The makers of the erectile dysfunction product popularized by the "Smiling Bob" ads will pay $2.5 million and provide consumers restitution to settle a multi-state enforcement action that alleges the defendants made unsubstantiated claims about dietary supplements' effectiveness and automatically billed consumers for products they never requested.
"Smiling Bob may have been happy, but many customers were not," said California Attorney General Bill Lockyer.
"The defendants violated consumer protection laws that rest on a simple principle: businesses must deal with people fairly and honestly. This settlement will prevent further violations and compensate consumers harmed by the defendants' practices."
Steve Warshak of Cincinnati, Ohio and five dietary supplement firms he owns entered the settlement with Lockyer, and the Attorneys General of 17 other states and Washington D.C.
The defendant companies include Berkeley Premium Nutraceuticals, Inc. (Berkeley) and four subsidiaries: Boland Naturals, Inc.; Lifekey, Inc.; Wagner Nutraceuticals, Inc.; and Warner Health Care, Inc. All five companies operate out of the same location in Cincinnati, Ohio.
The states' complaints allege the defendants violated state laws prohibiting false or deceptive advertising and unfair business practices.
The Attorneys General allege the defendants, in their advertisements, made claims about the effectiveness of their products that were not supported by reliable, competent scientific evidence.
The defendants made such unsubstantiated claims about more than 10 of their products, including Enzyte, the erectile dysfunction pill used by Smiling Bob. The defendants' ads claimed Enzyte would improve male sexual function and performance and give them firmer, fuller-feeling erections.
The companies' other dietary supplements include Altovis, Avlimil, Avlimil Complete, Dromias, Mioplex, Ogoplex, Numovil, Pinadol, Prulato, Rogisen, Rovicid, Suvaril, Nuproxi and Rudofil.
The Attorneys General further allege the defendants deceived consumers in marketing "free" 30-day trial orders of dietary supplement pills.
The defendants failed to tell consumers that if they accepted the offer, they would receive, and be automatically billed for, additional shipments. Then, the defendants made it difficult for consumers to cancel shipments or obtain a refund, according to the Attorneys General.
The settlement requires the defendants to provide restitution to all consumers who have unresolved complaints on file with Attorney Generals' offices, the Better Business Bureau or Berkeley on the date the settlement is filed with the court.
Additionally, the defendants must pay restitution to all consumers who file complaints with Attorney Generals' offices, the Better Business Bureau or Berkeley within 90 days after the settlement is filed.
To protect consumers from future violations, the settlement mandates reforms of the defendants' business practices. Under these "injunctive relief" provisions, the defendants must:
• Stop using the word "free" in advertising, unless all the terms and conditions related to the "free" offer are disclosed to the consumer and comply with applicable state and federal laws.
• Stop making health claims they cannot support with scientific evidence.
• Make disclosures to consumers prior to sale about products the companies will deliver as part of a "negative option feature" or membership, and about refunds and guarantee procedures.
• Record all telemarketing calls and retain them for one year.
Aside from the restitution, the settlement requires the defendants to pay the states $2.5 million to cover their investigation and litigation costs. The defendants also will have to pay the states a $2.5 million civil penalty if they fail to comply with the injunctive relief provisions, or fail to pay the $2..5 million in cost reimbursement.
The settling jurisdictions include: Arkansas, California, Florida, Illinois, Kansas, Mississippi, Missouri, Montana, North Carolina, Ohio, Oregon, Pennsylvania, Vermont, Virginia, Washington, Wisconsin and Washington D.C.
Customers of the defendant companies may file a complaint with their state's attorney general.