The FTC on Super (un)natural product claims

In a recent post by Seena Gressin, Attorney, Division of Consumer & Business Education, we get a glimpse of the FTC’s view of “natural”

For lovers of word-association games: what words leap to mind when you think of “all natural” ingredients?

Did you pick “Dimethicone,” “Phenoxyethanol,” or “Polyethylene”? Perhaps “Butyloctyl alicylate,” “Polyquaternium-37,” or “Neopentyl Glycol Diethylhexanoate”? No? Well, not to worry — you haven’t lost the game. But five companies that tagged products that contained one or more of these ingredients as “all natural” or “100% natural” are now rethinking their strategy.

The FTC alleged the companies misrepresented their personal care products — including sunscreens, moisturizers, shampoos, conditioners, and shower gels — by describing them as “all natural” or “100% natural” when they contained one or more synthetic ingredients.

According to the FTC, the claims showed up in product names, such as “All Natural Hand and Body Lotion,” sold under the trade name ShiKai by Trans-India Products, Inc., of Santa Rosa, Calif., and “Coconut Shea All Natural Styling Elixir,” sold under the trade name EDEN BodyWorks by ABS Consumer Products, LLC, of Memphis, Tenn.

The FTC said the claims also showed up in product ads. For example, The Erickson Marketing Group Inc., of Arvada, Colo., which uses the trade name Rocky Mountain Sunscreen, and California Naturel, Inc., of Sausalito, Calif., both advertised their sunscreens as “all natural,” while Beyond Coastal, of Salt Lake City, touted its sunscreen as “100% natural.”

Four of the companies have agreed to proposed orders that would prohibit them from claiming that any product is 100% natural unless they have reliable evidence to back up the claim. The orders also would require them to have proof for any claims they make about the products’ environmental or health benefits. The Commission issued a complaint against the fifth company, California Naturel, seeking the same relief.

How can you avoid being burned by misleading “all natural” claims for sunscreen and other products? Take the claims with a non-synthetic grain of salt, check out the ingredients list on the package, and please visit our website for information about shopping for products that claim to have health or beauty benefits.

 

According to the FTC, each of the following companies made the all-natural claim in online ads:

  • Trans-India Products, Inc., doing business as ShiKai, based in Santa Rosa, California, markets “All Natural Hand and Body Lotion” and “All Natural Moisturizing Gel” both directly and through third-party websites including walgreens.com and vitacoast.com. The lotion contains Dimethicone, Ethyhexyl Glycerin, and Phenoxyethanol. The gel contains Phenoxyethanol.
  • Erickson Marketing Group, doing business as Rocky Mountain Sunscreen, based in Aravada, Colorado, uses its website to promote “all natural” products such as the “Natural Face Stick,” which contains Dimethicone, Polyethylene, and other synthetic ingredients.
  • ABS Consumer Products, LLC, doing business as EDEN BodyWorks, based in Memphis, Tennessee, markets haircare products on its own websites and at Walmart.com. It makes “all natural” claims for products including “Coconut Shea All Natural Styling Elixer” and “Jojoba Monoi All Natural Shampoo.” In reality, the products contain a range of synthetic ingredients such as Polyquaternium-37, Phenoxyethanol, Caprylyl Glycol, and Polyquaternium-7.
  • Beyond Coastal, based in Salt Lake City, Utah, uses its website to sell its “Natural Sunscreen SPF 30,” describing it as “100% natural.” However, it also contains Dimethicone.
  • California Naturel, Inc., located in Sausalito, California, sells supposedly “all natural sunscreen” on its website, though the product contains Dimethicone. The Commission has issued a complaint alleging that California Naturel has made deceptive “all natural” claims in violation of Sections 5 and 12 of the FTC Act.

The proposed consent orders bar the four settling respondents from misrepresenting the following when advertising, promoting, or selling a product: 1) whether the product is all natural or 100 percent natural; 2) the extent to which the product contains any natural or synthetic components; 3) the ingredients or composition of a product; and 4) the environmental or health benefits of a product.

The orders require the respondents to have and rely on competent and reliable evidence to support any product claims they make. Some claims require scientific evidence, which is defined as tests, analyses, research, or studies that have been conducted and evaluated objectively by qualified individuals using procedures generally accepted in the profession to yield accurate and reliable results.

More information can be found at the FTC website. https://www.consumer.ftc.gov/blog/super-unnatural-product-claims?utm_source=govdelivery

Do you use a product that claims to be all natural, but isn’t? Share with your fellow readers or contact us to take action.

 

FTC issues warning letters over privacy risks in audio monitoring technology resulting from use of Silverpush code

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The FTC Issued warning letters to app developers using ‘Silverpush’ code — a piece of software that can monitor a device’s microphone to listen for audio signals that are embedded in television advertisements. The software is designed to monitor consumers’ television use through the use of “audio beacons” emitted by TVs, which consumers can’t hear but can be detected by the software. The software is capable of producing a detailed log of the television content viewed while a user’s mobile device was turned on for the purpose of targeted advertising and analytics.

The letters note that Silverpush has stated publicly that its service is not currently in use in the United States, but it encourages app developers to notify consumers that their app could allow third parties to monitor consumers’ television viewing habits should the software begin to be used in the United States.

Through the app developers ask users for permission to use the device’s microphone, despite the apps not appearing to have a need for that functionality. The letters also note that nowhere do the apps in question provide notice that the app could monitor television-viewing habits, even if the app is not in use.

The letters warn the app developers that if their statements or user interface state or imply that the apps in question are not collecting and transmitting television viewing data when in fact they do, that the app developers could be in violation of the FTC Act.

The letters were issued to 12 app developers whose apps are available for download in the Google Play store and appear to include the Silverpush code.

Lumos Labs, makers of Lumosity, settles with FTC over allegations of deceptive advertisement

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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.

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 complaint 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.

Unfortunately for consumers, Lumoisty did not have the science to back up its ads.

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

 

Payday lenders Red Cedar Services Inc. and SFS Inc. pay fines and waive fees to settle lawsuit by FTC

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Two payday lenders have settled Federal Trade Commission charges that they illegally charged consumers across the country undisclosed and inflated fees. Red Cedar Services Inc. and SFS Inc., have each paid $2.2 million and collectively waived $68 million in fees to consumers that were not collected. Red Cedar and SFS operated under the trade names 500 Fast Cash and One Click Cash, respectively.

The settlements arose from lawsuits filed by the FTC in April 2012 alleging that the lenders and others misrepresented how much loans would cost consumers, in violation of the FTC Act. For example, a contract used by Red Cedar, AMG Services and MNE Services stated that a $300 loan would cost $390 to repay, but they charged consumers $975.

The lawsuit also alleged that the companies failed to accurately disclose the annual percentage rate and other loan terms, in violation of the Truth in Lending Act (TILA), and made preauthorized debits from consumers’ bank accounts a condition of the loans, in violation of the Electronic Funds Transfer Act (EFTA).

The stipulated final federal court orders for Red Cedar and SFS also prohibit those defendants from misrepresenting the terms of any loan product, including the payment schedule and interest rate, the total amount the consumer will owe, annual percentage rates or finance charges, and any other material facts. The orders also bar defendants from violating the TILA and the EFTA.

KeyView Labs, Inc. and Brain Research Labs, LLC pay $1.4 to settle claims they deceived consumers

The marketers of a dietary supplement called Procera AVH will pay $1.4 million to settle claims brought by the Federal Trade Commission  that they deceived consumers with claims that the supplement was clinically proven to significantly improve memory, mood, and other cognitive functions.

Under the terms of the settlements, the companies  will pay $1 million to the FTC, and another $400,000 to satisfy a judgment in a case brought by local California law enforcement officials. They also will be barred from making similar deceptive claims in the future and from misrepresenting the existence, results, or conclusions of any scientific study.

According to the FTC’s complaint, the defendants marketed and sold Procera AVH as a “solution” to memory loss and cognitive decline, including as associated with aging. The defendants advertised the product using infomercials, direct mail flyers, newspapers, and the Internet.

Procera AVH typically cost $79 per bottle, or $119 for three bottles for consumers who signed up for the continuity purchase plan and agreed to get automatic refills.

Ashworth College Settles with FTC over misleading students about career training, placement and transfer of credits

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Ashworth College settled charges it mislead students into believing that they would get the training and credentials needed to switch careers or get a new job, and that the course credits they earned would transfer to other schools. In reality, many programs offered by the for-profit institution did not meet state requirements for desired careers, and the claims made about credit transfers were often not true.

According to the FTC’s complaint, the Professional Career Development Institute, LLC, doing business as Ashworth College, violated the FTC Act by deceptively marketing its online college degree and career-training programs. The FTC alleges some degrees and programs offered by Ashworth College failed to meet the basic educational requirements set by state licensing boards for careers or jobs such as real estate appraisers, home inspectors, elementary school educators, massage practitioners, and more. The FTC also alleges the institution claimed that its credits would transfer even though it lacked supporting data that other colleges and universities would accept their credits.

Tuition at Ashworth College ranges from hundreds to several thousand dollars. Ashworth College does not accept student loans, and students are required to pay tuition in full or make monthly payments. However, it does accept military benefits including GI Bill payments, and has directed some of its advertising to military service members and their families.

The proposed stipulated court order prohibits Ashworth College from making further misrepresentations and to pay $11 million.

FTC accuses BabyBus of violating Children’s Online Privacy Protection Act

 

The Federal Trade Commission sent a letter to BabyBus (Fujian) Network Technology Co., Ltd., a China-based developer of mobile applications directed to children, warning that the company may be in violation of the Children’s Online Privacy Protection Act (COPPA) Rule.

In the letter, the FTC notes that it appears the child-directed applications marketed by the company, BabyBus, appear to collect precise geolocation information about users. The letter notes that the company does not get parents’ consent before collecting children’s personal information, which would appear to violate the COPPA Rule.

The FTC stated that several of the company’s apps apps appear to collect precise geolocation information that is transmitted to third parties, including advertising networks and/or analytics companies. Under COPPA and its implementing Rule, 16 C.F.R. § 312 et seq., developers of apps that are directed to children under 13 –or that knowingly collect personal information from children under 13- are required to post accurate privacy policies, provide notice, and obtain verifiable parental consent before collecting, using, or disclosing any “personal information” collected from children.

Because the apps appear to be directed to children COPPA and its implementing Rule are applicable. Because the apps are collecting precise geolocation information, which is considered “personal information” under the Rule,2 notice must be provided and verifiable parental consent must be obtained before collecting, using, or disclosing this information.

The COPPA Rule requires companies collecting personal information from children under 13 to post clear privacy policies and to notify parents and get their consent before collecting or sharing any information from a child. The rule was revised in 2013  to adapt to the growth of mobile technology aimed at children.

The letter asks the company to evaluate its apps and determine whether they may be in violation, as well as informing the company that the Commission will review the apps again in the next month to ensure they are in compliance with the rule.

Letter: Babybus

Federal Trade Commission settles with L’Occitane Inc., Sensa Products LLC, HCG Diet Direct LLC and LeanSpa LLC over unsubstantiated weight loss claims

The Federal Trade Commission announced agreements with L’Occitane Inc., Sensa Products LLC, HCG Diet Direct LLC and LeanSpa LLC which required the companies to drop unsubstantiated claims from ads and, in some cases, to return money to consumers.

“Operation Failed Resolution” is part of the FTC’s ongoing effort to stop misleading claims for products promoting easy weight loss and slimmer bodies.  The marketers of Sensa, who exhorted consumers to “sprinkle, eat, and lose weight” – will pay $26.5 million to settle Federal Trade Commission charges that they deceived consumers with unfounded weight-loss claims and misleading endorsements.  The FTC will make these funds available for refunds to consumers who bought Sensa.

The agency also announced charges against the marketers of two other products that made unfounded promises: L’Occitane, which claimed that its skin cream would slim users’ bodies but had no science to back up that claim, and HCG Diet Direct, which marketed an unproven human hormone that has been touted by hucksters for more than half a century as a weight-loss treatment. The FTC also announced a partial settlement in a fourth case, LeanSpa, LLC, an operation that allegedly deceptively promoted acai berry and “colon cleanse” weight-loss supplements through fake news websites.

Under the agreement with Sensa, the company agreed to return $26.5 million to consumers. In the settlement with L’Occitane, the FTC said the company agreed to pay $450,000 to reimburse customers who bought two skin creams that promised “clinically proven slimming effectiveness” and would “visibly reduce the appearance of cellulite.”  A third company, HCG Diet Direct, sold liquid drops it said contained a hormone produced by human placenta that would help people lose weight. Under the settlement, the company agreed to an order requiring it to pay $3.2 million. The FTC also reached a settlement with LeanSpa, which used fake news websites to advertise the acai berry as a weight-loss miracle product until the company was shut down by the FTC and Connecticut attorney general’s office in 2011.

FTC releases survey showing estimated 25.6 million Americans fell victim to fraud

The Federal Trade Commission released a statistical survey of fraud in the United States during 2011, which showed that an estimated 25.6 million adults – 10.8 percent of the adult population – were fraud victims.

While fast-growing online commerce has benefitted consumers with greater choice and convenience, the survey indicates that, as of 2011, the Internet was also the place where consumers most often learned about fraudulent offers.  The Internet category, which included email, social media, auction sites and classified ads, was followed by print advertising, and TV and radio.  Most consumers bought fraudulent items via the Internet; telephone purchases ranked second.

The  survey asked consumers about 15 specific categories of fraud, and two general categories, and of the specific categories the top 10 were:

Weight-loss Products (5.1 million estimated)

Prize Promotions (2.4 million est.)

Unauthorized Billing for Buyers’ Club Memberships (1.9 million est.)

Unauthorized Billing for Internet Services (1.9 million est.)

Work-at-Home Programs (1.8 million est.)

Credit Repair Scams (1.7 million est.)

Debt Relief (1.5 million est.)

Credit Card Insurance (1.3 million est.)

Business Opportunities (1.1 million est.)

Mortgage Relief Scams (800,000 est.)

An estimated 17.3 percent of African Americans and 13.4 percent of Hispanics were victims; the rate for non- Hispanic whites was 9 percent.  The survey found that high school graduates were the least likely to have been fraud victims; those who did not complete high school were the most likely to have been victims.  Consumers who were more willing to take risks and those who had recently experienced a negative life event (such as a divorce, death of a family member or close friend, serious injury or illness in their family, or the loss of a job) were much more likely to have been victims.  Consumers who indicated they had more debt than they could handle were significantly more likely to have been fraud victims than those who were more comfortable with the amount of debt they had.

You can read a copy of the report here: FTC Fraud Survey

FTC settles with DR Phone Communications over deceptive marketing of prepaid calling cards

The cards tested by the FTC averaged just 40 percent of minutes advertised. According to the FTC’s complaint, filed in May 2012, DR Phone Communications markets and sells prepaid calling cards.  The cards are often sold in grocery and convenience stores, and at kiosks in other retail establishments.  The cards are especially popular with members of immigrant communities, many of whom depend on prepaid cards to stay in touch with family overseas

Since at least September 2010, the complaint states, the calling minutes actually delivered to consumers who bought the defendants’ prepaid cards were substantially less than promised in their marketing, advertising, and promotions.  The FTC bought samples of the defendants’ cards in September 2010 and November 2011, and of the 169 card tested, all failed to deliver the number of minutes prominently advertised on their point-of-sale posters. In all, the defendants’ cards delivered on average only 40 percent of the minutes promised, with 52 cards delivering less than 25 percent of the minutes advertised, and 25 cards delivering less than five percent of the minutes advertised.

Based on these results, the Commission charged the defendants with violating the FTC Act by misrepresenting the number of calling minutes the cards would provide, and failing to disclose adequately fees that would reduce the cards’ value, and in turn the number of calling minutes they provide.

The settlement permanently bars DR Phone Communications from making any material misrepresentations in connection with the marketing and sale of prepaid calling cards, including those about the number of minutes delivered and per-minute rates.  It also requires them to clearly and prominently disclose all material limitations of their prepaid calling cards, including:

The existence of all fees and when they will apply; That the advertised calling minutes are available only on a single call, if applicable; Any limit on the time during which the advertised rates or number of minutes are available; and When the calling card expires, if it does.

In addition, the proposed order requires the defendants to put procedures into place for five years to ensure the accuracy of their marketing materials and to prevent retailers from displaying expired marketing materials.  They also are required to end their relationships with any distributor who doesn’t display accurate marketing materials.

Finally, the proposed order imposes a judgment of $61,597, representing the total amount consumers lost using the cards between September 2010 and June 2012.