Online and mobile game company Lumosity deceived consumers by making unfounded claims in ads that its "brain training" games would help people to avoid declines in memory and cognitive abilities, the Federal Trade Commission said on Monday.
Lumosity also duped consumers by failing to disclose that 46 testimonials on its site, out of 160 total, were written by people who entered contests to win prizes like a free iPad or a lifetime subscription to Lumosity, according to the FTC.
The company, which advertised online, on TV and radio, has agreed to pay $2 million to settle the allegations.
The FTC's complaint, unveiled on Monday, offers examples of the ads Lumosity ran.
"Hey, Pandora listener," one began. "Can you remember the name of that song you just heard? ... Control and improve your memory with Lumosity.com, the personal trainer for your brain."
Lumosity has agreed that it will contact those who purchased subscriptions to its online and mobile games (which started at $14.95 a month), and let them know how to cancel their automatic renewals. Lumosity also promised to refrain from boasting that its games help stave off memory loss, without "competent and reliable scientific evidence."
The case marks at least the second time in the 12 months that the FTC has accused a company of deceiving consumers by failing to disclose the circumstances surrounding online endorsements.
Last February, the FTC alleged that car transportation company AmeriFreight boasted that it had better reviews than its competitors, but didn't reveal that the customers who wrote those reviews received discounts.
The FTC didn't allege that Lumosity or AmeriFreight gave customers incentives for positive write-ups. In fact, AmeriFreight told consumers that they should write "fair" reviews, not necessarily good ones.
Advertising lawyer David Mallen, a partner at Loeb & Loeb, says the FTC's stance reflects its view that any connections between endorsers and the brand must be disclosed -- even if the brand isn't explicitly soliciting positive comments. "The principle is that it affects the credibility of the message, even if the content hasn't been scripted or influenced directly by the brand," he says.