Summary judgment order holds that enforcement of “gag clauses” in contracts is unfair
A U.S. district court in Florida has granted the Federal Trade Commission’s motion for summary judgment on all counts of its amended complaint against weight-loss supplement marketer Roca Labs, including allegations that the company’s enforcement of “gag clauses” to stop consumers from posting negative reviews is unfair and likely to cause substantial harm, in violation of the FTC Act.
In issuing the ruling, the court gave the FTC 21 days to supplement its evidence of the amount of money the defendants should be ordered to pay to provide redress to defrauded consumers.
What the FTC Did to Protect Consumers
The Commission’s September 2015 complaint alleged that that Roca Labs, Inc.; Roca Labs Nutraceutical USA, Inc.; Don Juravin; and George Whiting sued and threatened to sue consumers who shared their negative experiences online or complained to the Better Business Bureau.
The defendants claimed that consumers violated the non-disparagement provisions of the “Terms and Conditions” they supposedly agreed to when they bought the company’s weight-loss products. The FTC alleged that these gag clause provisions, and the defendants’ related warnings, threats, and lawsuits, harm consumers by unfairly barring purchasers from sharing truthful, negative comments about the defendants and their products.
The FTC also alleged that the defendants made false or unsubstantiated weight-loss claims, misrepresented that one of their promotional websites was an objective information website, and failed to disclose their financial ties to that site and to people who posted positive reviews. In addition, the FTC alleged that the defendants violated their privacy promises to consumers by disclosing their personal health information in public court filings and to payment processors and banks.
In February 2016, the Commission approved an amended complaint adding several defendants to the case, including Must Cure Obesity, Co.; Juravin, Incorporated; and Zero Calorie Labs, Inc.
What the Judgment Means
The court found that the defendants violated the FTC Act by making deceptive weight-loss claims about their dietary supplements, known as Roca Labs Formula or “Gastric Bypass Alternative.” The court also found that the defendants’ threats to sue, and filing of lawsuits against, dissatisfied consumers for violating non-disparagement clauses in their online sales contracts unfairly suppressed negative information about the defendants and their products, to the detriment of subsequent purchasers, in violation of the FTC Act.
In addition, the court found that the defendants deceptively failed to disclose their financial relationship to testimonialists who worked for them, and their control of a supposedly independent and objective information website that they used to promote their products; misrepresented the nature of that site; misrepresented that they would keep their customers’ private health information confidential; and misrepresented that consumers had agreed to non-disparagement clauses in exchange for a substantial discount on the products.
Finally, the court found that the corporate defendants operated as a common enterprise, and that individual defendant Don Juravin is liable for the deceptive and unfair acts. The court ordered supplemental briefing to determine how much of the defendants’ $26.6 million in gross sales should be awarded to the FTC for consumer redress.
The U.S District Court for the Middle District of Florida, Tampa Division, issued the summary judgment order announced on September 14, 2018.
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