Federal Judge Requires FTC to Make Public Disclosures As a Condition of Settling a Lawsuit

District of New Jersey Judge Renee Marie Bumb has placed an unusual requirement the Federal Trade Commission as a condition for approving a settlement the FTC wants to enter into with the marketers of a weight loss supplement. In the case titled FTC v. Circa Direct, LLC, the FTC sued the sellers of an acai berry product, claiming the advertising made deceptive weight loss claims. After some months of litigation, the FTC and the Defendants reached a settlement agreement that did not require the any admission of guilt, a resolution that is common. However, Judge Bumb had serious reservations about approving a settlement without an admission of guilt. Taking a cue from a recent SEC prosecution in New York, Judge Bumb required the parties to submit briefs explaining why a settlement without a guilt admission was in the public's best interest. During the briefing period, the SEC case was appealed to the Second Circuit, who ruled the trial judge should have approved the SEC's settlement even without an admission of guilt.

Faced with the Second Circuit's precedent, Judge Bumb decided to conditionally approve the FTC settlement before her by requiring the FTC to take certain steps that would ensure that consumer searching for information about the product on the Internet could easily discover why the FTC originally decided the acai berry advertisements were deceptive. The judge explained her conditions as a guarantee that the Defendants' settlement would not enable them to sweep their conduct under a rug. "The FTC's allegations will not be tried in a court of law [but] they will at least be put before the public for evaluation and discussion. Though the actions outlined below may create a one-sided factual presentation, and are by no means a substitute for the trial's truth-seeking function, they will sufficiently address the public interest concern identified by the Court[.]"

Specifically, the court required the FTC to create and host a webpage discussing the settlement on the ftc.gov web page. The page must contain the following notice: "The United States District Court for the District of New Jersey has approved a settlement between the Federal Trade Commission and Defendants Circa Direct LLC and Andrew Davidson. The FTC had alleged that the Defendants falsely marketed certain acai-berry based products as promoting rapid and substantial weight loss when, in fact, they do not. While the Defendants do not admit to these allegations, they have submitted no evidence to this Court to the contrary. Below you may find a summary of the evidence that the FTC contends supports its allegations."

Judge Bumb required the webpage to further contain: (i) a detailed written summary of the FTC's original allegations, including a list of the products allegedly deceptively marketed, plus a link to the complaint; (ii) a detailed summary of the FTC's evidence that the advertising was deceptive, including links to the evidence itself; and (iii) a detailed summary of the science that led the FTC to conclude that Defendants' claims were scientifically implausible with a link to the declaration of the FTC's PhD nutritionist.

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