According to the FTC’s complaint filed in October 2014, Health Formulas, LLC and its related entities and principals used telemarketing, the Internet, and print, radio, and television advertisements to deceptively pitch a variety of dietary supplements and health products. The FTC claimed that Health Formulas tricked consumers into disclosing their credit and debit card information to enroll them into expensive programs with recurring monthly charges. Moreover, Health Formulas allegedly made false and unsubstantiated claims that their products would cause rapid and substantial weight loss without the need for diet or exercise.
The FTC filed suit pursuant to the Federal Trade Commission Act (“FTC Act”), the Electronic Fund Transfer Act (“EFTA”), the Telemarketing and Consumer Fraud and Abuse Prevention Act (“Telemarketing Act”), and the Restore Online Shoppers Confidence Act (“ROSCA”). This was the first FTC action alleging violations of ROSCA, which prohibits marketers from charging consumers in an Internet transaction unless the marketer has clearly disclosed all material terms of the transaction and has obtained the consumer’s express informed consent.
The stipulated final order entered on April 26, 2016 permanently enjoined Health Formulas from advertising, marketing, or selling any product that includes a “negative option feature” – a provision under which the consumer’s silence or failure to take affirmative action to reject a product is interpreted by the seller as acceptance of the offer or agreement thereto. The order further banned Health Formulas from making unsupported health claims and debiting consumers’ bank accounts without their consent. Finally, a judgment in the amount of $105 million was entered in favor of the FTC and against Health Formulas. However, the judgment will be suspended after the defendants surrender over $9 million in personal and business assets based on their inability to pay more.