On 19 September 2019, the Federal Trade Commission (FTC) announced that a bath and beauty products retailer and its CEO will pay USD 1.76 million to settle a false advertising complaint. According to the complaint, Truly Organic Inc. had claimed in its advertising that its products were "100% organic," "certified organic," "truly organic" and "vegan," although this was not true. Truly Organic had falsified US Department of Agriculture (USDA) organic certificates, knowingly sourced its products from companies that were not certified as organic and had supplied its resellers and influencers with false marketing information. In addition, Truly Organic had uploaded social media influencer videos to its YouTube channel that repeated the false statements.
Since at least as early as 2015, the defendants advertised and sold hair care products, body washes, lotions, baby products, personal lubricants, and cleaning sprays, some of which they made by buying wholesale products and adding ingredients to them, and others, such as their “bath bombs” and soaps, were bought as finished products and simply resold at a premium. According to the FTC, many of the products contained ingredients that were not organic, and these non-organic ingredients were only specified in lists which were buried amid other text on product labels and websites.
The USDA had resolved an investigation with Truly Organic in 2016 after Truly Organic and its CEO confirmed that it would no longer make the false statements regarding compliance with the USDA National Organic Program (NOP) certification. The CEO asserted that it had removed the certification seal from its labels and had begun "selling a completely redesigned group of products. We are well aware of the rules and regulations that govern the USDA Seal and have not used the seal whatsoever and do not plan to unless we gain proper certification.” According to the complaint, within days after being contacted by the USDA, the defendants were making similarly false claims. It does not appear that Truly Organic ever stopped the deception.
According to the complaint, Truly Organic and its CEO continued to "supply marketers and Internet influencers with product samples that had labels featuring the false certifications for use in the sale of defendants’ products for months after resolving the USDA investigation. Through 2018, Defendants continued to endorse and upload Internet influencer videos to Truly Organic’s YouTube channel containing 'certified organic,' 'USDA organic,' and 'vegan' claims, and featuring images of Truly Organic product packaging containing such claims."
The court order settling the FTC’s charges contains monetary and conduct provisions and the defendants will be subject to recordkeeping, monitoring and compliance provisions for many years. Specifically, the order:
- permanently restrained and enjoined the defendants from making deceptive claims, including false and/or unsubstantiated claims, that any good or service: 1() is wholly or partially organic; (2) contains or uses organic ingredients; (3) is certified organic; (4) is vegan; or (5) has been evaluated by any third party, including one affiliated with the USDA NOP, based on its environmental or health benefits or attributes
- permanently restrained and enjoined the defendants from making any representation about the environmental or health benefits of any good or service, unless it is non-misleading, true at the time it is made, and is supported by competent and reliable scientific evidence. permanently restrained and enjoined the defendants from providing anyone else with the means and instrumentalities that would enable them to make any representation prohibited by the order
- imposes a USD 1.76 million judgment against the defendants
The Truly Organic case was brought under Section 13(b) of the Federal Trade Commission Act (FTC Act), 15 U.S.C. § 53(b), to obtain permanent injunctive relief, rescission or reformation of contracts, restitution, the refund of monies paid, disgorgement of ill-gotten monies, and other equitable relief for Defendants’ acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a) in connection with the false or deceptive advertisement of certain personal care products as organic or certified organic. In addition to the decision being unanimous, FTC Commissioner, Rohit Chopra, also issued a separate statement that the defendants' conduct "distorted competition for organic products, inflicting harm on honest producers" and that the conduct also "harmed consumers, some of whom may have purchased their products for health reasons." Thus, although several other recent cases did not involve an award of monetary damages, the Commissioner made it clear that in this particular case, which involved unlawful conduct that was dishonest or fraudulent, "no-money settlements are inadequate, and the Commission should commit itself to exercising its full authority to protect consumers and honest businesses."
Clearly the FTC found that potential negative health impacts on consumers as well as the company's egregious conduct, such as falsifying USDA documents and continuing the deception after a warning by another federal agency, justified a strong response here.