Refrence:

FTC v. Wellness Support Network U.S. District Court for the Northern District of California, 2014 2014 U.S. Dist. LEXIS 21449 In the case that follows, the FTC alleges that Wellness Support Network, Inc. ("WSN"), a company co-owned by Robert Held and his daughter Robyn Held, had been misleading consumers in their online ads for products for the treatment of diabetes, in violation the FTC Act.

Opinion by: Joseph C Spero ... Diabetes affects over 10% of the adult population in the United States. Diabetes is characterized by abnormal glucose metabolism, in particular "hyperglycemia," which refers to high levels of glucose (or sugar) in the blood. ... Long-term complications of diabetes include heart disease and stroke. ... Diabetes is the leading cause of kidney failure, new cases of blindness and nontraumatic lower-limb amputations in the United States ... .

This case involves two products WSN began selling in 2004, the Diabetic Pack and the Insulin Resistance Pack (collectively, "the Products"). ... The Products were originally developed by Robert Held, who formulated them on the basis of scientific studies he found on the Internet. Defendants claim that the Products assist in the dietary or nutritional management of diabetes by providing nutrients which typical diabetics lack.

The majority of Defendants' customers find WSN on the Internet. Customers have purchased the Products on the WSN website, Amazon.com, eBay.com, and over the phone. ... WSN's sales revenue for the Products between 2004 and 2012 totaled $2,198,612.12.

WSN's Advertising Robyn and Robert Held develop all advertising and marketing for WSN products ... .

... [T]o increase the prominence of its website in search engines, WSN has used ... "pay-per-click" ("PPC") campaigns. Keywords that have been used [to direct customers to the WSN site] include ... "cure diabetes," "cure for diabetes," "diabetic cure," "remedies diabetes" [and] "natural diabetes cure. ..." WSN has advertised its Diabetic Pack and Insulin Resistance Pack primarily through online PPC campaigns ... designed by Robert Held. ... Some of WSN's more successful PPC ads read as follows:

Clinically Proven Natural Solution To Diabetes With A 90% Success Rate ...

Reverse the Effects of Diabetes

... The advertising consistently highlighted the Products' ability to lower blood sugar levels and reduce dependency on medication and emphasized the existence of scientific proof demonstrating these benefits. For example, ... Defendants' website included a page for Diabetic Pack with a picture of the product next to a large headline announcing a "Diabetes Breakthrough." Under the headline, the website stated that the product is "a medical food specifically formulated for the dietary management of diabetes," and went on to state: "Lower your blood sugar, safely and effectively with absolutely NO SIDE EFFECTS!! GUARANTEED!!" These claims were followed by a checklist of "breakthrough benefits" including "lower blood glucose levels" and "less dependency on medications."

The website also contained testimonials, including one from customer "Barbara Culver:"

This is the first time that I have ever ordered a product that really did what it said it would do! I was taking 50 units of insulin plus pills twice a day and my blood sugar just kept going up. I was tired all of the time and I could fall asleep as soon as I sat down. I also kept gaining weight. Since I've been using the Diabetic Pack I have lost 9 pounds, I have all kinds of energy and my sugar is down in the low 100s. Also I don't take insulin any more! ...

The website contained numerous references to science, including the headline, "Nobel Prize Winning Technology Validates WSN Diabetic Pack Ingredients." ... The WSN website claimed that the Insulin Resistance Pack, like the Diabetic Pack, is "the most technologically advanced product of its kind available anywhere and was validated by the 1999 Nobel Prize for physiology." ... Finally, some WSN webpages that advertised the Insulin Resistance Pack promised that "a new breakthrough can protect you from becoming diabetic and can help you reverse and eliminate your insulin resistance condition."

Customer Feedback and Other Information It is undisputed that no scientific studies were ever conducted to establish the effectiveness of WSN's Products. Rather, Defendants' claims about the Products are based on research studies addressing the benefits of the individual ingredients contained in Diabetic Pack and Insulin Resistance Pack. Robert Held testified that he believed the products were effective because people told him the Products worked for them, but he conceded that he did not know how many people had told him the Products worked. Similarly, when asked how many people WSN's products had not worked for, Mr. Held stated that he "[didn't] have clue." Between 2004 and 2007, WSN received approximately 384 consumer complaints about the Diabetic Pack ... .

Legal Analysis Whether Claims Were Made To show that a claim has been made, the FTC must establish that either

1) the representation has been explicitly stated in the defendant's advertising, or

2) the defendant's advertising, when viewed from the perspective of a reasonable consumer, gives the "net impression" that such a claim has been made ... .

The Court concludes that Defendants' advertising gives the net impression that Diabetic Pack is an effective treatment for diabetes. ... WSN's advertisements for Diabetic Pack repeatedly claimed that Diabetic Pack lowers blood sugar and even that it can take the place of diabetes medications ... .

The Court further finds that Defendants' advertising claimed that scientific studies prove that Diabetic Pack is an effective treatment for diabetes. In particular, Defendants' PPC advertising referred to the Diabetic Pack as "clinically proven" and its website stated that its ingredients were "validate[d]" by Nobel Prize Winning technology." ... Any reasonable consumer reading the description on Defendants' website of how Diabetic Pack works would conclude that the scientific studies relating to Foodform (R) ingredients also establish that Diabetic Pack is effective in treating diabetes.

The Court further finds that a reasonable consumer would get the net impression from Defendants' advertising that Diabetic Pack reduces or eliminates the need for insulin. ... WSN's PPC advertising expressly promised a "drug-free" "solution" to diabetes. Similarly, Defendants' website stated that one of Diabetic Pack's "breakthrough benefits" is "less dependency on medications." ... This impression was further reinforced by testimonials. ... "Jeff Rice" stated that he "threw all the medicines out the window and went a month with no medicine and just the Diabetic Pack supplements ..."

Defendants' website ... stated: "Yes, a new breakthrough can protect you from becoming diabetic and can help you reverse and eliminate your insulin resistant condition!" ... These express statements establish, as a matter of law, that Defendants claimed that Insulin Resistance Pack prevents diabetes ... .

Whether Claims Were Misleading [The FTC submits the report of Dr. W. Timothy Garvey, an expert in the science and treatment of diabetes.]

Dr. Garvey has offered detailed reasons for concluding that all ... Defendants' claims lack adequate substantiation [or] are actually false. According to Dr. Garvey, well-designed human clinical studies to substantiate WSN's claims would need to be controlled, randomized, double-blind and statistically meaningful. ... Dr. Garvey concluded that no studies that adhere to these requirements exist for the challenged Products. ... Defendants admit as much.

Dr. Garvey further opined that the studies cited by Defendants as to the individual ingredients in their Products are flawed. ... First, Dr. Garvey found that many of the studies cited by WSN were conducted in vitro or on animals and therefore cannot substantiate that the tested ingredients work in humans. Second, Dr. Garvey identified numerous shortcomings in the single-ingredient studies that make them inapplicable to WSN's products, including insufficient size, lack of placebo or other controls, and testing of much larger doses than are found in WSN's products ... .

... Accordingly, the Court finds based on the undisputed facts that the FTC has demonstrated that all of Defendants' claims are misleading.

Whether Claims Were Material Finally, the FTC must establish that the claims at issue are material, that is, that they "involve[ ] information that is important to consumers and, hence, likely to affect their choice of, or conduct regarding a product." Materiality is also presumed as to "claims that significantly involve health, safety, or other issues that would concern reasonable consumers." Because all of the claims in this case significantly involve the consumer's health, the materiality requirement is met.

question:

1. What are some of the factors that might make it easier for online scams like this one to succeed? What are some of the factors that might make them difficult to discover and prosecute?

Separate question:

1. According to Pew Research, in 2011 the pharmaceutical industry spent more than $25 billion marketing to physicians. But at this point one in five doctors will not see pharmaceutical sales representatives in their offices, and the industry has turned to new strategies, making use of data collected from prescriptions processed by pharmaciesdoctor's names, the drugs, and dosages they prescribe. Vermont passed a law forbidding the sale of this data by pharmacies, and forbidding their use to market to doctors. Who are the stakeholders in this situation? What are the ethical issues? Research: Find out what happened when the Supreme Court decided this case. Sorrell v. IMS Health Inc., 131 S.Ct. 2653 (2011).