Weight loss scams come in all sorts of shapes and sizes – pun intended! In addition to causing consumer harm, these boondoggles lead to chargebacks, regulatory scrutiny, and brand-damaging publicity. Here at G2, we keep an eye out for all types of merchant risk, including the following:
Misleading Claims
The FTC warns third parties to be on the look-out for deceptive claims, including: “Take it off and keep it off. Kiss dieting goodbye forever!” and “Block fat before your body absorbs it. The pounds and inches will melt away.” Moreover, the agency routinely cracks down on companies that market weight loss products with false and misleading claims. For example, in 2017, the FTC settled a case against NutriMost LLC, which claimed that their “NutriMost Ultimate Fat Loss System” would help people lose 20 to 40 pounds in 40 days and treat or cure diabetes, psoriasis and more, all without a restrictive diet.
Tainted Supplements
Sometimes, products marketed as dietary supplements contain hidden – and dangerous – active pharmaceutical ingredients. For example, in January, the FDA issued a public warning about GoLean Detox, a weight loss product that was found to contain undeclared sibutramine and phenolphthalein. Sibutramine is a controlled substance that was formerly sold under the brand names Meridia (in the US) and Reductil (globally). In 2010, sibutramine was withdrawn from the market in many countries due to increased risk of heart attacks and stroke. Phenolphthalein, a laxative, was also withdrawn from the market because it was found to cause cancer.
Other countries’ medicines agencies also test suspicious products and issue consumer warnings. Australia’s Therapeutic Goods Administration recently warned consumers about products including BASCHI Quick Slimming, Mang Luk Power Slim, and Deli by New Queen, all of which were found to contain sibutramine. G2 tracks regulatory updates globally and reports shady weight loss nutraceuticals via our Persistent Merchant Monitoring solution.
High-Risk Merchant Sales Tactics and Misleading Business Models
Weight loss products are sometimes sold using negative option marketing and via multi-level-marketing programs. Although not necessarily illegal, these high-risk approaches can violate the law.
Negative option marketing violates federal law where certain required disclosures are not made. Because negative option marketing raises an immediate red flag in the payments industry, fraudsters often create “bank pages” to obtain merchant accounts. G2 finds these bad actors via our Transaction Laundering Detection solution.
Multi-level marketing – often used to sell weight loss products – can be a problematic business model where it violates the Federal Trade Commission Act, which prohibits “unfair or deceptive acts or practices in or affecting commerce.” The most high-profile example involves Herbalife, which was hit with a $200 million fine and forced to restructure its business.
If you would like to know more about G2’s Transaction Laundering Detection and Persistent Merchant Monitoring solutions, contact us at info@g2llc.com.
