FTC Nails Online Supplement Company for Questionable Business PracticesFTC Nails Online Supplement Company for Questionable Business Practices
June 22, 2001
WASHINGTON--The Federal Trade Commission (FTC) has accused an online dietary supplement company of fraudulent actions. According to FTC, the American Fork, Utah-based Streamline International Inc. is operating an illegal pyramid operation while selling products containing false health claims and the toxic herb comfrey.
According to FTC (www.ftc.gov), the company has been using the Internet, radio, direct mail and print advertisements to promote its health-care products for the past five years. FTC began investigating Streamline (www.herbalmall.com) in 1997 but was unable to follow through with its actions because of being short-staffed.
According to FTC's complaint, the company's business model requires participants to make minimum monthly purchases in order to earn recruitment-related commissions. Marketing materials for the company claim "YES! YOU CAN MAKE $500 - $2,000 PER MONTH FOREVER!!!," which the Commission found misleading since participants in the Streamline program achieve little or no financial success.
In addition to these allegedly fraudulent business claims, FTC noted that the company states on its Web site that its products contain "only those ingredients that appear on the Food and Drug Administration's [FDA] list of generally recognized as safe [GRAS]." However, Streamline has been selling a line of products that include comfrey, which has been known to cause liver damage when used either internally or externally.
"There were other health claim issues we could have made, but we wanted to keep the focus on the pyramid allegations," said Jim Davis, a staff lawyer at FTC who is working on this case. According to Davis, the agency became concerned with Streamline after receiving consumer complaints and noticing its practices while conducting a periodic sweep for fraudulent Internet companies.
FTC has filed a motion for a preliminary injunction on the company's products while the case is being discussed. At trial, the agency plans to seek a permanent injunction.
"The company is contesting the charges that FTC has made," stated Jim Bean, the attorney representing Streamline. He added that the company hopes to reach a settlement with the Commission in the near future.
In the meantime, the questionable health claims on Streamline's site will be changed, and all of its comfrey products have been discontinued. The products contained the leaves of the comfrey plant, which the company did not know was a health risk since the manufacturer insisted that the plant's root was toxic, not its leaves. "We're looking to make sure that all of the products are the best quality products," Bean stated. "We expect that after this litigation, the products will still be available through the company."
J.R. Jackson, d/b/a Action Enterprises and Robert Waitkus, d/b/a WorldWide Opportunities Network, have also been named in the suit.
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