Supplement Seller To Pay $1 Million To Settle Ad ChargesMar 18, 2004 | Portland Press Herald
A Portland-based marketer of dietary supplements has agreed to pay the Federal Trade Commission $1 million to settle charges that it made false claims in its radio and television infomercials.
Vital Basics Inc. claimed that Focus Factor would improve memory and concentration for everyone from schoolchildren to the elderly, and that V-Factor would enhance sexual performance in men.
The FTC said in a statement released Wednesday that the company didn't have "adequate substantiation to back up the claims they made about the efficacy of Focus Factor and the safety of V-Factor."
Linda Conti, an assistant attorney general in Maine, called the FTC's case against Vital Basics "a very big case; among the largest, if not the largest," in the state's history.
Conti said the Maine Attorney General's Office has received consumer complaints about the company. She said she works regularly with the FTC and knew the commission was looking into Vital Basics, so she forwarded complaints to the FTC.
When her office has looked into complaints, the company has resolved them, she said.
The business on Commercial Street is the corporate descendant of Talk America Inc., a marketing company that was once lauded for its part in the economic revival of Congress Street, but criticized for its marketing practices. It paid a $150,000 penalty after consumer-protection officials in eight states complained, and later filed for bankruptcy.
Jonathan Shapiro, a Portland attorney representing Vital Basics, said the company admits no wrongdoing in paying the settlement.
"The company made a business decision to put this behind them and focus on its business on a going-forward basis," he said. "This complaint pertains to advertising that the company stopped running in December 2002 and has not run since then."
Shapiro said, "From our perspective, its current advertising has been reviewed and is in full compliance with the law."
The company no longer markets V-Factor. It is still marketing Focus Factor, but without making the claims the FTC said were unsubstantiated, according to Heather Hippsley, assistant director of the FTC's Division of Advertising Practices.
"They can continue to market the product; they're currently making claims it supports a healthy brain," said Hippsley. "That's fine as long as claims do not go too far beyond science today."
According to Vital Basics' Web site, Focus Factor "is a dietary supplement that supports healthy memory, concentration and focus with a unique blend of vitamins, minerals, protective antioxidants, botanical extracts and omega-3 oils."
Focus Factor sells for $74.95 a bottle, each containing 120 wafers. Vital Basics suggests taking at least six wafers a day.
Hippsley said the FTC is trying to increase regulation of dietary-supplement infomercials. Last year, she said, the commission brought about two dozen actions against marketing claims that it determined to be unfounded.
"It's a very big market," she noted.
Vital Basics' products are a successful part of that market.
"The amount of consumer redress here signifies there were substantial sales of the product," said Hippsley. "Sales were in the millions of dollars."
Hippsley said she hopes the FTC's actions will make the buying public more alert.
"The message . . . is if you're hearing the miracle cure for the first time on a television commercial, probably a consumer should not believe it," said Hippsley.
Shapiro said his client didn't agree with the FTC's assertions.
"The company does believe that the claims it made were substantiated," said Shapiro. "The company has hundreds of studies on the ingredients, clinical trials on the products. We think it's substantiated."
Under the consent agreement, Vital Basics can't make any unsubstantiated claims as to the safety or efficacy of the products. It also has to state clearly that the advertisement is an advertisement.
Future advertisement of the company's products is subject to FTC approval, according to the order. The order will be finalized following a 30-day period for public comment.
A Better Business Bureau report gave Vital Basics an "unsatisfactory record" because of "unanswered complaints and a pattern of complaints." According to the bureau, consumers have complained that they returned products and had trouble getting refunds.
According to Shapiro, 20 to 30 people now work for Vital Basics in Portland.
The original company, Talk America, was started by Robert B. Graham in 1991 in a one-room office on Exchange Street with four phones and a word processor.
In 1996, the company had 750 employees and Portland officials gave it an award for helping to pioneer the economic revival of Congress Street.
In 1999, the company ran into cash problems because of unsuccessful sales campaigns and it filed for bankruptcy. It emerged as Vital Basics in October 1999.
Graham is the president of Vital Basics, and was named in the consent agreement, along with Michael B. Shane, another company officer.
The $1 million settlement paid by Vital Basics will be used to address customer complaints, said the FTC.