COURT HALTS DISTRIBUTION OF ADULTERATED DIETARY SUPPLEMENTS BY CALIFORNIA COMPANY

FROM:  U.S. JUSTICE DEPARTMENT 

Monday, June 23, 2014

District Court Enters Permanent Injunction Against California-Based Firm and Individuals to Prevent Distribution of Adulterated Dietary Supplements

The Justice Department announced today that U.S. District Court Judge Otis D. Wright II of the Central District of California entered a consent decree of permanent injunction against GM Manufacturing Inc. (GMM) and Mao L. Yang, Mary Chen and David Yang on Friday, June 20, 2014, to prevent the distribution of adulterated dietary supplements.

“Adulterated dietary supplements may pose a significant risk to the public health,” said Stuart F. Delery, Assistant Attorney General for the Department of Justice’s Civil Division.   “The Department of Justice is committed to protecting the public from dietary supplements that are not manufactured in conformity with current good manufacturing practices as required by law.”

According to the complaint filed by the United States on June 2, 2014, GMM manufactured, labeled, prepared, packed, held and distributed dietary supplements from its facility in Gardena, California.   As alleged in the complaint, in spections by the Food and Drug Administration (FDA) established that the dietary supplements manufactured and distributed by the defendants were adulterated, in that they were prepared, packed and held under conditions that do not comply with the current good manufacturing practice regulations for dietary supplements.   For example, during an inspection in 2013, FDA observed that defendants failed to maintain, clean and sanitize, as necessary, equipment, utensils and other contact surfaces used to manufacture, package, label or hold components or dietary supplements.

As part of the permanent injunction, the defendants agreed to stop manufacturing, preparing and distributing dietary supplements.   The defendants agreed to provide 90 days’ notice to FDA before seeking to resume operations.   If the defendants seek to resume dietary supplement operations, they are required to comply with a series of remedial measures, including retaining an expert to inspect the company’s facility and provide a certification that all manufacturing deficiencies have been corrected.   Also, the defendants must report to FDA all actions they have taken to correct the deviations.   The defendants are not allowed to resume operations until FDA has re-inspected their facility and operations, and provided written notice to them.

According to the complaint, the defendants’ facility was inspected by FDA in 2012 and 2013.   During the 2013 inspection, the FDA observed significant violations of the Federal Food, Drug, and Cosmetics Act and implementing regulations, including violations that were the same or similar to those observed during the 2012 inspection.   Following the 2012 inspection, FDA issued a warning letter to Mao Yang informing him that the significant deviations documented by FDA during the 2012 inspection rendered defendants’ dietary supplements adulterated under the law.   The warning letter from FDA cautioned that failure to promptly correct the deviations, and prevent future ones, could lead to additional regulatory action, including an injunction.

Despite the inspections and warning letter from FDA, the defendants continued to manufacture and distribute adulterated dietary supplements in violation of the law.

The permanent injunction entered by the district court requires the defendants to recall all dietary supplements that the defendants manufactured, prepared, processed, packed, labeled, held, and/or distributed at any time since Feb. 13, 2012.   Defendants are then required to destroy all dietary supplements in their possession, custody and/or control.

Assistant Attorney General Delery thanked the FDA for referring this matter to the Department of Justice.  Trial Attorney Lauren Fascett of the Civil Division’s Consumer Protection Branch, in conjunction with Assistant U.S. Attorney Brian Villarreal in the Central District of California and Associate Chief Counsel Leslie Cohen of the Office of General Counsel, Enforcement of the Food and Drug Division, Department of Health and Human Services, brought this case on behalf of the United States.

HOME SECURITY COMPANY SETTLES CHARGES OF CONSUMER DECEPTION WITH FTC

FEDERAL TRADE COMMISSION 

FTC Approves Final Consent Settling Charges that Home Security Company ADT’s Endorsements Deceived Consumers

Following a public comment period, the Federal Trade Commission has approved a final consent order settling charges that the home security company ADT LLC misrepresented that paid endorsements from safety and technology experts who appeared as guests on news programs and talk shows were independent reviews.

First announced in March 2014, the settlement prohibits ADT from misrepresenting paid endorsements as independent reviews, and requires the company to clearly and prominently disclose any material connections in advertising for home security or monitoring products or services, and promptly remove reviews and endorsements that have been misrepresented as independently provided by an impartial expert or have failed to disclose a material connection between ADT and an endorser.

The Commission vote to approve the final order in this case was 4-0-1, with Commissioner McSweeny not participating.

PLASTIC LUMBER MAKER SETTLES CHARGES WITH FTC OVER MISLEADING CONSUMERS

FROM:  U.S. FEDERAL TRADE COMMISSION 

FTC Brings Second Case This Year Against Plastic Lumber Products Marketer For Misleading Environmental Claims

For the second time this year, the Federal Trade Commission has settled charges that a company that markets plastic lumber and related products misled consumers regarding the environmental attributes of its products.

Under the FTC proposed settlement, the company, American Plastic Lumber, Inc. (APL), is prohibited from making misleading statements about the amount of post-consumer recycled plastic content in its products or other environmental benefit claims and must have competent and reliable evidence to support any such claims.

“The FTC takes environmental marketing very seriously, and works hard to ensure that consumers are not misled when it comes to ‘green’ claims,” said Jessica Rich, Director of the Federal Trade Commission’s Bureau of Consumer Protection. “Businesses should consult the FTC’s Green Guides to understand what environmental clams they legally can and cannot make.”

APL is a California corporation, based in Shingle Springs, CA. It distributes plastic lumber products, such as picnic tables, benches, trash bins, wheel stops, and speed bumps, to end-use consumers and businesses in the construction industry.

In its administrative complaint, the FTC alleges that from at least June 2011 through June 2013, APL’s advertisements and marketing materials implied that its products – and the recycled plastics they contain – were made virtually all out of post-consumer recycled content such as milk jugs and detergent bottles. The complaint states that these claims were deceptive and misleading, and that in reality the products contained less than 79 percent post-consumer content, on average.

In addition, the complaint states, about eight percent of APL’s products contained no post-consumer recycled content at all, and nearly seven percent of the products were made with only 15 percent post-consumer content. These deceptive and unsubstantiated claims, the complaint concludes, violate Section 5 of the FTC Act, which prohibits deceptive acts or practices in commerce.

The proposed consent order prohibits APL from making deceptive claims regarding environmental benefits for any product or package. The terms of the settlement are similar to those in the first case the FTC brought related to unsubstantiated “green” lumber claims. That case, against N.E.W. Plastics Corp., was announced in February 2014. The Commission issued the final complaint and order in April 2014.

Specifically, the proposed order prohibits APL from making representations about the recycled content, post-consumer recycled content, or any other environmental benefit of its products or packaging unless they are true, not misleading, and can be substantiated by competent and reliable evidence.  It also provides that if, in general, experts in the relevant scientific field would conclude it necessary, such evidence must be competent and reliable scientific evidence.

It further requires APL to substantiate any recycled-content claims by demonstrating that the content is made of materials that were recovered from the waste stream. Finally, the proposed order requires APL to maintain and make available to the FTC for five years all of its advertising and promotional material making claims covered by the order, materials it relied upon in making such claims, as well as any tests, reports, studies, surveys or other evidence that contradicts or calls into question any environmental claims it makes. The order will expire in 20 years.

CREDIT REPAIR COMPANY AGREES IT WILL CEASE REPORTING FALSE DISPUTES TO CREDIT REPORTING SYSTEM

FROM:  U.S. JUSTICE DEPARTMENT 

Wednesday, June 18, 2014

Credit Repair Company Agrees to Pay $400,000 Civil Penalty and Halt Illegal Credit Repair Practices

The Justice Department’s Civil Division announced today that RMCN Credit Services Inc. (RMCN), of McKinney, Texas, and the Texas residents who own it, Doug and Julie Parker, have agreed to settle a federal court case charging them with falsely disputing negative information on consumers’ credit reports and collecting illegal upfront fees from customers.  The defendants have agreed to an order that puts an end to these practices, which are illegal under the Credit Repair Organizations Act (CROA), and pay civil penalties.

“This consent order sends a strong signal to the credit repair industry that we will enforce the law against companies that abuse the credit reporting system by flooding it with false disputes,” said Assistant Attorney General Stuart F. Delery of the Civil Division.  “This conduct degrades the accuracy of credit reports and raises costs for all consumers.”

In a complaint filed on behalf of the Federal Trade Commission (FTC) in the U.S. District Court for the Eastern District of Texas, the United States alleged that the defendants operated a credit repair company that offered to improve consumers’ credit scores by disputing negative information on their credit reports.   The complaint alleged that RMCN and Doug and Julie Parker lodged false disputes with credit bureaus by sending “consumer” letters raising fabricated disputes over negative information in its customers’ reports.   For example, the letters made false statements such as “I was never late” or “This is not my account.”  The government’s case further alleged that these letters were not written by consumers.  According to the government’s court filings, RMCN sent more than a million dispute letters during the five-year period preceding the complaint (October 2006 to October 2011).   This forced credit bureaus and creditors to incur costs responding to bogus letters, which ultimately raised the cost of credit for all consumers.

The complaint also alleged that RMCN charged their customers for credit repair services before those services were fully performed.  In particular, the government alleged that defendants charged a significant portion of their fee before any credit repair work began.

The agreed order prohibits defendants from making any untrue or misleading statements to consumer reporting agencies or creditors, prohibits them from charging advance fees for credit repair services, and bars them from making misrepresentations in connection with the sale of any good or service.   The order also imposes a civil penalty of $2.35 million.   If the defendants pay $400,000, the remainder of the judgment will be suspended based on the defendants’ inability to pay the full amount of the penalty.

Congress enacted CROA to protect the public from unfair and deceptive advertising and business practices by credit repair organizations.   CROA prohibits credit repair companies from making false statements, or statements they reasonably should have known were false, to credit bureaus and creditors concerning consumers’ credit standing or creditworthiness.   CROA also forbids credit repair companies from charging customers for credit repair services before those services are fully performed.

In agreeing to settle this matter, defendants have not admitted that they knowingly violated CROA.

The case was handled by Trial Attorney Tim Finley of the Civil Division’s Consumer Protection Branch, Assistant U.S. Attorney Kevin McClendon of the U.S. Attorney’s Office for the Eastern District of Texas, and Tom Carter, Emily Robinson and Luis Gallegos of the FTC.