Federal Trade Commission v. NPB Advertising, Inc.

218 F. Supp. 3d 1352, 2016 U.S. Dist. LEXIS 151840, 2016 WL 6493923
CourtDistrict Court, M.D. Florida
DecidedNovember 2, 2016
DocketCASE NO. 8:14-cv-1155-T-23TGW
StatusPublished
Cited by5 cases

This text of 218 F. Supp. 3d 1352 (Federal Trade Commission v. NPB Advertising, Inc.) is published on Counsel Stack Legal Research, covering District Court, M.D. Florida primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Federal Trade Commission v. NPB Advertising, Inc., 218 F. Supp. 3d 1352, 2016 U.S. Dist. LEXIS 151840, 2016 WL 6493923 (M.D. Fla. 2016).

Opinion

ORDER

STEVEN D. MERRYDAY, UNITED STATES DISTRICT JUDGE

The FTC sues (Doc, 22) Nicholas Con-gleton and others under Section 5 of the FTC Act for engaging in false or deceptive advertising. The FTC alleges that Congle-ton published or caused the publication of (1) false or unsubstantiated efficacy claims, (2) false establishment claims, (3) deceptive testimonials, and (4) deceptive news websites. The FTC moves (Doc. 46) for summary judgment and requests a permanent injunction against Congleton and restitution from both Congleton and “relief defendant” Dylan Loher.

DISCUSSION

1. Congleton enters the green-coffee extract business.

In April 2012, Nicholas Congleton received from a dietary-supplement manufacturer an e-mail touting the efficacy of “green-coffee extract” as a weight-loss aid. (Doc. 52-1 at 63-64) The e-mail linked to a three-minute clip from the television show “Dr. Oz.” (Doc. 52-1 at 64) In the clip, Dr. Oz describes a clinical study—the Vinson study—that “showed women and men who took green-coffee extract lost an astounding amount of fat and weight, 17 pounds in 22 weeks by doing absolutely nothing extra....” (Doc. 1-1 at 8) After watching the Dr. Oz clip and searching the Internet to learn more about green-coffee extract, Congleton, with co-defendants Paul Pascual and Bryan Walsh, founded a green-coffee extract business. (Doc. 52-1 at 64) The trade name of the defendants’ product is “Pure Green Coffee.”

To operate the business, Congleton, Pas-cual, and Walsh incorporated several corporations, including Nationwide Ventures, NPB, Olympus, JMD, Sermo, and Signature. (Doc. 46-5 at 1-9; 46-37 at 8) Con-gleton, Pascual, and Walsh operated the Pure Green Coffee business primarily through Nationwide (See Doc. 52 at 7), but the corporations’ functions overlapped.

Congleton bought several domain names, and in April or May of 2012 Pure Green Coffee began advertising on the Internet. (See Doc. 52-1 at 70-72) Congleton supervised the advertising campaign. (Doc. 46-37 at 9) Collectively the corporations paid Google and other digital-advertising companies $9,403,769 for online advertise[1358]*1358ments (Doc. 46-10 at 8), which generated $33,784,048 in gross receipts. (Doc. 46-5 at 7) Congleton, Pascual, and Walsh deposited $30,220,088.26 into bank accounts belonging to the corporations. (Doc. 46-10 at 4)

In March 2013 Pascual received a civil investigative demand from the FTC and told Congleton about the demand. (Doc. 52-1 at 128-29) Nationwide continued to advertise the green-coffee extract (Doc. 52-1 at 129), and Congleton failed to change the content of the business’s advertising. (Doc. 52-1 at 131) The defendants continued to sell. Pure Green Coffee until 2014. (Cf. Doc. 46-5 at 7, which notes that Nationwide reports gross income of $513,808 in 2014)

2. The FTC Act prohibits unfair or deceptive acts.

Section 5 of the FTC Act prohibits “unfair or deceptive acts or practices ... affecting commerce.” For each count, the FTC must show that Congleton misrepresented, expressly or impliedly, a material fact and that the misrepresentation likely would mislead a reasonable consumer. FTC v. Tashman, 318 F.3d 1273, 1277 (11th Cir. 2003). An express claim conveys a putative fact directly, while an implied claim conveys a putative fact obliquely. Kraft, Inc. v. FTC, 970 F.2d 311, 318 n.4 (7th Cir. 1992) (Flaum, J.). An advertisement’s “overall impression,” not an isolated word or phrase, determines the representation conveyed. Removatron Intern. Corp. v. FTC, 884 F.2d 1489, 1497 (1st Cir. 1989) (Bownes, J.).

A representation is material if a reasonable prospective consumer likely would rely on the representation. FTC v. Washington Data Resources, 856 F.Supp.2d 1247, 1272 (M.D. Fla. 2012) (citing FTC v. Transnet Wireless Corp., 506 F.Supp.2d 1247, 1266 (S.D. Fla. 2007) (Marra, J.)). Because an express claim inherently misleads a consumer, an express claim is presumptively material. Transnet Wireless Corp., 506 F.Supp.2d at 1267 (citing In The Matter of Thompson Med. Co., Inc., 104 F.T.C. 648, 816, 1984 WL 565377 (1984), aff'd, 791 F.2d 189 (D.C. Cir. 1986) (Mikva, J.)).

A. The efficacy claims

A health-related efficacy claim, which states that the product yields the benefit promised, likely will mislead a reasonable consumer if the claim is false or if the advertiser lacks competent and reliable scientific evidence to substantiate the claim. FTC v. Nat’l Urological Grp., Inc., 645 F.Supp.2d 1167, 1189 (N.D. Ga. 2008) (Pannell, Jr., J.), aff'd, 356 Fed.Appx. 358 (11th Cir. 2009). If the FTC alleges that a claim lacks competent and reliable substantiation, the defendant must produce the evidence on which he relied for substantiation. FTC v. QT, Inc., 448 F.Supp.2d 908, 959 (N.D. Ill. 2006) (Denlow, Mag.). If the defendant produces evidence of substantiation, the FTC must prove the inadequacy of that evidence. See QT, 448 F.Supp.2d at 959.

In this action, the FTC establishes that Nationwide claimed health-related efficacy. The Pure Green Coffee advertisements promise consumers “[t]remendous weight-loss results”: seventeen pounds in twenty-two weeks, seventeen pounds in twelve weeks, sixteen percent of body-fat in twenty-two weeks, sixteen percent of body-fat in twelve weeks, twenty pounds in four weeks, twenty-eight pounds in nine weeks, or ten pounds and one-to-two inches of belly-fat in one month. (See Doc. 46-21 at 4; Doc. 46-37 at 28-32 for several examples of the Pure Green Coffee efficacy claims)

The FTC establishes the falsity of these efficacy claims. Dr. David Levitsky, a professor of nutrition and psychology at Cor[1359]*1359nell University and an expert in weight loss, found the efficacy claims biologically implausible except for the claim that Pure Green Coffee would cause a consumer to lose seventeen pounds in twenty-two weeks (Doc. 46-12 at 14), the plausibility of which requires “close medical supervision and nutrient supplementation.” (Doc. 46-12 at 14-15) By establishing the falsity of these express claims, the FTC shows that the claims likely would mislead a reasonable consumer.

Also, the FTC establishes that Nationwide lacks competent and reliable scientific evidence to substantiate the efficacy claims. Opining that a scientist can accept a study’s findings only if the study is “well-designed, well-executed, and well-analyzed,” Dr. Levitsky explains that a competent and reliable study requires placebo control, double blinding, intent-to-treat analysis, drop-out tracking, human subjects with the same characteristics as the target audience, and the same ingredients and dose as the product making the efficacy claim. (Doc. 46-12 at 8-10) Even if the study’s method appears sound, a scientist must consider whether a latent design flaw undermines the study’s reliability. (See Doc. 46-12 at 10)

Congleton admits that the efficacy claims lack a scientific basis. (E.g., Doc.

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Cite This Page — Counsel Stack

Bluebook (online)
218 F. Supp. 3d 1352, 2016 U.S. Dist. LEXIS 151840, 2016 WL 6493923, Counsel Stack Legal Research, https://law.counselstack.com/opinion/federal-trade-commission-v-npb-advertising-inc-flmd-2016.