FTC sues weight-loss company for online 'gag clause'

The Federal Trade Commission (FTC) is suing a weight loss powder company over multiple allegations of unfair and deceptive practices, including attempts to bar customers from posting negative reviews online. 

The allegations against Roca Labs and its affiliates were made Monday in a federal court in Florida. In addition to the so-called gag clause, the FTC also alleges the company made false and unsubstantiated claims about the effectiveness of the product. 

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The commission also alleges the company failed to disclose that some positive reviews were made by people who received discounts. The company is also facing allegations that it violated customer privacy by disclosing some health information to banks and payment processors.

“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’s consumer protection head, Jessica Rich said.

The FTC said the company had made $20 million in sales since 2010. 

Backed by the technology industry, some members of Congress have been pushing legislation that would cut off online gag agreements tucked inside terms of service. 

Earlier this month, Sens. John ThuneJohn Randolph ThuneGOP senators voice confidence over uphill Senate battle Senate GOP hedges on attending Trump's convention amid coronavirus uptick Finger-pointing, gridlock spark frustration in Senate MORE (R-S.D.), Brian Schatz (D-Hawaii) and Jerry MoranGerald (Jerry) MoranSenate GOP hedges on attending Trump's convention amid coronavirus uptick Watchdog accuses Commerce of holding up 'Sharpiegate' probe report Senate Democrats push federal agencies to combat coronavirus scams and robocalls MORE (R-Kan.) introduced legislation meant to protect customers who make critical comments online against businesses, restaurants and retailers. The legislation would guard against "unfair disparagement clauses" in online terms of service agreements, which can be used to sue customers who write critical reviews. The legislation, which has also been introduced in the House, is backed by Yelp and the Internet Association.

Versions of the weight loss company’s terms of purchase in question Monday said that “regardless of your personal experience with RL, you will not disparage RL and/or any of its employees, products or services.”

Violating those terms allowed the company to waive any discounts and authorized it to “seek all legal remedies” to get the negative review retracted or removed. 

The FTC alleges those terms violate the commission’s rules against “unfair acts or practices” because they were likely “to cause substantial injury to consumers that is not reasonably avoidable by consumers and that is not outweighed by countervailing benefits to consumers or competition.”