Tuesday, July 21, 2009

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Dietary Supplements Distributor’s Sales and Marketing Scheme Prohibited After State Investigation

FORT WORTH – Texas Attorney General Greg Abbott today resolved the state’s investigation into an Arlington dietary supplements distributor. Under the settlement, FXsupplements.com agreed to stop shipping unauthorized orders to customers, refrain from making false health claims, and clearly disclose its terms of service to future purchasers. The online vendor also agreed to provide refunds to customers that it overcharged for its products.

Distributor Austin Hilton widely advertised the “acai berry” supplement as reducing the risk of heart attack, Alzheimer’s disease and cancers. His advertising materials also claimed the product could limit premature aging. Web advertisements indicated that the Acai Berry Maxx product was “naturally potent in antioxidants” and could flush up to 30 pounds of waste and toxins from the body. Hilton’s claims are not backed by sound scientific studies, and they have not been approved by the U.S. Food and Drug Administration (FDA).

Media links
Attorney General's lawsuit against FXSupplements.com
Final judgment against FXSupplements.com

When customers clicked on the FXsupplements.com or acaiberrymaxx.com advertising links, they were informed that they would have four minutes to place their orders before the free trial of the Acai Berry Maxx product expired. Customers who completed orders were asked to pay a $5.95 shipping and handling fee. To make the required payment, purchasers had to provide their credit or debit card numbers.

The Attorney General’s investigation found that this transaction led customers to a “terms and conditions” page that failed to clearly disclose several problematic provisions. By accepting the “free” 15-day supply valued at $65, customers unwittingly entered into a “negative option” plan with the company. Under this scheme, FXsupplements.com would automatically “renew” orders after the 14-day trial period expired without customers’ express authorization to continue. The renewal forced customers to pay $80 for one-month supplies of Acai Berry Maxx, even after customers demanded cancellation.

According to state investigators, the negative option language embedded within the “terms and conditions” violated state law. Under the Texas Deceptive Trade Practices Act, terms providing for ongoing contractual obligations must be disclosed clearly and conspicuously on the contract.

Investigators also discovered that FXsupplements failed to promptly ship orders. As a result, customers did not receive their free products until the free-trial had nearly expired. This gave customers little time to try the products without obligation and decide whether to order additional products. Meanwhile, Hilton and his companies automatically put customers onto a revolving shipment of prepaid products after the trial period ended without customers’ knowledge or consent.

While Hilton touted Acai Berry Maxx as a remedy or cure for diseases, FXsupplements’ “terms and conditions” contained fine-print language acknowledging that the products were not intended to diagnose, treat, cure or prevent any disorders and diseases. Importantly, the FDA has not approved Acai Berry Maxx as a drug with the curative properties claimed by Hilton.

Hilton and the defendant companies, which also includes Hilton HG, Ltd., agreed to numerous corrective measures and penalties, including customer restitution and Web page modifications. The agreed final judgment prohibits Hilton and FXsupplements from relying upon false advertising or deceptive schemes to sell the products. Under the agreement, material information cannot be obscured within the purchase agreements’ “terms and conditions.”

If the defendants employ the “negative option” billing plan in the future, they must clearly disclose the steps customers can take to discontinue their contract. Additionally, customers who are wrongly charged for unwanted products must receive prompt refunds. Hilton and his companies must also provide reliable telephone customer service in order for customers to contact the company.

Texans who believe they have been deceived by similar fraudulent business practices may call the Office of the Attorney General’s toll-free complaint line at (800) 252-8011 or file a complaint online at www.texasattorneygeneral.gov.