FTC ALLEGES GERBER FALSELY ADVERTISED GOOD START GENTLE FORMULA PRODUCTS

FROM:  U.S. FEDERAL TRADE COMMISSION 

FTC Charges Gerber with Falsely Advertising Its Good Start Gentle Formula Protects Infants from Developing Allergies

The Federal Trade Commission has charged Gerber Products Co., also doing business as Nestlé Nutrition, with deceptively advertising that feeding its Good Start Gentle formula to infants with a family history of allergies prevents or reduces the risk that they will develop allergies.

The agency also alleges that Gerber has falsely advertised Good Start Gentle’s health claims as FDA-approved. Through its federal court enforcement action, the Commission is seeking to prohibit Gerber from making the alleged false and unsubstantiated allergy-prevention claims.

“Parents trusted Gerber to tell the truth about the health benefits of its formula, and the company’s ads failed to live up to that trust,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “Gerber didn’t have evidence to back up its claim that Good Start Gentle formula reduces the risk of babies developing their parents’ allergies.”

In its complaint, the FTC alleges that since 2011, Gerber has advertised its Good Start Gentle formula through advertisements that ran on television, in magazines, at point-of-sale displays, online, and in other promotional material. Good Start Gentle sells for about $24 for a 23.2-ounce package of powdered formula.

Good Start Gentle is made with partially hydrolyzed whey proteins (PHWP). Gerber claims that feeding babies this formula, instead of formula made with intact cow’s milk proteins, will prevent or reduce the risk that they will develop allergies. In its ads, Gerber promotes Good Start Gentle by saying, for example:

“You want your baby to have your imagination…Your smile…Your eyes…Not your allergies.”
Also, a sticker on the package states that Good Start Gentle Formula is the:

“1st & ONLY Routine Formula TO REDUCE THE RISK OF DEVELOPING ALLERGIES.”
The agency’s complaint charges that Gerber lacked the scientific substantiation to make these general allergy-prevention claims, in violation of the FTC Act.

In addition, according to the FTC, Gerber’s ads also misrepresent that Good Start Gentle has qualified or received approval for a Food and Drug Administration health claim. For example, some ads prominently featured a gold badge stating that Good Start Gentle is the “1st and Only” formula that “Meets FDA Qualified Health Claim.”

In 2009, Gerber petitioned the FDA for permission to make a claim connecting PWHP with the reduced risk of one type of allergy, atopic dermatitis, in infants. The FDA allowed Gerber to make the narrow claim but only if Gerber carefully qualified its statement to make it clear that there is “little scientific evidence” for the relationship.

The Commission vote authorizing staff to file the federal court complaint was 5-0. The complaint was filed in the U.S. District Court for the District of New Jersey on October 29, 2014.

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest. The case will be decided by the court.

MARKETERS CHARGED BY FTC WITH DECEIVING BUSINESSES INTO PURCHASING CREDIT/DEBIT CARD PROCESSING FEES

FROM:  FEDERAL TRADE COMMISSION 
FTC Charges Marketers with Deceiving Small Businesses into Buying Credit/Debit Card Processing Services and Equipment

The Federal Trade Commission has charged an operation that sells credit and debit card payment processing services to small businesses with violating federal law.  The defendants allegedly made false and unsubstantiated claims and failed to disclose material facts to storefront businesses and sole proprietorships before they applied for services and equipment to process credit and debit card payments.  The FTC seeks to halt the allegedly illegal practices and return money to victims.

The defendants are Merchant Services Direct LLC (MSD), also doing business as Sphyra Inc.; Boost Commerce Inc.; Generation Y Investments LLC; Kyle Lawson Dove; and Shane Patrick Hurley.  The Washington State Attorney General’s Office has simultaneously filed an action against these defendants in the Superior Court for Spokane County, Washington.

According to the FTC’s complaint, as an “independent sales organization” (ISO), MSD sells to small local businesses the ability to accept credit and debit card payments.   The businesses pay fees whenever their customers pay with a credit or debit card.

As alleged in the complaint, MSD sales agents typically call small businesses and lead them to believe they are associated with the businesses’ current card processor, Visa or MasterCard, or their bank.  The sales agents allegedly promise substantial savings on credit and debit card processing.  They specify a much lower rate than the businesses currently pay, and quote one fee, a fixed per-transaction cost, without mentioning all the other fees the businesses will have to pay.  Merchants who ask if there are other fees allegedly are told there are none.

According to the FTC’s complaint, MSD agents also dupe customers into leasing new card processing terminals for two to four years, falsely claiming their current “swipe” terminals are outdated or incompatible with its services.  Sometimes they even claim the terminals are free.  Agents persuade merchants to sign fine-print, binding contracts on the spot by telling them the documents are merely applications – a ruse made easier, according to the FTC, by the fact that the contracts are labeled “applications.”  Merchants are often falsely told they can cancel any time.  Many victims discover their new lease obligation only after being billed, still owing the balance of their previous lease, which can be thousands of dollars.

Defendants also tout on various versions of their website “Guaranteed Lowest Rates,” claiming merchants could “save 30%” with “whole sale [sic] processing” or have “anywhere from 20% to 30% savings when switching to” MSD.  In fact, according to the FTC, there are no wholesale rates, as third parties process card payments, not MSD.   As alleged in the complaint, those who call MSD’s customer service department reach employees who either do not help them or say they will waive fees or provide refunds but don’t.  Customers who were promised they could cancel the “applications” they signed with no penalty are charged substantial cancellation fees, according to the FTC’s complaint.  Generally, only in response to complaints filed with the Better Business Bureau and state attorneys general have the defendants refunded money or waived fees.

The Commission vote authorizing the staff to file the complaint was 4-0.  The complaint was filed in the U.S. District Court for the Eastern District of Washington.  In addition to filing the lawsuit, the FTC has sought a court order immediately halting the unlawful practices along with an order freezing the defendants’ assets and appointing a receiver over the corporate defendants.

The FTC acknowledges the assistance of the Washington State Attorney General’s Office and the Better Business Bureau of Eastern Washington, North Idaho, and Montana.

NOTE:  The Commission files a complaint when it has “reason to believe” that the law has been or is being violated and it appears to the Commission that a proceeding is in the public interest.  The case will be decided by the court.