Marketers of Herbal Dietary Supplement Promoted in Chinese-Language Community Settle FTC Charges

A company that heavily advertised an herbal dietary supplement called “Sagee” to the Chinese-language and Vietnamese-language communities has settled Federal Trade Commission charges of making false and unsubstantiated claims for the product.

The ads claimed that Sagee can improve brain health and revitalize and rejuvenate the brain, as well as alleviate or treat a number of serious, chronic brain-related diseases. Under the terms of the settlement announced today, the defendants, Sagee U.S.A. Group, Inc., and its president, Xiao Hua Li, are prohibited from making any health benefits, performance, or efficacy claims for any product that purports to repair damaged brain cells; improve memory or concentration; slow down the brain’s aging process; and treat or alleviate conditions such as insomnia, migraine headaches, or cerebral embolism, unless the defendants have reliable scientific evidence to substantiate their claims.

“The FTC is committed to ensuring that supplement sellers make only truthful claims backed by scientific evidence – no matter what language they advertise in,” said Lydia Parnes, Acting Director of the FTC’s Bureau of Consumer Protection.

According to the complaint filed in federal court, Sagee purported to treat or alleviate such conditions as insomnia, migraine headaches, neuroticism, schizophrenia, tinnitus, autism, Alzheimer’s disease, cerebral embolism, cerebral hemorrhage, epilepsy, Parkinson’s disease, senile dementia, and stroke. In addition, the defendants’ ads contained statements that Sagee repairs brain cells, improves memory, concentration, attentiveness, and response times, slows down the brain’s aging process, and relieves aging-related conditions of the brain. The defendants advertised and sold Sagee through Chinese-language advertising on radio and television, in newspaper ads, and on the Internet. Some ads also appeared in Vietnamese and English.

The complaint alleges that the defendants made unsubstantiated efficacy claims for Sagee and falsely claimed that clinical studies support their therapeutic claims for the product.

To settle the charges, the proposed stipulated final judgment and order prohibits the defendants from making unsubstantiated efficacy claims for any dietary supplement, food, drug, device, or service. It also prohibits the defendants from misrepresenting through endorsements, the existence, contents, validity, results, conclusions, or interpretations of any test, study, or research.

The order requires the defendants to pay $10,000 in redress and contains a $1.38 million avalanche clause that would become due if the court finds that the defendants misrepresented their financial condition. In addition, the order requires the company, based in City of Industry, California, to send a notice to distributors containing the terms of the stipulated final judgment and warning them that if they fail to have their ads approved in advance, or make any claims prohibited by the order, the company will not ship further products to them. Finally, the order contains various record-keeping provisions to assist the FTC in monitoring the defendants’ compliance.

The Commission vote authorizing staff to file the complaint and the stipulated final judgment and order was 5-0. The complaint and the stipulated final judgment and order were filed in the U.S. District Court for the Central District of California, on December 29, 2004. The stipulated final judgment and order requires the court’s approval.

NOTE: This proposed stipulated final judgment and order is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Stipulated final judgments and orders have the force of law when signed by the judge.

Copies of the complaint and the stipulated final judgment and order are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint in English or Spanish (bilingual counselors are available to take complaints), or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.