By: David Bland
In the wake of the Omicron variant’s global surge, as COVID-19 case counts neared their peak of over 800,000 new cases per day across the U.S., the Federal Trade Commission (FTC) publicized a series of cease and desist demands it sent to 25 businesses over the past six months. Granted under the authority of the COVID-19 Consumer Protection Act, the list included four direct sellers targeted in November and December 2021.
Amplifei, Black Oxygen Organics, Family First Life, and Enagic USA received cease and desist letters including orders to certify within 48 hours of receipt that the violative claims have been removed from social media.
Congress passed this legislation as a part of the 2021 Consolidated Appropriations Act that was signed into law on Dec. 27, 2020. The Act empowers the FTC, for the duration of the COVID-19 public health emergency, to seek civil penalties against individuals and businesses that engage in a deceptive act or practice in or affecting commerce associated with the treatment, cure, prevention, mitigation, or diagnosis of COVID-19 or a government benefit related to COVID-19.
The Act states that such a violation would be unlawful under Section 5 of the FTC Act, and would thus be subject to civil penalties up to $43,792 per violation. (On Jan. 6, 2022, the FTC released a revised inflation-adjusted maximum civil penalty amount of $46,517.) Furthermore, under this Act, claims related to COVID-19 are considered violations of a rule defining an unfair or deceptive act or practice specified in Section 19(b) of the FTC Act, which opens the door to restitution and other forms of monetary relief against violators.
However, unlike standard Section 5 enforcement by the FTC, the COVID-19 Consumer Protection Act allows first-time violators to be targeted with civil penalties. Prior to this temporary law, civil penalties would be pursued only after violations of existing cease and desist orders occurred.
The Commission’s first enforcement measure under the COVID-19 Consumer Protection Act came in April 2020, just days before the U.S. Supreme Court would strike down the FTC’s use of Section 13(b) to seek equitable monetary relief. This left the Commission with its seldom-used monetary provisions under Sections 5 and 19(b) as the only remaining paths toward monetary relief, albeit ones with more teeth for COVID-19-related actions, thanks to the accommodations granted in the Act.
In the filing, a St. Louis-based chiropractor and his company, Quickwork LLC, was charged with violating the Act by claiming their nutritional supplements prevented and treated COVID-19. The company did not cease with its problematic claims, and a preliminary injunction against the defendants remains in force.
Direct Sellers Targeted, Social Media Platforms Notified
Included in the Commission’s most recent actions under the COVID-19 Consumer Protection Act are cease and desist orders to four direct selling companies. These letters represent the third round of warning letters sent to multi-level marketers for problematic COVID-19 claims, but are the first actions taken against direct sellers under the COVID-19 Consumer Protection Act. Furthermore, these 25 letters are the first to also have been copied to the social media platforms used to post the problematic claims. Facebook, Instagram, Twitter, YouTube, Etsy, LinkedIn, Shopify, and TikTok were copied at least once in this wave of FTC cease and
Amplifei Warned for Product Claims
In a Dec. 9, 2021, letter to Amplifei Founder and CEO Robert Oblon, the FTC advised that the company and its representatives were unlawfully advertising products to treat or prevent COVID-19. The letter quoted four social media posts made between June and September 2021 by company representatives, including a Facebook post made by the CEO himself in which he promotes one of his company’s product packages in a personal COVID-19 health update: “I just finished my battle with Rona, and I won. A healthy microbiome and strong immune system is how you beat it. #triadforthewin.”
Commission Targeting of ‘Magic Dirt’ Seller Contributes to its Demise
Black Oxygen Organics, a Canadian direct seller with U.S. operations, also received a cease and desist letter related to COVID-19 claims. Founded in 2015, the company specialized in selling fulvic acid-containing peat bog dirt as a wellness and nutritional supplement and was the subject of a national media firestorm in December 2021 after backlash from disgruntled customers became publicized along with public government scrutiny.
The FTC’s Nov. 17, 2021, letter to CEO Marc Saint-Onge advised that social media posts of company representatives promoting the treatment and prevention of COVID-19 using Black Oxygen products were in violation of the COVID-19 Consumer Protection Act. The letter cited four social media posts with violative claims, including one from Instagram stating, “True story of how BLACKOXYGEN helped this couple and their family. From her husband recovering from COVID-19 side effects and giving her the energy and the ability to handle the stress of being a mom and all the things that go with it. . . . #BLACKOXYGEN.”
Compounding the trouble faced by the company, the U.S. Food and Drug Administration (FDA) issued an advisory on Dec. 3, 2021, advising consumers not to use fulvic acid products from Black Oxygen due to elevated levels of lead and arsenic. The FDA advised that it had detained the company’s product at the Canadian border and issued a product recall. However, the company went out of business during this recall.
Insurance Direct Seller Targeted for COVID-19 Earnings Claims
A December 2021 FTC letter to Connecticut-based insurance direct seller Family First Life demonstrates that the COVID-19 Consumer Protection Act covers more than just product claims. The cease and desist demand sent to CEO Shawn Meaike stated that the company was misrepresenting to consumers their income potential if they became business opportunity participants.
The letter quoted three examples of these violations made by representatives on TikTok and YouTube, including claims to “Make your WEEKLY salary in ONE DAY as an agent with Family First Life,” as well as another claim suggesting that agents could make 10 months’ worth of income in one weekend.
Also of note in the Commission’s letter was a reminder to Family First Life that the FTC had recently put the company on notice for misleading or deceptive earnings claims, along with most U.S. direct sellers, when it delivered Notices of Penalty Offenses Concerning Money Making Opportunities and Endorsements and Testimonials in Fall 2021.
Enagic USA Receives Cease and Desist
Torrance, California-based Enagic USA is a direct seller of water purification and ionization equipment that received a December 2021 FTC warning about COVID-19 prevention and treatment claims that representatives had posted to Facebook and Twitter. One such claim suggested that the water system was “A natural prevention method for COVID-19,” while
another stated, “If worried about covid maybe it’s time to look into one of these amazing machines.”
Enagic USA is the only direct seller in this group of letter recipients that is a member of the Direct Selling Association (DSA). The Association commented that the company is “addressing the concern with the utmost seriousness.”
DSA Supports FTC’s Recent Actions
In a Jan. 20, 2022, press release, the DSA underscored its support of the FTC’s recent actions against COVID-19 claims.
“DSA statements and guidance issued since March of 2020 have been clear that unsubstantiated COVID-19 product claims and use of the pandemic to support the business opportunity are inappropriate. Any violation of DSA standards will be handled by our independent Code Administrator. Specifically, we have supported these statements and guidance with the launch of the Direct Selling Compliance Professional Certification Program last year and the creation of a Compliance Officers Council,” said Joseph N. Mariano, DSA president. “By identifying new ways to protect consumers and monitor the industry, DSA and its Board of Directors continue to work and establish strong compliance principles in the marketplace. We are committed to supporting rigorous consumer protection and ensuring there are no inappropriate claims as they can be dangerous and compromise the relationship our companies and salesforce members have with their customers.”
COVID-19 Actions Are Low-Hanging Fruit for FTC
Industry and legal observers will continue to watch the FTC’s civil penalty actions with interest, as the agency regroups after losing its power to extract quick financial damages from targets through Section 13(b) monetary actions.
Between the Notices of Penalty Offense sent to direct sellers in October and November of last year and the public’s exhaustion with COVID-19 troubles, the Commission’s new favorite weapon—the Penalty Offense Authority—is now clearly on a hair trigger and aimed at companies and field members that ignore these sentiments.
Just as health experts are advising Americans not to let their guard down as the pandemic drags on, direct sellers should remain vigilant about the product and income messaging their executives and distributors are posting to social media.