FTC Amends Door-to-Door Sales Rule (Not Really)

What Is The FTC Door-To-Door Rule?

The FTC recently announced that it has finalized the amendments to the Federal Cooling-Off Rule, (aka Door-to-Door Sales Rule).  The amended Rule will go into effect on March 13. When the proposed amendment was published, there was some anticipation on the part of the direct selling industry that sellers would be granted some relief from the Rule.

For those not familiar, the Rule requires that customers (including new distributors or consultants) be given two copies of the 3-day Notice of Right to Cancel whenever a purchase transaction for consumer goods or services takes place at a location other than the seller’s place of business.  While there are some possible exemptions, for the most part the rule covered many transactions between distributors and their customers and between distributors and their newly recruited distributors.

The major exemption that has been in place since the Rule was originally enacted (in 1972) was a $25 threshold requirement.  If the purchase amount was less than $25, the Rule did not apply and there was no requirement to provide the customer with two copies of the Notice of Right to Cancel.

When the FTC initially proposed the amendment, the threshold was raised to $130, which would have accounted for inflation since 1972.  This change would have been a relief to many direct sellers with lower cost items and kit prices.

Ultimately, the FTC left the $25 threshold in place for transactions that occur at the buyer’s residence.  For transactions that take place at other locations but are otherwise subject to the Rule, the threshold was raised to $130.

For many direct sellers, nothing has changed.  A company cannot print separate contracts, order forms or sales receipts for different sales locations.  Because a company will not always know the actual location of a sales transaction, the better course will be to include the Notice of Right to Cancel on all order forms, receipts, and purchase agreements.  For additional information, please feel free to contact our office.

BrainStrong Adult Dietary Supplement Makers Settle FTC Complaint

i-Health, Inc. and Martek Biosciences Corporation have settled Federal Trade Commission charges that they used deceptive advertising in marketing their BrainStrong Adult dietary supplement. The FTC complaint alleged that the supplement makers claimed BrainStrong improves adult memory and prevents cognitive decline, and that they falsely claimed they had clinical proof for the claims.

Television commercials for BrainStrong Adult showed a forgetful woman and a voiceover saying, “Need a memory boost?  Introducing BrainStrong…Clinically shown to improve adult memory.” In addition to television, the product was advertised on Twitter and brainstrongdha.com.

BrainStrong Adult sold for about $30 for a 30-day supply and was available at major retail stores, including CVS Pharmacy, Walmart, Walgreens and Rite Aid, as well as online through DrugStore.com and Amazon.com.

The final order bars i-Health, Inc. and Martek Biosciences from making claims regarding the ability of any promoted dietary supplement, food, drug or product to prevent cognitive decline or improve memory. In addition, they are barred from claiming any product containing DHA can prevent cognitive decline or improve memory in adults, unless the claim is truthful and supported by clinical testing.

It also bars them from making claims about the health benefits, performance, safety, or effectiveness of such products, unless the claims are supported by competent and reliable scientific evidence.  In addition, they cannot claim they have clinical proof when they do not.

Injunction Stops Sale and Distribution of BioAnue Supplements

A federal judge has granted the Food & Drug Administration’s request

A federal judge has granted the Food & Drug Administration’s request for a permanent injunction prohibiting BioAnue from making and distributing its dietary supplement products until they comply with FDA regulations.

While BioAnue sold the products as dietary supplements, the FDA maintained that they were “unapproved new drugs” because they were marketed without FDA approval as treatments for a variety of diseases, including cancer, HIV/AIDS, heart disease and diabetes. In addition, BioAnue failed to follow the FDA’s current good manufacturing practice regulations for dietary supplements.

The products covered by the order include TumoRx Cardio Clean, TumoRx Apoptosis Full Strength, TumoRx Formula CX, BioAnue Diabetic Mender, BioAnue Heart Mender, Stroke Mender, Cardiovascular Mender and Bovine Cartilage. According to the FDA, BioAnue made therapeutic claims for the supplements, thereby establishing them as drugs intended for treating disease.

Claims made for Tumor X Cardio Clean, for example, included “Cardio Clean can …. [C]lean out your arteries and eliminate high cholesterol and triglycerides.” and “Cardio Clean … transforms artery clogging cholesterol into disease fighting substances needed for proper function inside the body.” In addition, the FDA maintained that the product name itself is an implied drug claim.

The FDA first issued a warning letter to BioAnue in February, 2012. A follow-up FDA inspection  the following August showed in addition to not taking action to correct the violations cited in the warning letter, the company also was not complying with the FDA’s current good manufacturing practice requirements for dietary supplements.

Injunction Stops Sale and Distribution of BioAnue Supplements

A federal judge has granted the Food & Drug Administration’s request for a permanent injunction prohibiting BioAnue from making and distributing its dietary supplement products until they comply with FDA regulations.

While BioAnue sold the products as dietary supplements, the FDA maintained that they were “unapproved new drugs” because they were marketed without FDA approval as treatments for a variety of diseases, including cancer, HIV/AIDS, heart disease and diabetes. In addition, BioAnue failed to follow the FDA’s current good manufacturing practice regulations for dietary supplements.

The products covered by the order include TumoRx Cardio Clean, TumoRx Apoptosis Full Strength, TumoRx Formula CX, BioAnue Diabetic Mender, BioAnue Heart Mender, Stroke Mender, Cardiovascular Mender and Bovine Cartilage. According to the FDA, BioAnue made therapeutic claims for the supplements, thereby establishing them as drugs intended for treating disease.

Claims made for Tumor X Cardio Clean, for example, included “Cardio Clean can …. [C]lean out your arteries and eliminate high cholesterol and triglycerides.” and “Cardio Clean … transforms artery clogging cholesterol into disease fighting substances needed for proper function inside the body.” In addition, the FDA maintained that the product name itself is an implied drug claim.

The FDA first issued a warning letter to BioAnue in February, 2012. A follow-up FDA inspection  the following August showed in addition to not taking action to correct the violations cited in the warning letter, the company also was not complying with the FDA’s current good manufacturing practice requirements for dietary supplements.

MLM Attorney Kevin Grimes Reports: Marshals Seize $2 Million in Dietary Supplements Containing from Hi-Tech Pharmaceuticals

U.S. Marshals in Norcross GA, acting at the request of the FDA, seized $2 million in dietary supplements from Hi-Tech Pharmaceuticals, Inc. According to the FDA, the products contained 1, 3-Dimethylamylamine HCl (DMAA) or its chemical equivalent.

DMAA is an unapproved food additive that is deemed unsafe and thus illegal under the Federal Food, Drug, and Cosmetic Act. In 2012, the FDA issued warning letters to companies telling them that products containing DMAA either needed to be removed from the market or reformulated without DMAA.

During inspections of Hi-Tech Pharmaceuticals that began last October, investigators found 11 products that were labeled as containing DMAA or its chemical equivalent, including Black Widow, ECA XTREME, FASTIN, FASTIN-XR, Lipodrene, Lipodrene HARDCORE, Lipodrene XR, Lipodrene XTREME, LIPOTHERM, Stimerex-ES, and YELLOW SCORPION. The investigators also found  bulk DMAA raw ingredients at the facility.

In total, more than 1,500 cases of finished product and more than 1,200 pounds of in-process and raw material goods were taken.

Kevin Grimes MLM Attorney Reports: Chicago Jury Finds Kevin Trudeau Guilty of Criminal Contempt

Kevin Trudeau, who in 2010 was ordered by a federal judge to pay more than $37 million for violating a 2004 stipulated order by misrepresenting in infomercials the content of his book, “The Weight Loss Cure They Don’t Want You to Know About,” was found guilty of criminal contempt for violating that order. The jury took less than an hour to reach its verdict, which was read in a Chicago courtroom Nov. 12.

Prosecutors argued Trudeau knowingly violated the order when he used infomercials to tout the book’s plan that would “cure” obesity without requiring a special diet or needing to exercise, even though the book called for limiting calories to 500 a day and required walking an hour a day.

The defense argued that there was no violation, since the statements made in the infomercials were presented as opinions, and thus were protected speech under the First Amendment. In addition, because nothing was said in the infomercials that did not appear in the book, the defense maintained that a Trudeau was not misrepresenting the content of the book.

This case is separate from the civil case brought by the FTC, although it is that case from which the criminal contempt charge stemmed. The FTC first sued Trudeau in 1998, charging him with making false and misleading claims in infomercials for products he claimed could cause significant weight loss, cure addictions to heroin, alcohol and cigarettes, and achieve a photographic memory.

A stipulated court order barring Trudeau from making false claims for products in the future also ordered him to pay $500,000 back to consumers and established a $500,000 performance bond to ensure compliance.

In 2003, the FTC charged that Trudeau violated the 1998 order by falsely claiming in infomercials that a product called Coral Calcium Supreme could cure cancer. A preliminary injunction ordered him to cease making such claims, but when Trudeau nonetheless continued, he was found in contempt.

In 2004, Trudeau agreed to an order that resolved the Coral Calcium matter and ordered to pay $2 million in consumer redress and banned from infomercials, except for informational publications such as books, provided that he “must not misrepresent the content.”

MLM Law Reports: FDA Takes Action Against Dietary Supplement Maker James G. Cole, Inc.

The Food and Drug Administration has filed a complaint seeking a permanent injunction against James G. Cole, Inc., its president, James G. Cole, and its general manager, Julie D. Graves, to stop the company’s distribution of unapproved drugs and adulterated dietary supplements in violation of the Federal Food, Drug, and Cosmetic Act.

The complaint was filed by the U.S. Department of Justice in the U.S. District Court for the District of Oregon, Portland Division.

The injunction would stop the company from promoting and distributing its products until it complies with current good manufacturing practice (cGMP) requirements for dietary supplements, as well as remove all disease claims are removed from its websites, product labels and other products and websites under Cole’s custody and control.

The FDA says that  James G. Cole, Inc.‘s dietary supplements and other products have been marketed as treatments for cancer, heart disease, rheumatoid arthritis, autism, Alzheimer’s, fibromyalgia and high cholesterol. Under federal law, products offered for such uses are considered to be drugs, and none of those uses have been approved by the FDA.

The products include PCA, PCA-Rx, C-60, ACAI Resveratrol, Cytomune, Anavone, Liver Rescue, Probiotics and several other products. They are marketed under the Maxam Labs, Advanced Sports Nutrition and Maxam Nutraceutics brands.

In addition, during facilities inspections conducted in 2012 and 2013, the FDA found that James G. Cole Inc. distributed dietary supplements that were not manufactured in accordance with the cGMP requirements. For example, the company did not establish an identity specification for each component and did not conduct at least one appropriate test to verify the identity of a dietary ingredient.