Let’s say you’re a direct-seller and manage to persuade yourself that trying to threaten and intimidate your own customers is a good business practice.
How might you accomplish this?
Well, the FTC alleged today that Florida-based Roca Labs Inc. and Roca Labs Nutraceutical USA Inc. inserted “gag clause provisions” in purported customer agreements in a bid “to stop [consumers] from posting negative reviews and testimonials online.”
From an FTC statement dated today (italics added):
“In a complaint filed in federal court, the FTC alleges that Roca Labs, Inc.; Roca Labs Nutraceutical USA, Inc.; and their principals have sued and threatened to sue consumers who shared their negative experiences online or complained to the Better Business Bureau, stating that the consumers violated the non-disparagement provisions of the ‘Terms and Conditions’ they supposedly agreed to when they bought the products. The FTC alleges that these gag clause provisions, and the defendants’ related warnings, threats, and lawsuits, harm consumers by unfairly barring purchasers from sharing truthful, negative comments about the defendants and their products.”
Said Jessica Rich, director of the FTC’s Bureau of Consumer Protection:
“Roca Labs had an adversarial relationship with the truth. Not only did they make false or unsubstantiated weight-loss claims, they also attempted to intimidate their own customers from sharing truthful – and truly negative – reviews of their products.”
The FTC accuses Roca Labs of advertising its “Formula” and “Anti-Cravings” lines as “safe and effective alternatives to gastric bypass surgery.” In addition, the agency alleges, “[t]hey also claimed that users could lose as much as 21 pounds in one month, and that users have a 90 percent success rate in achieving substantial weight loss.”
Meanwhile, according to the FTC, “the defendants used testimonials and supposed ‘third-party’ reviews to illustrate the weight-loss success consumers achieved with their products. They solicited ‘Success Videos’ from purchasers by offering to pay 50 percent of the products’ price for providing positive reviews. In addition to threatening consumers who violated the gag clause provisions, the defendants claimed that consumers who posted negative reviews would owe the ‘full price’ for their products – hundreds of dollars more than advertised or actually paid, according to the complaint.”
Customers have directed at least $20 million to the firms for the powder products since 2010, the FTC alleges.
“The defendants sold the products starting at $480 for a three-to-four month supply, and have sold at least $20 million of the powder since 2010, according to the complaint.
In addition to the FTC’s unfairness charges based on the defendants’ gag clauses, the FTC alleges that the defendants’ weight-loss claims are false or unsubstantiated. The FTC also charges that the defendants failed to disclose that they compensated users who posted positive reviews. In addition, the FTC alleges that defendants violated consumers’ privacy by disclosing their personal health information in some cases to payment processors, banks, and in public court filings.”
Also named defendants were Don Juravin, also known as Don Adi Juravin and Don Karl Juravin, and George C. Whiting, also known as “Dr. George Whiting” and “George C. Whiting, Ph.D,” the FTC said.
Roca Labs implemented oppressive Terms and Conditions to stifle customers from complaining, the FTC charged. Here is one example, according to the complaint. (Italics and bolding added/light editing performed.)
A version of the Terms Defendants used prior to December 2014 . . . provided that Defendants, in the event a purchaser violated the Gag Clause, had the right to sue purchasers for an injunction, immediately bill them for $3500 in court costs and legal fees until they are determined in court, and immediately revoke all “discounts” that purchasers purportedly received. This version of the Terms further provided that Defendants could, after thirty days, report any such charge that remained unpaid to consumer reporting agencies, and forward the unpaid charges to a collection agency. This version of the terms also provided that Defendants could require purchasers who violated the Gag Clause to execute a notarized affidavit stating that their “disparaging remarks or review contained factually inaccurate material, was incorrect and breached [the Terms].” A version of the Terms used from approximately September 2012 into mid-2014 . . . provided that the purchaser further agreed that “any report of any kind on the web will constitute defamation/slander,” and agreed “to a predetermined compensation of $100,000. You agree and understand that you can not [sic] talk badly about the Formula because of any frustration you might have with the support department or your misunderstanding.”
In 2015, Public Citizen, a nonprofit group, sued Michigan-based KlearGear.com amid allegations the company effectively fined a Utah couple $3,500 after the wife posted a negative review of KlearGear at RipoffReport.com after her husband never received a desk toy and a keychain he’d ordered as Christmas gifts in 2008.
KlearGear also was accused in the lawsuit of causing a debt collector to go after the couple and of lying to credit-reporting agencies when asserting the debt was valid.
See Palmer v. KlearGear.com at Wikipedia.
