FTC False Advertising Judgment Marks Largest Fine Ever Paid by an Ad Agency

Marketing Architects agreed to pay a whopping $2 million

The clients in question were cited for 'deceptive advertising' and 'illegal billing practices' in 2016.
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This week, the Federal Trade Commission (FTC) announced that Marketing Architects, Inc. (MAI), an advertising agency based in Minneapolis, Minn., agreed to pay $2 million to settle a false advertising complaint filed with the FTC and the State of Maine Attorney General’s Office.

The decision is unique in that it represents the largest-ever penalty levied against an ad agency. It also specifically bars the agency from working to market weight loss products that are “deceptively pitched to consumers,” citing “a history of creating similar claims” for other clients.

In that sense, the case differs from a 2016 judgment involving Volkswagen’s false “clean diesel” claims, which did not name creative agency Deutsch as a responsible party.

This news comes exactly one year after the FTC forced Anthony and Staci Dill—entrepreneurs based in Portland, Me. heading Direct Alternatives and Original Organics, respectively—and their companies to “surrender substantial personal and business assets” for engaging in “illegal billing practices” and running a series of “deceptive” ads created by Marketing Architects.

Fake testimonials promised quick weight loss

Jessica Rich, director of the FTC’s Bureau of Consumer Protection, said at the time that the husband-and-wife team “told a blizzard of lies” to sell an assortment of “worthless weight-loss supplements” with names like AF Plus, Final Trim, Puranol and Pur-Hoodia Plus. These products were promoted via a series of MAI radio ads that promised “dramatic” weight loss. Paying customers were also enrolled in “unauthorized auto-renewal plans” and promised Walmart and Target gift cards that never arrived.

The pattern was a familiar one. In one ad cited by the FTC, a female actor claimed to have “already lost 30 pounds” after taking Puranol for six months before an announcer invited consumers to call for a “risk-free trial” to “experience the weight-loss power of all-natural Puranol.” The ads were “widely disseminated on the radio,” said Mary Engle, head of the FTC’s Ad Practices Division. But the testimonials—and the alleged customers behind them—were all fake.

Both of the Dills’ companies have since gone out of business. But as the FTC’s most recent judgment notes, this was not the first time MAI created radio ads for a client later forced to surrender millions for making misleading claims about its weight-loss products. From 2009 to 2011, the agency also created ads for the since-shuttered Sensa Products, which was ordered to pay more than $26 million to refund defrauded consumers in 2014.

“When we settled that case, we served a copy of the order to Marketing Architects,” Engle said. “We did not charge them in that case, but then, when we subsequently investigated another deceptive weight loss campaign by a company called Direct Alternatives and learned that MAI was the agency for them as well, we decided it was worth investigating agency in addition to the client.”

Holding agencies accountable

Engle told Adweek that weight loss is a particularly fraught product category because so few of the companies’ claims can be verified. “In this case, the testimonials were fictitious, and [MAI] made up the people,” she said. “That was clearly problematic.”

In a statement from a party hired to represent the agency, Marketing Architects says it’s “proud of its commitment to uphold high ethical standards.”

“We disagree with the allegations in the complaint but decided settlement over litigation was the best path forward for the business,” the statement continues. “One of our former clients made product claims that the FTC considered to be unfair advertising practices. We had no knowledge of these unfair practices or widespread customer dissatisfaction.”

The FTC sees things differently.

“Marketing Architects were aware of the requirements; they were not novices,” said Engle. (The shop was founded in 1997, employs more than 200 people and creates TV and radio ads for such clients as Terminix and American Home Shield.) “The agency … actually crafted the claims and came up with particularly effective sales techniques. That’s one of the reasons we found the need to put the company under order.”

The MAI statement continued: “We have made improvements to the way we do business, including hiring a general counsel with expertise in advertising law; strengthening our business practices; and no longer working with weight-loss companies. These changes will better position us for long-term growth.”

Engle said this week’s judgment should not be seen as a warning call to agencies. She did note, however, that the FTC plans to continuing holding them accountable in such cases.

“It’s important for agencies to remember that, when they create campaigns, they make sure the product can deliver on promises made in the ads,” Engle told Adweek. “It’s not just clients who have responsibility for substantiating an ad’s claims.”

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