Antitrust Lawyer Blog Commentary on Current Developments

Repeat Offenders Banned From Claiming Products Treat or Cure Diseases

An operation selling Chinese herbal supplements was banned on August 9 from claiming its products treated or cured diseases, to settle Federal Trade Commission (“FTC”) charges it violated a previous court order. The FTC alleged the sellers of Dia-Cope, a pill claimed to prevent, treat, and cure diabetes, violated the order by misrepresenting the health benefits of their product and misrepresenting that clinical trials proved their claims. The defendants will also give up their ill-gotten gains – all of the assets they received from the sale of Dia-Cope.
The defendants originally sold “Sagee”, a Chinese herbal supplement that they claimed could improve memory and concentration, repair damaged brain cells, slow the aging of the brain, increase the learning ability of people with mental handicaps, and treat various diseases and conditions related to brain function, including Alzheimer's disease, senile dementia, schizophrenia, autism, cerebral hemorrhage, stroke, epilepsy, and Parkinson's disease. They advertised Sagee mainly in Chinese-language media; some ads also appeared in Vietnamese and English. The supplements were sold by distributors on the Internet and in some stores.

The FTC charged that the claims about Sagee were false and unsubstantiated and an order entered in January 2005 prohibited the defendants from making unsubstantiated health benefit, performance, or efficacy claims for any dietary supplement, food, drug, device, or service. The order also barred them from misrepresenting the existence, results, validity or conclusions of any scientific study.

According to the FTC, the defendants then began advertising Dia-Cope on Web sites available in seven languages: English, Chinese, Japanese, Korean, Indonesian, Spanish, and Russian. The defendants claimed Dia-Cope could prevent, treat, and cure diabetes and claimed that thousands of human clinical trials proved it. Their Web sites, www.sagee.com and www.dia-cope.com, stated that the FDA had approved the product. Bottles of Dia-Cope with 90 capsules sold for $60 – enough with the suggested dosage to last one or two weeks.

According to the FTC, the defendants violated their court order by misrepresenting the health benefits of Dia-Cope, falsely claiming that the FDA approved the product, and misrepresenting that there was clinical support for their claims. A temporary restraining order was entered against the California-based defendants, Sagee U.S.A. Group, Inc. and Xiao Hua Li, on July 5, 2006, stopping their deceptive claims.

The modified order against the defendants bans them from claiming that any foods, drugs, devices, services, or dietary supplements can prevent, mitigate, treat, or cure any disease. Under the order, the defendants will give up all of the assets derived from the sale of Dia-Cope, $10,396. The order extends the original order's monitoring and record-keeping provisions and retains the strict provisions requiring the corporate defendant, Sagee, to monitor the activities of its distributors.

Authored by

Camelia C. Mazard
202-589-1837
cmazard@dbmlawgroup.com