False advertising and health claims in ecommerce – FTC v Seasilver USA Inc

Advertising law plays an important role in regulating ecommerce. Some aspects of consumer and marketing laws in Australia have been briefly summarised, however on the internet e-commerce websites are operating globally.

The most egregious cases of false and deceptive advertising frequently involve disreputable e-commerce owners making unsubstantiated health claims, which can often also involve the application of therapeutic goods legislation s in Australia.

Seasilver USA Inc was one such website shamelessly peddling miracle cures to consumers for over 650 types of diseases. In the United States both the Federal Trade Commission (FTC)and the Federal Drug Administration (FDA) were involved in investigation of Seasilver USA Inc for their false and deceptive claims in the marketing practices of their dietary supplement, Seasilver.

Efforts to put a stop to Seasilver’s activities involved the co-operation of not only the FTC and FDA but also Health Canada and Canada’s Competition Bureau.

The Seasilver case is an example of how aggressively regulatory bodies are prepared to pursue unscrupulous website operators who make bogus claims which could endanger lives. It is also an example of the degree of co-operation which occurs between regulatory agencies across borders.

Although Seasilver USA was trying to market their product as a dietary supplement, the claims it was making also brought it within the category of an ‘unapproved drug’ under the Federal Food Drug and Cosmetic Act. Australia also has therapeutic goods legislation which regulates such claims.

In the Silversea case several agencies worked together in ‘Operation Cure.all‘ to put an end to the fraudulent marketing of health related products by Seasilver USA Inc

The FTC enters details of internet, identity theft and consumer complaints relating to fraudulent behaviour into a database called Consumer Sentinel, which is made available to hundreds of civil and criminal law enforcement agencies in the US and abroad.

Their efforts paid off when Seasilver were ordered to pay almost $120 million by an appeals court after it failed to comply with an earlier judgement of the Court.

One of the most memorable cases in Australia involving the making of health claims was the Purple Harmony Plates case. The defendants were selling plates and discs it claimed had a healing energy field which could lower stress and fatigue, boost the immune system and negate the effects of re-radiated and electromagnetic frequencies.

Court orders were made by the Federal Court of Australia against the defendant website owners which were not complied with, leading to the defendants being found in contempt of court and fined. The court ordered that the defendants publish a corrective notice to consumers on its’ website www.purple-plates.com, which the defendant failed to do, resulting ultimately in the seizure of the site by the ACCC.

In defending himself against the contempt charges, the website operator Neil Arthur Lyster unsuccessfully argued before the Federal Court that he had seceded from the Commonwealth of Australia, and therefore any previous rulings of the Court over him were “null and void”.

Evidence tendered to the court showed that Lyster, as domain name holder of “www.purple-harmony-plates.com” had listed himself at a suburban Melbourne street address as “His Excellency Governor, Government of the Commonwealth, Australis, Purple Harmony Plates, Kew 3101”.

The orders made by the ACCC that it’s domain name be de-registered were very unusual for a Court to make. However because of the nature of the offending material, the ACCC wanted to make sure the operators were shut down. A US based domain name Registrar recognised the Federal Court orders and shut down the website. to Another site, www.purpleplates.com is still active.

Upon checking the internet some eight years later, it appears that the website www.purpleharmonyplates.com has been resurrected, bearing a striking similarity to the website which was the subject of Court proceedings in Australia.

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One Response to False advertising and health claims in ecommerce – FTC v Seasilver USA Inc

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