FTC Wins $21.5 Million Judgment against Weight-Loss Clinics

FTC News Release
April 10, 1992

The Federal Trade Commission has won a $21.5 million judgment against Pacific Medical Clinics Management, Inc., and its principal, James Norman Wells, who were charged by the FTC with falsely advertising that, through their medically-formulated program, consumers could adjust their metabolism and lose up to one and one-half pounds a day. The court also granted a permanent injunction prohibiting the defendants from misrepresenting the efficacy of any weight-loss or health-care program in the future.

The judgment stems from the FTC's October 1990 complaint against Pacific Medical Clinics Management, Inc., and two individuals, James Norman Wells and Karin Lynn Norred, who operated a chain of weight-loss clinics in California, Nevada, Texas, Georgia, and Virginia. The FTC charged that Pacific Medical Clinics, in television, radio and print advertisements, claimed that its weight-reduction program was medically safe and that by adhering to its recommended diet, and ingesting its "Growth Hormone Releaser" (GHR) tablets, protein supplements, and, in some instances a synthetic hormone called Synthroid, consumers could adjust their metabolism and lose up to one and one-half pounds a day. The FTC also charged that the defendants failed to disclose to prospective customers that the Food and Drug Administration has not approved Synthroid as safe and effective for the treatment of obesity and has, in fact, required that the drug bear a label warning against its use as a treatment for obesity. In September 1991, the Commission accepted a settlement with Karin Lynn Norred.

On April 6, 1992, US District Judge Gordon Thompson, Jr. found that consumers were promised a medically-approved weight-loss program and that they would lose a certain amount of weight. Instead, the judge found, the defendants failed to fulfill their promises regarding the amount of weight loss, and even when consumers did lose weight, it was attributable to the low-calorie diet that the defendants encouraged consumers to follow rather than any medically-approved system. Less than 2 percent of those who stayed on the program for at least 10 days lost a pound or a pound-and-a-half a day as promised in defendants' advertising, the judge continued, adding that "[i]ndividuals lost weight because they were put on a rigorous low-calorie diet, which is not what they were paying defendants to do."

The judge further stated that the GHR tablets were nothing more than food supplements similar to those contained in many commercially-available diet drinks. "Despite the plain and simple fact that defendants' program itself did not alter metabolic rates, defendant Wells refused to change the advertisements' claim that the diet caused an adjustment in metabolism because he believed this representation gave PMCM a competitive edge over other diet programs," the court said.

The court awarded the judgment of $21,551,669, the amount of total sales, because no consumers — even those who lost weight — received what was promised. "As a result, the proper remedy is the rescission of each of the purchases of diet packages — the full $21 million.…" The amount of money distributed to consumers may be much less and will depend on how much of the judgment is actually collected from the defendants.

The judgment was issued by the US District Court for the Southern District of California, in San Diego.

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