A nutraceutical company must pay $25 million in fines over FTC Act violations involving a product dubbed the “gastric bypass alternative.” What regulatory lines did the company cross? How can you avoid the same fate? Let’s dive in.
About the Roca Labs Case: A Reminder Not To Cross the Marketing and “Gag Clause” Lines
In 2015, the Federal Trade Commission opened an investigation against Roca Labs Nutraceutical USA Inc (“Roca”) for a host of promotional regulatory violations, including (but not limited to):
- Making “false and unsubstantiated weight loss claims”;
- Creating a neutral-looking review website that was backed by the defendants;
- Failing to disclose paid relationships with testimonial writers; and
- Suing and threatening to sue people who posted negative reviews about their products.
During the legal battle, Roca released personal health information via court filings. As such, the commission tacked on additional privacy-related charges.
For its part, Roca argued that it didn’t violate any regulations because “gag clauses” were legal before legislators passed the Consumer Review Fairness Act in 2016, which outlawed Terms of Service clauses that stripped consumers of First Amendment rights.
District Judge Mary Scriven didn’t agree. In her summary judgment, the judge explained:
“Because the defendants admittedly suppressed negative information about the products and because…the absence of negative information could make a consumer more inclined to purchase Roca Labs products.”
In the end, Judge Scriven ordered the defendants to pay a little over $25 million, which she deemed “a reasonable approximation of the Defendants’ unjust gain from their unlawful practices.” Common sense prohibitions (i.e., we promise to never engage in “unfair and deceptive marketing” again) were also established.
Important Lessons from the Roca Lab Case
What lessons should businesses extract from the Roca FTC compliance case?
- Don’t hide behind Terms of Service “gag clauses.” Perhaps they once worked, but no longer. It’s mere presence in your ToS now could invite legal trouble. If you haven’t updated your website agreements in a few years, the time has come.
- Disclosures are essential, and phony reviews are an FTC no-no.
- Don’t use phony, neutral-looking review sites commissioned by you or a third-party marketer working on your behalf.
- Don’t overstate health claims, and don’t withhold pertinent information that could mislead consumers or misrepresent the product. And remember: “Lies of omission” are actionable under FTC precedent.
We’ve Won Against the FTC; Do You Need Help?
Roca Labs crossed the “unfair and deceptive marketing” line and now has to pay big. But you don’t need to follow in their footsteps; avoiding the same fate takes a promotional campaign audit. Every business that operates into today’s global, regulation-heavy marketplace should have a lawyer that’s well versed in advertising and marketing law look at every marketing campaign before launch. The small investment could save you millions.
If the FTC is already knocking on your door, we can also help. Our FTC legal team is one of the few that’s beaten the FTC in court. It is possible.
So give us a call. We’ll listen to your situation and layout options. The best way to discover if we’re the right attorneys for your FTC unfair and deceptive marketing case is to call and talk. Let’s chat and find solutions.
