Infographic: courtesy of Federal Trade Commission
The Federal Trade Commission (Commission or FTC) on Wednesday announced an extensive network of online marketers agreed to settle a lawsuit alleging the fraudulent sale of dietary supplements and skin care products.
Regulators accused the vast network collectively operating as Tarr Inc.—and three individuals behind it—of a scheme that touted more than 40 weight loss, muscle building and wrinkle-reduction products through a variety of deceptive practices.
The defendants allegedly used fake media websites with domain names that appeared to be authentic news or magazine sites, such as goodhousekeepingtoday.com and menshealth.com--i.link.
“These fake sites had mastheads for what appeared to be legitimate news and journal organizations, including Men’s Health, Good Housekeeping, and Everyday with Dr. Oz," FTC explained in a press release. “The sites featured reporters and celebrities, like Paula Deen, Dr. Oz, Jennifer Aniston, and Jason Statham, who supposedly used the products themselves and experienced dramatic results."
However, the celebrities never endorsed the products, the Commission said.
One fake article proclaimed the actor Will Ferrell “lost 18 lbs of fat and gained 20 lbs of muscle in just 3 weeks with Elite Test 360 and Ripped Muscle X," the lawsuit alleged.
The defendants also made unsubstantiated health claims about the results consumers could expect to achieve, according to the Commission. Among the health claims quoted in FTC’s lawsuit: “I lost 32% of WRINKLES"; “Celebrity Doctor Proclaims This Garcinia Cambogia Pill Burns 17 lbs of Fat"; and “Rare Plant Increases Muscle Growth 700%."
One advertisement for a weight loss product (“Miracle Garcinia Cambogia") proclaimed: “I lost 23 lbs in 5 Weeks, No Special Diet, No Intense Exercise."
The defendants also used deceptive offers of “free" and “risk-free" trials, and they automatically enrolled consumers without their permission in negative option auto-ship programs with additional monthly charges, according to the Commission.
The defendants were charged with violating the FTC Act, the Restore Online Shoppers’ Confidence Act (ROSCA) and the Electronic Funds Transfer Act (EFTA).
A court order settling the charges imposes a judgment of US$179 million, corresponding to what the government agency alleged consumers nationwide paid the defendants over a period of more than five years. The judgment will be suspended after the defendants pay roughly $6.4 million to the Commission, the agency said.
The Commission’s agreement to suspend the judgment is based on the accuracy, completeness and truthfulness of defendants’ sworn financial statements and related documents. However, the judgment will be lifted as to any defendant if the court finds a defendant failed to reveal a material asset or materially misstated the value of any asset.
The defendants also were banned from certain negative option sales in the future and prohibited from various marketing tactics, such as failing to disclose the material terms and conditions of an offer before a consumer consents to pay for a product or service.
U.S. District Judge Larry A. Burns entered the court order against Richard Fowler, Ryan Fowler, Nathan Martinez and the 19 companies controlled by the defendants.
“We are pleased that the matter has been resolved to our satisfaction,” Leonard L. Gordon, a partner with Venable LLP, the law firm representing the corporate defendants, said in an emailed statement.
Rutan & Tucker LLP, a law firm that submitted documentation on behalf of the Fowlers, did not immediately respond to a request for comment. Martinez could not be reached for comment.
The lawsuit, Federal Trade Commission v. Tarr Inc. et al, was filed in the U.S. District Court for the Southern District of California, 3:17-cv-02024-KSC.