Federal Court Bans Deceptive Health Claims and a Wide Range of Other Deceptive Conduct

At the request of the Federal Trade Commission, a federal district court in California ordered a stop to the illegal tactics used by marketers who deceptively promoted dissolvable oral film strips as effective smoking cessation, weight-loss, and sexual-performance aids.

The court found that the FTC had prevailed on all 16 counts in its complaint against Jason Cardiff, Eunjung Cardiff, and seven entities they control, doing business as Redwood Scientific Technologies. The court’s permanent injunction, among other things, bans the Cardiffs and their companies from selling dissolvable oral film strips directly to consumers, bans engaging in multi-level marketing, bans them from making robocalls, and bans them from using negative-option marketing. It also imposes severe restrictions on their future conduct related to false advertising, fake testimonials, and unauthorized billing.

However, despite the fact that the FTC presented evidence that consumers lost $18.2 million to the defendants’ deceptive marketing, the court declined to order any compensation because of a recent Supreme Court’s ruling in the case of AMG v. FTC, which undercuts the agency’s authority to obtain such consumer redress.

“We’re pleased the court ruled in our favor as to every count in the complaint and entered such a strong injunction, including bans on several types of marketing,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “Unfortunately, the FTC still hasn’t been given back its full authority to return money to fraud victims, meaning the people hurt by this scheme – which brought in over $18 million – get nothing.”

Additional Judgments Announced

In addition to finding that the defendants’ health claims for the three products were false or unsubstantiated, the court found they engaged in many other unfair and deceptive practices. Specifically, the court found the Cardiffs violated the Restore Online Shoppers’ Confidence Act by failing to clearly and conspicuously disclose their auto-ship program to customers who purchased online.

It also found the Cardiffs unfairly enrolled consumers in auto-ship plans without their consent, failed to honor refund policies and guarantees, used fake testimonials, made false Made-in-the-USA claims, and made illegal robocalls. Additionally, the court found the Cardiffs made deceptive earnings claims as part of a multi-level marketing scheme.

The court order entered against defendants Jason Cardiff and Eunjung Cardiff permanently bans them from engaging in multi-level marketing, robocalls, negative option sales, and marketing, advertising, or selling thin film strips to consumers.

It prohibits them from making unsubstantiated claims about the health benefits of goods and services, deceptively claiming that they have proof regarding any such health claim, failing to properly disclose auto-ship programs sold online, deceptively claiming that an endorser is a real consumer, deceptively claiming that any product is made in USA, making false earnings claims, and making any other misrepresentation regarding total costs, refund policies, or material restrictions or limitations connected with a sale of goods and services.

The court also entered a default judgment against the seven corporate defendants that acted together with the Cardiffs as a common enterprise the owned and operated. This judgment imposes the same conduct provisions the court imposed in its order against the Cardiff defendants.