Colby Fox and his companies Tachht, Inc. and Teqqi, LLC recently settled a case with the Federal Trade Commission over an email marketing scheme and claims regarding the companies’ diet pills.
According to the FTC, which filed the proposed order in the U.S. District Court for the Middle District of Florida, Tampa Division, the defendants paid affiliate marketers to illegally send millions of spam emails to consumers from hacked email accounts, masquerading as notes from the consumers’ family and friends. Those emails contained links which directed consumers to websites for the defendants’ weight-loss products. On those websites, the FTC alleged that the defendants made certain unsubstantiated claims, including that the products could cause weight loss of 17 pounds in four weeks, and that the products were featured or endorsed by Oprah Winfrey and the hosts of the television show “The Doctors.” The defendants are required to pay a judgment of $500,000, which could be increased to as high as $1.3 million if it is determined that they understated their financial condition. Additionally, the defendants are barred from making false and unproven weight-loss claims, must have competent and reliable scientific evidence to support any such claims in the future, and must not misrepresent celebrity endorsements. In connection with the email marketing campaign, the FTC requires the defendants to monitor their affiliate marketers.
TAKEAWAY: Advertisers should be reminded that they can be liable for the actions of their affiliate marketers. Additionally, this case serves as a reminder that both claims and endorsements by celebrities must be substantiated.