FTC Curbs Hoodia Scammers

Stephen Barrett, M.D.

Weight-loss-pill marketers who offered free samples in order to obtain credit card information have agreed to stop making false claims and unauthorized charges. In 2008, the Federal Trade Commission filed a complaint against Neil J. Wardle, Pace Mannion, Christopher J. Wardle, and their companies UltraLife Fitness Inc. (d/b/a/ Pure Health Laboratories, Pure Health Labs, and Ultraburn PM) and Tru Genix LLC (d/b/a/ eFitness Clubhouse and eCurves Clubhouse). The complaint charged:

The FTC complaint was settled with a consent agreement under which the defendants were ordered to pay $9.9 million (the total estimated consumer injury). However, based on their inability to pay, each of the three defendants must pay $50,000 and the rest was suspended. The settlement agreement also bars the defendants from misrepresenting any material fact in connection with the sale of a dietary supplement, food, drug, device, or health-related program or service and from using billing information to acquire unauthorized payments.

Hoodia is a cactus extract said to keep South African tribesmen from feeling hungry during long hunts. In 2006, Consumer Reports on Health found no published scientific reports supporting weight-loss claims and noted that Pfizer had tried to develop hoodia into an obesity drug but had given up after failing to make an acceptable synthetic version [3].

The Better Business Bureau (BBB) has given UltraLife Fitness an "unsatisfactory" rating. In December 2008, the BBB reported that it had processed 730 complaints during the previous 36 months. The BBB report also noted that in 2006 and 2008, UltraLife and the Utah Division of Consumer Protection had entered into consent agreements related to the company's overbilling. The agreements included penalties of $13,500 in 2006 and $2,500 in 2008.

What's Wrong with This Picture?

The above-mentioned defendants appear to have taken in at least $9.9 million over a three-year period but were asked by regulatory agencies to disgorge only $166,000. Put another way, although the scheme was probably stopped, the defendants may have profited considerably. Even if they didn't profit, their customers lost millions of dollars.

Since 1990, the FTC has brought more than 100 regulatory actions against dubious weight-loss products. Despite this effort, the number of scams appears to be growing. Their marketers know that only a small percentage of scammers encounter regulatory action and that even those who do might still make millions. It is also clear that case-by-case enforcement, public education, and pleas to media advertising managers have little overall effect. The marketplace might improve, however, if weight-loss scams could be made less profitable to their "silent accomplices": the media and credit card companies that now facilitate the flow of misinformation and money.

Consider what would happen, for example, if Congress passed a law giving credit card holders the right to protest charges for up to a year for unauthorized charges or nondelivery for dietary supplements. As things stand now, consumers can protest for up to 60 days after the charge appears on their monthly bill. If the credit card company concludes that a refund should be made, the issuing bank can do a "chargeback" that retrieves the money from the seller's bank account. Lengthening the protest period would give consumers more time to detect when they have been defrauded. If the chargeback volume is high, the bank or credit card company might decide that the scammer's account is not worth keeping. If this happens often enough, credit card companies might become cautious about dealing with weight-loss scammers. Another possible strategy would be criminal prosecution for credit card fraud.

References

  1. Complaint for injunctive and other equitable relief. FTC v. UltraLife Fitness, Inc., et al., U.S. District Court, Central District of California. Civil No. 2:08-cv-07655-DSF-PJW, filed Nov 20, 2008.
  2. Proposed final judgment and order. FTC v. UltraLife Fitness, Inc., et al. Filed Dec 1, 2008.
  3. Hoodia: Worth trying for weight loss? Consumer Reports on Health, Feb 2006.
  4. Ultralife Fitness. BBB report, Dec 19, 2008.

This article was revised on December 24, 2008.

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