Attorney General Hardy Myers today announced a $5 million settlement agreement with an Ohio-based herbal products company resolving a 2005 multi-state lawsuit alleging the company mislead Oregonians about the effectiveness of its supplements and conducted an illegal marketing tactic known as a "negative option," causing consumers to be automatically billed for more shipments of product after trying a so-called "free" offer.
Named in a stipulated general judgment filed today in Marion County Circuit Court are Steve Warshak of Cincinnati, Ohio and his dietary supplement firms Berkeley Premium Nutraceuticals, Lifekey Inc., Boland Naturals Inc., Warner Health Care, and Wagner Nutraceuticals ("Berkeley"). The defendants do not admit violation of law.
Under the judgment, Berkeley must provide restitution to all Oregon consumers, who as of today, have unresolved complaints on file with the offices of the Oregon and Ohio Attorneys General, the Better Business Bureau, and Berkeley. The defendants also must provide consumer restitution for all consumers, who file complaints with those same offices within 90 days.
Consumers wanting to file complaints with the Oregon Attorney General's may call his consumer hotline at (503) 378-4320 (Salem area only), (503) 229-5576 (Portland area only) or toll-free at 1-877-877-9392. Justice is online at www.doj.state.or.us.
The lawsuit alleged that when consumers made an initial order of a "free" 30-day trial of dietary supplement pills, Berkeley representatives failed to tell them they would receive and be automatically billed for additional shipments -- a marketing tactic known as a "negative option feature" -- and often made it difficult to cancel shipments or get their money back.
Berkeley also attracted customers with advertisements resembling those for genuine pharmaceutical drugs. The companies' products include pills claiming to address numerous physical ailments, most notably Enzyte, a pill to enhance sexual function in men, advertised in television spots featuring a character named "Smiling Bob." The company also makes an array of herbal products that claim increased libido for women and such things as better night vision, memory recall, weight control and energy.
"Berkeley's conduct was egregious and more than 100 Oregon consumers agreed with us by writing complaints to various consumer protection agencies and the Better Business Bureau," Myers said. "This settlement ought to wipe that smile off Bob's face."
Under the judgment, Oregon, as a lead litigating state, will receive $700,000, half of which will be suspended if the defendants make required payments. Other states that filed similar settlements today in their state courts include Arkansas, Florida, Missouri, North Carolina, Ohio, Pennsylvania, Virginia, Washington, Wisconsin, as well as the District of Columbia. Other states, including California, Illinois, Kansas, Mississippi and Vermont, are expected to file similar settlements soon. The total payment to all states will be $5 million, one half of which is suspended if the company makes all required payments.
In the settlement, the defendants must abide by the following:
Pay the settling states $2.5 million for investigation and litigation costs. If they fail to pay, the defendants also will owe a civil penalty of $2.5 million to the states, with $350,000 going to Oregon.
Stop using the word "free" in advertising unless all the terms and conditions related to the "free" offer are disclosed to the consumer and in compliance with Oregon's "free" rule and applicable federal law.
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 from today.
Jan Margosian, (503) 947-4333 (media line only) firstname.lastname@example.org