Annotation of FTC v. Luanda Biomedical, Inc. | Christian Nossokoff | April 20, 2016

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Annotation of FTC v. Luanda Biomedical, Inc.

Annotation of a real life court case: FEDERAL TRADE COMMISSION v. LUNADA BIOMEDICAL, INC.

By Arielle Weg

 

-The trial took place at the United States District Court in the Central District of California.

 

-The plaintiff is the FTC who sued the defendants Lunada Biomedical, Inc. a corporation, Donna Kasseinova, sued as an individual and as an officer of Lunada Biomedical, Inc., Roman Trunin, sued as an individual and as an officer of Lunada Biomedical, Inc., and Emily Arutyunov, sued as an individual and as an officer of Lunada Biomedical, Inc.

 

-The FTC brings this action under  the Federal Trade Commission Act to obtain permanent injunction due to the violation of the FTC Act that require the defendant to disclose connections with labeling, advertising, marketing, distribution, and sale of Amberen, a dietary supplement that allegedly causes menopausal and perimenopausal women to lose weight and belly fat.

 

-The plaintiff is the FTC who outlines laws regarding advertising and media. They reserve the right to federal district court proceedings with its own attorneys if laws of the FTC are violated.

 

-The defendant is Lunada Biomedical, Inc., a California corporation, which labels, advertises, markets, distributes, and sells Amberen to consumers throughout to U.S.

 

-The defendant Donna Kasseinova owns 50% of Lunada, and is the company’s Chief Financial Officer. She has had partial control in the acts and practices relevant to this complaint.

 

-The defendant Roman Trunin owns 50% of Lunada and is the Chief Executive Officer. He has had partial control and participation in the alleged practices relevant to this complaint.

 

-The defendant Emil Arutyunov is the Chief Marketing Officer. He has connections to actions relevant to this case.

 

-Amberen is a dietary supplement that contains ammonium succinate and calcium disuccinate, developed by scientists at the Institute of Theoretical and Experimental Biophysics at the Russian Academy of Sciences. They received rights to market and sell the drug in the U.S. This was done through radio commercials, TV commercials, websites (including carolsblog.com), emails, and other marketing materials.

 

-The product was represented as a substantial weight loss product that could helps loss of belly fat, and increase in metabolism in women over the age of 40 who are permenopausal or menopausal. The endorsements claimed t be clinically proved to cause substantial weight loss in these women. The product also comes as a complementary risk for trial of a 30 day supply for the first 50 callers. There is no financial risk or obligation to this 30 day free trial.

 

-In December 2009 Lunada Inc. entered a Consulting Agreement with International Marketing Company (IMC) and the president Carol Nicholson. Under this agreement, the parties would perform marketing services for the product, which included maintaining a blog about menopause-related issues and to appear in other forms of advertisement. They compensated Nicholson $2,000 per month in addition to daily and hourly fees for other endorsements.

 

-From this the “Ask Carol: A Menopause Blog” was created. The blog deceptively appeared as a personal account of Nicholson’s personal experiences with menopause. The reality was that Lunada discussed what would be on the blog, and pre-reviewed any postings without reader’s knowledge. In the posts, Nicholson openly endorsed the use of Amberen, stating it solved a multitude of problems such as weight gain, hot flashes, irritability, and sleeplessness. She referred to her own background as a registered nurse, which gave her a level of expertise in the recommendations. Blog posts included a number to call and a hyperlink to the website for consumers to purchase the products. There was no disclosure on the website that Carol’s Blog was paid for by Lunada through IMC. Lunada paid IMC and Nicholson more than $37,000.

 

-The actual violations of the FTC Act  regarding the blog posts include unfair or deceptive acts or practices and misrepresentations of a product. The specific problem over all was that the “clinical studies” promising weight loss and belly fat loss didn’t actually measure this in women taking the drug.

 

-In relation to this specific topic, “failure to disclose material connections with endorses” is the most relevant complaints. Other complaints in this trial include; false proof claim, false claims concerning Amberen’s success and customer satisfaction rates, and false risk free trial claim (required customers to return product, and did not compensate shipping fees).

 

-The plaintiff requested that the courts enter a permanent injunction to prevent further violations of the FTC Act and award such relief as the Court finds necessary to compensate injury to consumers due to Defendant’s violations of FTC Act.

 

- Proof of these claims are presented in transcripts of advertisements for the product.

 

-Exhibit I includes the Ask Carol blog post. The blog posts highly recommends the use of the drug over all other options, and links to the product to purchase. There is no indication on the blog of Carol’s paid connection to the product. She even includes a anecdote about her life, and responds to reader’s questions.

 

Citation:

FEDERAL TRADE COMMISSION v. LUNADA BIOMEDICAL, INC. 1-57. UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA. Ftc.gov. Federal Trade Commission, Web. 04 Apr. 2016.

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April 20, 2016

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Christian Nossokoff

Student at American University

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