Reader's Digest Sheds Up to $23.8 Million to Settle With FTC on Ab Circle Pro

Weight-Loss Device Doesn't Work as Promised, FTC Says

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The heavily-advertised Ab Circle Pro doesn't take weight off nearly like advertised, according to the Federal Trade Commission, so Reader's Digest Association will shed some weight as the primary contributor to a $15 million-to-$25 million settlement announced Thursday.

Ads for the Ab Circle Pro, which aired more than 10,000 times in 2009 and 2010, promised it would help people lose 10 pounds in two weeks by exercising just three minutes a day, the FTC said in a statement, calling the claims false or unsubstantiated.

Reader's Digest isn't accused of wrongdoing and didn't acknowledge any under the settlement. But it did in 2007 acquire Direct Holdings Americas and Direct Entertainment Media Group -- the former Time Inc. book division that also markets Time Life books, CDs and DVDs.

That ultimately put Reader's Digest on the hook for $13.8 million to $23.8 million of the settlement announced today. People familiar with the matter said that while the FTC has frequently gone after direct-response TV ad claims in the past, the unusually large size of this settlement owes to finding a "relief defendant" with deep pockets to foot the tab.

Reader's Digest agreed last month to sell DHA and most of DEMG's assets to Mosaic Media Investment Partners for a sum termed "not material." While RDA spokesman David Press wasn't immediately sure whether the assets sold included the Ab Circle Pro stake, new owner Mosaic is not party to the FTC settlement. (Update: DEMG had responsibility for marketing Ab Circle Pro, but not an ownership stake, Mr. Press said, and no assets related to the product were transferred to Mosaic in the deal.)

Besides Reader's Digest, defendants in the complaint included Fitness Brands, Fitness Brands International and the individuals who control them -- Michael Casey and David Brodess. Other defendants include infomercial producer Tara Borakos and two companies she controls -- Tara Productions and New U -- as well as fitness model and motivational speaker Jennifer Nicole Lee, who claimed in ads to have lost 80 pounds using the Ab Circle Pro.

But besides Reader's Digest Association and its two subsidiaries, the only others paying into the settlement fund are co-owner Fitness Brands and its owners, who will pay $1.2 million.

The ultimate size of the settlement will depend on how many consumers seek refunds for the exercise equipment, which sold for $200 to $250 in direct-response ads and other prices via retailers.

Under the settlement, Ms. Lee "cannot misrepresent" that the Ab Circle Pro or any exercise equipment, food, drug or device contributed to her weight loss, the FTC said. Nor can she endorse any similar product unless the endorsement "reflects her honest opinion or experience."

David Vladeck, director of the FTC's Bureau of Consumer Protection, said in a statement that marketers "should think twice before promising a silver-bullet solution" to health problems. "Weight loss is hard work, and telling consumers otherwise is deceptive," he said.

Reader's Digest in its statement said it was "not involved in the marketing" of the product, and was only a "relief defendant." The product was marketed and distributed by RDA's DEMG subsidiary, the publisher said.

"The defendants do not agree with the allegations made by the FTC," the RDA's statement said, adding that none of the defendants have admitted wrongdoing or liability and are "settling these claims to avoid protracted legal proceedings."

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