Web sites where they sold the bogus supplements. According to the FTC complaint, the defendants falsely claimed that their supposed “hoodia” products cause rapid, substantial and permanent weight loss. In addition, the FTC alleged that the operation violated the CAN-SPAM Act by initiating commercial e-mails that contained false “from” addresses and deceptive subject lines, and failed to provide an opt-out link or physical postal address.

The FTC asked the court to order a halt to the illegal operations, pending trial. The settlement announced today with Spear Systems, Inc., Bruce Parker, an Australian national, and Lisa Kimsey, ends the litigation with them.

Litigation continues with another defendant named in the October 2007 complaint, Xavier Ratelle, a Canadian national based in Quebec. In addition, 9151-1154 Quebec, Inc., doing business as Q Web; 9064-9252 Quebec, Inc.; HBE, Inc.; and Abaragidan Gnanendran have been added as defendants in an amended complaint. They are based in Quebec.

This was the first agency law enforcement action where FTC staff employed the U.S. SAFE WEB Act to share information with foreign partners. Passed by Congress last year, the Act recognizes that spam, spyware, fraud, and other practices harmful to consumers are increasingly global in nature, and strengthens the FTC’s ability to cooperate with foreign counterparts. In addition to sharing key information for law enforcement efforts, it also gives the FTC enhanced authority in investigative assistance, protecting the confidentiality of information from foreign sources, and strengthening enforcement relationships.

The Commission vote to accept the settlements was 4-0. They were filed in U.S. District Court for the Northern District of Illinois.

NOTE: Stipulated final judgments and orders are for settlement purposes only and do not constitute an admission by the defendant of a law violation. Consent judgments have the force of law when signed by the judge.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

(spear systems)
(FTC File No X 080003)