Friday, October 07, 2016

Straightforward deference to FTC substantiation rules dooms gray hair treatment

Federal Trade Commission v. COORGA Nutraceuticals Corp., --- F.Supp.3d ---- , 2016 WL 4472994, No. 15-CV-0072 (D. Wyo. Aug. 15, 2016)

The FTC sued COORGA over its claims that its Grey Defence product reversed/prevented gray hair and that there was scientific proof of this.  Defendant Coore, COORGA’s principal, is a soi-disant “applied scientist” with degrees in economics and no post-secondary chemistry or biology courses.  He developed the Grey Defence formula over a 9-month period by conducting “comparative scientific research” of various journal articles, studies related to Vitiligo (a disease that causes the loss of skin color), and various “therapeutic compounds.”  He also spoke with scientists about their laboratory work unrelated to Grey Defence specifically and tested the product on himself (“seeing re-pigmentation of some of my own hair follicles after 3 months in the range of around 3%”).

From 2011 to June 10, 2016, COORGA had $433,848.93 in gross sales to U.S. consumers, of which it refunded $29,608.26.  Coore intends to sell a new product, Grey Defence Xtreme 3.0, as soon as this case concludes, and defendants have developed other products, including brain JOLT! (to “boost working memory”), TumorDefence (to cure cancer), FatBLOKKER! (now known as mealBUDDYZ!), Endura, and Sodhalose-C (to fight neurogenerative diseases). These products have likewise been developed through Coore’s own “research and review of journal articles and discussions with ingredient suppliers without consulting any medical professionals or scientists.”

Um, no.  Anyway, the case provides a straightforward review of the standards for substantiating efficacy and establishment claims; where the products are health-based, any efficacy claim may functionally be an establishment claim.  Substantiation requires a “reasonable basis,” and reasonability is assessed considering “the type of product,” “the type of claim,” “the benefit of a truthful claim,” “the ease of developing substantiation for the claim,” “the consequences of a false claim,” and “the amount of substantiation experts in the field would consider reasonable.” If an establishment claim “states a specific type of substantiation,” however, the “advertiser must possess the specific substantiation claimed.” And if an ad conveys a non-specific establishment claim—e.g., “medically proven”—the advertiser “must possess evidence sufficient to satisfy the relevant scientific community of the claim’s truth.”

“For both efficacy and non-specific establishment claims, then, like those at issue in this case, it is appropriate to consider the amount of substantiation required by the relevant scientific community in determining whether the advertiser’s claim is false, misleading, or unsubstantiated.”  The FTC submitted the testimony of Dr. George Cotsarelis, a Doctor of Medicine and Professor of Dermatology at the University of Pennsylvania School of Medicine and Director of the Hair and Scalp Clinic at the University of Pennsylvania Health System.  He opined that substantiation for claims about reversing or preventing the formation of gray hair would require at least one well-designed, randomized, placebo-controlled, and double-blinded human clinical trial. Coore’s testimony to the contrary was inadmissible because he wasn’t and couldn’t be qualified as an expert. “Simply reading articles over a nine-month period does not impart the knowledge, skills, experience, training, or education one needs to competently interpret and evaluate scientific journal articles, opine on what constitutes scientific proof, and weigh the evidence related to the cause or prevention of gray hair.”
So, the efficacy and establishment claims were unsubstantiated.  Coore’s research could be “potentially useful in generating hypotheses for future studies,” but they weren’t enough for these claims, nor was feedback from 20 Grey Defence users out of 100 contacted.  Defendants argued that they only claimed to rely on their own “observational study,” so they did possess the level of substantiation they claimed.  But defendants actually went beyond that: they claimed that their product was “based upon a foundation of scientific evidence,” using phrases such as “scientifically shown.”

The court found injunctive relief proper, both for consumer redress (in an amount to be determined) and to prevent future violations of the law.  Given Coore’s further marketing plans, there was a cognizable danger of recurring violations.  The court noted that injunctive relief under the FTCA can “fence in” offenders by enjoining more than the specific misconduct previously engaged in, as long as there is “a reasonable relation to the unlawful practices found to exist,” but sought further input from the parties on the scope of the injunction.

Coore was also personally liable for consumer redress.  He actually knew about the material misrepresentations, or was at a minimum recklessly indifferent to the truth or falsity of the misrepresentations:

Coore was intimately involved with Grey Defence’s development and advertising, yet chose not to consult any medical professional to evaluate his purported substantiation or conduct any well-designed clinical trial to investigate Grey Defence’s efficacy. Instead, he arrogantly relied on his own internet research, knowledge from high school biology and chemistry classes, a test on himself, and conversations with researchers who did not actually evaluate Grey Defence’s efficacy. This type of evidence constitutes reckless indifference. 

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