FTC Permanently Halts Operators of Fake Acai Berry Websites7 Feb, 2012 By: Linda A. Goldstein
The Federal Trade Commission’s (FTC) aggressive efforts to shut down the operators of so called “fake news sites” promoting acai berry supplements, and other weight-loss products has resulted in a strong settlement prohibiting the defendants from engaging in such conduct in the future and seizing virtually all available assets from the website operators.
The websites at issue were often disguised as real news sites bearing titles such as “News 6 Alerts,” “Health Alerts,” “News Alerts” and other journalistic sounding names and – according to the FTC complaint – purported to represent actual news stories of persons who had achieved substantial and rapid weight loss when taking acai berry supplements. Many of the websites also represented that the stories being featured had appeared on actual news sites like CNN and Fox News. Readers may recall that the popularity of these sites quickly propelled the sales of acai berry, turning the product into a marketing phenomenon.
Last year, the FTC took harsh action against the operators of these websites by seeking temporary restraining orders and asset freezes, and, just last month, the FTC announced permanent settlements with six of the website operators. Some of the substantive terms of the consent orders memorializing the settlements provide some important insight into the FTC’s current enforcement posture.
First, as expected, the consent orders prohibit the website operators from ever misrepresenting that promotional websites are independent objective news reports or that news reporters have performed independent testing on the product. Such fake news sites not only violate the FTC’s general prohibition on false and misleading advertising but also constitute a violation of the FTC’s Endorsement and Testimonial Guidelines. To that end, the consent orders further require that in the future any material connections between those providing endorsements on a product website and the product or advertiser be clearly and conspicuously disclosed.
While there is nothing surprising about the FTC’s prohibition of fake news sites or fake independent reports, there is no question that the distinction between pure advertising and editorial is increasingly blurred on the Internet. Marketers will often present editorial content relevant to their products or services that are not clearly labeled as advertising. This case should stand as a stark reminder to marketers to ensure that their product websites are labeled as such and do not appear to be independent editorial content.
Secondly, in all of the consent orders, the FTC has continued its recent trend of requiring that weight-loss claims be supported by two independent clinical tests conducted on the product itself or on a substantially equivalent product. This consent order calls to mind 2011 settlements with Nestle, Iovate and Reebok. These settlements leave little doubt that the FTC is unlikely to deem any weight-loss claims for weight-loss products to be adequately supported without at least one if not two clinical studies conducted on the product itself.
Finally, the use of ex parte asset freezes in these cases stands as a striking reminder that challenges by the FTC can result in a loss not only of the assets directly attributable to the conduct at issue but to virtually all personal assets that those involved in the allegedly misleading conduct have. The FTC is increasingly demanding full restitution in most of its cases and will look to recover those assets wherever it can find them.