Markets Wired

The creators and marketers of the Lumosity “brain training” program have agreed to settle Federal Trade Commission charges alleging that they deceived consumers with unfounded claims that Lumosity games can help users perform better at work and in school, and reduce or delay cognitive impairment associated with age and other serious health conditions.

As part of the settlement, Lumos Labs, the company behind Lumosity, will pay $2 million in redress and will notify subscribers of the FTC action and provide them with an easy way to cancel their auto-renewal to avoid future billing.

“Lumosity preyed on consumers’ fears about age-related cognitive decline, suggesting their games could stave off memory loss, dementia, and even Alzheimer’s disease,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “But Lumosity simply did not have the science to back up its ads.”

According to the FTC’s complaint, the Lumosity program consists of 40 games purportedly designed to target and train specific areas of the brain. The company advertised that training on these games for 10 to 15 minutes three or four times a week could help users achieve their “full potential in every aspect of life.” The company sold both online and mobile app subscriptions, with options ranging from monthly ($14.95) to lifetime ($299.95) memberships.

Lumosity has been widely promoted though TV and radio advertisements on networks including CNN, Fox News, the History Channel, National Public Radio, Pandora, Sirius XM, and Spotify. The defendants also marketed through emails, blog posts, social media, and on their website, Lumosity.com, and used Google AdWords to drive traffic to their website, purchasing hundreds of keywords related to memory, cognition, dementia, and Alzheimer’s disease, according to the complaint.

The FTC alleges that the defendants claimed training with Lumosity would 1) improve performance on everyday tasks, in school, at work, and in athletics; 2) delay age-related cognitive decline and protect against mild cognitive impairment, dementia, and Alzheimer’s disease; and 3) reduce cognitive impairment associated with health conditions, including stroke, traumatic brain injury, PTSD, ADHD, the side effects of chemotherapy, and Turner syndrome, and that scientific studies proved these benefits.

The complaint also charges the defendants with failing to disclose that some consumer testimonials featured on the website had been solicited through contests that promised significant prizes, including a free iPad, a lifetime Lumosity subscription, and a round-trip to San Francisco.

The proposed stipulated federal court order requires the company and the individual defendants, co-founder and former CEO Kunal Sarkar and co-founder and former Chief Scientific Officer Michael Scanlon, to have competent and reliable scientific evidence before making future claims about any benefits for real-world performance, age-related decline, or other health conditions.

The order also imposes a $50 million judgment against Lumos Labs, which will be suspended due to its financial condition after the company pays $2 million to the Commission. The order requires the company to notify subscribers who signed up for an auto-renewal plan between January 1, 2009 and December 31, 2014 about the FTC action and to provide a means to cancel their subscription.

The Commission vote authorizing the filing of the complaint and proposed stipulated order was 4-0, with Commissioner Julie Brill issuing a separate concurring statement. The FTC filed the complaint and proposed order in the U.S. District Court for the Northern District of California, San Francisco Division.

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 Council’s goal of increasing the number of Americans who are healthy at every stage of life. This case is part of the FTC’s ongoing efforts to protect consumers from misleading health advertising.

NOTE: The Commission authorizes the filing of a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. A stipulated order has the force of law when signed by the district court judge.

The Federal Trade Commission works to promote competition, and protect and educate consumers. You can learn more about how competition benefits consumers or file an antitrust complaint. Like the FTC on Facebook, follow us on Twitter, read our blogs and subscribe to press releases for the latest FTC news and resources.