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Posted January 5, 2005

Marketers of Brain-Rejuvinating Supplement Settle FTC Charges of False Claims

On January 5, 2005, the U.S. Federal Trade Commission (FTC) announced that a company that heavily advertised an herbal dietary supplement called "Sagee" to the Chinese-language and Vietnamese-language communities had settled FTC 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.