FTC restrains unsubstantiated coronavirus claims

Federal Trade Comm’n v. Golden Sunrise Nutraceutical, Inc., 2020 WL 4501968, No. 1:20-cv-01060-DAD-SKO (E.D. Cal. Aug. 5, 2020) 

Dealing with coronavirus-related claims, the court grants a TRO against defendants, including Tieu (president and CEO of the corporate defendants) and Meis (medical director/board member of one corporate defendant). Tieu was also indicted based on the same underlying conduct, and his pretrial release required him, among other things, to cease representing any Golden Sunrise product as having been approved or having proven itself to the FDA and to cease representing that his product has been approved or recognized by any government entity as preventing, treating, or curing COVID-19. 

The alleged conduct predates the pandemic. “Since at least 2016, defendants have promoted and sold a variety of products labeled as dietary supplements,” claiming numerous health benefits for them, “including treatment of serious diseases.” Defendants’ homepage stated that their “plans of care” “are intended to treat, modify, reverse, or cure a Serious or Life-threatening disease or condition; and real-world evidence indicates that the G.S. Nutraceutical treatments have potential to address unmet medical needs for such disease or condition.” Defendants also claimed that the FDA had reviewed and accepted their products, e.g., claiming that one product “was the first dietary supplement in the United States to be approved as a prescription medicine and also for the indication to treat Serious or Life-threatening conditions. It qualified for both of these under the Regenerative Medicine Advance Therapy (RMAT). This designation acknowledges not only the effectiveness of these herbs, usually only associated with pharmaceutical drugs, but also [that they] caus[e] no side effects, a quality of dietary supplements.”  

The FTC argued that, in fact, defendants’ products lack any FDA approval, as RMATs or otherwise. The dietary supplements allegedly consist almost entirely of common herbs and spices (e.g., olive leaf extract, yarrow extract, turmeric extract, cayenne extract, and eucalyptus extract). 

“In March 2020, defendants began marketing their Emergency D-Virus treatment plan as a cure for COVID-19.” After the FTC issued a warning letter, defendants removed express references to COVID-19, instead using terms such as “the virus,” “viral,” or “the viral pandemic.” (OK, that’s just insulting.) 

The complaint alleged violation of sections 5(a) and 12 of the FTCA (reminder that the latter covers false advertising of food, drugs, devices, services, or cosmetics): (I) false and unsubstantiated disease claims pertaining to COVID-19; (II) false and unsubstantiated claims pertaining to cancer; (III) false and unsubstantiated disease claims pertaining to Parkinson’s Disease; and (IV) false claims about the use for which the FDA cleared Golden Sunrise products. The FTC sought and received a TRO on I and IV, requesting that defendants be temporarily restrained from further violations of the FTCA as alleged in the complaint, as well as related measures such as an order restraining them from destroying or disposing of business records or clinical tests or studies and requiring them to provide a copy of the order to their employees and affiliates. 

The court found that the requested relief was within its authority to grant ancillary relief. Defendant Meis argued that he resigned as medical director two days after the suit was filed and requested that defendants remove website references to him in that capacity. He argued that he was no longer a primary participant and couldn’t control defendants’ advertising. But the court accepted the FTC’s argument that it had no information that he’d actually stopped participating; he hadn’t met the stringent test for showing that the action was moot due to voluntary cessation.

Since the FTCA authorizes injunctive relief, irreparable harm was presumed, and the only thing to do was to weigh the equities and consider the likelihood of success on the merits. 

As for likely success: uh, yes. Replacing the express COVID-19 claims with claims about “the virus,” “the virus epidemic,” and “the viral pandemic” still “implied” that the product was an effective treatment for COVID-19. [I don’t think those are implications, but then again it doesn’t matter much for the FTC.] The FTC argued that defendants lacked a reasonable basis for their claims, and that the standard for substantiating these particular claims should be very high. The court agreed. The relevant factors for the appropriate amount of substantiation: “(1) the product involved; (2) the type of claim; (3) the benefits of a truthful claim; (4) the ease of developing substantiation for the claim; (5) the consequences of a false claim; and (6) the amount of substantiation experts in the field would agree is reasonable.” Medical claims require competent scientific or medical tests or studies, and “a false claim could result not only in consumers not seeking proper medical care but also in their not adhering to social and safety norms regarding mask wearing, social distancing, and other activities designed, as effectively as possible, to keep not only themselves but also others safe from the COVID-19 virus.” Experts agree that controlled, scientific trials are required to substantiate these claims (the court makes no reference to the opinions of nonexperts like the President and his trade advisor), and that no such trials exist.

And these claims were material; express claims are presumed material, and implied claims about health/safety are also material. 

The court also found likely success on the FDA-related misrepresentations.  “[B]ecause these representations are inherently about the legitimate effectiveness of defendants’ products … to cure or treat COVID-19,” the same high degree of substantiation was required, and the same materiality was present.