Without Placebo I'm Nothing

Federal Trade Commission v. QT, Inc., -- F. Supp. 2d --, 2006 WL 2587914 (N.D. Ill.)

"The pain just went away."

"Within seconds the pain was gone."

"You don't have to live with pain."

These are just a few statements, from many, many similar ones, found in infomercials for the Q-Ray® Ionized Bracelet®. The infomercials were highly successful in selling the bracelent.

The FTC sued, claiming that the defendants marketed it in a deceptive and misleading manner by falsely representing that (1) the bracelet provides immediate, significant or complete pain relief and (2) scientific tests prove the pain-relief claims. In addition, the FTC alleged that (3) defendants falsely represented that QT's 30-day satisfaction guarantee permits consumers to readily obtain a full refund of the purchase price if they return the bracelet within 30 days. The court agreed with the FTC on all three points.

Since at least 1996, QT has advertised, marketed, and sold the Q-Ray bracelet via U.S. media outlets and Internet sites such as www.qray.com.

The bracelet is made of copper and zinc, though the infomercials say the bracelet isn’t copper. The defendants claimed that composition differences in the various styles are irrelevant because the effect comes from ionization, “a high-voltage process that changes metal conductivity.” Defendant’s principal Que Te Park testified that he picked the term “ionized” without having a definition for it and without intending to convey that the bracelet is electrically charged. He doesn’t know what that’s supposed to do to the bracelet. QT doesn’t test any bracelets it gets from its supplier to insure they’re ionized. Park made up the theory that the bracelet works like acupuncture or Eastern medicine. The court found his testimony contradictory and full of obfuscation. “He is a clever marketer but a poor witness.”

QT offered various studies, mostly from other countries, mostly non-blinded, using very small numbers, some as few as two or three people. The better of QT’s half-baked studies showed no effect versus placebo. QT’s market surveys showed a 50/50 split in consumer satisfaction with pain relief; 25% of people who purchased the bracelets, historically, demanded refunds. Park claimed anecdotal evidence from personally meeting 8,100 satisfied consumers (1% of all purchasers), but many of the warranty cards defendants offered as testimonials distorted incentives by telling consumers they’d get a 20% discount for their next purchase if they submitted a testimonial. (Now, presumably dissatisfied consumers wouldn’t make a next purchase, but people who’d experienced relief due to the placebo effect or natural regression to the mean might well do so.)

In sum, there was no scientific evidence that the Q-Ray bracelet receives, retains, or emits an electrical charge or has any properties different from any other bracelet made from the same metals. Nor was there a “reasonable basis” to make the advertising claims, which in the case of health claims requires at least one well-conducted, placebo-controlled, randomized, double-blind clinical trial. This was a scheme to defraud consumers out of millions of dollars by preying on their desire to find a simple solution to alleviate their physical pain. The website had the chutzpah to claim, “Once the positive benefits that you enjoy while wearing the Q-Ray Ionized Bracelet begin to fade or disappear it is time for a new Q-Ray as the ionized power in your bracelet has been exhausted, and cannot be restored.”

Notable components of the ruling: The defendants introduced an expert to defend the idea of traditional Chinese medicine, which is generally not tested using Western double-blinded, placebo-controlled clinical studies but is based on long experience. This might have been a tougher sell for the FTC had there been any evidence that the Q-Ray bracelet derived from any aspect of traditional Chinese medicine. As it was, the court simply held that traditional Chinese medicine offered no support for defendants’ claims.

Defendants also introduced an expert to testify that the placebo effect is real and offers benefits to patients when they believe a device will work. Defendants’ marketing was, he thought, likely to induce a successful placebo effect. The legal argument here was that older cases, which barred products that satisfied consumers although they lacked any physiological basis for effectiveness, have been overtaken by new scientific evidence that the placebo effect is real. The court, however, ruled that previous cases had considered the existence of the placebo effect and had held it an illegitimate means of making sales, because it requires lies to consumers.

Even if one can argue that a placebo effect means that claims of pain control are not technically false, they are “misleading” under the FTC act because the device isn’t inherently effective. It’s the marketing and not the device itself that produces results; any device so marketed would serve. This reasoning is trickier than it seems, though I think it’s the right way to go. Ordinarily, we don’t care why a product works; we don’t even understand why a product works. Mechanism of action, in other words, is not material. But in this case, if we learned why, the bracelet would stop working. The basic premise of the sale is trickery. And that, I think, matters to consumers, just as conditions of production that don’t affect physical qualities – dolphin-free tuna, Made in America, etc. – matter to consumers.

Remedies: The retail price of the Q-Ray bracelet sold by QT ranges from $49.95 to $249.95. QT's wholesale cost for the Q-Ray bracelet ranges between $7.50 and $28. Defendants thus marked up the bracelet over 650 percent in setting the retail price to consumers. Its sales during the relevant period were over $137 million, and its net profit $22.5 million. The court granted restitution and recission. Defendants had to disgorge profits plus interest. Every purchaser will be allowed a full refund, not to exceed a total of $87 million (defendants’ net sales). Thus, the amount paid will be somewhere between $22.5 million (plus interest) and $87 million.

The court also held defendant Que Te Park personally liable.

Final note: The remaining claims on the website seem to be pure mumbo-jumbo about balance, health, energy and performance. Though they’re possibly too vague to be misleading, I think that they still falsely promise a health benefit – especially when combined with the warnings in the FAQ not to let the “terminals” touch, not to use without a doctor’s permission while pregnant, etc.