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Note:This website is where you can find advertising law information based on archived news briefs from past issues of Advertising Compliance Service. These archived advertising law-related news briefs were published in Advertising Compliance Service in April 2003.





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Infertility Svcs.
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FTC and 29 state Attorneys General launched a law enforcement crackdown targeting alleged Internet auction scams that bilked thousands of consumers out of their money and merchandise. The crackdown, "Operation Bidder Beware," coordinated by FTC in conjunction with the National Association of Attorneys General (NAAG), resulted in 57 criminal and civil law enforcement actions and a related consumer education campaign. Auction fraud is the single largest category of Internet related complaints in FTC's Consumer Sentinel database, which logged over 51,000 auction complaints in 2002.

Many of the cases involve straightforward scams where consumers allegedly "won" the bid for merchandise through an Internet auction Web site, sent in their money, but never get the merchandise, according to FTC. The Commission alleged that in one case, the defendants combined auction fraud with serial identity theft to conceal their identities and divert the blame to the identity theft victim. In that case, FTC charged that, since early 1999, one operator constantly changed his Internet auction account name to conceal the fact that while he accepted payment, he didn't deliver the promised merchandise.

According to FTC, in 2001, he added a new wrinkle. While he allegedly continued to advertise and accept payment for merchandise he never delivered, he embarked on serial identity theft. FTC alleged that he set up bank accounts and post office boxes in other people's names, and directed that payment be sent to them. Consumers and law enforcers believed the identity theft victims were the ones who had bilked the consumers out of their money. According to FTC, his identity theft victims were people with whom he had feuded, people whose identity information he and an accomplice had taken from the records of a suburban Chicago hotel, and even a dead man. A U.S. district court in Chicago ordered a halt to the alleged scam and frozen the defendant's assets to preserve them for consumer redress.

NOTE: The Commission files a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant has actually violated the law. The case will be decided by the court.

(FTC Release, April 30, 2003.)


FTC recently released a report reviewing its activities related to "Do Not Call," deceptive lending, e-commerce and other areas. This article briefly summarizes those aspects of this report related to advertising compliance.

HIGHLIGHTS 2002-2003

The report details activities including:

Privacy: "Do Not Call"

Amendments to its Telemarketing Sales Rule, which among other changes, launched the National Do Not Call registry, providing a central database of telephone numbers of consumers who chose not to get telemarketing calls.

Consumer Protection Law Enforcement and Rulemaking

Addressing FTC's consumer protection mission, the report notes that the agency's activities regarding current issues of importance to consumers, include identity theft, telemarketing fraud, Internet fraud, and credit reporting. FTC uses such tools as--

its complaint databases, Consumer Sentinel, which contains over one million fraud complaints and is available to more than 650 enforcement agencies across the U.S., Canada, and Australia, to keep abreast of consumer experiences in the marketplace;

Internet surfs to single out the most serious online fraud and deception; and

workshops, hearings, and conferences to advance the public policy debate.

Law Enforcement Targeting Fraud

Drawing on data from Consumer Sentinel and Internet surfs, FTC has brought 120 cases targeting fraud and deception since April 2002. In the past year, FTC obtained over 55 judgments ordering over $650 million in consumer redress. Key areas of consumer protection litigation have included

deceptive billing in the "Miss Cleo" psychic services, in which the defendants forgave an estimated $500 million in outstanding consumer charges;

a host of cases targeting deceptive claims for dietary supplements, cosmetics, devices and services; and

international pyramid schemes.

Privacy Enforcement

The report notes that FTC continued its aggressive enforcement of existing laws to protect consumer privacy. It has brought

47 law enforcement actions targeting deceptive spam, half of them since 2002;

eight cases to enforce the Children's Online Privacy Rule, including settlements with Mrs. Fields Cookies and Hershey Foods Corporation which yielded $100,000 and $85,000 respectively, and represent the biggest COPPA penalties awarded to date;

three cases targeting companies that allegedly collected extensive personal information from millions of high school students and sold it to commercial marketers, despite promising that the information would be used only for education-related service providers; and

settlements with the Microsoft Corporation and Eli Lilly and Company for misrepresenting their privacy and security policies.

Consumer Protection Workshops and Reports

To advance understanding of marketplace developments and issues, FTC conducts workshops and studies and publishes its findings in reports. In the past year, for example, FTC has conducted--

a weight-loss advertising workshop and issued a staff report, "Weight-Loss Advertising: An analysis of Current Trends;"

a cross-border fraud workshop with participation from Australia, Canada, Germany, the United Kingdom, the Organization for Economic Cooperation and Development, and the International Consumer Protection and Enforcement Network;

a report on food advertising, "Advertising Nutrition & Health: Evidence from Food Advertising 1997-1997"; and

a report on marketing violent entertainment to children.

FTC lends its expertise to other government agencies and intervenes in court proceedings when important issues affecting consumers are at stake, the report says. In the past year, FTC has appeared as a friend of the court in three private class action law suits and filed comments with the Food and Drug Administration and the Department of Housing and Urban Development.

Consumer and Business Education

The report notes that consumer and business education continued to be a significant part of FTC's agenda, and through publications, Web sites, media outreach, partnerships and exhibits, the agency reached millions of consumers and business people.

[Source: FTC's Review of its 2002 Activities], April 7, 2003.


Nature's Youth, LLC completed its voluntarily destruction of some 5700 boxes (each containing a 30-day supply) of its misbranded product, "Nature's Youth hGH," according to the Food and Drug Administration (FDA). This destruction, which occurred at locations in two states, was recently completed and involved approximately $515,000 worth of product. The firm also said it would change the labeling for future marketing of the product to comply with the law. "FDA will continue to take strong action to protect American consumers from dietary supplements that are not accurately labeled or that make misleading claims unsupported by scientific evidence." So said FDA Commissioner Mark McClellan.

FDA decided that the product was misbranded after evaluating unsubstantiated "structure and function" claims made on the company's website, as well as a review of the labeling of the product line. Among the false and misleading claims was that Nature's Youth hGH was a "proprietary blend of amino acids and precursor nutrients which enhance the body's natural production of Human Growth Factors and Insulin-like Growth Factor-1" that would, among other things, "improve physical performance, speed recovery from training, increase cardiac output, and increase immune functions." The product also claimed to be "your body's best defense against aging."

(FDA News Release, P03-33, April 30, 2003.)
















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