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Lumos Labs Case Signals to Health Software Industry an Intention by the FTC to Police Industry’s Advertising Claims

Written by on Saturday, January 16th, 2016 Print This Post Print This Post

The Federal Trade Commission’s pursuit of Lumos Labs over advertising claims made about its Luminosity brain training software programs has sent a clear cautionary signal to the health software industry that the FTC intends to exercise regulatory authority over advertising in the space to monitor companies’ health-related advertising claims for deceptive advertising issues.

The FTC reached a settlement this week with Lumos Labs on its deceptive advertising claims against the company.  A copy of the FTC’s press release on the settlement is attached here.

The FTC’s complaint attached here alleged that the company’s claims about the health benefits of training with Luminosity’s mobile apps and subscription-based software services were not substantiated by science at the time that the claims were made, in violation of Sections 5(a) and 12 of the FTC Act, 15 U.S.C. § 45(a).  Also, the complaint alleged that testimonials about the benefits of the program were solicited in conjunction with a contest with prizes–a fact which was not disclosed in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).  The FTC alleged these violations caused consumers to suffer substantial injury and unjustly enriched Lumos Labs.

As part of the settlement, Lumos Labs has agreed to pay a fine of Two Million Dollars ($2 Million) to the FTC.  In addition, Lumos Labs agreed to turn over its customer list and to provide email and subscription-based notices to consumers notifying them of the settlement and giving them visible notice of their rights to end their subscriptions when they renew.  The FTC agreed to lift a $50 million judgment against Lumos Labs conditioned upon the accuracy, completeness, and truthfulness of the financial statements provided by the company to the FTC.  A copy of the full order is attached hereThe Washington Post reports that the FTC anticipates spending the majority of the fine on consumer refunds.

The FTC action against Lumos Labs highlights the increased popularity of software in the health technology space and provides a clear signal that the FTC intends to exercise its regulatory powers against software companies making health claims for advertising purposes that have not been scientifically proven.  Indeed, the FTC recently posted to its website some general guidelines for companies making health claims, in which it advised software companies procure clinical studies to support their health claims about their software products.  A quick search of “health claims” on the FTC’s website underscores the apparent seriousness in which the FTC is taking the issue of regulating product health advertising claims.

The bottom line: software companies making health claims about their products are on notice that the FTC will be closely watching how you are advertising your product.  So, companies in the health software industry need to make FTC compliance a high priority for their businesses.

 

 

 


Category: FTC Regulation
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