Anyone who surfs the Web has probably seen the ads featuring Oprah Winfrey and her resident on-air physician, Dr. Mehmet Oz. "For a limited time only, we are giving away two 100% risk-free trials of the best resveratrol product on the internet," read one recent ad, referring to a red-wine extract that some supplement makers believe has life-extending powers.
The ad included a large photo of Oz and said "I take resveratrol myself, and love it." The words "as seen on Oprah" were included on a banner at the bottom of the ad. It turned out neither Winfrey nor Oz endorsed the product, and the so-called free trial was anything but free for many of the consumers who fell for the marketing ploy. The ads trapped thousands of customers into expensive monthly subscriptions for resveratrol and other supplements, such as acai, a Brazilian berry extract that has been credited with promoting weight loss.
It appears Winfrey and Oz have had enough of their names and likenesses being used to mislead consumers. On Aug. 19, Oz and Winfrey's production company, Harpo Entertainment Group, filed suit against more than 50 Web marketers of nutritional supplements. The numerous allegations include trademark and copyright infringement, false endorsement, and "cybersquatting"—the use of domain names that are "confusingly similar" to those used by Winfrey and Oz, the complaint says. The supplements are sold through sites with names such as www.drozadvice.com and www.oprahdietsecret.com.
Many of the ads include clips of Oz and Winfrey talking generally about acai and resveratrol—but not endorsing any products in particular. Implying that they did sanction certain products is illegal, says Marc Rachman, an attorney with Davis & Gilbert in New York, which is handling the suit. "They are not authorized to use clips from the show. They are not authorized to use the names and likenesses" of Winfrey and Oz, Rachman says. "The ads are purporting to talk in Dr. Oz's voice. Customers thought he was endorsing these supplements. This is deceptive and it is a false endorsement."
The lead defendant named in the suit is FWM Laboratories of Hollywood, Fla., which sells Resveratrol Ultra, Acai Berry Detox, and other supplements. Customers have complained to the Better Business Bureau that FWM makes it difficult to return products, and the company continues to charge their credit cards long after they cancel. FWM is currently under investigation by the Florida Attorney General's economic crimes division.
FWM Blames Its Affiliates FWM's CEO Brian Weiss was not available to comment, a company spokeswoman said Aug. 20. But in an interview earlier this summer, Weiss told BusinessWeek that he didn't write his own ads. Instead, he said, he worked through networks of "affiliates," which he paid to spread the word about FWM's products through Google (GOOG), Yahoo! (YHOO), and other sites. Weiss said that his employees kept an eye out for inappropriate celebrity endorsements and he asked the affiliates to pull those ads. He declined to name the ad affiliates FWM uses, because "we don't want our competitors to know who we deal with."
Affiliate marketers are companies or individuals who devise Internet ad campaigns and spread them through programs such as Google AdWords. Through AdWords, companies bid on their placement in searches and sponsored links, and pay only when Web surfers click on their ads. The program is Google's bread and butter, accounting for most of its $22 billion in revenues last year. And the popularity of AdWords is likely to grow even more, now that Google is making it easier for advertisers to capitalize on Oprah and other trademarked names. On June 15, Google announced a new policy allowing companies to cite registered trademarks in ads, even if they don't own those trademarks.
The Federal Trade Commission has been cracking down on Internet scams of late. On July 1, the FTC announced it was bringing eight cases against companies using the Web to market get-rich schemes and money-saving opportunities that turned out to be nothing more than excuses to hit consumers with exorbitant credit-card charges. Earlier this year, the FTC asked Google and Facebook to pull down scam ads claiming to offer consumers money from the federal government's stimulus plan. And the agency has been just as tough on companies as it has on their advertising affiliates. It will neither confirm nor deny that it's looking into supplement schemes, but FTC attorney Karen S. Hobbs says that in general, "Our position is companies cannot hide behind affiliate marketing. We pursue companies directly."
State attorneys general are becoming increasingly concerned about this issue. On Aug. 19, Illinois Attorney General Lisa Madigan filed consumer fraud lawsuits against three suppliers and one affiliate marketer of acai berry products. "Consumers should always be skeptical and educate themselves instead of blindly believing any endorsement claims," Madigan said in a statement. "We must hold these Internet scammers accountable for their role in a seedy marketing game that steers unsuspecting consumers to online schemes."
Harpo's suit targets both supplement sellers and their affiliate marketers. The complaint names a handful of individuals who the company believes are responsible for writing and distributing the ads, but Rachman says there could be as many as 500 such affiliates, and his firm is still trying to locate most of them. When the bad actors are identified, the complaint will be amended to include them. The lawsuit does not specify a damage amount.
Rachman says that in the past, lawyers generally went after deceptive Web site operators individually, but that Harpo felt it would be more effective to cast a wide net. "We'd go after one Web site," he says, "and then another would pop up where the affiliate changed the Web address by a letter or a dash," but the content was pretty much the same. "We didn't want to engage in whack-a-mole. We want these practices to stop." Most of all, he says, "we want consumers to get their money back."