Last month, the Federal Trade Commission announced that it reached a settlement with R360 and its owner, resolving allegations that they deceptively marketed their substance abuse treatment centers. The case is the first that the FTC has brought under the Opioid Addition Recovery Fraud Prevention Act of 2018.
In a statement, Samuel Levine, Director of the FTC's Bureau of Consumer Protection, said, "We'll continue to use the authority Congress gave us to go after companies that prey on those suffering from addictions."
The Opioid Addiction Recovery Fraud Prevention Act allows the FTC to seek civil penalties for unfair or deceptive acts or practices in connection with any substance use disorder treatment service or product, which includes any services that purport to provide treatment, referrals to treatment, or recovery housing for people with substance use disorders.
Here, the FTC alleged that R360 deceptively promoted its "R360 Network" of treatment centers, advertising that the company would connect individuals with treatment centers that met their individualized needs and that were selected through a rigorous evaluation process. The FTC charged, however, that R360's owner decided which treatment centers would be part of the network, but did not have sufficient expertise to make these decisions, and that individuals were automatically routed to a member of the network, without actually assessing the individual's needs.
The FTC also charged the defendants with misrepresenting that an expert "interventionist" and well-known television personality who was featured in the commercials had hand-picked only the highest quality, cream of the crop, ethical treatment centers. For example, in one of the commercials, the expert said, "I've been out there to all these treatment centers all over the country and I was able to see which ones are doing things ethically. So we handpicked those."
As part of the consent order, the defendants agreed to not make misrepresentations in the future about substance abuse disorder treatment products and services, including claims such as that individuals will be directed to treatment centers based on their individual needs and that a product or service has been evaluated or endorsed by an expert. Although the order also includes a $3.8 million civil penalty, the requirement to make payment was suspended based on the defendants' inability to pay it.
FTC Chair Lina M. Khan issued a statement in connection with the settlement, emphasizing "the importance of fully exercising the legal authorities that Congress has granted us." She also emphasized that, in this case, the FTC brought the action against the owner of the company as well, signaling "to individuals who break the law that they cannot evade accountability by hiding behind a corporate shield."
In a separate statement, Commissioner Christine S. Wilson criticized FTC leadership for its delay in finalizing the settlement, which apparently sat on the "back burner for almost 18 months." Raising questions about how the agency's resources are being allocated, Wilson said, "I hope that future Commissions appreciate the imperative to act swiftly on deceptive addition treatment marketing rather than unnecessarily delaying actions that could salvage lifelines for desperate consumers."
This alert provides general coverage of its subject area. We provide it with the understanding that Frankfurt Kurnit Klein & Selz is not engaged herein in rendering legal advice, and shall not be liable for any damages resulting from any error, inaccuracy, or omission. Our attorneys practice law only in jurisdictions in which they are properly authorized to do so. We do not seek to represent clients in other jurisdictions.
