Alerts

AD-ttorneys@law – April 24, 2020

Alerts / April 24, 2020

In This Issue:

Industry Groups Commend FDA Action on Corona Scams

Four heavy-hitters in the supplement game make it clear how

Letter About Letters

If the types of scammers that would profit from dubious coronavirus cures had the ability to feel anything at all, they might be alarmed at the attention they’re getting from all sides – from state attorneys general, the Food and Drug Administration (FDA), the Federal Trade Commission (FTC) and now industry groups.

Four organizations – the American Herbal Products Association, the Consumer Healthcare Products Association, the Council for Responsible Nutrition and the United Natural Products Alliance – have issued a letter thanking the FDA for its work targeting coronavirus scams, specifically, the administration’s barrage of sternly worded letters.

“Since the beginning of the COVID-19 pandemic in March, FDA has sent warning letters to 16 companies responding to claims that their products can prevent, treat or cure COVID-19,” the letter reads (we count more than 20 FTC missives now). “The U.S. dietary supplement industry commends the Food and Drug Administration (FDA) for taking action to protect consumers by calling out marketers who make illegal and unsubstantiated drug claims related to COVID-19.”

The Takeaway

This letter follows an earlier missive from the same group back in February, proving that the dietary supplement industry was on top of the coronavirus from the beginning.

Both letters present a four-part “unified advisory,” stating that marketers and retailers should refuse to stock or sell supplements that supposedly treat, cure or prevent COVID-19, the disease caused by the virus, and refrain from promoting dietary supplements that make such claims. Consumers are urged to avoid such products, and to immediately report to healthcare professionals if they might have COVID-19 or have come in contact with the virus.

So, if you’re in the business of marketing or selling supplements, and if you’re even edging close to COVID-19 claims (or even claims that address COVID-19 symptoms), take a moment and reel them in. As the associations note: “Even if research is conducted and published on this topic, the law that regulates dietary supplements in the U.S., the Dietary Supplement Health and Education Act of 1994, prohibits marketers of dietary supplements from promoting any dietary supplement product by making disease prevention or treatment claims.”

Stick with the basics, and steer clear of trouble.

FTC Cuts Checks to Salve Wounded Negative Option Subscribers

Multiple defendants pay out $488K in settlement fees

Same Old Story?

The Federal Trade Commission is mailing out nearly half a million in checks to consumers it says were swindled by a tangled nest of marketing companies and executives.

The offending companies are a veritable alphabet soup, including AAFE Products Corporation, JBE International, BSDC Inc., KADC Inc., BNRI Corporation and a passel of executives running one or more of the enterprises. Together, they ran several websites hawking golf equipment and cooking gear. What these two sets of merchandise have in common escapes the imagination.

The specific offenses the companies are accused of are a familiar mix of negative option and free trial offers: Prospective buyers, unable to find well-hidden disclosures, would sign up for a free offer and find themselves hooked up with a costly monthly subscription.

Bundle Up

The interesting wrinkle in the AAFE case involves “deceptive bundled offers.” According to the FTC’s original complaint, “Consumers who accept the bundled offer receive the initial product and are automatically enrolled in at least one continuity plan.”

It was a double and possibly more-than-double whammy: “The defendants signed consumers up for more ‘free’ trials after forcing them to click through as many as 14 upsell pages to reach a final confirmation page,” the Commission stated. “According to the complaint, many of those pages included poorly disclosed, or undisclosed, additional ‘free trials’ that resulted in yet more unauthorized charges.”

The Takeaway

The FTC went after the AAFE companies back in March 2017 and settled with the company later that year. The defendants were forbidden to misrepresent costs, free offers and obligation-free samples, and were required to revise disclosures so they were clear. It also mandated a simple cancellation process; consumers complained about how customer service representatives would try to upsell them when they were looking to escape the subscriptions.

The settlement also levied $2.4 million against the various directors and executives; at the end of the day, less than $500,000 went out to consumers, spread out over more than 14,000 checks averaging $34 each.

Sports Club Operator Accused of Charging Fees During Pandemic Closure

Will New York Sports Club operator learn from state AG warning?

Double (Triple, Quadruple…) Trouble

Town Sports International Holdings (TSI) has had its share of run-ins with consumers and regulators in the past. The owner and operator of “city” fitness club franchises – New York Sports Clubs, Boston Sports Clubs, Philadelphia Sports Clubs, Washington Sports Clubs – TSI has been sued for Telephone Consumer Protection Act violations (in New York and Florida), VIP membership scams (in New York’s Southern District), and contract and membership cancellation disputes (in New York’s Eastern District – twice). These past controversies have attracted the attention of state attorneys general.

But TSI’s response to the coronavirus pandemic is stirring up trouble for the company yet again, at a time when a business’s crisis response efforts are crucial to its public profile.

States’ Fights

The attorneys general of New York, the District of Columbia and Pennsylvania penned a curt letter to TSI CEO Patrick Walsh, calling his company out over allegations that it continued charging its members regular fees after shuttering its locations in response to state-mandated club closures.

“It appears that TSI…has violated multiple State laws by charging consumers membership dues for services TSI no longer offers, imposing punitively high cancellation and freezing fees that are unconscionable under the circumstances, misleading consumers about their rights to cancel or freeze their memberships, withholding information from consumers about how they can cancel or freeze their memberships, and refusing to honor cancellation requests,” the letter reads.

Yikes.

The attorneys general close the letter by demanding that TSI “immediately implement a membership freeze at no cost to members and honor cancellation requests submitted by mail, telephone, or email without charging any fees or imposing any conditions (such as advance notice requirements).”

TSI has also been hit with two class action suits in New York related to the pandemic closures that echo the allegations of the attorneys general (two in the Southern District).

The Takeaway

You can’t charge fees for services you aren’t delivering. That’s simple.

Yet the controversy surrounding TSI’s actions is confounding because the company could have scored an easy marketing win.

According to the letter from the attorneys general, other fitness companies responded to the coronavirus shutdown with aplomb: Competitor’s Planet Fitness and Equinox “sent emails to their members informing them of the mandatory closure and assuring them that their memberships would be frozen at no cost to the members until the clubs reopen.”

Nothing reads worse to the public than appearing to profit during times of public pain. What makes this misstep worse is that TSI fired most of its employees in response to the pandemic to save money. Charging fees for services it could not render in the midst of a painful public health crisis is bad enough, but the company’s cost-cutting of workers – understandable, but still a hard sell in the new PR environment – meant that cancellation requests and inquiries went unanswered.

A double whammy of a response, making an already awful situation worse. There’s no legal or marketing advice that can help when a company flouts plain old common sense.

Photographer Prods Actress Ellen Barkin With Copyright Infringement Suit

He says she reposted his pic without his permission, but isn’t he asking for trouble?

Switch Hitter

Ellen Barkin – actress, producer, former girl-gang member – is fabulous.

“Having an opinion and sticking to your guns – if you’re a man, like Nick Nolte, Al Pacino or Robert De Niro – means “deeply talented and deeply committed,’” she once told The New York Times. “If you’re a woman, it means ‘You’re difficult.’”

Director Blake Edwards said of her: “She’s a street fighter, very complex, very sexy…you know that line, ‘She’s an interesting cat, but don’t put your hand in the cage?’”

Photographer Steven Hirsch may have given her his whole arm.

Last Nerve

Barkin has decidedly strong opinions about sexism and sought out a spectator’s seat in the courtroom during Harvey Weinstein’s recent trial. She had accused Weinstein of verbally abusing her during the shoot for a movie he produced, and had been publicly supportive of actress Annabella Sciorra, who was testifying against Weinstein in the trial.

Hirsch took a snap of Barkin giving him the finger in the courthouse hallway one morning before the beginning of a trial session. He sold the pic to the New York Post, which used it to craft a “Page Six” article accusing the actress of “diva” behavior. He subsequently copyrighted the photo.

True to form, Barkin proudly reposted the picture on her website, with a terse caption – “Mood.”

The Takeaway

Hirsch sued Barkin in late March in the Southern District of New York for copyright infringement and integrity of copyright management information for posting the photo without his permission and without crediting him for the photo.

It’s too soon to know what Barkin’s response will be, but we’re willing to bet that it will be…robust. Why?

First, she’s taken on bigger foes than Hirsch in the past, including her ex-husband, billionaire Ron Perelman, from whom she won $4.3 million back in 2010.

More significantly, Hirsch’s whole case seems wobbly, given that he posted a picture of her without her permission, a possible violation of Barkin’s right of privacy.

We’re excited to see what comes next. Let us know if you want to share popcorn.

Check Out Our Latest Blog Post

Takedown Tips for Brands Battling Unauthorized Distribution During the COVID-19 Pandemic

The hair salons are closed – now what? During this COVID-19 pandemic, many consumers are resorting to buying hair care products online, including products such as permanent hair colorants that are designed solely for use by licensed cosmetologists. Brands should monitor e-commerce sites for the unauthorized distribution of their salon-only products that are being dumped online. Instructions and warnings are written for trained professionals, not ordinary consumers. The concern is these products are not for the ordinary consumer to use at home without professional help, and improper use can result in serious harm or injury. What can brands do about their products being unloaded in this manner? Read more here.

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