Slashdot Mirror

← Back to Stories (view on slashdot.org)

Brain Game Maker Lumosity Fined $2 Million For False Advertising (sciencemag.org)

Posted by Soulskill on from the snake-oil-punishment dept.

sciencehabit writes: Lumos Labs, the company that produces the popular 'brain-training' program Lumosity, yesterday agreed to pay a $2 million settlement to the Federal Trade Commission (FTC) for running deceptive advertisements. Lumos had claimed that its online games can help users perform better at work and in school, and stave off cognitive deficits associated with serious diseases such as Alzheimer's, traumatic brain injury, and post-traumatic stress.

The $2 million settlement will be used to compensate Lumosity consumers who were misled by false advertising, says Michelle Rusk, a spokesperson with the FTC in Washington, D.C. The company will also be required to provide an easy way to cancel auto-renewal billing for the service, which includes online and mobile app subscriptions, with payments ranging from $14.95 monthly to lifetime memberships for $299.95. Before consumers can access the games, a pop-up screen will alert them to the FTC's order and allow them to avoid future billing, Rusk says.

43 of 70 comments (clear)

  1. 5 stars by 110010001000 · · Score: 1

    I noticed that it is one of the highest rated apps in the iTunes store. 70 million installs. $11 a month. That is like a billion dollars a month*! * I don't use Lumosity.

    1. Re:5 stars by Anonymous Coward · · Score: 1

      You don't need to pay to download it. 70 million installs could = $0. The reality is somewhere in the middle.

    2. Re:5 stars by ewibble · · Score: 2

      But if only 1 million people pay at $11 a month, a 2 Million dollar fine is peanuts, it always astounds me how companies get fined so little relative to there income, and the amount they swindle, and individuals get fined so much (relatively speaking)

    3. Re:5 stars by mysidia · · Score: 1

      But if only 1 million people pay at $11 a month, a 2 Million dollar fine is peanuts

      2 out of 11 million = 18% of your revenue is NOT peanuts.

      Also, do keep in mind, they likely have at least a couple million or so in business expenses for that many customers, so $2M would be more like 25% of their revenue.

      As for their profit.... better subtract out the $2M in expenses, and 35% = $3.15 Million in taxes on the whole $9 million, Because the dollar amount of fines and penalties are a portion that is always taxable (Cannot deduct the fine).

      So the normal profit is something like $5 Million, then a $2 Million fine from that is actually 40% of their profit.

      I would call that quite a sizable penalty, and definitely something they should seek to avoid in the future.

      They incur fines like that, they might find themselves in bankruptcy, because it causes them to be in violation of accounting ratios required by their lenders as a condition of loans, and they may have investors insisting on getting their money back.

      Purpose of such fines is to enforce the law, penalize violations, and modify behavior, not bankrupt companies and put people out of work.

    4. Re:5 stars by tehcyder · · Score: 1

      Idiot. Redo your math now and compare the total fine (which by the way is tax deductible) against their total income, not one months. That's $11M/month for however many months they operated fraudulently (likely several years).

      Yes, there should be a -1 Factually Incorrect mod.

      --
      To have a right to do a thing is not at all the same as to be right in doing it
    5. Re:5 stars by yodleboy · · Score: 1

      you're assuming they have no cash reserves, rainy day fund, legal war chest or whatever you want to call it. I think that's pretty unlikely, if for no other reason than this investigation has been going on for some time and it would have been prudent to sock away some funds in case the outcome was bad.

  2. The game worked... by Hussman32 · · Score: 4, Funny

    It seems as though the plaintiffs became smart enough to realize it's possible to use the legal system to enrich themselves. Was it the game that did it?

    --
    "Who are you?" "No one of consequence." "I must know." "Get used to disappointment."
  3. Really? by ltrand · · Score: 5, Interesting

    Wait, let me get this straight, you can sell herbal supplements with the same claim and weak/non-existent scientific support and be in the clear, but this is worthy of a fine? Or how about selling "unlimited" data plans that are explicitly NOT unlimited, and not be hit with false advertising either?

    Oh, wait. I forgot what country this was. They probably didn't give the right bribes out to be in the clear. NM, nothing to see here.

    1. Re:Really? by lucm · · Score: 5, Insightful

      Wait, let me get this straight, you can sell herbal supplements with the same claim and weak/non-existent scientific support and be in the clear, but this is worthy of a fine? Or how about selling "unlimited" data plans that are explicitly NOT unlimited, and not be hit with false advertising either?

      It's like complaining about someone finding a cure for lung cancer while liver cancer still kills people.

      Those apps that prey on people's quest for better health are a shame and it's a good thing if they get fined. There are other crooks out there but let's celebrate the victories, not use them to promote vague accusations of bribery.

      --
      lucm, indeed.
    2. Re:Really? by ltrand · · Score: 2

      Yeah, except that AT&T & the rest still advertise "unlimited XGB" despite it being an oxymoron.

      No, what goads me is that the prosecution over false advertisement is very arbitrary in general. Or at least on the cover seems that way given the amount of products out there that literally cannot work as advertised.

    3. Re:Really? by mysidia · · Score: 1

      you can sell herbal supplements with the same claim and weak/non-existent scientific support and be in the clear

      The difference is food/supplements/medical are the FDA, and consumer products are FTC.

      And if the FDA truly cracked down on all products with only weak scientific support, perhaps a number of the major pharmaceuticals could no longer be sold.

      Personally, I think this system is not working, and manufacturers of all products should be required to back up the claims of all benefits and composition with independent verification and vetting by unrelated researchers, Also, they should be required to provide a link to digital documents with source material.

      So if a manufacturer claims their food product is "Low in Fat", they should be required to have a researcher analyze samples from every manufacturing batch, and continuously publish the detailed analysis to show it, with a link included in a QR code on their products.

      Also, the publications should be required to be annotatable by 3rd parties with reviews and aggregate ratings tallied to 10-point scales and including the common prices per package and per ounce of product, and easily viewable by customers and can only be moderated by FDA-licensed neutral moderators.

    4. Re: Really? by thesupraman · · Score: 1

      Does that mean someone should prove that deoderant turn women into sex hungry idiots in you presence or that that soda makes you young cool and living an exciting life?
      How about that SUV purchase that suddenly makes you an outdoor adventurer?

      I would suggest someone stood on the wrong toes here.. Most likely by not wording things just right.. Or not having enough lawyers and/or the right campaign contributions.

      Welcome to the good old USA where it's perfectly OK to fake people out of their money so long as you slither between the rules just right. It's called progress didn't you know ;)

    5. Re:Really? by Coisiche · · Score: 1

      I'm not in the US but does this represent a precedent for class action over misleading claims?

      Because politicians make all sorts of misleading claims in the run-up to elections. And there's no such thing as a poor politician. Just sayin'.

    6. Re: Really? by itsdapead · · Score: 1

      Welcome to the good old USA where it's perfectly OK to fake people out of their money so long as you slither between the rules just right. It's called progress didn't you know ;)

      Well, the UK has a more sensible system with an industry regulator who's usual sanction is to just ban the ad rather than enrich lawyers with huge settlements, and the criteria is whether it is likely to mislead the target audience. The ad for this app would get banned pretty quickly (provided someone complained) without the need for a lawsuit.

      In the UK ads, energy drinks still cause biologically and aerodynamically unfeasible mutations, deodorants still cause you to be mobbed by attractive members of the opposite (invariably) sex and 50-quid-a-bottle wrinkle cream still (despite the research) outperforms cheap, generic moisturiser. However, the first two are usually played for laughs and rely on the "would not mislead" rule, while the wrinkle cream ads are always very carefully worded and cite some (highly unscientific and subjective) survey for which the results could presumably be produced on demand.

      (I'm guessing that people who buy expensive wrinkle cream are good at convincing themselves that it works)

      --
      In a survey of 100 programmers, 111111 thought that duck-typing was a good idea.
    7. Re: Really? by tehcyder · · Score: 1

      the wrinkle cream ads are always very carefully worded and cite some (highly unscientific and subjective) survey for which the results could presumably be produced on demand.

      They're generally along the lines of "85% of the 70 women we asked said that X cream improved the appearance of their skin". Well yes, and if I wash my face with water it does too.

      --
      To have a right to do a thing is not at all the same as to be right in doing it
    8. Re:Really? by parkinglot777 · · Score: 1

      Keep blaming others again without trying to find a solution to prevent the same situation again? So you are one of those who watch bully beating up a victim because you think it is the victim's fault that he/she is too weak to fight against the bully?

      I know that this fine is not that much to teach the bully, but it could be used as precedence if the same bully or similar attempts to do it again. It seems to be a warning rather than a punishment.

  4. Where's the false advertising by ozduo · · Score: 1

    Someone with a very smart brain made millions off stupid people. What could be smarter than that

    --
    I got to the chocolate box before you, that's why the hard ones have teeth marks.
    1. Re:Where's the false advertising by ArcadeNut · · Score: 1

      Getting away with it...

      --
      Visit the Arcade Restoration Workshop @ http://www.arcaderestoration.com
    2. Re:Where's the false advertising by ewibble · · Score: 4, Informative

      They did get away with it, https://gigaom.com/2013/01/31/...
      give me $24 Mil in revenue a year, I will gladly pay a one off $2 Mill fine, change my wording slightly e.g. stick the word "may" in it somewhere and continue trading as normal.

    3. Re:Where's the false advertising by BenVis · · Score: 3, Interesting
      from TFA:

      The order also imposes a $50 million judgment against Lumos Labs, which will be suspended due to its financial condition after the company pays $2 million to the Commission.

      To me that suggests that, 24 Mil in revenue in 2012 notwithstanding, $2 million is already enough to ruin the company.

      --
      "Preceded by itself yields falsehood" preceded by itself yields falsehood.
    4. Re:Where's the false advertising by ewibble · · Score: 1

      That is a bit confusing really,

      The order also imposes a $50 million judgment against Lumos Labs, which will be suspended due to its financial condition after the company pays $2 million to the Commission. The order requires the company to notify subscribers who signed up for an auto-renewal plan between January 1, 2009 and December 31, 2014 about the FTC action and to provide a means to cancel their subscription.

      So what? They shut down after paying only 2 Mil of 50 mil, how much did the directors/owners get in fees/dividends before shut they down. Why would they need to notify subscribers if they are shutting down anyway? What it suggest is they have taken most of the money out of the company already, and using a limited liability company to reduce their bill from 50 million to 2. And may continue to trade under a different holding company.

  5. well by Anonymous Coward · · Score: 1

    Unlike most IQ tests I ever took, the tests on Lumosity actually correlated pretty well with my own experience of where I do well and where I don't do well. For example, games which require switching tasks rapidly is not something I can do. The games which required that did expose it. I got very high scores on numerical skills and much lower ones on vocabulary ones. This all may seem very general, but when I played their games, I did find that they targeted very specific cognitive functions. The question is whether playing the games can improve those functions or is it only testing them. They claimed they improved them. And, I guess, they can't back that up. But the tests were more accurate than anything else I've seen anywhere (and I have looked).

    1. Re:well by tehcyder · · Score: 1

      Unlike most IQ tests I ever took, the tests on Lumosity actually correlated pretty well with my own experience of where I do well and where I don't do well. For example, games which require switching tasks rapidly is not something I can do. The games which required that did expose it. I got very high scores on numerical skills and much lower ones on vocabulary ones. This all may seem very general, but when I played their games, I did find that they targeted very specific cognitive functions. The question is whether playing the games can improve those functions or is it only testing them. They claimed they improved them. And, I guess, they can't back that up. But the tests were more accurate than anything else I've seen anywhere (and I have looked).

      The more IQ tests you do, the better you get at them and the higher your IQ score becomes.

      Why are there so many people who think they have 150+ IQs? Because if you troll around the internet doing IQ tests for long enough, eventually you'll find one that you get a 150+ score on, even without the tests being rigged in some way.

      --
      To have a right to do a thing is not at all the same as to be right in doing it
  6. Bullshit ... by gstoddart · · Score: 2, Interesting

    The $2 million settlement will be used to compensate Lumosity consumers who were misled by false advertising

    Name me one fucking instance where the settlement went to the consumers who were misled. This will go the lawyers, and you'll get mailed a fucking coupon for $5 off your next goddamned month of Lumosity.

    These settlements are complete horseshit, and don't act as a deterrent. Compensate consumers my ass.

    And, yes, I'm intentionally swearing for effect, because claiming this will compensate consumers if a completely fucking lie.

    You want to compensate people and act as a deterrent? Let them line up and take a swipe at the CEO. THAT might stop this kind of behavior. This $2 million settlement? That won't do a damned thing.

    --
    Lost at C:>. Found at C.
  7. Everything works, to a degree by rmdingler · · Score: 1
    I believe the brain is in need of exercise as much as a muscle, in that the people who remain mentally agile into old age are the ones who continue to challenge their minds with problem solving.

    Luminosity, reading, puzzle solving, posting intelligently... everything helps.

    Stagnation is the great killer.

    --
    Happiness in intelligent people is the rarest thing I know.

    Ernest Hemingway

    1. Re:Everything works, to a degree by Anonymous Coward · · Score: 1

      That or people with good minds seek out challenges.

    2. Re:Everything works, to a degree by sysrammer · · Score: 1

      "reading, puzzle solving, posting intelligently"

      So, a lot like reading /. Reading, of course; puzzle solving such as "what does TFS have to do with the article?"; posting intellige...

      nm

      --
      His ignorance covered the whole earth like a blanket, and there was hardly a hole in it anywhere. - Mark Twain
    3. Re:Everything works, to a degree by mysidia · · Score: 1

      Luminosity, reading, puzzle solving, posting intelligently... everything helps.

      Stagnation is the great killer.

      Are you sure that you have not reversed the causal direction?

      People who are not mentally agile in old age tend to have a lack of interest or lack of ability to have fun reading, puzzle solving, luminosity, and posting intelligently, therefore, they tend to not engage in those activities --- leaving mostly only people who are mentally agile to do those things.

    4. Re:Everything works, to a degree by rmdingler · · Score: 1

      Are you sure that you have not reversed the causal direction? People who are not mentally agile in old age tend to have a lack of interest or lack of ability to have fun reading, puzzle solving, luminosity, and posting intelligently, therefore, they tend to not engage in those activities --- leaving mostly only people who are mentally agile to do those things.

      Consider it at a selfish gene level.

      Old folks who remain actively important to the preservation of their family lines are worth (sometimes) scant resources not for their physical contributions.

      --
      Happiness in intelligent people is the rarest thing I know.

      Ernest Hemingway

    5. Re:Everything works, to a degree by Ol+Olsoc · · Score: 1

      I believe the brain is in need of exercise as much as a muscle, in that the people who remain mentally agile into old age are the ones who continue to challenge their minds with problem solving.

      Luminosity, reading, puzzle solving, posting intelligently... everything helps.

      Stagnation is the great killer.

      Its the mental version of blaming one's physical problems on the person with the physical problem. If you didn't exercise your brain, its your fault if you get Alzheimer's.

      Sounds good, but probably puts the solution before the problem. Cognitive decline is often very slow and subtle, so people might be not excercising their brains earlier on, because they are somewhere in the middle of that slow decline.

      Its like the people I know who think that retirement is the great killer because people die after retirement. It's this weird idea that they won't die if they don't retire.

      I'm pretty certain that the reason some people stay sharp and active is because they are already sharp and active, not because they would turn into an imbecile if they stopped playing brain games.

      IOW, if you enjoy the brain games, by all means do them. I wouldn't expect them to add years to your life though.

      --
      The shepherds did so well protecting the flock that the sheep no longer believed that wolves existed.
    6. Re:Everything works, to a degree by tlhIngan · · Score: 1

      I believe the brain is in need of exercise as much as a muscle, in that the people who remain mentally agile into old age are the ones who continue to challenge their minds with problem solving.
      Luminosity, reading, puzzle solving, posting intelligently... everything helps.

      Stagnation is the great killer.

      Correct, the brain is a "use it or lose it", however, the problem is Luminosity was making specific claims that their training helps you be more mentally agile and can reverse aging.

      The science on "brain training" is quite clear - this was done years ago when the brain training games for Nintendo DS came out over a decade ago.

      Yes, you do get mentally sharper, in the areas the game trains you in. So if you're doing a bunch of arithmetic problems, you actually get faster and better and doing it, and the brain areas also get improved. But it's a big stretch to say that it also improves other areas of your brain.

      So it helps, but only in the area it's testing. Since doing arithmetic mentally is a generally useful skill, training like that can improve your life in general (knowing how much your shopping cart costs at the grocery store is a good aid in helping come in on budget, for example). But other games like a electronic version of three card monte is only useful if you want to be cheated by a con artist.

      Luminosity might help, but the science behind it is sketchy as to what it actually does, compared to specific training for mental math and other skills. A lot of the improvement may simply come down to being able to play the game better.

    7. Re:Everything works, to a degree by The-Ixian · · Score: 1

      Stagnation is the great killer.

      Much like fear...

      I must not fear. Fear is the mind-killer. Fear is the little-death that brings total obliteration.

      --
      My eyes reflect the stars and a smile lights up my face.
  8. Cancel a lifetime membership? by just+another+AC · · Score: 1

    The company will also be required to provide an easy way to cancel... lifetime memberships for $299.95.

    Why would anyone cancel a lifetime membership in this, or anything for that matter?
    If they have perpetual access with no further obligation it would be stupid to cancel it (unless they think cancelling is some kind of moral stand).

    1. Re:Cancel a lifetime membership? by mysidia · · Score: 1

      Why would anyone cancel a lifetime membership in this, or anything for that matter?

      You decided it was worthless, so you want your $299.95 back... suppose you are 25 years old, and you bought a lifetime membership with an expectency of living 75 more years, so you purchased approximately 900 months of service, and you want to cancel after 24 months.... That should get you a refund of $291

    2. Re:Cancel a lifetime membership? by tehcyder · · Score: 1

      Why would anyone cancel a lifetime membership in this, or anything for that matter?

      You decided it was worthless, so you want your $299.95 back... suppose you are 25 years old, and you bought a lifetime membership with an expectency of living 75 more years, so you purchased approximately 900 months of service, and you want to cancel after 24 months.... That should get you a refund of $291

      I suppose you think that if you died tomorrow your heirs would get a refund of the balance too?

      Unless they worded their T&C really stupidly, I doubt you've got a chance.

      --
      To have a right to do a thing is not at all the same as to be right in doing it
  9. Re:False claims by penguinoid · · Score: 1

    Yeah, their claims were pretty exaggerated. When I saw they had a Brain Training exercise that increased penis size I knew they were on pretty shaky ground.

    I thought that the entire purpose of the internet was to transmit visual aids for an exercise that increases penis size.

    --
    Don't waste your vote! Vote for whoever you want, unless you live in a swing state it won't matter anyways
  10. Re:Lumosity helped me recover from a concussion by ranton · · Score: 3, Informative

    I finally felt well enough to try Lumosity ... [and got better]

    This is why actual research has control groups. After your concussion started improving, you could have probably sprinkled the fairy dust I just invented on your head and would start to see improvement in a week. I'm sorry about your tough recovery, but your anecdote is no different than the moms who think vaccines caused their kid's autism. There are plenty of people who think some sugar water cured their cancer too.

    --
    -- All that is necessary for the triumph of evil is that good men do nothing. -- Edmund Burke
  11. PT Barnum by bkgoodman · · Score: 1

    PT Barnum said it best....

  12. Oil of Oley by deodiaus2 · · Score: 1

    I heard that Oil of Oley was sued. I think that they reworded their commercials to say that "it makes skin look younger" from the old claims that it "actually reverses effects of aging". Mostly, I think that the company reduced the number of explicit TV ad and rely on "word of mouth" and leave the blame with the cosmetics salesperson to take any hits.
    Still, fraud by my definition, but less fraudulent. Olive Oil is just as "effective at reducing lines and wrinkles" but costs a lot less.

    1. Re:Oil of Oley by Ol+Olsoc · · Score: 1
      There is also an infomercial done by Jayne Seymore for some product that is supposed to eliminate "crepey skin". Lots of testimonials and silly pseudo-scientific gibberish. It's oil for crissakes. I wash my hands a lot, so they tend to get dry and "crepey" A little glycerin and rosewater followed by a little olive oil, and they are as soft and smooth as can be.

      Buying both wouldn't make the down payment on a half ounce of Jayne's stuff.

      --
      The shepherds did so well protecting the flock that the sheep no longer believed that wolves existed.
  13. Re:False claims by Ol+Olsoc · · Score: 1

    I thought that the entire purpose of the internet was to transmit visual aids for an exercise that increases penis size.

    Turns out its only temporary, and makes a mess on the keyboard.

    --
    The shepherds did so well protecting the flock that the sheep no longer believed that wolves existed.
  14. Re:Training for nothing. by Ol+Olsoc · · Score: 1

    If you're going to practice something every day, why not make it something other than some dumb ass app. Like, learn to cook or play a musical instrument. Is it some miracle that people get better at some shit they do every day?

    Mod this AC up! While I enjoy gaming, I also have been a relentless experience junkie as I've aged. Does it make me smarter and slow cognitive decline? I dunno, but it's fun.

    --
    The shepherds did so well protecting the flock that the sheep no longer believed that wolves existed.
  15. Another Fed Agency Destroying Innovation by bentaisan · · Score: 1

    The science behind Lumosity's claims looks positive so far. Did the FTC provide any counter examples or studies showing that certain types of Lumosity games are not significantly effective? It seems to me that the government would have a vested interested in improving the intelligence of its population. http://www.scientificamerican....