FTC shuts down alleged scam website shilling supplements
WASHINGTON — The Federal Trade Commission last week jointly filed a complaint with the U.S. Attorney’s Office for the District of Connecticut, seeking to permanently stop a Connecticut-based operation that allegedly used fake news websites to promote its products, made deceptive weight-loss claims and told consumers they could receive free trials of acai berry and "colon cleanse" products, only if they paid the nominal cost of shipping and handling.
The FTC alleged that many consumers ended up paying $79.99 for the trial and for recurring monthly shipments of products that were hard to cancel. The defendants allegedly have taken in more than $25 million from consumers in the United States.
The parties have agreed to a court order temporarily halting the illegal conduct of Boris Mizhen, LeanSpa and two other companies Mizhen controls; continuing an asset freeze; appointing a temporary receiver; and giving the receiver, the FTC, and Connecticut authorities immediate access to the business premises.
The news websites associated with the product used domain names that appear to be objective news or health sites, such as Channel8health.com, Dailyhealth6.com and Online6health.com. The sites included stories such as "Acai Berry Diet Exposed: Miracle Diet or Scam?" and "1 Trick of a Tiny Belly: Reporter Loses Her ‘Belly’ Using 1 Easy Tip," and often displayed the logos of major news sources, such as CNN, MSNBC and Fox News.
People represented as reporters on the sites claimed to have tried the defendants’ weight-loss products, such as LeanSpa, NutraSlim, and SlimFuel, and to have lost a substantial amount of weight quickly — sometimes as much as 25 lbs. in four weeks without any special diet or vigorous exercise regime. The news sites had links to the defendants’ own websites, where consumers were offered trial samples of two weight-loss dietary supplements: an acai-berry product and a colon cleanse product. The affiliate marketers earned a commission for each consumer who landed on their sites and signed up for a trial.
According to the complaint, once consumers landed at the defendants’ sites — including TryLeanSpa.com, TryNutraSlim.com and TryQuickDetox.com — they were told that for a limited-time only, in exchange for a nominal shipping and handling fee that typically was $4.95 or less, they would receive trial samples of the acai berry or colon cleanse product, or both, and consumers were urged to provide their credit or debit card account information to pay the nominal fee to obtain a trial sample.
The complaint alleged that the defendants used several entities known as "independent sales organizations," including Check21 and Eureka Payments, to obtain merchant accounts at banks to process credit and debit sales transactions. Using these merchant accounts with several banks, including National Bank of California, WestAmerica Bank, HSBC Bank and the First Bank of Delaware, the defendants caused millions of dollars of unauthorized credit and debit card charges. The bulk of those unauthorized charges allegedly were processed through First Bank of Delaware.
The defendants’ allegedly deceptive practices also included charging some consumers $79.99 for products before the consumers even received the trial samples or before the 14-day trial period had ended; falsely promising a "100% satisfaction guarantee" and full refunds to customers who were dissatisfied with the product; misrepresenting that objective news reporters have performed independent tests on the products and independent consumers have endorsed the products; making unsupported claims that consumers could quickly lose a significant amount of weight; and falsely stating that the claims were clinically proven. The complaint alleged that the defendants’ business practices violated Sections 5 and 12 of the FTC Act, the Electronic Funds Transfer Act and Regulation E, and the Connecticut Unfair Trade Practices Act.
The stipulated court order halts the defendants from marketing or selling "negative-option" continuity plans, from making unauthorized charges while selling any good or service, and from making certain deceptive claims. The order also requires the defendants to cease collecting on customer accounts, and extends an asset freeze over the defendants until a final resolution of the court action.
This is the FTC’s 11th case involving fake news websites used to promote dietary supplements. In April 2011, the agency charged 10 companies that operated "fake news" sites promoting acai berry weight-loss products.
What’s hot in home health care
Hamacher Resource Group in November introduced a new digital product library featuring as many as 6,000 home health care items. Drug Store News caught up with Hamacher president Dawn Vogelsang to talk about the opportunities in home health care today.
DSN: What is the demand for home health care at retail today?
Dawn Vogelsang: The number of people over 90 [years old] has tripled over the last 30 years. Of those over 90, 8-out-of-10 are either living alone or with a loved one, so the demand for home health care products is naturally going to rise. As more people enter their senior years and try to remain active, they still have to deal with limitations and chronic conditions that become more prevalent as we get older.
DSN: How many categories does the digital library encompass?
Vogelsang: Although a library is never finished, we estimate it will include 6,000 items at the completion of the build-out, which represents 40-plus subcategories. Those subcategories range from wound care to wheelchairs and everything in between.
DSN: What are the challenges in merchandising this set at retail?
Vogelsang: The size and variety of the products, the lack of true retail packaging and the need for consultation to make purchase decisions in some of the subcategories are just a few. We capture product dimensions both in package and out of package where it makes sense, so a retailer knows how much space is needed to display the product. …
When it comes to large products, such as some of the equipment and mobility aids, there may not be room to even carry these products in the store. … Our home health care digital library can in essence be used as a virtual store extension. If the retailer has a website, they can populate it with our images and data to show a much larger selection of products than they could fit in their store. If they don’t have a website where they can feature all the products that are available, they would still have access to the digital library with all of the specific information, and they could order what their customer needs from the distributor and have it in store the next day.
DSN: Hamacher also developed educational guides in conjunction with the new library. What are those exactly?
Vogelsang: The Retail Building Blocks: Home Health Care Series is really a great way for retailers to determine which products and what size department they should invest in. The first module is literally a self-assessment, … a step-by-step process that helps them determine how to incorporate a home health care department into their current offering.
LOS ANGELES — To help under-the-weather junior, Hyland’s has rebranded its pediatric line of products Hyland’s Baby. Hyland’s cough-cold liquid offerings are trending at 76.5% growth to $2.6 million for the 12 weeks ended Oct. 30, according to SymphonyIRI Group across food, drug and mass (excluding Walmart).
And for this cough-cold season, Hyland’s added a new Hyland’s Baby cough syrup for infants 6 months and older to the line. The Hyland’s Baby cough syrup begins shipping in January, the company reported, at a suggested retail price of $9.99.