Global enforcement action brings 'Sweep'ing change

23 September 2002


Following the world-wide Internet Sweep for misleading and deceptive claims about health products, held earlier this year, 18 companies are facing legal action, and over 200 investigations are still running in the 19 countries that participated.

This Sweep was an official activity of the International Marketing Supervision Network. The IMSN is a network of law enforcement agencies in 30 countries, whose driving purpose is action to prevent and redress cross border deceptive marketing practices. The Network is meeting in Sydney this week to discuss outcomes of the last sweep and plan for the upcoming years' activities.

During the one-day sweep for sites promoting or selling health products, over 1,400 websites from around the world were identified as 'suspicious'. Of these, nearly half used testimonials as their main method of convincing consumers to purchase their products. Of the testimonials used, only a third claimed to be from relevant experts. Only 37.7 per cent of the suspicious sites mentioned clinical studies.

This has prompted the IMSN to issue the important warning to consumers to always seek independent verification of claims made about health products. Do not be persuaded by testimonials alone, as there is no way of verifying that they are legitimate. Rather, speak to a health professional or seek independent evidence. If you feel that you have been a victim of a cross-border health scam over the Internet, report your complaint to IMSN members at www.econsumer.gov, so that IMSN members may use the complaints to decide whether to take law enforcement action.

"People’s health is their most valuable asset", ACCC Commissioner and current IMSN President, Sitesh Bhojani, said today. "Businesses that prey on consumers with a special vulnerability such as illness will not be tolerated by the IMSN".

Actions coming out of the Sweep include BioPulse, Inc, which has settled Federal Trade Commission charges in the USA against their Internet advertising of 'therapies' claimed to treat cancer and other serious diseases. Court action was raised with 11 Internet traders in New Zealand, most of which have settled law enforcement concerns without going to court. The Portuguese Consumer Institute's actions led to four websites being deleted entirely.

The Swedish authorities have reached out-of-court settlements with 14 businesses, including ceasing to supply the identified products. The Austrian Consumer Protection agency obtained undertakings from two businesses, and took another business to court. Switzerland (the previous IMSN President) has shut down various websites and commenced legal action against one business.

Belgian authorities reached out-of-court settlements with seven businesses, closed down six websites, and issued fines to two businesses. French authorities have taken legal action against three traders. Investigations and cases are still open in USA, Denmark, New Zealand, Australia, Sweden, Austria, Switzerland, France, Hungary, Japan, UK and Belgium.

"The level and frequency of cooperation between members of the IMSN is growing", Mr Bhojani said. "Sweeps are not just an information gathering exercise. They assist consumers through the provision of information, and lead to law enforcement action by agencies in up to 30 countries in Europe, North America, and the Asia-Pacific region".

Local actions:

In Australia, with the assistance of State Fair Trading authorities, Commonwealth Therapeutic Goods Administration and State Health Complaints Offices, the ACCC has reached out-of-court settlements with:

  • a business based in Sydney promoting pheromone products claiming the benefits of increased eye contact, smiles, dates, sex, and self-confidence
  • a Victorian business promoting the use of magnetic fields and colloidal silver suspended in water to cure AIDS and boost the immune system
  • a Perth business promoting lamps made from salt crystals as being "used by health practitioners for many years to enhance immune systems", when this claim could not be substantiated
  • businesses in New South Wales and South Australia promoting magnets and magnetic devices as effective in treating headaches, back injuries, circulation problems, insomnia, arthritis and sprains
  • a Melbourne business claiming to test, diagnose and treat ageing, thereby reversing the ageing process
  • a Victorian business marketing a multi-coloured shirt claimed to relieve stress, make the wearer more intelligent and perceptive, improve concentration, allow the wearer to continuously exercise, and stimulate and strengthen the immune system
  • a New South Wales business promoting computer software designed to assist visualisation and affirmation techniques, claimed to treat disease
  • a Queensland business promoting herbal products for "curing colds overnight", and curing hangovers, morning sickness, and stomach ulcers, as well as adjusting menstrual cycles to make them more regular and reversing the effects of osteoarthritis
  • a Queensland business promoting colloidal silver as being a treatment for gastritis, malaria, parasitic infections, psoriasis, and yeast infections
  • a New South Wales business promoting a slimming device claimed to "tone your muscles in a 1 hour session (where you lie down) to the equivalent of a 7 hour workout in the gym"; and many others.

All representations have been removed from the website entirely or altered after proposed court action by the ACCC. Some websites were deleted from the world wide web entirely without any further action. The ACCC still has investigations and cases under way. If its concerns are not addressed satisfactorily, it will take the matters to the Federal Court.

The ACCC has instituted proceedings against Danoz Direct and its director, alleging misleading and deceptive conduct in the marketing of the product Abtronic on its website, as well as in TV commercials and catalogues. Danoz Direct is defending all aspects of the matter, in which the Court has set a trial date for 28 October 2002. The FTC has also instituted proceedings against Abtronic promoters in the US, alleging false and deceptive claims.

The ACCC has also filed in the Federal Court asking for injunctions, corrective statements and refunds against Transformation 2012 concerning web site claims to treat or assist in curing cancer, AIDS, diabetes, herpes, hepatitis, flu, asthma, migraine, MS, discoid lupus, and chronic fatigue. This site also clearly targets consumers in other countries.

"Online traders trying to evade prosecution by locating in other jurisdictions had better watch out!", Mr Bhojani said. "IMSN members are also taking actions based on consumer complaints to eConsumer.gov, which has received over 2,500 complaints from consumers around the globe since its launch in April 2001.

"This Network of law enforcers will not tolerate misleading or fraudulent activity. The IMSN is expanding in numbers and will cooperate more in the coming years. The members will be discussing Sweep 2003 at the current IMSN meeting being held in Sydney".

More information

Participation

IMSN members are: Australia, Austria, Belgium, Canada, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Japan, Korea, Latvia, Luxembourg, Malta, Mexico, Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Spain, Sweden, Switzerland, UK and USA.

Participants in Sweep 2002 were: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Ireland, Hungary, Japan, Korea, New Zealand, Norway, Poland, Portugal, Sweden, Switzerland, UK and USA.

In the participating countries the federal consumer protection authorities were also able to enlist the assistance of local consumer affairs and State attorney's offices, and health authorities. This overcame difficulties in some IMSN countries with jurisdiction over health related products, and provided valuable technical assistance during the Sweep.

The IMSN has been running regular Sweeps since 1997, and now runs them as an annual event, targeting different consumer issues each year. The focus of Sweeps is fast shifting from the event itself to the enforcement activities and education actions that arise between Sweeps.

Outcomes

Actions taken by IMSN members as part of Sweep 2002 include:

  • litigation;
  • settlement of charges or allegations by consent orders or enforceable undertakings;
  • obtaining out-of-court settlements of IMSN agencies' concerns (by deleting or altering of websites);
  • assessment of information provided by traders, and ceasing action if concerns are addressed;
  • warning emails sent to website operators; and
  • massive publicity campaigns, including promotion of consumer protection laws, and provision of health information to consumers.

Over 519 emails were sent directly to the traders operating websites identified as making 'suspicious' claims. In addition, information was disseminated to businesses and consumers through over 50 newspaper, magazine and online articles, as well as major TV news services in most countries and countless radio interviews.

Over 74 traders have taken action in response to letters of demand from IMSN members. Actions taken include deleting websites entirely, ceasing supply of specific products, and altering or removing representations as agreed with the agency. IMSN members have generally ceased action when their concerns have been addressed 'out-of-court'.

In Australia, the ACCC has been following through on orders of the Federal Court in another health matter, ACCC v Purple Harmony Plates Pty Ltd. After the trader failed to comply with Court orders to place corrective statements on their website, the ACCC took the matter back to the Court alleging contempt. The Court has issued fines for contempt, and the ACCC is further pursuing ways of ensuring that the corrective statements are placed on the website as ordered.

Further advice for consumers

Prevention is better than cure when it comes to health scams, so:

  • if it sounds 'too good to be true', it probably is;
  • beware of products or treatments that are advertised as a quick and effective cure-all for a wide range of ailments or for undiagnosed symptoms;
  • be cautious of testimonials claiming amazing results;
  • watch out for promoters using phrases such as "scientific breakthrough", "miraculous cure", "exclusive product" and "secret ingredient"; and
  • before you purchase, consult your pharmacist, doctor or other health professional.

In Australia, consumers who believe they have been a victim of a health scam on the Internet can call and report the matter to the ACCC InfoCentre on 1300 302 502.

If you believe you have been victimised by a foreign website advertising a health scam, file a complaint at www.econsumer.gov. Law enforcement agencies in 17 countries of the IMSN have access to the site.

Sweep history

The ACCC has been the Sweep coordinator for the IMSN since 1997. Participation has been steadily increasing, with 19 countries participating in Sweep 2000 and Sweep 2002 – the highest participation so far. The ACCC will be encouraging even higher participation in Sweep 2003.

Previous Sweeps have focused on 'get rich quick' scams (including pyramid selling), misleading health claims, and compliance with the internationally recognised OECD Guidelines on best practice for e-commerce.

Sweeps have an enormous impact on global trade by:

- assisting promotion of fair trading by educating businesses;

- broadening consumer awareness;

- improving market conduct by demonstrating a presence of authorities in the Internet space; and

- facilitating enforcement action by each agency in light of information from the Sweep.

Release number: 
MR 229/02
ACCC Infocentre: 

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