The two agencies say the joint action is the first step in keeping these products from being marketed online and in retail outlets.

HCG is FDA-approved as a prescription drug for the treatment of some cases of female infertility and other medical conditions, but is not approved for weight loss. The letters warn the companies that they are not only in violation of federal law by selling unapproved drugs, but that they are making unsupported weight loss claims.

The labeling for the “homeopathic” HCG products states that they should be taken in conjunction with a very low calorie diet. According to the FTC, the weight loss claims are deceptive since there is no substantial scientific evidence that HCG increases weight loss beyond that resulting from the calorie-restricted diet. In addition, the FDA says that people on very low calorie diets may be at risk for a number of harmful side effects and should only use such diets under medical supervision.

According to the Warning Letters, the companies have 15 days to notify the FDA of the steps they have taken to correct the violations cited. Failure to do so may result in legal action, including seizure and injunction, or criminal prosecution.

The seized materials, more than 4,000 pounds of ephedrine alkaloid-containing raw material - Cissus quadrangularis and Cassia angustifolia extracts – were valued at $70,000.

Ephedrine alkaloids are adrenaline-like stimulants that are potentially dangerous effects to the heart. Before 2004, ephedrine alkaloids had been used extensively in dietary supplements promoted for aiding weight control and boosting sports performance and energy. However,  available data showed little evidence of ephedrine’s effectiveness. There could be a modest, short-term weight loss, but that was without any clear health benefit. Yet the alkaloid raised blood pressure and otherwise stressed the circulatory system, effects tied to heart attack, stroke and death.

Similar to the recent Google Buzz privacy settlement, the proposed Facebook settlement requires the social networking company to take specific steps to ensure it lives up to its privacy promises, including giving consumers clear and prominent notice and obtaining the user’s express consent before their information is shared beyond the privacy settings the user has established.

Facebook also will be required, for the next 20 years, to obtain independent, third-party audits certifying that it has a privacy program in place that meets or exceeds the requirements of the FTC order, as well as to ensure that the privacy of consumers’ information is protected.

The proposed settlement also

• bars Facebook from making misrepresentations about the privacy or security of user’s personal information.
• requires Facebook to obtain a user’s express consent before effecting changes that override their privacy preferences.
• requires Facebook to prevent anyone from accessing a user’s material more than 30 days after the user has deleted the account.
• requires Facebook to establish and maintain a comprehensive privacy program designed to address privacy risks associated with the development and management of new and existing products and services, and to protect the privacy and confidentiality of users’ information.
• requires Facebook within 180 days, and every two years after that for the next 20 years, to obtain independent, third-party audits certifying that it has a privacy program in place that meets or exceeds the requirements of the FTC order, and to ensure that the privacy of consumers’ information is protected.

Among the instances cited in the complaint where allegedly made promises that it did not keep:

• In December 2009, Facebook made changes that allowed made public certain information that users may have designated as private without warning users of the change or getting their approval in advance.
• Facebook represented that third-party apps that users’ installed would have access only to user information that they needed to operate. In fact, the apps could access nearly all of users’ personal data – data the apps didn’t need.
• Facebook told users they could restrict sharing of data to limited audiences – for example with “Friends Only.” In fact, selecting “Friends Only” did not prevent their information from being shared with third-party applications their friends used.
• Facebook promised users that it would not share their personal information with advertisers when in fact, it did.

The action was based on alleged violations by ATF and MADE of the current Good Manufacturing Practice (cGMP) regulations for the manufacture of dietary supplements. According to the Complaint filed by the Justice Department, ATF is the sole distributor of dietary supplement products manufactured by MADE. Also named in the complaint is James G. Vercelotti, the owner and operator of both entities.

Under the cGMPs for dietary supplements (found at 21 C.F.R. § 111), dietary supplements must be manufactured according to processes that incorporate controls in the design and production process to assure a quality finished product. The purpose of the cGMPs for dietary supplements is to ensure quality and safety. According to the Complaint, ATF and MADE failed to adhere to the cGMPs in the manufacture of over 400 dietary supplement products. The Complaint alleges a number of deviations from the cGMPs at pages 3 through 5 of the Complaint. You can access the Complaint here.

In addition to the alleged deviations from the cGMPs, the Complaint alleges that the defendants misbranded their dietary supplement products by substituting ingredients for those listed on the product labels. Finally, the Complaint alleges that the defendants failed to submit Serious Adverse Event reports to the FDA as required by the Dietary Supplement and Nonprescription Drug Consumer Protection Act (21 U.S.C. §§ 379aa – 379aa-1). As an example of this failure, the Complaint alleges that the defendants received a report of a serious adverse event from a consumer who claimed that one of their products caused a high blood pressure spike requiring hospitalization and subsequently caused a mild heart attack. The defendants failed to submit a report of this event to the FDA as required by the Act.

According to the press release issued by the FDA, this is the first time that the agency has sought a permanent injunction against a dietary supplement manufacturer of this size.

The FTC’s 2009 complaint alleged that the defendants made false and deceptive claims about hoodia and its effectiveness as a treatment for obesity, and falsely claimed that their ingredient was hoodia when it was not. The complaint also alleged that they falsely and deceptively claimed their product was, among other things, scientifically proven to suppress appetite, resulting in weight loss and was clinically proven to reduce caloric intake by 1,000 to 2,000 calories per day.

• David J. Romeo, and two companies he controlled, Nutraceuticals International LLC and Stella Labs LLC, are banned from making any weight-loss claims while marketing foods, drugs, and dietary supplements. The settlement imposes a $22.5 million judgment against Romeo and the two companies, which will be suspended when Romeo forfeits his vacation home in Vermont, and assigns to the FTC the right to collect on $635,000 in business loans owed to him. If it is later determined that the financial information Romeo gave the FTC was false, the full amount of the judgment will become due.
• Nutraceuticals International principal Craig Payton is banned from marketing any foods, drugs, or dietary supplements.
• Nutraceuticals International marketing executive Deborah B. Vickery is required to pay a $4 million judgment, which has been suspended due to her inability to pay..
• All five defendants are prohibited from making any false or unsupported claims about foods, drugs, or dietary supplements, and from helping others to make these claims. They also are barred from misrepresenting the results of any scientific study.

The settlement bars Google from future privacy misrepresentations, requires it to implement a comprehensive privacy program, and calls for regular, independent privacy audits for the next 20 years. This is the first time an FTC settlement order has required a company to implement a comprehensive privacy program to protect the privacy of consumers’ information.

According to The Guardian, Avon’s recent regulatory filing disclosed that “a formal order of investigation” by the SEC was underway. The filing said the SEC was investigation Avon under the Foreign Corrupt Practices Act which makes it illegal U.S. firms to bribe foreign officials.

The SEC also is investigating Avon’s contacts with financial analysts in 2010 and 2011.

•  make claims that toning shoes and other toning apparel are effective in strengthening muscles, or that using the footwear will result in a specific percentage or amount of muscle toning or strengthening, unless the claims are true and backed by scientific evidence;
• make any health or fitness-related efficacy claims for toning shoes and other toning apparel unless the claims are true and backed by scientific evidence; and 
• misrepresent any tests, studies, or research results regarding toning shoes and other toning apparel.

Among the claims that the FTC took issue with were advertisements for Reebok’s EasyTone walking shoes, RunTone running shoes, and EasyTone flip flops that stated that the soles of the shoes feature pockets of moving air to create “micro instability” that tones and strengthens muscles as you walk or run.  According to the FTC Complaint, the company made unsupported claims that walking or running in its shoes would strengthen and tone key leg and buttock muscles more effectively than walking or running in regular shoes.  The FTC’s complaint also alleges that Reebok falsely claimed that walking in EasyTone footwear had been proven to lead to 28 percent more strength and tone in the buttock muscles, 11 percent more strength and tone in the hamstring muscles, and 11 percent more strength and tone in the calf muscles than regular walking shoes. 

Although Reebok denies any wrong-doing, it is clear from the terms of the settlement that the company did not possess the necessary evidence to substantiate the advertising claims that it was making for its products.  As such, this case serves as a timely reminder to all marketers of health related products, whether they be nutritional supplements, weight loss products, or toning footwear, that they must have “competent and reliable scientific evidence” in their files to support the claims that are made in advertising materials for their products.  Bear in mind that anecdotal evidence such as customer testimonials does not satisfy this standard.  Nor do purported scientific studies that are of dubious quality.  Competent and reliable scientific evidence is defined in FTC cases as “tests, analyses, research, studies, or other evidence based on the expertise of professionals in the relevant area, that have been conducted and evaluated in an objective manner by persons qualified to do so, using procedures generally accepted in the profession to yield accurate and reliable results.”  

To view the FTC’s complaint and the stipulated judgment, go to http://www.ftc.gov/os/caselist/1023070/index.shtm.

1. The financial benefit for owners to hold a genealogy position is a fallacy.
2. Owners holding genealogy positions can inhibit an IPO.
3. Minority shareholder rights may be violated.
4. You may be unwittingly selling a security.
5. Ownership of genealogy positions by owners can lead to an inequitable distribution of income.
6. Ownership of genealogy positions can lead to conflicts of interest.
7. Termination of a business relationship is made more difficult if management holds a genealogy position.

But the challenges associated with management holding a position in the genealogy can be overcome with proper planning and execution.

So if you are starting an MLM and are considering taking a position in the genealogy, read the latest addition to our MLM Startup Series that discusses these points and how to cope with them in more detail.

The money will be distributed to 75,000 Inter-Mark member salespeople as commissions owed to them. According to a report in the Minneapolis Star-Tribune, some Inter-Mark members could receive as much as $200,000.

A special administrator working with Inter-Mark will verify claims and disburse the funds.

While the government would say only that they didn’t want the members deprived of their money, Inter-Mark is taking the action as an admission by the government that the company did nothing wrong.