FTC Hits JustFab CEO’s Weight-Loss Company With $26.5 Million Fine
Sensa, a Los Angeles area weight-loss company, has been fined $26.5 million by the Federal Trade Commission for deceptive advertising.
Sensa sells a powder for $59 a month that customers are supposed to sprinkle on food to help them feel full faster, thus losing weight. But the FTC isn’t buying those claims.
“The defendants did not have competent and reliable scientific evidence to support these claims,” according to the FTC’s complaint.
The FTC said it originally imposed a $46.5 million judgment on Sensa and its founders, but was accepting a reduced amount “due to their inability to pay.” The company was said to have sales of $364 million between 2008 and 2012. The FTC also charged two other companies, L’Occitane and HCG Diet Direct, and said it reached what it called a partial settlement with a fourth firm called LeanSpa.
In addition to Sensa Products and its parent company Sensa Inc., the complaint also named Sensa CEO Adam Goldenberg as a defendant.
Goldenberg, as many in the e-commerce industry know, was the CEO of Intelligent Beauty, now known as Sensa Inc. The holding company previously incubated DermStore, a beauty product e-commerce site that Target acquired in August.
The third, and perhaps best-known, Goldenberg is associated with is JustFab. JustFab sells women’s shoes on a subscription basis, charging members $39.95 a month. Last year the company acquired a similar Los Angeles startup called ShoeDazzle, and the two companies are expected to bring in $400 million in revenue and hit profitability this year, Goldenberg told me last year.
But JustFab also has some marketing-related issues that customers and media have pointed out over the years related to how it markets and explains its subscription program. In September, for example, TechCrunch published an article pointing out that JustFab’s checkout process in Germany made it much more clear than the one on its U.S. site how to purchase a pair of shoes without signing up for its monthly subscription program.
When I broached this topic with Goldenberg in a visit to JustFab’s office in December, he contended that the TechCrunch article ran as JustFab was rolling out a new checkout page that just hadn’t hit the U.S. site yet and did two weeks later. He also said that JustFab has 1.5 million active monthly subscribers and that it never could have grown so large if its customers thought its practices were shady.
“When you’re this large and have that many customers, a very small percent that don’t understand it well still make a lot of noise,” he told me.
To be clear, JustFab hasn’t been charged with anything. But Goldenberg’s involvement with a company that the FTC just hit with a giant fine for deceptive advertising probably won’t help JustFab’s perception.
Goldenberg did not immediately respond to an email seeking comment.