“What are robocalls and hoodia, Alex?”
In its pending action against Sonkei Communications and two of its officers, the FTC has charged that the defendants sold robocall services to telemarketers who pitched things like home security systems, grant procurement programs, and credit card services. According to the complaint, the defendants gave their clients the means to make illegal robocalls, to call numbers on the Do Not Call Registry, and to hide their identities by transmitting phrases like SERVICE MESSAGE or SERVICE ANNOUNCEMENT, rather than accurate Caller ID information. The lawsuit, filed on the FTC’s behalf by the Department of Justice, asks for civil penalties and a stop to the illegal calls.
Now for the hoodia link — and there is one, we promise. According to the FTC’s complaint against Stella Labs, Nutraceuticals International, and three individuals, the defendants were part of a scheme that supplied manufacturers of weight loss supplements with an ingredient they said was hoodia, a derivative of the cactus-like Hoodia gordonii plant. The FTC charged that the defendants made false and deceptive weight loss claims about hoodia, and falsely said the ingredient they sold was hoodia when it wasn’t. According to the FTC, they provided their trade customers with the ingredient, deceptive ads, and purported substantiation materials — which gave those companies the means to deceptively advertise their own hoodia weight loss products. The upshot of the recently settlement? One defendant is banned from making weight loss claims and must turn over a vacation home and other assets to pay a portion of the $22 million judgment. Another is banned from the dietary supplement business.
What’s the thread running through these otherwise unrelated cases? Certainly, companies are responsible for their own deceptive acts and practices. But in appropriate circumstances, defendants may be liable for the help they give to others who break the law. In the robocall case, for example, the complaint charges the defendants with “assisting and facilitating” their clients, who allegedly placed illegal robocalls, called people on the Do Not Call list, and transmitted false Caller ID info — all violations of the Telemarketing Sales Rule. According to the hoodia complaint, by providing their trade customers with the ingredient — as well as with deceptive ads and promotional materials — the defendants gave those companies “the means and instrumentalities for the commission of deceptive acts and practices,” in violation of Section 5 of the FTC Act.
A. To avoid a compliance miscue, don’t help others violate the law.
Q. What's the lesson savvy marketers take from these cases, Alex?