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Ads Touting “Your Baby Can Read” Were Deceptive, FTC Complaint Alleges

As part of its ongoing efforts to stop over-hyped advertising claims, the Federal Trade Commission has filed false advertising charges against the marketers of Your Baby Can Read! – a program that was widely touted in infomercials and on the Internet. The program uses videos, flash cards, and pop-up books that supposedly teach children as young as nine months old how to read. Two of the three defendants in the case have agreed to settle with the FTC.

The FTC complaint charges Your Baby Can, LLC, its former CEO, and the product’s creator with false and deceptive advertising, for claims in ads and product packaging that the program could teach infants and toddlers to read and that scientific studies proved the claims. The complaint also charges company principal and product creator Robert Titzer, Ph.D, with making deceptive expert endorsements. Your Baby Can and Titzer represented that the program taught children as young as nine months old to read; gave children an early start on academic learning, making them more successful in life than those who didn’t use it; and that scientific studies proved these claims, according to the complaint.

In addition to Titzer and Your Baby Can, the complaint names as a defendant Hugh Penton, Jr., who served as president and chief executive officer of the company until March 2010.

Penton and Your Baby Can have agreed to settle the FTC’s charges. The agency is initiating litigation against Titzer in federal court.

The settlement with Penton and Your Baby Can, LLC prohibits the Carlsbad, California-based defendants from further use of the term “Your Baby Can Read.” The settlement also imposes a $185 million judgment, which equals the company’s gross sales since January 2008. Upon Your Baby Can’s payment of $500,000, the remainder of the judgment will be suspended due to the company’s failing financial condition. Your Baby Can has represented that it is going out of business. If it is later determined that the financial information the company gave the FTC was false, the full amount of the judgment will become due.

According to the complaint, the defendants sold the Your Baby Can Read! program to parents and grandparents of children aged three months to five years since at least January 2008, charging about $200 for each kit and taking in more than $185 million, directly via a toll-free number and their own websites. The defendants marketed the program on YouTube, Twitter, and Facebook, and television infomercials and ads on network and cable stations such as Lifetime, Discovery Kids, Disney DX, Cartoon Network, and Nickelodeon. It also was available for purchase online at Amazon.com and BabiesRUs.com, as well as, at retail stores nationwide, including Wal-Mart, Kmart, Walgreens, Buy Buy Baby, Toys “R” Us, and BJ’s Wholesale Club.

One 30-minute television infomercial featured a home video of a two-year-old girl who used the program and is purportedly reading a page from the children’s book Charlotte’s Web. The girl’smother then appears, saying that when her daughter was three years old, “she read her first Harry Potter book and she fell in love with it.”

According to the complaint, the defendants failed to provide competent and reliable scientific evidence that babies can learn to read using the Your Baby Can Read! program, or that children at age three or four can learn to read books such as Charlotte’s Web or Harry Potter.

The settlement order against Penton and Your Baby Can LLC prohibits them from misrepresenting the benefits, performance, or efficacy of any product or service for teaching reading or speech, or enhancing language ability, cognitive ability, school performance, or brain development. They also are barred under the settlement from misrepresenting that scientific support exists for such assertions.

The Commission vote authorizing the staff to file the complaint against Titzer, Penton, and Your Baby Can, LLC, and approving the proposed consent judgment with Penton and Your Baby Can, LLC was 5-0. The documents are being filed in the U.S. District Court for the Southern District of California.

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant has actually violated the law. The settlement order is for settlement purposes only and does not constitute an admission by the defendant that the law has been violated. Settlement orders have the force of law when approved and signed by the District Court judge.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

(FTC File No. 1123045)

FTC Refunds $6 Million to Consumers Who Bought Deceptively Advertised Supplements that Were Supposed to Cause Weight Loss and Treat Erectile Dysfunction

The Federal Trade Commission is mailing 153,109 checks for $40.45 each to consumers who were deceived by supplement marketers National Urological Group and Hi-Tech Pharmaceuticals. A federal district court ruled in favor of the FTC in 2008, ordering the defendants to provide money for refunds.

The marketer made false advertising claims that two supposed weight-loss supplements, Thermalean and Lipodrene, were clinically proven to cause substantial weight loss, including a 19 percent loss in total body weight.

A third supplement, Spontane-ES, supposedly treated erectile dysfunction. The ads deceptively claimed that the supplement was clinically proven to safely and effectively treat 90 percent of men with erectile dysfunction.

The checks, totaling over $6 million, will be mailed by an administrator working for the FTC. Consumers who have questions about the refund process should call toll free, at 1-877-483-2883, or visit the FTC’s refunds website. The FTC never requires consumers to pay money or provide information before redress checks can be cashed.

The checks will be valid for 60 days and must be cashed on or before October 23, 2012.

Consumers should carefully evaluate advertising claims for vitamins and other dietary supplements. For more information see: Who Cares: Dietary Supplements.

(FTC File No. X050009)

FTC Sends Refunds to Consumers Harmed by Scheme Charged with Falsely Promising Federal Jobs

The Federal Trade Commission is mailing 1,897 refund checks to consumers who allegedly were deceived by false promises that they could get federal jobs if they paid for study materials or counseling services to help them pass an exam, even though often there were no exams or jobs. Under settlements reached in December 2010 and March 2012 as part of the FTC’s ongoing efforts to protect consumers in financial distress, the defendants, Government Careers Inc., Jon Coover, Richard Friedberg, and Rimona Friedberg, are permanently banned from selling employment-related products or services.

More than $50,000 is being returned to consumers; payments will be 22.73 percent of their loss. Consumers who receive the checks from the FTC’s refund administrator should cash them within 60 days of the date they were issued. The FTC never requires consumers to pay money or provide information before redress checks can be cashed. Consumers with questions should call the refund administrator, BMC Group, at 1-888-768-2051, or visit www.FTC.gov/refunds.

(Government Careers redress)

California Man Previously Sued by FTC Is Indicted on Criminal Charges for Phony Debt Collection Scam

A federal grand jury has charged a Tracy, California-based man with 21 criminal counts of wire fraud and mail fraud for a fake debt collection scheme. The Federal Trade Commission previously filed civil charges against the man, Kirit Patel, and two companies he controlled, Broadway Global Master Inc. and In-Arabia Solutions Inc.

The grand jury indictment alleges that on 21 occasions between January 2011 and March 2012, Patel sent e-mails, wire transfers, and mail as part of his efforts to defraud consumers.

The criminal case, announced last week by U.S. Attorney for the Eastern District of California Benjamin B. Wagner, followed a civil lawsuit filed by the FTC in April 2012. The FTC alleged that Patel and his two companies fraudulently collected more than $5.2 million from consumers for debts that they either didn’t owe to the defendants or didn’t owe at all, as part of a scheme that involved more than 2.7 million phone calls to at least 600,000 phone numbers. The agency obtained a court order to halt the scheme pending trial. Many of the individuals targeted by the scam were strapped for cash and thought the money they were paying would be applied to loans they owed, according to the FTC.

The FTC’s Criminal Liaison Unit, a special branch set up to ensure that appropriate consumer scams are referred for criminal prosecution, referred the case to the Department of Justice and the Secret Service. The FTC would like to thank both agencies for following up on this matter.

(FYI CLU Broadway Global Masters)

FTC Extends Deadline to Comment on Proposed Modifications to the Children’s Online Privacy Protection Rule Until September 24, 2012

The Federal Trade Commission will extend until September 24, 2012, the deadline for commenting on additional proposed modifications to the Children’s Online Privacy Protection Rule, which gives parents control over what information websites and online services may collect from children under 13.

On August 1, 2012, the Commission published a Supplemental Notice of Proposed Rulemaking seeking comments on proposed modifications to the Children’s Online Privacy Protection Rule with a deadline of September 10, 2012. In response to requests from several organizations, public comments on the Supplemental Notice of Proposed Rulemaking will now be accepted until September 24, 2012. Instructions for submitting comments are found in the Notice. Comments can be submitted electronically by clicking here. The Commission vote approving the extension of the comment period was 5-0.

Marketers of ‘Ab Circle Pro’ Device to Pay as Much as $25 Million in Refunds to Settle FTC Charges

As part of its ongoing efforts to stop over-hyped health claims, the Federal Trade Commission has filed deceptive advertising charges against the marketers of the Ab Circle Pro – an abdominal exercise device – who promised consumers that exercising on the device for just three minutes a day would cause them to lose 10 pounds in two weeks. The defendants have agreed to settlements that provide as much as $25 million – and at least $15 million – depending on the volume of refunds consumers request.

Consumers who bought an Ab Circle Pro can submit a refund claim here.

image of woman working out on Ab Circle Pro According to the FTC, in advertisements, the defendants promised that a three-minute workout on the Ab Circle Pro – a fiberglass disk with stationary handlebars and two knee rests that roll on the edge of the disk, allowing consumers to kneel and rotate side-to-side – was equivalent to doing 100 sit ups. In the infomercial, pitchwoman Jennifer Nicole Lee compared the Ab Circle Pro to a gym workout, saying, “You can either do 30 minutes of abs and cardio or just three minutes a day. The choice is yours.” The infomercial claimed that consumers using the Ab Circle Pro for three minutes a day would “melt inches and pounds,” and featured testimonialists claiming they had lost as much as sixty pounds. Consumers buying through the infomercial typically paid $200 to $250 for the device, while the price for those buying from retailers varied more widely.

Said David Vladeck, Director of the FTC’s Bureau of Consumer Protection, “The FTC reminds marketers that they should think twice before promising a silver-bullet solution to a health problem – whether it involves losing weight or curing cancer. Weight loss is hard work, and telling consumers otherwise is deceptive.”

In addition to multiple versions of the infomercial – which aired more than 10,000 times between March 2009 and May 2010 – the defendants marketed the Ab Circle Pro online, in stores, in one- and two-minute television commercials, and in print advertisements.

The complaint names as defendants Fitness Brands, Inc., Fitness Brands International, Inc., and the two individuals who control them, Michael Casey and David Brodess; Direct Holdings Americas, Inc. and Direct Entertainment Media Group, Inc.; infomercial producer Tara Borakos and two companies she controls, Tara Productions Inc. and New U, Inc.; and Jennifer Nicole Lee and two companies she controls, JNL, Inc. and JNL Worldwide, Inc.

The complaint charges all the defendants except Lee and her companies with making false and/or unsupported claims, including that using the Ab Circle Pro caused rapid or substantial weight and fat loss; resulted in loss of weight, fat, or inches in specific parts of the body, such as the abdomen, hips, buttocks, and thighs; provided fat loss and weight loss equivalent to, or better than, a much longer gym workout; and provided the same rapid and substantial weight loss that people who provided testimonials for the infomercial said they experienced. The complaint also charges the Fitness Brands, Inc. defendants with providing the means to Direct Holdings Americas, Inc. and Direct Entertainment Media Group, Inc. to deceive consumers.

The complaint charges all the defendants with misrepresenting that using the Ab Circle Pro allowed Jennifer Nicole Lee to lose 80 pounds.

The complaint names Reader’s Digest Association, Inc. as a relief defendant, alleging that the company received proceeds of the deceptive advertising from its subsidiaries, Direct Holdings Americas and Direct Entertainment Media Group.

Under the settlements, Lee and the two companies she controls cannot misrepresent that the Ab Circle Pro, any substantially similar device, or any exercise equipment, food, drug, or device contributed to her weight loss. She also cannot endorse any exercise equipment, food, drug, or device unless the endorsement reflects her honest opinion or experience.

The settlements bar all defendants other than Lee and the two companies she controls from claiming that the Ab Circle Pro or any similar device is likely to cause rapid and substantial loss of weight, inches, or fat; is likely to do so in specific areas of the body such as the abdominal area, hips, thighs, and buttocks; or makes a significant contribution to an exercise plan that provides rapid and substantial loss of weight, inches, or fat. The defendants also are prohibited from claiming that the Ab Circle Pro or any similar device, if used for three minutes a day, causes users to lose 10 pounds in two weeks; provides the same exercise benefits as doing 100 sit-ups; or provides weight- or fat-loss benefits that are equivalent or superior to longer workouts on other exercise devices or gym equipment.

The settlements also prohibit all except the Lee defendants from making fat-, inch-, or weight-loss claims for any exercise equipment, food, drug, or device unless such claims are supported by competent and reliable scientific evidence. The defendants further cannot claim that consumers using such products can generally expect to achieve the results claimed by endorsers of the products, unless such claims are supported by competent and reliable evidence.

The settlements bar the Fitness Brands, Inc. defendants from providing others with the means to make any of the representations prohibited above.

Under the settlements, the Fitness Brands, Inc. defendants will pay $1.2 million. Direct Holdings Americas, Inc.; Direct Entertainment Media Group, Inc.; and relief defendant Reader’s Digest will pay $13.8 million – and up to $10 million more, depending on the volume of refund requests.

Consumers should carefully evaluate advertising claims for weight-loss products. For more information, see: Weight Loss & Fitness.

The Commission vote authorizing the staff to file the complaint and approving the proposed consent decree was 5-0. The complaint was filed in the U.S. District Court for the Southern District of Florida on August 22, 2012.

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant has actually violated the law. The consent order is for settlement purposes only and does not constitute an admission by the defendant that the law has been violated. Consent orders have the force of law when approved and signed by the District Court judge.

(FTC File No. 1023047)

At FTC’s Request, U.S. Court Hands Down Record $478 Million Judgment Against Marketers of Massive Get-Rich-Quick Infomercial Scams

At the request of the Federal Trade Commission, a U.S. district court ordered the marketers of three get-rich-quick systems, including “John Beck’s Free & Clear Real Estate System,” to pay a record $478 million for deceiving close to one million consumers with phony claims that they could make easy money using their programs. The Order also imposes a lifetime ban that puts three of the defendants permanently out of the infomercial and telemarketing businesses.

The Order comes about four months after the court granted the FTC’s request for summary judgment against the marketers, concluding that they misled consumers using the infomercials for the John Beck program, as well as “John Alexander’s Real Estate Riches in 14 Days,” and “Jeff Paul’s Shortcuts to Internet Millions.” The court found that despite the marketers’ easy-money claims for the systems, which cost $39.95 each, nearly all the consumers who bought them lost money. In addition, the defendants sold personal coaching services, which cost up to $14,995, to consumers who purchased any of the three systems.

The case is part of the FTC’s ongoing efforts to stop scams that prey upon financially distressed consumers. The Order represents the largest litigated judgment ever obtained by the agency.

Jeffrey Klurfeld, Director of the Western Region of the Federal Trade Commission, issued the following statement regarding the Order:

“This huge judgment serves notice to anyone thinking of using phony get-rich-quick schemes to defraud consumers. The FTC will come after you if you violate the law. It’s also a reminder to consumers that they should be skeptical about these types of easy-money claims.”

Consumers Asked DISH Network to Leave Them Alone, But FTC Says Calls Kept Coming

DISH Network, one of the nation’s largest providers of satellite television service, faces a Federal Trade Commission lawsuit alleging that it illegally called millions of consumers who had previously asked telemarketers from the company or its affiliates not to call them again.

The calls allegedly violated provisions of the FTC’s Telemarketing Sales Rule that state that even if a consumer is not on the National Do Not Call Registry, a telemarketer may not call him or her again if the consumer specifically asks to be placed on the company’s own entity-specific do-not-call list.

“We have vigorously enforced the Do Not Call rules and will continue to do so to protect consumers’ right to be left alone in the privacy of their own homes,” said FTC Chairman Jon Leibowitz. “It is particularly disappointing when a well-established, nationally known company – which ought to know better – appears to have flagrantly and illegally made millions of invasive calls to Americans who specifically told DISH Network to leave them alone.”

According to the FTC’s complaint, DISH Network violated the agency’s Telemarketing Sales Rule while calling consumers nationwide in an attempt to sell its satellite television programming. DISH Network makes these telemarketing calls both directly to consumers and via a network of authorized dealers who make calls on its behalf. Specifically, the FTC alleges that DISH has made millions of outbound telephone calls since about September 1, 2007 to consumers who had already told them that they did not want to receive any more telemarketing calls from the company.

The Department of Justice, working on behalf of the FTC, is currently litigating another case against DISH Network for allegedly calling consumers on the National Do Not Call Registry, or causing its dealers to make such calls, in violation of the Telemarketing Sales Rule. Information developed as part of that case was used to bring the new case against Dish Network announced today. In filing the complaint, the FTC aims to stop the illegal calls and is seeking civil penalties for DISH Networks’ numerous alleged telemarketing violations.

Information for Consumers

For more information the FTC’s Do Not Call Registry and telemarketing in general, including entity-specific do-not-call requirements, see the following consumer education publications: Q&A: The National Do Not Call Registry and Straight Talk About Telemarketing. The FTC also reminds consumers that if your number has been on the National Do Not Call Registry for at least 31 days and you receive a call from a telemarketer that you believe is covered by the National Do Not Call Registry, you can file a complaint online or by calling the registry’s toll-free number at 1-888-382-1222 (for TTY, call 1-866-290-4236). To file a complaint, you must know either the name or telephone number of the company that called you, and the date the company called you.

The Commission vote authorizing the staff to file the complaint was 3-0-2, with Commissioners Julie Brill and Maureen Ohlhausen recused. The complaint was filed in the U.S. District Court for the District of Central District of Illinois, Springfield Division, on August 22, 2012.

(FTC File No. 122-3205, Civ. No. 3:12-cv-03221)
(Dish Network II.final)

FTC Updates Telemarketer Fees for the Do Not Call Registry as of October 1, 2012

The Federal Trade Commission has announced updated fees starting on October 1, 2012, for telemarketers accessing phone numbers on the National Do Not Call Registry.

All telemarketers calling consumers in the United States are required to download the numbers on the Do Not Call Registry to ensure they do not call those who have registered their phone numbers. The first five area codes are free, and organizations that are exempt from the Do Not Call rules, such as some charitable organizations, may obtain the entire list for free. Telemarketers must subscribe each year for access to the Registry numbers.

The access fees for the Registry are being increased as required by the Do-Not-Call Registry Fee Extension Act of 2007. Under the Act’s provisions, in fiscal year 2013 (from October 1, 2012 to September 30, 2013), telemarketers will pay $58, an increase of $2, for access to Registry phone numbers in a single area code, up to a maximum charge of $15,962 for all area codes nationwide, an increase from the previous maximum of $15,503. Telemarketers will pay $1 more per area code for numbers they subscribe to receive during the second half of the 12-month subscription period, for a total of $29 per area code.

For consumers who want to add their phone number to the Registry, registration is free and does not expire.

The Commission vote authorizing publication of the Federal Register notice announcing the new fees was 5-0. (FTC File No. P034305; the staff contact is Ami Dziekan, Bureau of Consumer Protection, 202-326-2648.)

(FYI 32.2012.wpd)

FTC Closes Its Investigation Into Facebook’s Proposed Acquisition of Instagram Photo Sharing Program

The Federal Trade Commission has closed its nonpublic investigation of Facebook’s proposed acquisition of Instagram, Inc., without taking any action. Accordingly, the deal may now proceed as proposed.

The Commission vote to close the investigation was 5-0. The closing letters to the companies can be found on the FTC’s website and as a link to this press release. (FTC File No. 121-0121; the staff contact is Christina Perez, 202-326-2048)

The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to [email protected], or write to the Office of Policy and Coordination, Bureau of Competition, Federal Trade Commission, 601 New Jersey Ave., Room 7117, Washington, DC 20580. To learn more about the Bureau of Competition, read Competition Counts. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.

(FYI 31.2012.wpd)

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