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FTC Amends Complaint Against Operators of Invention-Promotion Scheme

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In March 2017, the Federal Trade Commission charged the operators of a patent and invention-promotion scam with deceiving consumers and suppressing complaints about the company by using threats of criminal prosecution.

As previously blogged about here, the FTC stated that “[t]hrough TV ads, telemarketing, and the internet, the Florida-based defendants touted their services as a way for inventors to patent their products and make big money. According to the FTC, in their initial conversation with an inventor, the defendants’ sales people invariably praised the invention and made big promises.

The FTC also alleged that defendants were paid thousands of dollars to patent and market their inventions based on bogus “success stories” and testimonials. Moreover, according to the FTC, the defendants employed unfair tactics to discourage consumers from publishing reviews about the service, including threats of legal action, criminal charges and prison.

A federal court in Miami, Florida, temporarily halted the scheme and froze its assets pending litigation. On June 5, the court extended its temporary restraining order until June 26, 2017.

The Federal Trade Commission has amended its complaint against World Patent Marketing.

The amended complaint alleges that WPM claimed its clients’ products were sold in numerous popular “big box” stores, even though no such inventions are sold in any brick and mortar stores. According to the FTC, WPM also falsely touted licensing deals between inventors and “WPM China” involving WPM’s purported manufacturing plant in China. However, according to the FTC, “WPM China” does not exist, and WPM has no manufacturing plant in China.

The amended complaint further alleges that WPM falsely told consumers that its review team needed to approve their ideas before they could move forward with the company, when in fact no such review occurred.

Contact an FTC defense lawyer if you are the subject of a local, state AG or federal regulatory enforcement investigation or action.

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ADVERTISING MATERIAL. These materials are provided for informational purposes only and are not to be considered legal advice, nor do they create a lawyer-client relationship. No person should act or rely on any information in this article without seeking the advice of an attorney. Information on previous case results does not guarantee a similar future result. Hinch Newman LLP | 40 Wall St., 35th Floor, New York, NY 10005 | (212) 756-8777.

Massachusetts AG Reaches Geofencing Settlement with Digital Advertising Company

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According to a recent press release by the Massachusetts Attorney General, the agency has reached settlement terms with a digital advertising company that prohibits it from using mobile geofencing technology to target women entering local reproductive health facilities.

Geofencing technology permits digital advertisers to direct advertisements to users through browsers and applications on their devices when those users are located in specifically designated territory.

“While geofencing can have positive benefits for consumers, it is also a technology that has the potential to digitally harass people and interfere with health privacy,” said AG Healey. “Consumers are entitled to privacy in their medical decisions and conditions. This settlement will help ensure that consumers in Massachusetts do not have to worry about being targeted by advertisers when they seek medical care.”

In the press release, the MA OAG explains that that geofencing creates a virtual “fence” around a specified location that is tripped when a person crosses the “fence” with a phone or other mobile device.

Once the geofence is tripped, an advertiser will attempt to display an ad in an open app or web browser on the person’s mobile device. The ad is typically tailored to that location and other information about the user.

A mobile device also may be tagged so that marketing messages can be directly pushed to it whenever the same app or browser page is opened in the future. Users may not realize when they installed these apps that the app would disclose their location information for purposes unrelated to the app, including advertising.

In its advertising campaign, according to the OAG, Copley Advertising LLC set mobile geofences at or near reproductive health centers and methadone clinics in Columbus, New York City, Pittsburgh, Richmond and St. Louis. When a user entered the geofenced area near these locations, consumers’ devices were pushed tagged advertisements for up to 30 days.

The advertisements allegedly included text such as “Pregnancy Help,” “You Have Choices” and “You’re Not Alone” that, if clicked, took recipients to a webpage with information about abortion alternatives and access to a live web chat with a “pregnancy support specialist.”

The settlement, resolved through an Assurance of Discontinuance, resolves allegations that the foregoing practices would violate consumer protection laws in Massachusetts by tracking a consumer’s physical location near or within medical facilities, disclosing that location to third-party advertisers, and targeting the consumer with potentially unwanted advertising based on inferences about his/her private, sensitive and intimate medical or physical condition, all without the consumer’s knowing consent.

Key takeaway: Advertisers must consider the privacy implications of targeted advertising, including the collection, storage and use of sensitive consumer data.

Contact an experienced privacy lawyer for questions regarding online data collection requirements.

Follow the author on Twitter at FTC Defense Lawyer.

ADVERTISING MATERIAL. These materials are provided for informational purposes only and are not to be considered legal advice, nor do they create a lawyer-client relationship. No person should act or rely on any information in this article without seeking the advice of an attorney. Information on previous case results does not guarantee a similar future result. Hinch Newman LLP | 40 Wall St., 35thFloor, New York, NY 10005 | (212) 756-8777.

 

Dietary Supplement Makers Ordered to Cease Making Drug Claims

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In March 2017, the U.S. District Court for Colorado entered a consent decree of permanent injunction against EonNutra LLC, CDSM LLC and HABW LLC, manufacturers and distributors of unapproved drugs and dietary supplements, and their owner, requiring the businesses to immediately cease operations until they comply with federal laws.

The products were made available on numerous websites and via a retails location in Colorado.

“Companies that market their products with unproven health claims and also continue to violate manufacturing regulations put consumers’ health in jeopardy,” said Melinda Plaisier, FDA associate commissioner for regulatory affairs, in a recent press release issued by the U.S. Food and Drug Administration. “The FDA will take the enforcement actions necessary to protect consumers from this undue risk.”

The FDA inspected the businesses numerous time since 2012. Despite assurances the deficiencies would be remedied, subsequent FDA inspections revealed that they had not been.

The FDA also determined that the dietary supplement products were misbranded and unapproved new drugs because they were being marketed with drug claims despite not being approved for any use.

According to the FDA, some of the claims the dietary supplement products were marketed with included the treatment of high cholesterol, hypertension, diabetes, depression and muscle pain.

During the inspections, FDA investigators also found the businesses were manufacturing and distributing misbranded and adulterated dietary supplements.

Numerous violations of the FDA’s current Good Manufacturing Practice (cGMP) regulations for dietary supplements were found, including failure to establish specifications for dietary supplement components and failure to test or verify that components and finished products meet product specifications for identity, purity, strength or composition.

The FDA stated that because the businesses failed to follow cGMP regulations, their dietary supplements were adulterated under the Federal Food, Drug, and Cosmetic Act.

According to the FDA, some of the supplements were also misbranded because the business failed to properly list on the products’ label the number of servings per container and the correct serving size per container. Additionally, the FDA believed that they failed to list each ingredient contained in the dietary supplements and identify the specific part of the plant each botanical dietary ingredient was derived from.

The consent decree prohibits the marketing of misbranded or unapproved new drugs and adulterated or misbranded dietary supplements. Additional requirements include product recall, the retention of labeling and good manufacturing practices experts, and written permission from the FDA to resume operations.

If you are a manufacturer or distributor of dietary supplements, contact an advertising compliance lawyer to evaluate whether product claims could be considered “drug” claims, as well as how to mitigate enforcement risk exposure by complying with CGMP regulations.

Follow me on Twitter at FTC Defense Lawyer.

 

HINCH NEWMAN LLP. ADVERTISING MATERIAL. These materials are provided for informational purposes only and are not to be considered legal advice, nor do they create a lawyer-client relationship. No person should act or rely on any information in this article without seeking the advice of an attorney. Information on previous case results does not guarantee a similar future result.

 

FTC Chair States that the Agency will Advocate to Oppose State Special Interests

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FTC Acting Chair Maureen Ohlhuasen has recently indicated that the Commission will advocate on a state level to oppose special-interest groups seeking to impose burdensome job licensing requirements and other regulations that limit competition.

In conjunction with the policy initiative, the FTC has launched a new website highlighting the work of the agency’s new Economic Liberty Task Force. The task force addresses regulatory hurdles to job growth, including the proliferation of occupational licensing.

According to the Commission, nearly 30 percent of American jobs require a license today, up from less than five percent in the 1950s. For some professions, occupational licensing is necessary to protect the public against legitimate health and safety concerns. But in many situations, the Commission believes that the expansion of occupational licensing threatens economic liberty and that overbroad restrictions impose significant barriers while imposing costs that harm American workers, employers, consumers, and our economy as a whole.

“This is an important moment for economic liberty. Governors, state legislators, and many other stakeholders want to move forward to remove or narrow occupational licensing regulations and open doors to opportunity, enhancing competition and innovation,” said Acting Chairman Ohlhausen. “The FTC’s Economic Liberty Task Force has moved quickly to create a website that will gather many existing resources, from the FTC and elsewhere, into a central repository for stakeholders. It will be a dynamic resource and will grow to incorporate additional work by the task force and others in this important area.”

Ohlhausen believes that states should be free to adopt their own regulations, but that oftentimes state policy makers only hear one-sided viewpoints from parties seeking protectionist benefits before implementing new rules.

According to Ohlhausen, in some states market participants control more than 90 percent of occupational licensing boards. Almost 30 percent of jobs require a license, and studies say licensing requirements have resulted in 250 million fewer jobs and billions of dollars in costs to consumers.

The task force has been created in order to address these issues and will seek to work with state policy makers and other officials to help states analyze the interplay between regulation and competition.

Work has already started on the state level to reform burdensome job licensing requirements. “This is a time of change and many Americans are demanding less regulation and more economic opportunity,” Ohlhausen said.

Contact an FTC defense lawyer if you would like to discuss recent FTC policy initiatives, the design and implementation of compliant advertising campaigns, or if you are the subject of a local, state attorney general or federal regulatory matter.

 

HINCH NEWMAN LLP. ADVERTISING MATERIAL. These materials are provided for informational purposes only and are not to be considered legal advice, nor do they create a lawyer-client relationship. No person should act or rely on any information in this article without seeking the advice of an attorney. Information on previous case results does not guarantee a similar future result.

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