Judge Sides With FTC, Rules 'Gag Clauses' Illegal

Weight-loss marketer Roca Labs engaged in an unfair practice by attempting to stifle reviews by consumers, a federal judge has ruled.

"Because defendants admittedly suppressed negative information about the products and because ... the absence of negative information could make a consumer more inclined to purchase Roca Labs products, the court finds that defendants’ practices have caused or were likely to cause substantial injury to consumers," U.S. District Court Judge Mary Scriven in Tampa, Florida said in a ruling issued Friday.

The ruling comes in a lawsuit brought by the Federal Trade Commission in 2015, when the agency alleged that Roca Labs engaged in a host of deceptive and unfair marketing practices, including attempting to stifle bad reviews. The FTC argued that the attempted suppression was likely to leave consumers with an overly favorable impression of Roca Labs' products.

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Roca Labs, which touts its weight-loss products as more effective than gastric bypass surgery, allegedly said in a prior version of its sales terms that any negative online reviews would be considered defamatory. The company also told consumers that they would be subject to $100,000 in damages for posting reviews, according to the FTC. Roca Labs followed up on its threats by suing at least four customers, according to the FTC.

The FTC has prosecuted other companies over their social media practices, but the complaint against Roca Labs appeared to mark the first time the agency claimed that suppressing commentary is in itself an unfair practice. The complaint against Roca Labs also includes other allegations, including that the company didn't disclose that it paid users to post positive reviews, and that it violated consumers' privacy by disclosing their personal health information in court filings and other documents.

After the FTC sued Roca Labs, Congress passed the Consumer Review Fairness Act. That law invalidate standardized terms of service that restrict consumers' ability to post reviews. Since that law took effect, the FTC sued another company -- the Minneapolis-based business Sellers Playbook (which hawked a system for selling products on Amazon) -- for allegedly attempting to stifle bad reviews.

Roca Labs raised several arguments in its defense, including that its practices didn't cause "tangible" injuries to consumers. Scriven rejected the company's stance, writing that the review-suppression effort harmed consumers, or were likely to do so. "The record demonstrates that some consumers paid hundreds of dollars for the Roca Labs products and unsuccessfully sought refunds because of defendants’ practice of issuing threats under the guise of enforcing the gag clause," she wrote.

Scriven also found in the FTC's favor on its other claims against the company. She delayed ruling on how much Roca Labs must pay in damages, writing that she needs additional information from the FTC about refunds for consumers.

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