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U.S. regulators announced a settlement with a company it took action against for deceptively marketing a plant extract that it claimed caused weight loss, and whose marketing strategy involved fake positive Amazon reviews.

The Federal Trade Commission said it was the agency’s first-ever lawsuit against a company for commissioning fake paid reviews on retail sites like Amazon.

The FTC sued Cure Encapsulations, Inc. and its owner, Naftula Jacobowitz, for “deceptive marketing” claiming that its product, Quality Encapsulations Garcinia Cambogia Extract with HCA, causes weigh loss by suppressing appetite, and blocks new fat cells from forming without any scientific proof. The suit also alleges that the company used a company called AmazonVerfiedReviews.com – which no longer exists — to write fabricated reviews and give the product 5 stars.

The FTC claims that Jacobowitz told AmazonVerfiedReviews.com that the extract needed an average rating of 4.3 out of 5 stars, saying, “Please make my product … stay a five star,” according to the agency’s press release.

“People rely on reviews when they’re shopping online,” Andrew Smith, the FTC’s director of the Bureau of Consumer Protection, said in a statement. “When a company buys fake reviews to inflate its Amazon ratings, it hurts both shoppers and companies that play by the rules.”

A lawyer for Cure Encapsulations said there have been no false reviews since June 2015, and any fake reviews have been taken down.

“There [is] no misconduct after that date — no more false reviews — and all have since been removed,” August Horvath, a lawyer for both the company and Jacobowitz told ABC News.

Garcinia cambogia, a fruit native to Indonesia, has been heavily marketed for its weight loss abilities across different media platforms.

As part of the settlement with the FTC, which was announced Tuesday, Cure Encapsulations is required to send emails to all of its customers, stating, “According to the FTC, we deceptively claimed — among other things – that our product causes significant weight loss, is a powerful appetite suppressant, and blocks the formation of new fat cells. We don’t have scientific proof for any of those claims,” according to a filing with the U.S. District Court for the Eastern District of New York.

Amazon shut down Cure Encapsulation’s ability to sell its products on its platform on Tuesday after the FTC announcement, Horvath said. The settlement was originally signed by the company in October, and was finalized last week, delayed in part by the government shutdown, he said.

But because Amazon has stopped sales for the product on its platform, and the business is “basically an Amazon storefront,” Hovarth said the future of Cure Encapsulations hangs in the balance. “We’d like to work through Amazon in good faith to get it resolved,” he said.

In 2016, Amazon sued AmazonVerfiedReviews.com, and the company has since gone out of business.

Amazon, which has been battling the cottage industry of fake reviews, commended the FTC lawsuit. The retail giant has been criticized over the credibility of customer reviews as the number of third-party sellers using its platform has skyrocketed, creating opportunities to exploit the review process.

“We welcome the FTC’s work in this area. Amazon invests significant resources to protect the integrity of reviews in our store because we know customers value the insights and experiences shared by fellow shoppers,” an Amazon spokeswoman wrote in an emailed statement to ABC News. “Even one inauthentic review is one too many. We have clear participation guidelines for both reviewers and selling partners and we suspend, ban, and take legal action on those who violate our policies.”

As per the latest study by Persistence Market Research (PMR), the global weight loss dietary supplements market is anticipated to witness healthy growth. The market is likely to register 6.0% CAGR throughout the forecast period 2017-2026. The global weight loss dietary supplements market is also estimated to bring in US$ 37,177.6 million revenue by 2026 end.

A sample of this report is available upon request @  https://www.persistencemarketresearch.com/samples/20380

With obesity becoming a global health concern, weight loss continues to be one of the most focused areas. Hence, increasing number of companies are coming up with the new products in weight loss supplements. The increasing consumption and demand for weight loss dietary supplements, regulations on the production of these supplements along with ingredients used are also gaining traction in various countries. The government in various countries are also focusing on the quality and quantity of ingredients used and if any of these ingredients can have severe side-effects, affecting the health of the consumers negatively.

Increasing use of Natural and Organic Ingredients in the Weight Loss Dietary Supplements

The negative effects of being obese and overweight are resulting in the increasing use of weight management products. Consumers are also adopting weight loss supplements in forms of pill, liquid, and powder. Hence, with the increase in the use of these supplements, manufacturers are also trying to produce safer products, thereby using organic and natural ingredients and plant-based ingredients. Among various ingredients, green tea extract is considered as one of the most popular and safest ingredients in the weight loss dietary supplements. Similarly, Garcinia cambogia is also being considered as an ingredient in the weight loss supplements. However, these ingredients have been reported to have adverse effects like a headache, constipation, UTI. Hence, there has been an increase in the investment in the research on other organic ingredients that can be used to produce weight loss supplements.

Global Weight Loss Dietary Supplements Market: Segmental Insights

The global weight loss dietary supplements market includes various segments such as end-user, form, ingredients, distribution channel, and region. Based on the form, the market is categorized into powder, liquid, and soft gell/pills. Soft gell/pills are expected to dominate the market during the forecast period. By the end of 2026, soft gell/pills are expected to exceed US$ 18,500 million revenue.

Based on the end-user, the segment consists of men, women and senior citizen. Among these, women are expected to be the largest users of weight loss dietary supplements. Women segment as the end-user is estimated to create an incremental opportunity of more than US$ 7,900 million between 2017 and 2026.

By Distribution Channel, pharmacies drug store is expected to emerge as the largest distribution channel for the weight loss dietary supplements. Pharmacies drug store is estimated to account for more than one-third of the revenue share by the end of 2017.

Based on the ingredients, the segment consists of amino acids, vitamins minerals, botanical supplements, and others. Vitamins minerals are expected to emerge as one of the largest used ingredients in the weight loss dietary supplements. By the end of 2026, vitamins minerals are estimated to exceed US$ 16,900 million revenue.

Region-wise, the market is categorized into Europe, North America, Asia Pacific Excluding Japan (APEJ), Latin America, Japan, and the Middle East and Africa (MEA). Among the given regions, North America is expected to dominate the global weight loss dietary supplements market throughout the forecast period 2017-2026.

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Global Weight Loss Dietary Supplements Market: Competitive Assessment

Key players in the global weight loss dietary supplements market are Amway (Nutrilite), Abott Laboratories, GlaxoSmithKline, Glanbia, Herbalife International, Pfizer, American Health, Stepan, Nature’s Sunshine Products, and FANCL.

New York-based company Cure Encapsulations, Inc. and its owner Naftula Jacobowitz, settled Federal Trade Commission charges that the company paid a third-party website to write and post fake reviews for a weight-loss supplement on an independent retail website and made false and unsubstantiated claims in those fake reviews.

What Happened?

Cure Encapsulations advertised and sold “Quality Encapsulations Garcinia Cambogia Extract with HCA” capsules as an appetite-suppressing and carb- and fat-blocking weight-loss supplement through an independent retail website. The website allows consumers who have purchased products to leave reviews and provide a one- to five-star rating for the product. Cure Encapsulations paid a third-party website to post a series of positive, five-star reviews in order to boost the supplement’s rating and maintain a high rating. The company misleadingly represented that these reviews, which make unsubstantiated claims, including that the supplements were a “powerful appetite suppressant” and cause weight loss of up to 20 pounds, were posted by consumers who had actually purchased and used the product. In its first case against fake paid review, the FTC charged Cure Encapsulations with unfair and deceptive business practices as well as false and misleading advertising.

Consumers rely heavily on reviews from other consumers when they shop online. A significant number of positive reviews can have the effect of convincing a consumer who is on the fence about a product to make a purchase. As the FTC’s Director of Consumer Protection stated, “it hurts both shoppers and companies that play by the rules” when a company uses fake reviews to attract customers.

Under the proposed order settling the FTC’s complaint, Cure Encapsulations is prohibited from making misrepresentations that an endorsement is truthful or made by an bonafide consumer, and from making any health benefit or efficacy claims for any dietary supplement, food, or drug unless such claims are supported by competent and reliable scientific evidence. The company is also required to notify consumers who bought the supplements about the FTC’s allegations and attaching a National Institute of Health fact sheet that explains how Garcinia Combogia has “little to no effect on weight loss.” To top it all off, the order imposes a $12.8 million judgment, with $50,000 due now and the remainder as a means to enforce the order and in the event Cure Encapsulations misrepresented its financial condition to the FTC.

Practical Tips

This action sets a strong precedent that the FTC is willing to target companies that abuse online markets in this way. To avoid a situation such as this, we recommend abiding by the following rules:

• When using endorsements, remember that all endorsements must reflect the honest opinion of the person making the endorsement, and all material connections between the endorser and the advertiser must be clearly disclosed;
• An endorsement cannot make representations that would be deceptive if made directly by the advertiser. Advertisers are liable for unsubstantiated claims made in endorsements;
• All advertising claims must be appropriately substantiated. Health-related claims must be supported by competent and reliable scientific testing, such as clinical trials; and
• Do not rely on a trusted platform to mask false advertising!