When is "Free" Not Really Free to the FTC?
Seller Beware: Consumer Protection Insights for Industry
In what seems to be a run-of-the-mill complaint against a dietary supplement maker, the Federal Trade Commission (FTC) recently charged that Lunada Biomedical, Inc. could not substantiate claims that its Amberen product would cause substantial weight loss in women over 40. But there are two other allegations that our readers might be interested in looking at more closely because they highlight issues that go beyond the core issue of substantiating claims.
Since the FTC revised its Endorsement Guides in 2009, endorsements have been a consistent enforcement theme, as we've chronicled here and here. Moreover, FTC recently updated its endorsement FAQs. This time, the FTC alleged that Lunada paid a consultant to establish a blog about menopause-related issues that appeared to be written from the perspective of an ordinary person. Because the blog endorsed Amberen, the FTC alleged that it was deceptive for the blog not to disclose its relationship with Lunada. Stay tuned for more about the updated FAQs from Seller Beware.
The FTC also challenged how Lunada administered its 30-day "risk free" trial offer. According to the complaint, "risk free" means "without incurring any financial obligation", but Lunada allegedly required consumers to return unopened boxes of the product at the end of the trial, and some participants were never reimbursed for shipping and handling. The FTC has guidance on advertising "free" offers and money back guarantees. Perhaps the most important piece of advice for avoiding headaches is clearly and conspicuously to set forth all terms, conditions, and obligations of the offer or guarantee at the outset.
© Arnold & Porter Kaye Scholer LLP 2015 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.