On October 15, 2019, NatureCity, LLC, a Florida-based marketer and seller of aloe vera-based supplements, entered into a stipulated order with the Federal Trade Commission ("FTC") settling alleged violations of the FTC Act. Under the terms of the order, NatureCity, its CEO, and Senior VP (collectively, "Defendants") agreed to pay a $537,500 settlement fee and enter into an $18.7 million judgment, which will be partially suspended after the settlement fee is paid. In addition, NatureCity is barred from including false and unsupported health claims in all future supplement marketing materials.
What did the FTC allege?
NatureCity's Supplement Marketing Practices
According to the FTC's complaint, NatureCity's direct mail advertisements violated Sections 5 and 12 of the FTC Act by deceptively claiming that taking the company's supplements, TrueAloe and AloeCran, would result in numerous unsubstantiated health benefits. For example, some of NatureCity's advertisements claimed that its products reduced cholesterol levels, relieved chronic pain, and treated multiple health conditions, such as diabetes and acid reflux. However, NatureCity was unable to produce any independent, third-party studies to back up its claims, even though its advertisements implied that its products were clinically proven to treat a range of ailments. In addition, many of NatureCity's supplement marketing materials included purported customer testimonials. In violation of the FTC's Product Endorsement and Testimonial Guidelines, NatureCity failed to disclose that it compensated the individuals that provided the testimonials. NatureCity also attempted to influence the content of these testimonials by instructing individuals to "imagine" that they were trying to "encourage a friend to try" its products.
Terms of the Settlement Order
It is important to note that the FTC complaint and the subsequent settlement order was brought not just against NatureCity, but also against two members of its management team. For their role in disseminating the company's deceptive supplement marketing materials, judgement was entered against the company's CEO (a majority owner) and Senior VP (a minority owner). Under the terms of the Order, the Defendants are barred from continuing the company's deceptive advertising practices. Specifically, NatureCity agreed that it would no longer make any efficacy representations regarding its products unless those statements were supported by randomized, double-blind, and placebo-controlled studies that were conducted by qualified and experienced researchers. In addition, any future advertisements that include paid testimonials must clearly and conspicuously disclose any incentives or compensation given to the endorsers. Further, NatureCity was ordered to, within 30 days, provide notice of the settlement to consumers who had purchased TrueAloe or AloeCran within the last five years. This notice must state that, as part of the settlement agreement, NatureCity will no longer claim that its products have specific health benefits, as those claims are not supported by sound scientific evidence. The notice must also inform consumers that the company had compensated individuals in exchange for positive testimonials.
In its statement accompanying the release of the order, the FTC noted that it was especially concerned with the actions of NatureCity because the company targeted older adults and "tried to steer them away from standard medical treatments." It also made clear that the FTC will continue to pursue companies that make deceptive, unsubstantiated health claims about their products.
As readers know, the FTC and state attorneys general frequently investigate and prosecute companies for deceptive advertising practices. Accordingly, it is important that supplement marketers work with experienced marketing attorneys to guide them through state and federal consumer protection laws in order to avoid regulatory trouble.
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