The watchdog, which recently filed 10 lawsuits against firms allegedly hiring third parties to create ‘fake’ news sites promoting acai diet supplements, says Phoenix-based Central Coast Nutraceuticals Inc must pay $1.5m to refund consumers duped into believing its ‘free trial’ offers were really free.
Central Coast has been banned from claiming that its products can cause weight loss, unless such claims are supported by two well-controlled human clinical studies.
It has also been barred from making free or introductory price trial offers where consumers pay nothing up front to receive a product, but are then automatically charged a higher price unless they cancel the shipments or immediately return the product.
‘Rapid weight loss in a fiercely short time period’
In a complaint filed in Illinois in 2010, the FTC alleged that two individuals and five related companies deceptively claimed that their Acai Pure supplements would “enable rapid weight loss in a fiercely short time period, without any unwanted side effects”, when they did not have any credible evidence to support this claim.
The defendants were also accused of citing phony endorsements from Oprah Winfrey and Rachael Ray and of making unauthorized charges to consumers' bank accounts, despite promises of ‘free’ trials.
The FTC charged that the defendants violated the Federal Trade Commission Act, as well as the Electronic Fund Transfer Act and its implementing language, Regulation E.
At the request of the FTC in August 2010, a federal court halted the allegedly illegal conduct of the Central Coast Nutraceuticals defendants, imposed an asset freeze, and appointed a receiver to oversee the corporate defendants.
The settlement order – announced by the FTC yesterday - includes an $80m judgment, which will be suspended when the FTC receives assets worth $1.5m from the defendants.
The order also requires Graham D. Gibson, president and chief executive of Central Coast Nutraceuticals, and an officer, director and owner of defendants iLife, Simply Naturals, Fit for Life, and Health and Beauty, to pay the FTC the balance of his investment account; transfer to the FTC $500,000 after mortgaging his home in Phoenix, Arizona, or transfer the property to a court-appointed liquidator if he cannot obtain the mortgage; and sell his interest in a Hawaii vacation property.
However, the order resolves the FTC's charges against all other defendants in the case: Michael A. McKenzy; iLife Health and Wellness LLC; Simply Naturals LLC; Health and Beauty Solutions LLC; and Fit for Life LLC.
It also requires the court-appointed receiver to transfer to the FTC the estimated $600,000 that will remain in the accounts of Central Coast Nutraceuticals and the affiliated corporate defendants after their outstanding expenses are paid.
Acai: Antioxidant powerhouse? Yes. Miracle weight loss pill? No…
While a growing body of clinical evidence suggests free-radical-scavenging acai berries can deliver exciting cardiovascular and other benefits, they do not help you to lose weight, claim experts.
Speaking to NutraIngredients-USA earlier this year, AIBMR Life Sciences chief executive Dr Alex Schauss - an expert on the science behind acai – said it was “about time” the FTC cracked down on firms making claims about acai and weight loss.
He added: “It’s incredibly frustrating and really quite intolerable that they are making these fraudulent claims about losing weight when there is such strong science behind acai’s genuine benefits. It’s distracting attention from the really exciting research on this extraordinary antioxidant.”
Recent research suggested a wide range of benefits, from an ability to reduce atherosclerotic lesions in arteries and increase dexterity and reduce pain amongst older people to effects on the expression of genes that protect against oxidative stress, he said.
Click here to read more details about the case.