Markets Wired

National pharmacy chain Rite Aid Corporation has agreed to pay $500,000 to settle FTC
charges that it deceptively advertised that its “Germ Defense” tablets and lozenges could prevent and treat colds and the flu or reduce the severity and duration of these illnesses. Rite Aid marketed the Germ Defense products by touting their similarity to “Airborne” products. The FTC also has charged Rite Aid’s supplier, Improvita Health Products, Inc., with false and deceptive advertising in an ongoing case.

“This settlement is one ‘cold remedy’ that works,” said FTC Chairman Jon Leibowitz. “The FTC will hold retailers accountable for the claims they make on their store brand products.”
Like Airborne Health, Inc., which settled deceptive advertising charges with the FTC last
year for marketing its effervescent tablets as a cold prevention and treatment remedy, Rite Aid will settle similar charges for selling a purported cold-and-flu remedy under its private label. Rite Aid will pay $500,000 for consumer redress under the agreed-upon final order. The company is required to post a refund notice, along with postage-pre-paid refund request forms, in a clear and conspicuous location in the cold-and-flu aisle at each of its stores for 60 days beginning on October 1, 2009. Consumers will have until December 31, 2009 to submit refund requests for up to six packages of Germ Defense.

Also under the settlement agreement, Rite Aid may not claim that any Rite-Aid-label version of Airborne, or any Rite-Aid-label food, drug, or dietary supplement can reduce the risk of or prevent colds or flu, reduce the severity or duration of colds, or boost the immune system unless the claims are truthful, not misleading, and substantiated by competent and reliable scientific evidence.

Rite Aid and Improvita marketed several flavors of Germ Defense lozenges and tablets as
dietary supplements that contained vitamins C and E, zinc, and echinacea. They claimed the products could reduce the risk of or prevent colds and flu; protect against or fight germs; reduce the severity or duration of a cold; protect against colds and flu in crowded places; and boost the immune system, according to the complaints. The FTC charged that there is inadequate evidence to support these claims.

In the case against Improvita, the FTC charged the company with deceptive acts or practices and with making false advertisements in violation of federal law. Improvita allegedly supplied the Germ Defense products to Rite Aid and other retailers, and provided advertising, packaging, and promotional materials containing the unsubstantiated claims. Improvita also sold Germ Defense directly to consumers via an Internet site, according to the complaint. Thomas B. Klamet and Daniel P. Kohler, both of whom were principals in the Cleveland, Ohio-based company, also were charged in the complaint.

The Commission vote approving the Rite Aid complaint and stipulated order was 4-0. The complaint and proposed agreement were filed in the U.S. District Court for the Middle District of Pennsylvania on July 13, 2009. The order becomes effective when entered by the court.

The Commission vote authorizing the staff to file the complaint against Improvita Health
Products, Inc. was 4-0. The complaint was filed in the U.S. District Court for the Northern District of Ohio on April 15, 2009, and the case is currently in litigation.

NOTE: The Commission files 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. The complaint is not a finding or ruling that the defendant has actually violated the law. The stipulated final order is for settlement purposes only and does not constitute an admission by the defendants of a law violation. A stipulated final order requires approval by the court and has 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.

(FTC File Nos. 072-3236 (Rite Aid) and 072-3189 (Improvita))
(Germ NR.wpd)