A lawsuit filed by the Napa County District Attorney’s office against a direct marketer has triggered a dispute that offers a rare insight into the nature of competition in the infomercial industry.
The dispute started in March, when the Napa DA filed a complaint against Enforma Natural Products Inc., a marketer of a weight-loss program called The Enforma System. The product was the second most popular infomercial on the air following the ubiquitous “Tae Bo” infomercial, according to infomercial ranking sources. Enforma generated strong sales – $2 million a week at its peak by some estimates – and big commissions for its media buyer, Mercury Media Inc., Santa Monica, CA, which was estimated to place $800,000 in media a week for Enforma.
The DA alleged that infomercial claims made about chitosan, the chief ingredient in Enforma’s “Fat Trapper” product, were unsubstantiated by clinical data and that not enough research was conducted to positively show that chitosan could reduce weight.
The case, which is still pending, is being watched closely by other infomercial companies, not only because at least four others are also marketing a chitosan-based product, but also because Enforma’s strong performance may have hurt sales for competing weight-loss programs.
One company apparently affected by Enforma’s success was E4L Inc., formerly National Media Corp., an infomercial and Internet marketer in Encino, CA, that markets a weight-loss program called “Larry North’s Great North American Slimdown,” which has been a respectable hit.
A source familiar with E4L said the company disseminated an already publicly available press release issued by the Napa DA about its case against Enforma to broadcast stations. The press release triggered a chilling effect among station managers who voiced concern about the DA’s allegations, the source said.
The dissemination of that release among stations prompted Enforma to retaliate with a slew of litigious threats. The company accused Maximum Coverage Media, a media agency in San Diego that represents E4L, of disseminating the press release in an effort to get television stations to pull the infomercials for The Enforma System.
A certified letter, dated March 29, was sent to Steve Netzley, president/CEO of MCM, ordering him to cease and desist in the attempt to scare broadcast stations from airing the infomercial.
“These actions are unconstitutional, illegal and in violation of both federal and state statutes and Enforma’s common law rights,” said the letter signed by Maryann R. Marzano, of Bailey & Marzano, Santa Monica, CA, one of the attorney’s for Enforma. The basis of Marzano’s action was information provided to her by “numerous” unnamed sources.
Phone calls to Marzano’s office were not returned.
The letter accused Netzley of violating the Unfair Practices Act, the Cartwright Act, tortious interference with contractual relations and interference with prospective economic advantage, inducement to breach of contract and defamation. The letter went on to say that if Netzley did not comply with the cease and desist order then Enforma would seek injunctive relief and punitive damages.
Netzley reacted to the threats with a letter to Marzano, also dated March 29, stating that Marzano was “gravely misinformed” by the sources. In the letter, he demanded that Marzano produce a list of the sources who claimed that someone on MCM’s staff, or Netzley, himself, was responsible for disseminating the press release, which by its nature is a document that any member of the public has access to.
“What really made me angry was that they sent the letter to every address they had on me,” he said. “It [the press release from the DA] is a public document, and to my knowledge they [Enforma] have not taken any action against us in court. I think it would be very costly for them if they took this to court. We didn’t eve come close to doing what they are alleging.”
In response to the dissemination of the press release, Enforma sent a letter to national broadcasters and networks stating that the lawsuit filed by the district attorney is being contested and the lawsuits are being filed “based upon wholly inadequate information and erroneous assertions.”
“It is important to know that this matter has been brought by the District Attorney’s offices involved, not based on any complaint by a consumer,” said the letter dated March 26. “Enforma, in response to this complaint filed voluminous documents including 32 scientific studies and declarations of two Ph.D. research scientists who state unequivocally that the prosecution’s expert is both unqualified and erroneous in her opinions concerning chitosan.”
The judge hearing the case postponed the hearings so the court would have ample time to review the documents submitted by Enforma. The prosecution was also granted a continuance so, the DAs would also have an opportunity to review the documentation.
“Despite the impression created in the press release, there has been no adjudication of, and no determination in any way by any authority that there is anything wrong with any of the matter contained in the advertisements for the products,” Enforma’s letter states. The company said it will not settle the lawsuit and would “vigorously oppose any legal action seeking to restrict the advertising of this product.”