FTC Targets False Celebrity Endorsements, Deceptive Claims

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The use of false celebrity endorsements and deceptive claims made by Zurixx, LLC, and related entities caused the Federal Trade Commission (FTC) to obtain a temporary restraining order.

The defendants advertised that their coaching and training program helped consumers make large sums of money by flipping houses (buying them, making quick updates and then reselling).

Together with the Utah Division of Consumer Protection, the FTC charged the defendants with “routinely” using fake endorsements from reality TV celebrities (such as Tarek and Christina El Moussa from HGTV’s Flip or Flop and Peter Souhleris and Dave Seymour of A&E’s Flipping Boston) to entice consumers to attend Zurixx events where they would learn everything they needed to be successful at flipping houses.

The events were really sales presentations, according to the regulators, that cost consumers almost $2,000. The advice centered on obtaining new credit cards or increasing current credit limits to help finance real estate deals. Presenters at the events often described them as a “beginner” course, the complaint alleged, and tried to upsell attendees on additional products and services that cost up to $41,297.

In addition to running afoul of the FTC Act, the defendants also violated the Consumer Review Fairness Act (CRFA) by requiring some consumers to sign agreements prohibiting them from speaking to state attorneys general, the FTC or other regulators to get a refund, from posting negative reviews about Zurixx, or from submitting complaints to the Better Business Bureau.

The Utah federal court granted a temporary restraining order against the defendants that halted their business operations, required their company to preserve the assets, and prohibited them from making unsupported marketing claims or interfering with consumers’ ability to review the company and its products.

To read the complaint and the temporary restraining order in FTC v. Zurixx, LLC, click here.

Why it matters: The FTC’s latest enforcement action addresses two hot issues for the agency: violations of the CRFA and fake celebrity endorsements. Advertisers would be well served to avoid both.

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.

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