The FTC routinely pursues dietary supplement makers for making allegedly deceptive or unsubstantiated claims, and most of those investigations are resolved through settlements. The FTC's recent unsuccessful efforts to bring a contempt action regarding one of those settlements and its decision to then challenge the alleged contemptuous conduct in an administrative proceeding provide interesting insights into FTC settlements and the FTC's relentless pursuit of companies that fall into disfavor.
On November 20, 2020, the FTC approved an administrative complaint against dietary supplement marketer Health Research Laboratories (HRL), its owner and officer Kramer Duhon, and Whole Body Supplements (WBS), alleging the respondents engaged in deceptive marketing and advertising of their supplements. According to the complaint, respondents are allegedly making unsubstantiated claims that four of their supplements prevent or treat cardiovascular and other diseases.
This is not the first legal challenge that respondents HRL and Duhon have faced with the FTC. In January 2018, a stipulated order permanently banned the defendants from making weight loss claims, joint-related disease claims, and other unsubstantiated health claims regarding defendants' products and imposed a collective monetary judgment of approximately $3.7 million. The order defined "Covered Products" as "any Dietary Supplement, Food, or Drug, including BioTherapex and NeuroPlus." Some prohibited weight-loss claims include representations that any Covered Product: (1) causes substantial weight loss no matter what or how much the consumer eats; (2) causes permanent weight loss; or (3) causes substantial weight loss when a product is worn on the body or rubbed into the skin. The order also banned joint-related disease, cognitive performance, and health claims that a product treats or cures arthritis, relieves joint pain, or improves memory concentration or represents a product's health benefits, safety, performance, or efficacy.
In December 2019, the FTC and the State of Maine filed a contempt motion in federal district court for violating the stipulated order. According to the motion, the defendants violated the order's terms by making unsubstantiated claims about four of its products not challenged in the original action. According to the FTC, defendants represented that their Black Garlic Botanicals, BG18, and The Ultimate Heart Formula (UHF) products cure, treat, or mitigate cardiovascular disease, atherosclerosis, and hypertension while claiming that Neupathic cures, treats, or mitigates diabetic neuropathy.
As background, to prove contempt, an order must be "clear and unambiguous," so that the words clearly and unambiguously forbid the precise conduct on which the contempt allegation is based. To sustain a finding of contempt, the order's language must leave "no reasonable doubt" that the alleged conduct is prohibited.
In a blow to the FTC, in a July 2020 order, the United States District Court of Maine found the January 2018 order to be ambiguous on its face. The plaintiffs contended that the contempt defendants specifically violated Section II.H of the order, which prohibited representations that "any Covered Product 'cures, mitigates, or treats any disease'" and that "any disease" clearly and unambiguously encompasses all diseases, including diabetes, diabetic neuropathy, cardiovascular disease, atherosclerosis, and hypertension. The January 2018 order defined "Covered Products" as "any Dietary Supplement, Food, or Drug, including BioTherapex and NeuroPlus," specifying that "including" meant "including but not limited to." However, defendants argued that "any disease" encompassed only the diseases enumerated in Section II's heading, which read:
PROHIBITED REPRESENTATIONS: OTHER WEIGHT-LOSS CLAIMS, JOINT-RELATED DISEASE CLAIMS, AND ALZHEIMER'S DISEASE, MEMORY, AND COGNITIVE PERFORMANCE CLAIMS
According to the court, because plaintiffs' interpretation was supported by the plain text and the broad purpose of the judgment and defendants' narrower interpretation was reasonable in light of the section's heading, the section was susceptible to conflicting reasonable interpretations and therefore ambiguous and not the proper basis for a contempt finding. The court also left open the possibility of considering extrinsic evidence to resolve the ambiguity.
However, in an August 2020 order, the Court denied the FTC's contempt motion based on the previous determination that Section II.H was facially ambiguous and because the plaintiffs did not seek a hearing to offer extrinsic evidence to cure the ambiguity. Not surprisingly, the language found to be ambiguous by the Maine District Court is common in FTC orders challenging dietary supplements.
Perhaps not liking its chances in federal court in Maine, where a new case was likely to end up in front of the same judge, the FTC choose to challenge the conduct in its home court through an administrative proceeding before an ALJ. If the FTC prevails, a Section 19 proceeding for redress is likely after the administrative proceeding concludes.
The language found ambiguous in the original order is common in FTC orders challenging health claims, and the FTC has continued to use it. To avoid similar challenges down the road, however, the FTC has made the headings preceding that part of the order more generic, so that defendants cannot argue that the heading somehow limits the broad language that follows or creates ambiguity over the scope of the order. See here for an example.
For now, the administrative litigation continues, and the FTC's record in its home court is close to perfect. Whether other prior settlements are subject to similar attack will depend on the language and headings in the order and how they relate to the products challenged in a contempt action.
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