Lumosity, an online game provider, is set to pay a total of USD2 million after its advertisement said - without backup research and authorized claims -- that their games aid students in studying and improve athletic performance.
The Federal Trade Commission, on Tuesday, said that the amount serves as payment to settle allegations with regard to its "unfounded claims that its games reduce or delay intellectual impairment that comes with age." It will be used to refund consumers. The amount will also give the company the chance to just move on.
FTC further said that if Lumosity breaks the terms of its settlement, it would be forced to pay as much as $50 million.
FTC's Bureau of Consumer Protection, Jessica Rich, further said that the company has taken advantage of the fears of consumers in relation to age-related cognitive decline. Rich said that the company is "suggesting their games could stave off memory loss, dementia, and even Alzheimer's disease."
The company was also criticized by the FTC for failing to disclose that it had given prizes, including a trip to San Francisco, for consumers who gave testimonials for the product, the FTC said.
Lumosity, on the other hand, did not deny or admit the anything. They further said that FTC's complaint was "a reflection of marketing language that has been discontinued." They offer subscription-based access to both games and activities.
As part of the settlement, the company is also tasked to notify all its subscribers of the said agreement with FTC and offer them an easy way to cancel auto-pay subscriptions. The subscription costs about $15 per month.
Lumosity is based in San Francisco and is a unit of Lumos Labs. It was formed on 2005 and has more or less 70 million "brain trainers" in around 182 countries.
Lumos Labs meanwhile released a statement saying that the settlement has nothing to do with "the rigor of our research or the quality of the products" and it remains "committed to moving the science of cognitive training forward."
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