By Bradley O. Cebeci

As we have recently reported, the United States Supreme Court’s decision in AMG Capital Management cut off the FTC’s ability to use section 13(b) of the FTC Act—which facially allows the FTC to seek only injunctive relief to stop practices it views as unfair and deceptive—as a vehicle for pursuing monetary relief against defendants in FTC district court enforcement actions. That does not mean a free ride for marketers who run afoul of the FTC, however.

Case in point.

Earlier this week, the Commission approved final administrative consent orders against three companies, BASF SE, its subsidiary, BASF Corp. and DIEM Labs, which together have agreed to pay more than $416,000 to settle charges that they deceptively marketed two dietary fish oil supplements as clinically proven to reduce liver fat in adults and children with non-alcoholic fatty liver disease (NAFLD).

The FTC’s administrative complaint, filed on March 31, 2021, alleges that BASF SE, which developed and owns the supplements Hepaxa and Hepaxa PD (the “Products”), acted through its US subsidiary, BASF Corp., to retain DIEM Labs to advertise and distribute both supplements in the United States.

The final orders prohibit the companies from claiming that the Products (or any similar products) cure, treat, or mitigate any disease, unless the claim is true and substantiated by competent and reliable scientific evidence in the form of randomized human clinical testing. The final orders also impose a monetary judgment in excess of $416,000 to enable the Commission to provide refunds to all consumers who bought either supplement.

So, if the FTC may no longer pursue monetary relief under section 13(b), why did these companies agree to disgorge these monies?

Because, if a respondent elects to contest the charges brought by the FTC via an administrative complaint, the complaint is adjudicated in a trial-type proceeding before an administrative law judge (“ALJ”). Upon conclusion of the hearing, the ALJ issues an “initial decision” setting forth her findings of fact and conclusions of law, and recommending either entry of an order to cease and desist or dismissal of the complaint. Either side may appeal the initial decision. Upon such an appeal, the Commission receives briefs, holds oral argument, and thereafter issues its own final decision and order. A Commission order generally becomes final 60 days after service on the respondent.

A respondent who violates a final order faces civil penalties, which may be pursued by the FTC in federal district court. After a final order is entered, the Commission may also seek consumer redress from the respondent in federal district court for consumer injury caused by the conduct that was at issue in the administrative proceeding pursuant to Section 19 of the FTC Act. Finally, the Commission may even obtain civil penalties against non-respondents who received a copy of a final order declaring a practice unfair or deceptive.

The takeaway: those deemed by the FTC to be engaged in deceptive or unfair marketing practices should not expect to get a pass. They still face the risk of civil penalties and consumer redress.

If you have been served with a Civil Investigative Demand or FTC complaint, you need experienced counsel to defend your interests.

Bradley O. Cebeci is a Partner with Rome & Associates who focuses his practice on payments, FTC defense, and digital marketing.