Federal Trade Commission (FTC) Discredits Itself

Does the FTC believe they are “untouchable” or is it consumers and business owners who have this misconception?

In relation to our previous post, “FTC Bamboozles the Public on Bamboo Fabric”, we felt it appropriate to inform consumers of a sampling of prior FTC cases that did not stand up in a court of law, or were shut down before making it to the courtroom. The reason these cases were ultimately won is not based solely on the evidence the FTC lacked, but more so on the fact that these companies and individuals had the determination and funds to fight the FTC on their false allegations.

It is important that consumer, whether purchasing bamboo sheets or male fertility supplements, understand and recognize that the FTC is a government agency whose power extends with great reach, constrained by no leash whatsoever. Though they have sometimes used this power in the interest of consumers, after reading a few outlined cases below, there should be no doubt in your mind that they not only have their own agendas, they often misuse their power.

Our intention is not to redirect focus to the FTC’s ineptness, rather there seems to be a lot of naïve individuals out there that simply believe “it must be so” because our government said so. All the while, the FTC has a history of wrong doings, incompetence, misusing its power and destroying peoples lives. What you might not realize…is this all has a great effect on you – the consumer. And because of that, we ask you to open your eyes and start paying attention to what is going on with our government agencies.

August  27, 2009 – American Bar Association vs. FTC

The American Bar Association files suit against the FTC to bar them from applying Red Flags Rule to practicing lawyers.

“Because the FTC is exceeding the powers delegated to it by Congress and misinterpreting the Rule, the ABA is seeking declaratory and injunctive relief in advance of pending FTC Rule enforcement on Nov. 1, 2009,” stated the ABA in a recent press release.

The ABA complaint states the application of the Rule to practicing lawyers is “arbitrary, capricious and contrary to law,” and that the FTC has “failed to articulate, among other things.”

ABA President Carolyn Lamm said, upon the filing of the lawsuit, “Congress did not intend to cover lawyers under the Rule. The FTC’s decision to apply the Rule to lawyers is contrary to an unbroken history of state regulation of lawyers and intrudes on traditional state responsibilities. The Rule requires extensive reporting and bureaucratic compliance that would unnecessarily increase the cost of legal services. This kind of unauthorized federal regulation of law practice threatens the independence of the profession and the lawyer’s role as client confidante and advocate.”

August 17, 2009 – LaneLabs vs. FTC

FTC Allegations
The FTC had filed a motion against LaneLabs in 2007, alleging that it was making unsubstantiated claims for its calcium and male fertility supplement products. The FTC recommended a fine of $24 million.

The FTC’s claims took issue with statements that AdvaCal can “build bone density” and that it is “clinically shown to be three times more absorbable than other calciums”. They also took issue with marketing statements on LaneLabs other product, Fertil Male, stating that the product has been marketed as a “natural supplement for male fertility” and is “clinically shown to promote sperm count and motility”.

In its complaint, the FTC stated that these claims were “unsubstantiated”, and that the results of scientific trials had been “misrepresented”. “The defendants unsubstantiated claims constitute contempt and have resulted in injury to consumers,” stated the FTC complaint.

Ruling Against FTC
Judge Dennis Cavanaugh of the US District Court of New Jersey denied the motion on the grounds that LaneLabs had “clearly offered support and substantiation for the claims regarding their products”. The court also stated, “In considering the testimony offered by all of the experts, the difference between FTC’s experts and the Defendants’ experts came down to a difference of opinion – not necessarily matters of right and wrong”.

The court also said that the FTC had provided no evidence that consumers had complained or were harmed by the use of the supplements. Neither of the FTC experts said the products were not effective or constituted a health risk to the public.

“In this courts opinion, to tell Defendants that their efforts were not good enough years after not advising them of any compliance issues is disingenuous and is highly relevant to the inquiry into whether Defendants should have done something different in the first instance.” You can read the LaneLabs Court Ruling here.

September 14, 2007 – Federal Trade Commission Makes Vast Errors

Do you remember the battle over “hot fuel” back in 2007? FTC Chairwoman Deborah Platt Majoras had stated that the effect of temperature on fuel was minimal – tablespoons in a 20-gallon tank for 20 degrees fluctuation – and therefore the FTC would not be investigating the issue of hot fuel.

What does this mean? Well, many consumers believe that oil companies and fuel retailers knowingly profit from the sale of “expanded fuel.”

Once subcommittee chairman Dennis Kucinich, D-OH, pointed out to Majoras that the data communicated between FTC and Rep. Darrell Issa, R-CA, was inaccurate and grossly underestimated the effects of hot fuel, the Federal Trade Commission apologized to the House Subcommittee on Domestic Policy for “providing inaccurate information”.

Judy Dugan of the Foundation for Taxpayer and Consumer Rights stated that the Federal Trade Commission has “fallen on its sword.” “The FTC letter, riddled with error and false conclusions, should be the last straw for Congress, which Rep. Kucinich understands. We hope the Senate, which is already considering legislation to fix the “hot fuel” ripoff will also investigate the FTC’s utter dismissal of harm to consumers by oil companies,” said Dugan.

John Siebert, project leader of the Owner-Operator Independent Drivers Association, agreed with Dugan stating, “FTC officials have never indicated that they would take it up before, and now that they have, they’ve screwed it up so thoroughly, we’re going to agree with Judy Dugan that they should now recuse themselves from anything regarding this. They’ve already shown their true colors that they are pro-oil.”

Here is a snippet from The House Subcommittee letter, signed by Chairman Rep. Dennis Kucinich:
Majoras also claims, on the basis of this error, that “It appears that the sale of ‘hot fuel’ might not cost consumers extra money.” This statement was followed by a long explanation by Kucinich breaking down the miscalculations provided by the FTC, and stating the result was almost 12 times that calculated by the FTC. You can view the full letter by Dennis Kucinich here.

June 23, 2006 – FTC Lost Personal Data on Identity-Theft Suspects

As Fox News reported, the FTC had two government laptops containing sensitive personal data, sitting in an attorney’s car…easy for the taking. This took place after a series of breaches.

The Federal Trade Commission said it would provide free credit monitoring for 100 people targeted for investigation whose names, addresses, social security numbers, and in some instances, financial account numbers – were taken from an FTC attorney’s locked car.

“Many of the people whose data were compromised were being investigated for possible fraud and identity theft”, said Joel Winston, Associate Director of the FTC’s Division of Privacy and Identity theft protection.

March 9, 2005 – Upsher-Smith/Schering-Plough vs. FTC

FTC Allegations
In its 2001 complaint, the FTC alleged that the Upsher-Smith/Schering-Plough 1997 patent settlement violated antitrust laws.

Ruling Against FTC
In 2002, after a lengthy trial, the FTC’s own administrative law judge ruled in favor of Upsher-Smith and Schering-Plough, dismissing the complaint. However, the FTC reversed this ruling and found against the companies.

March 8, 2005, three years later, the United States Court of Appeals for the Eleventh Circuit ruled, in a unanimous decision, that the administrative law judge was right and the FTC was wrong. The appeals court stated that the FTC was “not supported by law or logic.” The appeals court also found that the FTC decision was “contradicted by overwhelming evidence.” The court also added, “it would seem as though the Commission clearly made its decision before it considered any contrary conclusion.”

January 22, 2003 – Mark O. Haroldsen vs. FTC

FTC Allegations
The FTC filed its action in 1996, claiming that Financial Freedom Report had engaged in deceptive sales practices and was liable for $146 million in consumer injury. The FTC claimed that Haroldsen was responsible for the companies’ activities and was personally liable to repay the alleged consumer injury. The FTC also indicated that it would require, at a minimum, a payment in excess of $10 million as a condition to any settlement.

In its complaint, the FTC claimed that Financial Freedom Report sold the products of its sister companies through seminars by using deceptive sales pitches intended to defraud consumers.

Ruling Against FTC
Judge David Sam found that the FTC had failed to present any evidence to support its claims. The court also ordered the FTC to pay Haroldsen $190,000 in attorney fees. This of course did not come close to what Haroldsen paid out and lost throughout his six-year battle.

Judge David Sam was so disgusted by the FTC’s actions, he declared, “The Federal Trade Commission (FTC) acted wantonly, oppressively, vexatiously and in bad faith in prosecuting claims against Mark O. Haroldsen.”

Evan A. Schmutz, Haroldsen’s lead attorney, stated, “The court was particularly displeased because FTC’s pretrial statements asserted the strength of its evidence yet, at the time of trial, the FTC failed to produce even a single consumer to provide relevant testimony in support of any of the government’s claims.” Schmutz added, “The court was clearly troubled by the FTC’s pursuit of its action against Haroldsen, long after it knew the evidence was lacking, simply because it believed Haroldsen had the ability to pay. The court concluded that the FTC’s pursuit of claims was an improper attempt to force Haroldsen to pay an unjustified settlement simply to avoid having to fight the U.S. government.”

Side Note
Haroldsen is a Salt Lake City businessman and best-selling author of “How to Wake Up the Financial Genius Inside You.” The Haroldsen companies employed more than 500 people and generated revenues in excess of $100 million in 1994. As a result of the lawsuit and negative publicity, Haroldsen’s companies lost their banking relationships and were forced to shut down their operations.

The FTC took away six years of Haroldsen’s life, caused his businesses to shut down, cost him hundreds of thousands, and clearly had an impact on the 500 employees when operations came to a close. Read more detail on the Haroldsen vs FTC case here.

January 4, 2002 – SOTA vs. FTC

FTC Allegations
On June 13, 2000 SOTA received a letter from the FTC charging SOTA Instruments, Inc. with engaging in deceptive acts and practices and is acting in the public’s best interest. They stated they believe SOTA has caused substantial injury to consumers by SOTA having an internet link on their site to another website. They believe the injury occurred because the website SOTA linked to posted letters from customers of SOTA that shared how SOTA’s products had helped them in their lives. If SOTA had only stated on their website that “results were not typical” then supposedly the FTC would have no problem with the link.

The FTC stated, “It is in the public interest to dispose of this matter expeditiously.” This statement was accompanied by a three-inch thick consent agreement, and the FTC required that the company keep the FTC fully informed of all their business activities for the next 20 years. Additionally, the FTC demanded that the company hand over its entire customer database.

These are just some of the initial demands put forth by the FTC, in the hopes that the company would not fight it, no doubt. The company…SOTA, chronicled their experience with the FTC. We urge you to review this for yourself and see just what tactics the FTC uses to pull rank.

Ruling Against FTC
Incidentally, after about 18 months of defending themselves… SOTA emerged victorious. On January 4, 2002 SOTA received a letter from the FTC stating, “The case against SOTA has been closed.”

After reading the chronicled communications between SOTA and the FTC, we can certainly understand why they were quick to dismiss this case.

June 19, 2001 – Dr. Tedd Koren vs. FTC

FTC Allegations
In 1995 the FTC made claims that chiropractor, Dr. Tedd Koren, was not allowed to write about the dangers of vaccination, the usefulness of pediatric chiropractic, and the latest information about clinical trails because he was a doctor of chiropractic, therefore, his writing faced a higher standard of review than the writings of nonprofessional, medically unlicensed journalists.  They claimed that the only “safe information” a chiropractor could give under “their theory” was on low back pain, and that the writing about the dangers of vaccination “terrorized” American families.

The FTC argued that the points made in Dr. Koren’s publications were outside the scope of practice of a chiropractor, and were therefore false and misleading.

Ruling Against FTC
On June 19, 2001 attorneys for the FTC informed Dr. Tedd Koren that they had dropped their investigation against him for allegations of false claims in three (of nearly one hundred) pamphlets that Koren Publications makes available to chiropractors and the public.

“This letter is to advise you that the matter about which you inquired in your letter to Ms. Maher dated April 26, 2001 has been closed. This action is not to be construed as a determination that a violation has not occurred, just as the pendency of an investigation should not be construed as a determination that a violation occurred. The commission reserves the right to take further action as the public interest may require.”

The Case Itself
This was such a compelling case, displaying the power and control the FTC tries to unjustly inflict on businesses. This case is exemplary of how the FTC could forever change the 1st amendment – it’s time consumers start paying attention to our “government agencies”.

Just to give you the overall magnitude of this case, Dr. Tedd Koren had a team of attorney’s fighting directly with the FTC for six years without this case ever making it into a courtroom. Because this was such a significant case for the future of health professionals and the peoples first amendment right, Dr. Koren was joined in his fight by high caliber attorneys including; James Turner of the Washington D.C. law firm of Swankin and Turner; Charles Brown, twice-elected former attorney general of West Virginia; David Swankin, former executive director of the White House Office of Consumer Affairs under Lyndon Johnson; Betsy Lehrfeld, former West Coast director of the Council on Economic Priorities; and Christopher Turner, a specialist in regulatory information law.

All the attorneys believed strongly that the restrictions proposed for Dr. Koren posed a threat to his constitutional first amendment right and, if successful, to the first amendment rights of all chiropractors, health care practitioners and other professionals.

This six-year siege could have resulted in heavy fines, restrictions on what he could write, and 20 years of “fencing-in” oversight by the FTC. And, at one point Dr. Koren signed a consent order negotiated between his first attorney and the FTC, only to have the agency turn around and reject that agreement.

We believe Donald M. Petersen Jr., BS, HCD(hc), FICC(h), Publisher of Dynamic Chiropractic, said it best in his article on chiroweb.com, “Of the many battles fought by our profession, few are as frustrating as those waged against federal bureaucracies. Elected officials act with a certain degree of accountability, but officials of federal agencies, whom are appointed to their offices for political reasons, seem aloof, if not domineering in their actions. When the power of these officials is misused or overextended, particularly when it is directed at a specific profession, what recourse does that profession have?”

He goes on to say, “This battle was not waged in the courtroom before an impartial judge. Dr. Koren and his team of lawyers were to fight a war with several FTC lawyers funded by taxpayer dollars and supported by chiropractic’s long-time nemesis Stephen Barrett.”

In regards to the FTC’s letter to Dr. Koren closing the case on three of the pamphlets, Donald Petersen remarked, “These words seem to suffice as the FTC’s version of “no harm, no foul.” But what about the six years and thousands of dollars spent getting the FTC lawyers to back off? There appears to be very little accountability, and even less remorse. One gets a sense that many people in these agencies see themselves as untouchable, and that they can do anything they want without incurring personal liability for their actions.”

August, 1998 – FTC Illegal Seizure of Business and Cover Up

In 1998 the FTC conducted nationwide sweeps, and in this particular “sweep”, it  involved 60 law enforcement actions (coined “Project Risky Business”) directed at investment opportunity businesses in the direct market/entertainment industry.

Without further ado, we turn your attention to the chronicled case against the NAB. Here you can review what transpired in great detail and decide for yourself if you believe the FTC was covering up their wrong doings.

In Conclusion

It seems the FTC often misuses its power, draws conclusions before obtaining proper evidence, threatens businesses with an insurmountable fine they couldn’t possibly afford in order to prevent them from proving the FTC wrong, makes false allegations and diminishes a company’s reputation in the public eye before the company has an opportunity to stand up for themselves, does not claim responsibility for their actions, most certainly has their own agenda – possibly supported by outside interests, and continues to claim they are “protecting consumers” in cases such as the ones indicated above.

Isn’t America supposed to be a country where people are innocent until proven guilty? Is the FTC above our justice system? Are they given so much rein that they can do as they see fit while spending years destroying peoples lives and businesses without accepting responsibility? Are American citizens so blind to what’s happening in our government, that we ourselves are to blame for allowing this to happen over and over again?

Will the FTC’s newest agenda on controlling journalism and the media as we know it be their final feat in killing our first amendment right? It’s a sad state of affairs when our “protectors” become our “dictators” because we gave them the power to do so.

Have we gotten your attention yet? Curious as to how far the FTC’s authority extends? Just take a gander at how much free rein they have under FTC Authority on their website. You might just want to do a little research of your own while you are visiting ftc.gov.

If you have found yourself up against the FTC in an ongoing battle that you believe was unjustified, please share your story here. Speak now or forever hold your peace – and this could be quite literal very soon.

Wake up America – this video is just a small snippet of what’s going on in our government. There are not enough people and politicians speaking up, and those that do have clearly not been heard. You want to see change but are you willing to fight for it?

Tagged as: allegations, false claims, FTC