Markets Wired

Two Maine-based marketers of weight-loss supplements and their owners will surrender substantial personal and business assets and will be prohibited from making deceptive claims about health products and engaging in deceptive marketing practices under a settlement reached with the Federal Trade Commission and the State of Maine’s Office of the Attorney General.

The agencies’ joint complaint charges Anthony Dill, his wife Staci Dill, and their two companies, Direct Alternatives and Original Organics LLC, with violating the FTC Act and Maine consumer protection laws in connection with their promotion and sale of weight loss supplements AF Plus and Final Trim. In total, the defendants sold more than $16 million worth of the two products over the past four years. The companies have ceased all sales.

“The Dills’ companies told a blizzard of lies,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “They sold worthless weight-loss supplements, lied about their supposed ‘risk-free trial’ offers, took people’s money with unauthorized auto-renewal plans, and made it nearly impossible to return their bogus products.”

“This company preyed on the vulnerability of consumers who seek a legitimate weight loss program,” said Attorney General Janet T. Mills. “The alleged conduct here is not limited to making false claims about their products; it also includes charging consumers hundreds of dollars in automatic monthly orders and making it very difficult for customers to cancel orders or get their money back. The Maine Attorney General’s Office is grateful to the FTC for the resources and assistance it brought to this case.”

The joint complaint alleges that the defendants falsely claimed users would quickly and easily lose significant weight and reduce their waist size by taking AF Plus and Final Trim and that the results were “proven” by scientific studies. The defendants used radio ads – at least one of which claimed to be a public service announcement – to sell their products.

For example, according to the complaint, one AF Plus ad featured a purported company spokesperson claiming it was a “proven breakthrough in weight loss.” Another ad falsely claimed that AF Plus is “PROVEN” to help users lose “a dramatic” amount of weight and that it is “so powerful, it even works while you sleep.” Consumers were told they could “keep eating their favorite foods” and still lose weight. Final Trim ads claimed that users “lost all of the extra inches and pounds,” that Final Trim was “an amazing PROVEN breakthrough in weight loss,” and that users could lose “pounds in days” without dieting.

According to the complaint, the defendants sold the products pitching a “risk-free trial” offer that was not free of risk. Many consumers who agreed to the “risk-free trial” offer discovered that the only way to avoid being charged $79.90 for a minimum order of two bottles was to return one unopened bottle at their own expense prior to the end of the 30-day risk-free trial. In addition, consumers allegedly were not refunded the initial shipping charge of $7.95.

In addition, the agencies allege that many consumers were enrolled in a poorly disclosed monthly continuity plan resulting in additional charges to their credit and debit card accounts. The defendants allegedly made obtaining refunds difficult as well. According to the complaint, consumers had a hard time getting through to the defendants’ customer service number and encountered stiff resistance to refunds for both the initial risk-free-trial and subsequent continuity shipments.

The defendants also were charged with deceptively promising $80 worth of Walmart or Target gift cards to consumers who agreed to trial memberships in two buying clubs. Consumers never received the $80 in gift cards and were auto-billed $24.95 per month for each club if they failed to cancel the memberships within 30 days, according to the complaint.

The stipulated federal court order settling the agencies’ charges bans the defendants from claiming any dietary supplement, over-the-counter drug, patch, cream, wrap, or other product worn on or rubbed into the skin can cause rapid or substantial weight loss or can cause a certain amount of weight loss over a certain period of time.

Second, the order prohibits other claims, including that a product causes weight loss, a specific amount of weight loss, or boosts users’ metabolism, unless the defendants have competent and reliable scientific evidence in the form of randomized, double-blind, and placebo-controlled human clinical testing to prove the claims are true. It also prohibits claims regarding the performance or efficacy of a product, unless they are supported by competent and reliable scientific evidence.

Third, the order prohibits the defendants from misrepresenting that they have the necessary tests, studies, or research to support a product’s weight-loss claims or that the product is clinically proven to cause weight loss. It also requires them to preserve all records related to any clinical tests or studies used to support any health claims they make.

The order further prohibits the defendants from misrepresenting other facts material to the sale of a product related to return and cancellation policies and auto-billing subscriptions. This includes failing to tell consumers about any negative-option feature, requiring the defendants to get consumers’ express informed consent before obtaining any billing information, and honoring returns or cancellation requests.

The order prohibits the defendants from violating the Restore Online Shoppers’ Confidence Act when selling any good or service and requires them to comply with the Electronic Fund Transfer Act for purchases made using a debit card or other electronic fund transfer.

Finally, the order imposes a $16,419,989 judgment which will be suspended after the defendants sell or liquidate a substantial portion of their assets, including real estate, furniture, appliances, timeshares, a boat, snowmobiles, IRAs, jewelry, artwork, numerous investment accounts, and business investments.

The Commission vote authorizing the filing of the complaint and approving the proposed stipulated final order was 4-0. The complaint and proposed stipulated final order were filed in the U.S. District Court for the District of Maine and the final order was entered by the Court on February 5, 2016.

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

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