FTC Action Threatens Endorsers
Enforma infomercials and advertisements represented that the "all-natural" program enabled users to lose weight without diet or exercise. They claimed that its pyruvate product, Exercise in a Bottle, increased the body's capacity to burn calories and that its chitosan-based Fat Trapper prevented the absorption of dietary fat.
In its complaint, the FTC alleged that these claims constituted unfair or deceptive acts or practices and false advertisements in violation of Sections 5(a) and 12 of the Federal Trade Commission Act.
The filing of the complaint is particularly noteworthy because the FTC already settled claims with Enforma Natural Products and two of its principals, Andrew Grey and Fred Zinos, in April. As part of the settlement, the corporate defendant and Grey agreed to pay a landmark $10 million in consumer redress. Despite that victory, the FTC has now cast its net wider, suing nonprincipals involved in Enforma advertisements - producers, scriptwriters and hosts - including Garvey and his management company, Garvey Management Group Inc.
As a paid endorser, Garvey appeared in print, radio and Internet advertising for Enforma products. Garvey also co-hosted Enforma infomercials, in which he participated in product demonstrations and made several allegedly unsubstantiated claims in support of the Enforma System. According to the FTC, Garvey's statements and actions triggered liability for him and his company under the FTC Act.
At first glance, the FTC's direct action against Garvey appears to break new - and frightening - ground in celebrity endorsement liability. In reality, this marks a natural progression of the FTC's policies and litigation history. In the past 20 years, the FTC has increased its monitoring of endorsements, claim substantiation and dietary supplement advertisements. The FTC issued three guidelines applicable to the Enforma scenario.
First, in 1980, the FTC released its Guides Concerning Use of Endorsements and Testimonials in Advertising. The guides define "endorsement" generally as "any advertising message ... which ... consumers are likely to believe reflects the opinions, beliefs, findings, or experience of a party other than the sponsoring advertiser."
The guides impose a heavier burden on "expert endorsers." If an endorser is held out as an expert, whether expressly or by implication, then "the endorser's qualifications must in fact give him the expertise that he is represented as possessing with respect to the endorsement."
Second, in 1997 the FTC announced its Operation Waistline campaign against false and misleading diet advertisements. Finally, in 1998, the FTC issued Dietary Supplements: An Advertising Guide for Industry, laying out specific requirements for marketing these products.
This guide states that "products related to consumer health or safety require a relatively high level of substantiation" to support the advertiser's claims. Significantly, the guide explicitly warns, "All parties who participate directly or indirectly in the marketing of dietary supplements have an obligation to make sure that claims are presented truthfully and to check the adequacy of support behind those claims." A good illustration of this warning is the FTC's current action extending liability to Garvey and other nonprincipals involved in the Enforma campaign.
From a litigation standpoint, Garvey is not the first celebrity endorser to be sued by the FTC, though he is one of few. In the past 30 years, the FTC has named only a handful of celebrities as defendants in deceptive-advertising cases. Particularly noteworthy are cases involving advertisements for an acne cream (Acne-Statin) and an automobile gadget (G.R. Valve) featuring actor/singer Pat Boone and astronaut Gordon Cooper, respectively.
In both cases, the celebrities heartily endorsed the products while failing to disclose that they received royalty fees based on product sales. In the acne cream case, Boone falsely attested to his daughters' personal satisfaction with Acne-Statin when, in fact, they did not use the product. In the G.R. Valve case, the FTC alleged that Cooper had misrepresented himself as having expertise to support G.R. Valve's claims of increasing fuel economy in automobiles. By the early 1980s, the FTC had settled both cases and did not initiate any actions against celebrity endorsers for almost 20 years - until Garvey appeared in Enforma advertisements.
Garvey's actions may have caught the FTC's attention because of a volatile combination of factors. First, Garvey, a famed athlete, endorsed a product making various dietary and fitness claims. In his script, Garvey made references to his illustrious athletic past and emphasized his personal knowledge of fitness and exercise.
He then boasted that the Enforma System "will help you lose weight, burn more calories and even lower cholesterol by simply taking a pill." While Garvey's statements certainly amounted to endorsements, they also may have constituted a misrepresentation of his expertise in the fields of diet and health in contravention of the FTC's stated guides.
Second, Garvey appeared in the Enforma campaign during a period when the FTC announced its heightened scrutiny of diet and exercise advertisements. If Enforma's claims are truly unsubstantiated, then Garvey was negligent in failing to verify the accuracy of his scripted lines. So Garvey may have participated in the type of behavior explicitly denounced by the FTC.
Finally, Garvey appears to have a fee structure similar to that of Boone and Cooper. According to the FTC complaint, Enforma pays Garvey a royalty fee based on the number of Enforma products sold. Though the FTC has determined that profit participation is no longer dispositive of liability, its existence will weaken any of Garvey's attempts to present himself as a mere hired hand.
To date, the FTC and Garvey have not entered into any settlement agreements. The outcome of this case is pending, but future celebrity endorsers can glean important lessons to avoid falling into this situation. First, celebrities should consult a lawyer before endorsing a product in a field, such as diet and weight loss, that is subject to heightened FTC scrutiny.
Second, they should not make statements about a product without first verifying the accuracy of these statements and the "net impression" they may make on the consumer.
Finally, they should not hold themselves out as expert endorsers for a product if they lack requisite knowledge in that field. n
• D. John Hendrickson is a partner and Carolyn L. Hann an associate at Hall Dickler Kent Goldstein & Wood, New York.