“Teami and its owners earned millions making unsubstantiated claims about their products and promoted those claims using paid influencers” – from Kylie Jenner to Cardi B – many of whom “failed to appropriately disclose their connections to the company, even after being warned to stop,” the Federal Trade Commission (“FTC”) announced on Friday in connection with a new settlement. According to the government agency, Teami is on the hook for running afoul of the FTC Act and as a result, is being forced to pay nearly $16 million.
In a complaint for permanent injunction filed on Thursday in a federal court in Florida, the FTC asserted that since its start in 2014, Seminole, Florida-based Teami has made has made more than $15.2 million in sales in connection with its Teami Profit tea, Teami Alive tea, Teami Relax tea, and the Teami 30 Day Detox Pack, among other products, which it has sold on its own e-commerce site, as well as through nationally-reaching third-parties like Amazon and Ulta Beaty.
Hardly an ordinary lineup of products, Teami claimed in furtherance of its marketing that these products are capable of “treating cancer,” leading to “rapid and substantial weight loss,” “preventing and treating colds and flus,” and “decreasing migraines.” The problem with those claims, according to the FTC? They “false or misleading” and/or “were not substantiated at the time they were made,” thereby constituting “a deceptive act or practice and the making of false advertisements, in or affecting commerce” in violation of the FTC Act.
More than merely misleading consumers as to the efficacy of its products, the FTC asserts that Teami went a step further by paying a lineup of mega-famous celebrities and heavily-followed influencers to promote the products without requiring that such endorsements be clearly disclosed as such paid-for advertisements. “In addition to advertising Teami products on the Teami website,” the FTC argued, Teami “paid celebrities, including Kylie Jenner and Demi Lovato, and other influencers to promote them on Instagram and other social media,” many of which failed to properly alert consumers as to the nature of the posts.
In light of such alleged widespread disclosure violations, the FTC says that it contacted Teami in April 2018 to inform the company that “any material connections to any endorsers, such as monetary payments, should be clearly and conspicuously disclosed in their endorsements.” This includes “using unambiguous language” placed “above the ‘more’ link” on Instagram. It also sent warning letters to the ten influencers named in its complaint, who allegedly made inadequate disclosures in connection with heir promotion of the Teami products.
While the FTC claims that a month later, Teami introduced a social media policy and instructed influencers to ensure that all posts “for which you receive free product or any type of compensation as an inducement to make the post … use hashtags or words that clearly let the public know of the connection between you and Teami” and to make sure that such disclosures are included above the “more” button on Instagram, the issue of undisclosed or improperly disclosed posts continued.
“Numerous Instagram posts published by paid influencers after May 2018 did not comply with Teami’s own social media policy,” the FTC claims, including posts from Cardi B, Jordin Sparks, Brittany Renner, and Adrienne Eliza Houghton, among others. This is particularly problematic, according to the government agency, as “in many instances, paid influencers were contractually required to obtain approval from Teami for their Instagram posts – including the specific text used – before publishing them.”
With such “obvious and widespread” violations in mind, including Teami’s alleged pattern of “making false and unsubstantiated health claims and failing to disclosure material connections with influencers … over a period of several years, which continued for many months after Teami learned that the FTC was investigating them,” the FTC filed suit against the company and two of its executives.
Now, on the heels of filing its complaint, the FTC revealed that it had reached a settlement with Teami, in which the company “neither admits nor denies any of the allegations” lodged against it, but nonetheless, is prohibited from making health claims in connection with its products “unless the representation is non-misleading” based on “competent and reliable scientific evidence.” Beyond that, the legally-binding order requires that Teami ensure that all influencer endorsements include proper disclosures, and requires that the company carefully monitor such social media posts to ensure proper disclosure.
These terms mirror those that have traditionally been included in prior settlements between manufacturers and marketers, and the FTC, making the kicker the monetary judgment. In furtherance of the order, which was approved by the U.S. District Court for the Middle District of Florida, a judgment in the amount of $15,209,452 — the total sales of the challenged products — has been entered in favor of the FTC against Teami and its executives “as equitable monetary relief.” That judgment, the FTC revealed on Friday, will be “suspended upon payment of $1 million, based on the defendants’ inability to pay the full amount.”
According to a statement from the FTC on Friday, “Today’s order resolving those allegations puts a halt to these practices, and orders the Defendants to return $1,000,000 to consumers who were harmed.”
“Social media is full of people peddling so-called detox teas, promising weight loss,” Andrew Smith, Director of the FTC’s Bureau of Consumer Protection said. “Companies need to back up health claims with credible science and ensure influencers prominently disclose that they’re getting paid to promote a product.”