Markets Wired

The Federal Trade Commission’s case against the marketers of Xenadrine EFX, a purported weight-loss product, has ended, with the final defendant in the case settling charges of false and unsubstantiated advertising. The marketers claimed that Xenadrine EFX was clinically proven to cause rapid and substantial weight loss and was more effective than ephedrine-based diet products, and their ads included consumer testimonials.

In 2005, the FTC charged defendant Tracy Chinery, her husband Robert Chinery, Jr., and one of their companies, RTC Research & Development, LLC, with making false and unsubstantiated weight-loss claims for Xenadrine EFX. In 2006, the U.S. District Court for the District of New Jersey entered a settlement agreement between the FTC and two of the three defendants – Robert Chinery and RTC – that prohibited such conduct and provided for consumer redress.

The parties agreed that the only remaining issue was whether Tracy Chinery’s conduct as the managing member of RTC and as an officer and employee of Nutraquest, Inc., the original marketer of Xenadrine EFX, was sufficient to find her personally liable for the advertising under the FTC Act. The parties stipulated to an expedited procedure under which Tracy Chinery would sign a settlement agreement that was virtually identical to the one signed by Robert Chinery and RTC unless the court rejected the Commission’s claims against Tracy Chinery by granting either a motion to dismiss or a motion for summary judgment in her favor.

The court denied Tracy Chinery’s motion to dismiss in July 2007, ordered discovery to proceed, and then denied her motion for summary judgment in March 2009. Tracy Chinery signed the settlement agreement, which the court has now entered.

Under the final order, all three defendants are barred from making any claims about the health benefits, performance, efficacy, safety, or side effects of any weight-loss product, dietary
supplement, food, drug, or device, unless the representation is true, not misleading, and substantiated by competent and reliable scientific evidence. The order also prohibits
misrepresentations about any test or study, and about the actual experience of any user or endorser. Finally, it requires clear and prominent disclosure of any relationship that would materially affect the weight or credibility given to a testimonial or endorsement provided by a user of the product.

Under the 2006 settlement, the defendants, including Tracy Chinery’s company, RTC, paid $8 million for consumer redress and agreed to limit their future advertising claims. The new settlement with Tracy Chinery does not require her to make any monetary payments beyond those already made under the 2006 settlement.

NOTE: Stipulated court orders are for settlement purposes only and do not necessarily constitute an admission by the defendants of a law violation. Stipulated orders 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.

(Xenadrine NR.wpd)
(Civil Action No. 05-3460 (GEB))