Federal Judge Trims Diet Supplement Maker’s Earnings by $40M and Orders Recall of Banned Labeling

by Proskauer - Advertising Law
Contact

On May 14, a Georgia federal court dished out severe contempt sanctions against Hi-Tech Pharmaceuticals, its president and two others for violating a 2008 court order relating to the advertising and labeling of Hi-Tech’s “diet supplements.” In addition to ordering a recall, the court also ordered the Hi-Tech defendants to disgorge not only their profits from the falsely advertised supplements, but also their entire gross receipts from the products at issue, in the amount of $40,120,950.

In 2008, following an FTC enforcement action, the Hi-Tech defendants were permanently enjoined from making performance-related advertising claims about their supplements without “competent and reliable scientific evidence.” Unfortunately, the defendants did not stick to the prescribed regimen. Less than three years later, they were back in court because of problematic advertisements about several diet drugs that Hi-Tech marketed.  For example, the package for Hi-Tech’s drug Fastin made the following claims — “Rapid Fat Loss Catalyst,” “Rapid Fat Loss,” “Increases the Metabolic Rate, Promoting Thermogenesis (The Burning of Stored Body Fat),” and “Rapid Fat Burner” all without, in FTC’s and the court’s view, “competent and reliable scientific evidence” to support these claims.

The court found that Hi-Tech’s advertising for Fastin and other drugs violated the 2008 order and, to make matters worse, found that Hi-Tech’s violations were willful. Hi-Tech’s internal documents revealed that the defendants had ignored Hi-Tech’s counsel’s “grave concerns” about the publication of the Fastin claims, including concerns that the claims did not comply with the 2008 order. Similarly, despite acknowledging in internal documents that double-blind placebo-based clinical studies would be needed to substantiate any weight-loss claims, Hi-Tech went to market without performing any such study. 

Another thing that seemed to upset the court – indeed it belongs in the Hall of Fame of bad judgment – was that Hi-Tech’s president, while failing to pay a fine of several million dollars imposed in the earlier FTC enforcement action, purchased for himself a Lamborghini Gallardo. 

To prevent further harm to consumers and to coerce Hi-Tech into compliance with the 2008 order, the court ordered the defendants to recall all products bearing the banned packaging and labels. This order was backed up with a promise of “coercive incarceration” should the Hi-Tech parties not take sufficient action. In addition, the court ordered respondents to pay an amount equal to the gross receipts of the products at issue, rather than Hi-Tech’s profits on those products, because “[r]equiring the defendants to return the profits that they received rather than the costs incurred by the injured consumer would be the equivalent of making the consumer bear the defendants’ expenses.” The court ordered the FTC to distribute these funds to affected consumers, sending a clear message that, in the absence of adequate scientific evidence, the only thing the Hi-Tech defendants can claim to have lost weight is their own pocketbooks.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Proskauer - Advertising Law | Attorney Advertising

Written by:

Proskauer - Advertising Law
Contact
more
less

Proskauer - Advertising Law on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.