CHICAGO (CN) - An informercial salesman must pay $37.6 million in sanctions for violating a court order that forbade him from deceiving consumers into buying his products, the 7th Circuit ruled.
Kevin Trudeau accepted a $2 million fine and a lifelong ban from infomercials in 2004 after the Federal Trade Commission charged him with making deceptive infomercials for a coral calcium product that he falsely claimed could cure cancer and other diseases.
But the First Amendment still afforded Trudeau the right to make honest infomercials for his educational publications such as books.
Trudeau faced another FTC action in 2009 over his New York Times bestselling book, "The Weight Loss Cure 'They' Don't Want You to Know About," which promotes hormonal injections and a strict diet to control activity in the hypothalamus and pituitary glands, purported to control appetite.
Trudeau's infomercial allegedly misrepresented the contents of the book by claiming that the program was "easy to do" and that, after completion, readers can "eat whatever [they] want" without gaining weight.
"When consumers buy and read the book, they find it actually describes a complicated, expensive system involving daily injections, specialized cleanses and supplements, and severe food restrictions, followed by a 'fourth phase' of the protocol, which requires dietary restrictions and never ends," the FTC said in a statement.
U.S. District Judge Robert Gettleman approved a $37.6 million remedial fine and banned Trudeau from infomercials promoting books for three years. On appeal, the 7th Circuit overturned the ban because "it did not give Trudeau an opportunity to purge, that is, to comply with the underlying order not to misrepresent his publications."
The appellate judges also asked Gettleman to explain how he calculated the fine.
In Gettleman's order to reinstate, he noted that calculated $37.6 million by multiplying the cost of the book by the number of orders placed through the 800-number, plus shipping, minus returns. The FTC planned to distribute the fine to all consumers who had purchased the book. The court also required Trudeau to post a $2 million performance bond before appearing in another infomercial, which would be forfeited if the content was deemed misleading.
Back for another round on appeal, the 7th Circuit dismissed Trudeau's arguments and said Gettleman's calculations were "conservative."
"Out of an abundance of caution - in order to avoid using any questionable figures - the district court decided not to include internet sales or in-store sales of the 'Weight Loss Cure,' even though those books were sold with a conspicuous 'As Seen on TV' sticker, making the link between those sales and the infomercial less than speculative," Judge John Tinder wrote for a three-member panel.
The court also denied that the performance bond violated Trudeau's First Amendment rights by requiring him to pay before any misleading statement is made.
"Insofar as the court order applies to misleading commercial speech, there is no possible First Amendment violation, of course, because misleading commercial speech gets no constitutional protection," Tinder wrote, adding that the court tailored the bond to meet consumer-protection interests without needlessly stifling speech. Trudeau forfeits no money unless another misleading commercial is made, the judge added.
"It does not limit Trudeau as an author; it does not curtail Trudeau's attempt to pitch products in any print medium; it does not even apply if Trudeau makes a TV or radio ad under two minutes," Tinder wrote. "Its application targets only the commercial conduct that has caused such tremendous consumer harm in the past - infomercials."
Trudeau's friction with the FTC dates back to 1998, when he was fined over allegations that his broadcasts contained unsubstantiated claims.
Read the Top 8
Sign up for the Top 8, a roundup of the day's top stories delivered directly to your inbox Monday through Friday.