A Medifast Inc. (MED) unit has agreed to pay $3.7 million to settle charges that its advertisements for meal-replacement products made unsupported claims about users' success in losing weight, the Federal Trade Commission said.
The FTC alleges Jason Pharmaceuticals, which sells Medifast-brand low-calorie meal substitutes, made unsupported representations since at least November 2009 in radio, TV, Internet and print advertisements that consumers using Medifast programs and products would lose two to five pounds each week, and violated a previous agency order.
In a statement, Medifast said it stands behind its weight-loss claims and said the company is pleased that the parties reached an agreement on claim language and a protocol for future research to avoid further legal proceedings.
Medifast said the FTC objected to the company's use of the words up to in its advertised weight-loss claims of two to five pounds a week. The company agreed to modify its weight-loss claim to lose 2-5 lbs. per week for the first 2 weeks and 1-2 lbs. per week thereafter and said the clarification is consistent with its prior and ongoing clinical studies.
Under the settlement, Jason Pharmaceuticals is prohibited from misrepresenting that consumers who use any low-calorie meal-replacement program can expect to achieve the same results an endorser does, or can lose a particular amount of weight or maintain the weight loss, the agency said.
Jason Pharmaceuticals' most-advertised plan is the Medifast 5 and 1 plan that consists of 800 to 1,000 calories a day.
The settlement is part of the FTC's efforts to crack down on deceptive and misleading claims.
Medifast, which makes diet-meal plans and runs weight-management centers, has posted improving revenue recently, but expenses related to the company's expansion of its weight-control centers have put pressure on margins. The company competes with Weight Watchers International Inc. (WTW), Nestle SA's (NSRGY, NESN.VX) Jenny Craig Inc. and Nutrisystem Inc. (NTRI).
In July, the company reported its second-quarter profit fell 53% on higher expenses, though revenue improved 20%.