FTC refunds $8.5 million to consumers over fraudulent product claims

By Danielle Masterson

- Last updated on GMT

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Getty Images

Related tags Ftc Misleading marketing Fraud coronavirus Warning letter UNPA

The Federal Trade Commission just announced it is issuing refund checks totaling over $8.5 million to consumers defrauded by misleading claims on weight loss products an erectile dysfunction product in a case dating back to 2004.

The case goes back more than 15 years, long predating FTC's recent enforcement surge on coronavirus treatment claims. The FTC filed a complaint in November 2004 ​against several individuals and their related companies: National Urological Group, Inc (NUG); National Institute for Weight Loss, Inc.; Hi-Tech Pharmaceuticals, Inc.; Jared Wheat; Thomas Holda; Stephen Smith, Michael Howell; and Dr. Terrill Mark Wright.

The FTC charged them with making deceptive claims about the efficacy and safety of two supposed weight loss supplements, Thermalean and Lipodrene, and one supposed erectile dysfunction treatment, Spontane-ES. 

Unsubstantiated claims

The defendants’ advertisements claimed their products were clinically proven to cause substantial weight loss, including a 19% loss in total body weight. They also claimed Spontane-ES, a purported treatment for erectile dysfunction, was clinically proven to safely and effectively treat 90% of men with ED. Terrill Mark Wright, M.D., who is still practicing medicine in Georgia, was ordered to pay $15,454 for his deceptive endorsement of Thermalean.

The court rejected the defendants’ arguments that the advertising was protected commercial speech under the First Amendment or that it was mere puffery and so could be easily discounted by consumers. The court held that the FTC’s requirement calling for “competent and reliable scientific evidence” is not unconstitutionally vague, pointing to the FTC’s dietary supplement guides as evidence that an ordinary person could understand the definition of the term as outlined in the guides. The court also rejected the defendants’ argument that the FTC’s challenge to the advertising was precluded by a consent decree that the defendants had entered into with the FDA.

In December 2008, a federal district court ordered the marketers to pay $15.8 million, and permanently barred the defendants from engaging in deceptive conduct in the future. However, that injunction didn’t stop them. In 2017, a judgement against the group in federal court imposed sanctions of more than $40 million​ for making false and misleading claims about weight loss products Fastin, Lipodrene, Benzedrine, and Stimerex-ES. 

Special delivery 

The FTC mailed out the first batch of checks for misleading claims related to Thermalean, Lipodrene, and Spontane-ES in August 2012, resulting in more than $6 million returned to over 100,000 consumers.

This week, the FTC announced it is mailing a second round of payments. A whopping 143,636 refund checks totaling over $8.5 million will head to the mailboxes of consumers who once bought the deceptively marketed weight loss and ED supplements. 

“The $15 million that the court ordered to be paid in the case, like in most FTC deceptive advertising cases involving a payment as part of a settlement or decision, was intended to be used for consumer refunds, not for the FTC or the US Treasury.  So the FTC is distributing additional amounts it must have recently received,”​ explained Ivan Wasserman, a consumer product attorney.

However, Mitchell J. Katz, Public Affairs Specialist at FTC, told NutraIngredients-USA​ that it’s unclear whether this is the final batch of checks to be mailed out. 

“It can depend on many factors, including how many people cash the checks they receive in this mailing.”

The FTC said consumers who receive a refund check from should deposit or cash it within 60 days, as indicated on the check. All affected consumers are eligible to receive a total refund of $102.32. Some consumers in this mailing already received partial refunds and will now receive the remainder they are due.

An ongoing issue 

The FTC recently announced it has sent over 30 more letters warning​ dietary supplement marketers to stop making unsubstantiated claims that their products can treat or prevent coronavirus. This is the fourth batch of warning letters the FTC has sent out.  In all, the Commission has sent similar letters to almost 100 companies and individuals.

On Monday, Senate Minority Leader Chuck Schumer (D-N.Y.) called on the FTC to issue hefty fines rather than issuing warning letters. He said the  warning letters are a slap on the wrist.

"Let's face it, there are a lot of older people, there are a lot of just average folks who are desperate. They may have a loved one who has it, they want to make sure they don't get it and they say 'why don't I try it?' These scammers prey on people in their weakest moments."

United Natural Products Alliance (UNPA) President Loren Israelsen said that the stakes have never been higher. “Therefore we need to be equally vigilant in holding the line against predatory claims and protecting highly vulnerable populations from physical and economic harm,” ​he said.

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