[Federal Register Volume 59, Number 16 (Tuesday, January 25, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-1561]
[[Page Unknown]]
[Federal Register: January 25, 1994]
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FEDERAL TRADE COMMISSION
[File No. 912 3071]
Nu Skin International, Inc., et al; Proposed Consent Agreement
With Analysis To Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed consent agreement.
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SUMMARY: In settlement of alleged violations of federal law prohibiting
unfair acts and practices and unfair methods of competition, this
consent agreement, accepted subject to final Commission approval, would
prohibit, among other things, a Provo Utah-based multi-level marketing
company and its principals from making deceptive claims about its
purported baldness treatment, purported wrinkle lotion, purported burn
cream, or substantially similar products, and require them to possess
scientific evidence to substantiate a variety of product performance,
benefits, efficacy, or safety claims for those and other products. The
respondents would also be required to make certain disclosures in
connection with future earnings claims to prospective distributors, and
disgorge a total of $1.225 million.
DATES: Comments must be received on or before March 28, 1994.
ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,
room 159, 6th St. and Pa. Ave., NW., Washington, DC 20580.
FOR FURTHER INFORMATION CONTACT:
C. Steven Baker or Nicholas J. Franczyk, Chicago Regional Office,
Federal Trade Commission, 55 East Monroe Street, suite 1437, Chicago IL
60603, (312) 353-8156.
SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Sec. 2.34 of the
Commission's Rules of Practice (16 CFR 2.34), notice is hereby given
that the following consent agreement containing a consent order to
cease and desist, having been filed with and accepted, subject to final
approval, by the Commission, has been placed on the public record for a
period of sixty (60) days. Public comment is invited. Such comments or
views will be considered by the Commission and will be available for
inspection and copying at its principal office in accordance with
Sec. 4.9(b)(6)(ii) of the Commission's Rules of Practice (16 CFR
4.9(b)(6)(ii)).
In the Matter of Nu Skin International Inc., CJM, Inc., CST
Management, Inc., and CK&C, Inc., corporations, Clara McDermott,
individually and as an officer and director of CJM, Inc., Craig
Tillotson, individually and as an officer and director of CST
Management, Inc., and Craig Bryson, individually and as an officer
and director of CK&C, Inc.
Agreement Containing Consent Order To Cease and Desist
The Federal Trade Commission having initiated an investigation of
certain acts and practices of Nu Skin International, Inc., CJM, Inc.,
CST Management, Inc., and CK&C, Inc., corporations; Clara McDermott,
individually and as an officer and director of CJM, Inc.; Craig
Tillotson, individually and as an officer and director of CST
Management, Inc.; Craig Bryson, individually and as an officer and
director of CK&C, Inc., (hereinafter sometimes collectively referred to
as ``proposed respondents''), and it now appears that the proposed
respondents are willing to enter into an agreement containing an order
to cease and desist from the use of the acts and practices being
investigated,
It is hereby agreed by and between Nu Skin International, Inc.,
CJM, Inc., CST Management, Inc., and CK&C, Inc., by their duly
authorized officers, and Clara McDermott, Craig Tillotson, and Craig
Bryson, individually or by their respective counsel, and counsel for
the Federal Trade Commission that:
1. Proposed respondent Nu Skin International, Inc. (``Nu Skin''),
is a corporation organized, existing, and doing business under and by
virtue of the laws of the state of Utah, with its principal office or
place of business located at 75 West Center, Provo, Utah 84601.
2. Proposed respondent CJM, Inc., is a corporation organized,
existing, and doing business under and by virtue of the laws of the
state of Utah, with its principal office or place of business located
at 1565 East 3300 South, Salt Lake City, Utah 84106.
3. Proposed respondent Clara McDermott is an officer and director
of proposed corporate respondent CJM, Inc. Individually or in concert
with others, she formulates, directs, and controls the acts and
practices of CJM, Inc., including the acts and practices alleged in the
draft of the complaint attached hereto. Her principal office or place
of business is the same as that of CJM, Inc.
4. Proposed respondent CST Management, Inc., is a corporation
organized, existing, and doing business under and by virtue of the laws
of the state of Utah, with its principal office or place of business
located at 11 Northridge Way, Sandy, Utah 84092.
5. Proposed respondent Craig Tillotson is an officer and director
of proposed corporate respondent CST Management, Inc. Individually or
in concert with others, he formulates, directs, and controls the acts
and practices of CST Management, Inc., including the acts and practices
alleged in the draft of the complaint attached hereto. His principal
office or place of business is the same as that of CST Management, Inc.
6. Proposed respondent CK&C, Inc., is a corporation organized,
existing, and doing business under and by virtue of the laws of the
state of Utah, with its principal office or place of business located
at 3800 Sherwood Drive, Provo, Utah 84604.
7. Proposed respondent Craig Bryson is an officer and director of
proposed corporate respondent CK&C, Inc. Individually or in concert
with others, he formulates, directs, and controls the acts and
practices of CK&C, Inc., including the acts and practices alleged in
the draft of the complaint attached hereto. His principal office or
place of business is the same as that of CK&C, Inc.
8. Proposed respondents admit all the jurisdictional facts set
forth in the draft of the complaint attached hereto.
9. Proposed respondents waive:
(a) Any further procedural steps;
(b) The requirement that the Commission's decision contain a
statement of findings of fact and conclusions of law;
(c) All rights to seek judicial review or otherwise to challenge or
contest the validity of the order entered pursuant to this agreement;
and
(d) All claims under the Equal Access to Justice Act, 5 U.S.C. 504.
10. This agreement shall not become part of the public record of
the proceeding unless and until it is accepted by the Commission. If
this agreement is accepted by the Commission, this agreement, together
with the draft of the complaint contemplated hereby, will be placed on
the public record for a period of sixty (60) days and information in
respect thereto publicly released. The Commission thereafter may either
withdraw its acceptance of this agreement and so notify the proposed
respondents, in which event it will take such action as it may consider
appropriate, or issue and serve its complaint (in such form as the
circumstances may require) and decision, in disposition of the
proceeding.
11. This agreement is for settlement purposes only and does not
constitute an admission by proposed respondents of facts, other than
jurisdictional facts, or of violations of law as alleged in the draft
of complaint here attached.
12. This agreement contemplates that, if it is accepted by the
Commission, and if such acceptance is not subsequently withdrawn by the
Commission pursuant to the provisions of Sec. 2.34 of the Commission's
Rules, the Commission may, without further notice to proposed
respondents, (1) issue its complaint corresponding in form and
substance with the draft of the complaint here attached and its
decision containing the following order to cease and desist in
disposition of the proceeding and (2) make information public in
respect thereto. When so entered, the order to cease and desist shall
have the same force and effect and may be altered, modified or set
aside in the same manner and within the same time provided by statute
for other orders. The order shall become final upon service. Delivery
by the U.S. Postal Service of the complaint and decision containing the
agreed-to order to proposed respondents' addresses as stated in this
agreement shall constitute service. Proposed respondents waive any
right they may have to any other manner of service. The complaint may
be used in construing the terms of the order, and no agreement,
understanding, representation, or interpretation not contained in the
order or the agreement may be used to vary or contradict the terms of
the order.
13. Proposed respondents have read the complaint and the order
contemplated hereby. They understand that once the order has been
issued, they will be required to file one or more compliance reports
showing that they have fully complied with the order. Proposed
respondents further understand that they may be liable for civil
penalties in the amount provided by law for each violation of the order
after it becomes final.
ORDER
Definitions
For purposes of this Order:
1. ``Substantially similar hair loss treatment product or service''
shall mean any product or service that is advertised or intended for
sale over-the-counter to treat, cure or curtail hair loss and which
contains or purportedly contains polysaccharides or any extract
thereof.
2. ``Substantially similar facial treatment product or service''
shall mean any product or service that is advertised or intended for
sale over-the-counter to remove facial wrinkles and that contains or
purportedly contains albumin or any extract thereof.
3. ``Substantially similar skin treatment product or service''
shall mean any product or service that is advertised or intended for
sale over-the-counter to treat or promote the healing of burns that
would otherwise require skin grafting and that contains or purportedly
contains aloe vera and/or avian collagen or any extract thereof.
4. ``Competent and reliable scientific evidence'' shall mean tests,
analyses, research, studies, or other evidence based on the expertise
of professionals in the relevant area, that has been conducted and
evaluated in an objective manner by persons qualified to do so, using
procedures generally accepted in the profession to yield accurate and
reliable results.
I
It is ordered, That respondents Nu Skin, CJM, Inc., CST Management,
Inc., and CK&C, Inc., corporations, their successors and assigns, and
their officers; Clara McDermott, individuallly and as an officer and
director of CJM, Inc.; Craig Tillotson, individually and as an officer
and director of CST Management, Inc.; Craig Bryson, individually and as
an officer and director of CK&C, Inc., and respondents' agents,
representatives and employees, directly or through any partnerships,
corporation, subsidiary, division, or other device, do forthwith cease
and desist from:
A. Representing, in any manner, directly by implication, in
connection with the advertising, packaging, labeling, promotion,
offering for sale, sale or distribution of Nutriol Hair Fitness
Preparation (``Nutriol''), or any substantially similar hair loss
treatment product or service in or affecting commerce, as ``commerce''
is defined in the Federal Trade Commission Act, that:
1. The use of the product or service can or will stop, prevent,
cure, relieve, reverse or reduce hair loss;
2. The use of the product or service can or will promote the growth
of hair where hair has already been lost;
3. The product or service is as effective drug Minoxidil in the
treatment of hair loss; or
4. Competent and reliable data show that the product or service is
effective in stopping hair loss and promoting hair growth.
B. Representing, in any manner, directly or by implication, in
connection with the advertising, packaging, labeling, promotion,
offering for sale, sale or distribution of any other product or service
in or affecting commerce, as ``commerce'' is defined in the Federal
Trade Commission Act, that:
1. The use of the product or service can or will stop, prevent,
cure, relieve, reverse or reduce hair loss;
2. The use of the product or service can or will promote the growth
of hair when hair has already been lost;
3. The product or service is as effective as, or more effective
than, any other product or service is the treatment of hair loss; or
4. Competent and reliable data show that the product or service is
effective in stopping loss and promoting hair growth,
unless such representation is true and, at the time of making such
representation, respondents possess and rely upon competent and
reliable scientific evidence that substantiates the representation.
C. Advertising, packaging, labeling, promoting, offering for sale,
selling, or distributing any product that is represented as promoting
hair growth or preventing hair loss, unless the product is the subject
of an approved new drug application for such purpose under the Federal
Food, Drug, and Cosmetic Act, 21 U.S.C. 301 et seq., provided that,
this subpart shall not limit the requirements of part I.A and B herein.
II
It is further ordered, That respondents Nu Skin, CJM, Inc., CST
Management, Inc., and CK&C, Inc., corporations, their successors and
assigns, and their officers; Clara McDermott, individually and as an
officer and director of CJM, Inc.; Craig Tillotson, individually and as
an officer and a director of CST Management, Inc.; Craig Bryson,
individually and as an officer and director of CK&C, Inc., and
respondents' agents, representatives and employees, directly or through
any partnership, corporation, sudsidiary, division, or other device, do
forthwith cease and desist from:
A. Representing, in any manner, directly or by implication, in
connection with the advertising, packaging, labeling, promotion,
offering for sale, sale or distribution of Fact Lift with Activator
(``Face Lift''), or any substantially similar facial treatment product
or service in or affecting commerce, as ``commerce'' is defined in the
Federal Trade Commission Act, that:
1. The use of the product or service can or will permanently remove
facial wrinkles; or
2. The product or service is as effective as, or more effective
than, the prescription drug Tretinoin (currently marketed as Retin-A)
in the removal of facial wrinkles.
B. Representing, in any manner, directly or by implication, in
connection with the advertising, packaging, labeling, promotion,
offering for sale, sale or distribution of any other product or service
in or affecting commerce, as ``commerce'' is defined in the Federal
Trade Commission Act:
1. The efficacy of the product or service in the treatment of
facial wrinkles; or
2. That the product or service is as effective as, or more
effective than, any other product or service in the treatment of facial
wrinkles,
unless such representation is true and, at the time of making such
representation, respondents possess and rely upon competent and
reliable scientific evidence that substantiates the representation.
III
It is further ordered, That respondents Nu Skin, CJM, Inc., CST
Management, Inc., and CK&C, Inc., corporations, their successors and
assigns, and their officers; Clara McDermott, individually and as an
officer and director of CJM, Inc.; Craig Tillotson, individually and as
an officer and director of CST Management, Inc.; Craig Bryson,
individually and as an officer and director of CK&C, Inc., and
respondents' agents, representatives and employees, directly or through
any partnership, corporation, subsidiary, division, or other device do
forthwith cease and desist from:
A. Representing, in any manner, directly or by implication, in
connection with the advertising, packaging, labeling, promotion,
offering for sale, sale or distribution or Celltrex or any
substantially similar skin treatment product or service in or affecting
commerce, as ``commerce'' is defined in the Federal Trade Commission
Act, that the product or service will promote the healing of third
degree burns.
B. Representing, in any manner, directly or by implication, in
connection with the advertising, packaging, labeling, promotion,
offering for sale, sale or distribution of any other product or service
in or affecting commerce, as ``commerce'' is defined in the Federal
Trade Commission Act, that the product or service will promote the
healing of, or is otherwise an effective treatment for burns, unless
such representation is true and, at the time of making such
representation, respondents possess and rely upon competent and
reliable scientific evidence that substantiates the representations.
IV
It is further ordered, That respondents Nu Skin, CJM, Inc., CST
Management, Inc., and CK&C, Inc., corporations, their successors and
assigns, and their officers; Clara McDermott, individually and as an
officer and director of CJM, Inc.; Craig Tillotson, individually and as
an officer and director of CST Management, Inc.; Crain Bryson,
individually and as an officer and director of CK&C, Inc., and
respondents' agents, representatives and employees, directly or through
any partnership, corporation, subsidiary, division, or other device, in
connection with the advertising, packaging, labeling, promotion,
offering for sale, sale or distribution of any product or service in or
affecting commerce, as ``commerce'' is defined in the Federal Trade
Commission Act, do forthwith cease and desist from:
A. Making any representation, directly or by implication, regarding
the performance, benefits, efficacy or safety of any food, or device,
as those terms are defined in section 15 of the Federal Trade
Commission Act, 15 U.S.C. 55, unless at the time of making such
representation respondents possess and rely upon competent and reliable
scientific evidence that substantiates the representation.
B. Making any representation, directly or by implication, regarding
the performance, benefits, efficacy or safety of any product or service
(other than a product or service covered under Part IV.A. herein),
unless at the time of making such representation respondents possess
and rely upon competent and reliable evidence, which when appropriate
must be competent and reliable scientific evidence, that substantiates
the representation.
V
It is ordered, That respondents Nu Skin, CJM, Inc., CST Management,
Inc., and CK&C, Inc., corporations, their successors and assigns, and
their officers; Clara McDermott, individually and as an officer and
director of CJM, Inc.; Craig Tillotson, individually and as an officer
and director of CST Management, Inc.; Craig Bryson, individually and as
an officer and director of CK&C, Inc., and respondents' agents,
representatives and employees, directly or through any partnership,
corporation, subsidiary, division, or other device, in connection with
inducing or seeking to induce the participation of any person in any
distribution, sales, or marketing plan, in or affecting commerce, as
``commerce'' is defined in the Federal Trade Commission Act, do
forthwith cease and desist from:
A. Misrepresenting, in any manner, the past, present, or future
profits, earnings, income, or sales from such participation; and
B. Representing, in any manner, directly or by implication, by use
of hypothetical examples or otherwise, that distributors earn or
achieve from such participation any stated amount of profits, earnings,
income, or sales in excess of the average profits, earnings, income, or
sales of all distributors in any time period respondents may select,
unless in conjunction therewith such average profits, earnings, income,
or sales are clearly and conspicuously disclosed, and the percent of
all distributors who actually achieved such stated profits, earnings,
income, or sales in such time period is clearly and conspicuously
disclosed.
VI
It is further ordered, That respondent Nu Skin shall:
A. Within thirty (30) days from the effective date of this Order
deliver a dated and signed notification letter in the form set forth in
Appendix A to this Order to each of its current officers, agents,
representatives, employees, and distributors.
B. For a period of five (5) years from the effective date of this
Order deliver signed notification letter in the form set forth in
Appendix A to this Order to each of its future officers, agents,
representatives, employees, and distributors within three (3) days
after the person assumes such position. Respondent Nu Skin shall be in
compliance with this subparagraph with respect to notifying future
distributors if such notification letter is included in each starter
kit provided to each future distributor.
C. Institute a reasonable program of continuing surveillance
adequate to reveal whether the practices of each person described in
Part VI.A. and B. conform to the requirements of this Order, and
promptly investigate any complaints about any such person received by
Nu Skin and maintain records of any such complaint, investigation and
disposition of the complaint for five (5) years from the date of the
complaint, such records to be furnished to the Commission upon request.
D. Discontinue dealing with any person described in Part VI.A. and
B:
1. Who engages in the acts or practices prohibited by Parts I.A.,
II.A. or III.A. of this Order; or
2. Once respondent Nu Skin has actual knowledge, or knowledge
fairly implied on the basis of objective circumstances, that such
person is engaged in acts or practices prohibited by any other part of
this Order, unless such person immediately ceases engaging in such acts
or practices.
VII
It is further ordered, That respondents CJM, Inc., CST Management,
Inc., CK&C, Inc., Clara McDermott, Craig Tillotson, and Craig Bryson
shall:
A. Within thirty (30) days from the effective date of this Order
deliver a dated and signed notification letter in the form set forth in
Appendix A of this Order to each of their officers, agents,
representatives, employees, and present distributors, other than those
persons whom Nu Skin is required to notify pursuant to Part VI.A and B
above.
B. For a period of five (5) years from the effective date of this
Order deliver a dated and signed notification letter in the form set
forth in Appendix A to this Order to each of their future officers,
agents, representatives, employees, and distributors who are engaged in
the advertising, promotion, offering for sale, sale or distribution of
any food, drug, device or cosmetic within the meaning of Section 15 of
the Federal Trade Commission Act, 15 U.S.C. 55, or who are engaged in
any multilevel marketing plan or business, other than those persons
whom Nu Skin is required to notify pursuant to Part VI.A and B above,
within three (3) days after the person assumes such position.
VIII
It is further ordered, That respondents shall, within sixty (60)
days after service of this Order, and at such other times as the
Federal Trade Commission may require, file with the Commission a
report, in writing, setting forth in detail the manner and form in
which they have complied with this Order.
IX
It is further ordered, That respondents Nu Skin, CJM, Inc., CST
Management, Inc., and CK&C, Inc., shall notify the Federal Trade
Commission at least thirty (30) days prior to any proposed change in
their corporate structures, including but not limited to dissolution,
assignment or sale resulting in the emergence of a successor
corporation, the creation or dissolution of subsidiaries or affiliates,
the planned filing of a bankruptcy petition or any other corporate
change, that may affect compliance obligations arising under this
Order.
X
It is further ordered, That respondents Clara McDermott, Craig
Tillotson, and Craig Bryson shall, for a period of five (5) years from
the date this Order becomes final, notify the Commission within thirty
(30) days of the discontinuance of their present business or employment
and of each affiliation with a new business or employment. Each notice
of affiliation with any new business or employment shall include the
individual respondent's new business address and telephone number,
current home address, and a statement describing the nature of the
business or employment and the duties and responsibilities. The
expiration of the notice provision of this Part X shall not affect any
other obligation arising under this Order.
XI
It is further ordered, That respondents Nu Skin, CJM, Inc., CST
Management, Inc., and CK&C, Inc., corporations, their successors and
assigns, and their officers; Clara McDermott, individually and as an
officer and director of CJM, Inc.; Craig Tillotson, individually and as
an officer and director of CST Management, Inc; Craig Bryson,
individually and as an officer and director of CK&C, Inc., shall, for
five (5) years after the last date of dissemination of any
representation covered by this Order, maintain and upon request make
available to the Federal Trade Commission or its staff for inspection
and copying:
A. All materials which come into their possession from a
distributor or any other source that were relied upon in disseminating
such representation; and
B. All tests, reports, studies, surveys, demonstrations, or other
evidence in their possession or control that contradict, qualify, or
call into question such representation, or the basis relied upon for
such representation, including complaints from consumers.
XII
It is further ordered, That respondent Nu Skin, its successors and
assigns, shall pay to the Federal Trade Commission, by cashier's check
or certified check made payable to the Federal Trade Commission and
delivered to the Regional Director, Federal Trade Commission, 55 East
Monroe Street, suite 1437, Chicago, Illinois 60603, the sum of one
million dollars ($1,000,000). Respondent shall make this payment on or
before the tenth day following the date that this Order becomes final.
In the event of default on any obligation to make payment under this
section, interest, computed pursuant to 28 U.S.C. 1961(a), shall accrue
from the date of default to the date of payment. The funds paid by
respondent shall, in the discretion of the Federal Trade Commission, be
used by the Commission to provide direct redress to purchasers of the
Nutriol, Face Lift, and Celltrex products. If the Federal Trade
Commission determines, in its sole discretion, that redress to
purchasers of these products is impracticable or otherwise unwarranted,
any funds not so used shall be paid to the United States Treasury.
Respondent shall be notified as to how the funds are distributed, but
shall have no right to contest the manner of distribution chosen by the
Commission.
XIII
It is further ordered, That respondents CJM, Inc., CST Management,
Inc., and CK&C, Inc., their successors and assigns, and their officers,
and Clara McDermott, Craig Tillotson and Craig Bryson, individually and
as officers and directors of said corporations, shall pay to the
Federal Trade Commission, by cashier's check or certified check made
payable to the Federal Trade Commission and delivered to the Regional
Director, Federal Trade Commission, 55 East Monroe Street, suite 1437,
Chicago, Illinois 60603, the sum of two hundred twenty-five thousand
dollars ($225,000). The respondents shall make this payment on or
before the tenth day following the date this Order becomes final. In
the event of default on any obligation to make payment under this
section, interest, computed pursuant to 28 U.S.C. 1961(a), shall accrue
from the date of default to the date of payment. The funds paid by the
individual respondents shall, in the discretion of the Federal Trade
Commission, be used by the Commission to provide direct redress to
purchasers of the Nutriol, Face Lift, and Celltrex products. If the
Federal Trade Commission determines, in its sole discretion, that
redress to purchasers of these products is impracticable or otherwise
unwarranted, any funds not so used shall be paid to the United States
Treasury. The respondents shall be notified as to how the funds are
distributed, but shall have no right to contest the manner of
distribution chosen by the Commission.
Appendix A
Dear Officer, Agent, Representative, Employee, Distributor: The
Federal Trade Commission (``FTC'') has conducted an investigation to
determine whether Nu Skin International, Inc. (``Nu Skin''), and
certain of its distributors may have engaged in acts or practices
which violate section 5 of the Federal Trade Commission Act, 15
U.S.C. 45, as amended, including, but not limited to, false and
unsubstantiated product claims and earnings representations for Nu
Skin products and distributorships. As a result of its
investigation, the FTC has alleged that Nu Skin, CJM, Inc., CST
Management, Inc., and CK&C, Inc., corporations; Clara McDermott,
individually and as an officer and director of CJM, Inc.; Craig
Tillotson, individually and as an officer and director or CST
Management, Inc.; and Craig Bryson, individually and as an officer
and director of CK&C, Inc., (herein collectively referred to as
``respondents''), have made false and unsubstantiated
representations in connection with the advertising, promotion,
offering for sale, sale, and distribution of Nutriol Hair Fitness
Preparation (``Nutriol''), Face Lift with Activator (``Face Lift''),
and Celltrex and the recruitment of Nu Skin distributors.
As a result of recent discussions with the FTC, the respondents
have agreed to a Consent Order (``Order'') with the FTC. The Order
is for settlement purposes only and does not constitute an admission
of violations of law by any of the respondents. Pursuant to the
Order, the respondents have agreed not to make certain claims for
the Nutriol, Face Lift, and Celltrex products or any substantially
similar products or services. In addition, the respondents have
agreed not to make certain claims for any other products or services
unless they can substantiate those claims. The respondents have also
agreed not to make certain claims about the past or potential
earnings of their distributors. Finally, the respondents are
obligated by the Order to discontinue dealing with any person who
engages in the acts or practices prohibited by the Order.
Specifically, the Order prohibits the respondents from claiming
that:
1. Nutriol or any substantially similar product or service (a)
can or will stop, prevent, cure, relieve, reverse or reduce hair
loss; (b) can or will promote the growth of hair where hair has
already been lost; or (c) is as effective as, or more effective
than, the prescription drug Minoxidil in the treatment of hair loss;
2. Competent and reliable data show that Nutriol or any
substantially similar product or service is effective in stopping
hair loss and promoting hair growth;
3. Face Lift or any substantially similar product or service (a)
can or will permanently remove facial wrinkles; or (b) is as
effective as, or more effective than, the prescription drug
Tretinoin (currently marketed as Retin-A) in the removal of facial
wrinkles; and
4. Celltrex or any substantially similar product or service will
promote the healing of third degree burns.
In connection with any other product or service, the Order
prohibits the respondents from representing:
1. That the product or service: (a) Can or will stop, prevent,
cure, relieve, reverse or reduce hair loss; (ii) can or will promote
the growth of hair where hair has already been lost; (iii) is as
effective as, or more effective than, any other product or service
in the treatment of hair loss; (iv) is as effective as, or more
effective than, any other product or service in the treatment of
facial wrinkles; or (v) will promote the healing of, or is otherwise
an effective treatment for burns;
2. That competent and reliable data show that the product or
service is effective in stopping hair loss and promoting hair
growth; and
3. The efficacy of the product or service in the treatment of
facial wrinkles,
unless the claim is true and, at the time of making the claim, it
possesses and relies upon competent and reliable scientific evidence
that substantiates the claim.
The Order also prohibits the respondents from advertising,
packaging, labeling, promoting, offering for sale, selling, or
distributing any product that is represented as promoting hair
growth or preventing hair loss, unless the product is the subject of
an approved new drug application for such purpose under the Federal
Food, Drug, and Cosmetic Act, 21 U.S.C. 301 et seq.
The Order also prohibits the respondents from making any
representation regarding the performance, benefits, efficacy or
safety of any food, drug, or device unless at the time of making
such representation respondents possess and rely upon competent and
reliable scientific evidence that substantiates the representation.
Similarly, the Order prohibits the respondents from making any
representation regarding the performance, benefits, efficacy or
safety of any product or service (other than any food, drug, or
device), unless at the time of making such representation
respondents possess and rely upon competent and reliable evidence,
which when appropriate must be competent and reliable scientific
evidence, that substantiates the representation.
Finally, the Order prohibits the respondents from:
1. Misrepresenting the past, present, or future profits,
earnings, income, or sales of any person in any distribution, sales
or marketing plan; and
2. Representing that distributors earn or achieve any stated
amount of profits, earnings, income, or sales in excess of the
average profits, earnings, income, or sales of all distributors
unless in conjunction therewith the average profits, earnings,
income, or sales are clearly and conspicuously disclosed, and the
percent of all distributors who actually achieved such stated
profits, earnings, income, or sales is clearly and conspicuously
disclosed.
In addition to the Order's prohibitions, the Order requires the
respondents to provide a copy of this notice to each of their
current and future officers, agents, representatives, employees, and
distributors. The Order also requires Nu Skin to discontinue dealing
with any person who makes any of the representations for Nutriol,
Face Lift, Celltrex, or any substantially similar products or
services, that are expressly prohibited by the Order. Nu Skin must
also discontinue dealing with any person who Nu Skin knows is
engaged in any other acts or practices prohibited by the Order,
unless the person immediately ceases engaging in such acts or
practices.
If you have any questions or would like a copy of the Order, you
can contact us at [ ].
Very truly yours,
[Respondent's name]
Analysis of the Proposed Consent Order To Aid Public Comment
The Federal Trade Commission has accepted an agreement to a
proposed Consent Order from Nu Skin International, Inc., CJM, Inc., CST
Management, Inc., and CK&C, Inc., corporations; Clara McDermott,
individually and as an officer and director of CJM, Inc.; Craig
Tillotson, individually and as an officer and director of CST
Management, Inc.; and Craig Bryson, individually and as an officer and
director of CK&C, Inc.
The proposed Consent Order has been placed on the public record for
sixty (60) days for receipt of comments by interested persons. Comments
received during this period will become part of the public record.
After sixty (60) days, the Commission will again review the agreement
and the comments received and will decide whether it should withdraw
from the agreement and take other appropriate action, or make final the
proposed Order contained in the agreement.
This matter concerns advertisements and promotional practices for
three Nu Skin International, Inc. products: Nutriol Hair Fitness
Preparation (``Nutriol''), Face Lift with Activator (``Face Lift''),
and Celltrex. This matter also concerns the advertisements and
promotional practices for the recruitment of persons to be Nu Skin
International, Inc. distributors.
The Commission's proposed Complaint alleges that the advertisements
expressly or impliedly claim that Nutriol will stop hair loss,
stimulate hair growth, and is as effective as, or more effective than,
the prescription drug Minoxidil in the treatment of hair loss. These
claims are alleged to violate section 5 of the Federal Trade Commission
Act, 15 U.S.C. 45, because they are false and the proposed respondents
did not possess adequate substantiation for the claims at the time they
were made.
The proposed Complaint also alleges that the advertisements
expressly or impliedly claim that Face Lift will permanently remove
facial wrinkles and is as effective as, or more effective than, the
prescription drug trentinoin (currently known as Retin-A) in the
removal of facial wrinkles. These claims are alleged to violate section
5 of the Federal Trade Commission Act, 15 U.S.C. 45, because they are
false and the proposed respondents did not possess adequate
substantiation for the claims at the time they were made.
The proposed Complaint also alleges that the advertisements
expressly or impliedly claim that Celltrex will promote the healing of
third degree burns. This claim is alleged to violate section 5 of the
Federal Trade Commission Act, 15 U.S.C. 45, because it is false and the
proposed respondents did not possess adequate substantiation for the
claim at the time it was made.
The proposed Complaint also alleges that the advertisements
expressly or impliedly claim that the amount of money represented in
the advertisements is representative, or typical, of what individuals
who become Nu Skin distributors will generally achieve on a monthly or
annual basis. This claim is alleged to violate section 5 of the Federal
Trade Commission Act, 15 U.S.C. 45, because it is false and the
proposed respondents did not possess adequate substantiation for the
claim at the time it was made.
Finally, the proposed Complaint alleges that the advertisements
expressly or impliedly claim that using Nutriol, Face Lift, and
Celltrex will result in physiological changes in the body, as well as
cosmetic changes in appearance. These claims are alleged to violate
sections 5 and 12, 15 U.S.C. 45 and 52, because they are false
advertisements which induced, or will likely induce, the purchase of
drugs or cosmetics.
The proposed Consent Order prohibits the proposed respondents from
representing, directly or by implication, that: (1) Nutriol, or any
substantially similar product or service, (a) can or will stop,
prevent, cure, relieve, reverse or reduce hair loss; (b) can or will
promote the growth of hair where hair has already been lost; or (c) is
as effective as, or more effective than, the prescription drug
Minoxidil in the treatment of hair loss; and (2) competent and reliable
data show that Nutriol, or any substantially similar product or
service, is effective in stopping hair loss and promoting hair growth.
In addition, the proposed Consent Order prohibits the proposed
respondents from making these representations, directly or by
implication, for any other product or service, unless such
representations are true and at the time of making such
representations, respondents possess and rely upon competent and
reliable scientific evidence that substantiates the representations.
The proposed Consent Agreement also prohibits the proposed respondents
from advertising, packaging, labeling, promoting, offering for sale,
selling, or distributing any product that is represented as promoting
hair growth or preventing hair loss, unless the product is the subject
of an approved new drug application for such purpose under the Federal
Food, Drug, and Cosmetic Act, 21 U.S.C. 301 et seq.
The proposed Consent Order also prohibits the proposed respondents
from representing, directly or by implication, that Face Lift, or any
substantially similar product or service, (1) can or will permanently
remove facial wrinkles; or (2) is as effective as, or more effective
than, the prescription drug Tretinoin (currently marketed as Retin-A)
in the removal of facial wrinkles. In addition, the proposed Consent
Order prohibits the proposed respondents from representing, directly or
by implication, the efficacy of any other product or service in the
treatment of facial wrinkles, or that such other product or service is
as effective as, or more effective than, any other product or service
in the treatment of facial wrinkles, unless such representation is true
and, at the time of making such representation, respondents possess and
rely upon competent and reliable scientific evidence that substantiates
the representation.
The proposed Consent Order also prohibits the proposed respondents
from representing, directly or by implication, that Celltrex, or any
substantially similar product or service, can or will promote the
healing of third degree burns. In addition, the proposed Consent Order
prohibits the proposed respondents from representing, directly or by
implication, that any other product or service will promote the healing
of, or is otherwise an effective treatment for burns, unless such
representation is true and, at the time of making such representation,
respondents possess and rely upon competent and reliable scientific
evidence that substantiates the representation.
The proposed Consent Order also prohibits the proposed respondents
from making any representation, directly or by implication, (1)
regarding the performance, benefits, efficacy or safety of any food,
drug, or device, unless at the time of making such representation
respondents possess and rely upon competent and reliable scientific
evidence that substantiates the representation; and (2) regarding the
performance, benefits, efficacy or safety of any other product or
service, unless at the time of making such representation respondents
possess and rely upon competent and reliable evidence, which when
appropriate must be competent and reliable scientific evidence, that
substantiates the representation.
The proposed Consent Order also prohibits the proposed respondents
from, (1) misrepresenting, in any manner, the past, present, or future
profits, earnings, income, or sales from participation of any person in
any distribution, sales, or marketing plan; and (2) representing, in
any manner, directly or by implication, by use of hypothetical examples
or otherwise, that distributors earn or achieve from participation in
any distribution, sales, or marketing plan any stated amount of
profits, earnings, income, or sales in excess of the average profits,
earnings, income, or sales of all distributors, unless in conjunction
therewith such average profits, earnings, income, or sales are clearly
and conspicuously disclosed, and the percent of all distributors who
actually achieved such stated profits, earnings, income, or sales in
such time period is clearly and conspicuously disclosed.
The proposed Consent Order also contains provisions requiring
proposed respondent NU Skin International, Inc., to discontinue dealing
with any person who makes any of the representations for Nutriol, Face
Lift, Celltrex, or any substantially similar products or services, that
are expressly prohibited by the Order. Nu Skin must also discontinue
dealing with any person who Nu Skin knows is engaged in any other acts
or practices prohibited by the Order, unless the person immediately
ceases engaging in such acts or practices.
The proposed Consent Order also contains provisions requiring
distribution of the Order or a summary of the Order to all current and
future officers, agents, representatives, employees, and distributors
of the proposed respondents; record retention demonstrating compliance
with the Order; and notification to the Commission of any changes in
the structure of the proposed corporate respondents or the employment
of the individual respondents.
Finally, the proposed Consent Order requires proposed respondent Nu
Skin International, Inc., to pay the Federal Trade Commission
$1,000,000, and proposed respondents CJM, Inc., CST Management, Inc.,
CK&C, Inc., Clara McDermott, Craig Tillotson, and Craig Bryson to pay
the Federal Trade Commission $225,000. The funds paid by the proposed
respondents shall, in the discretion of the Federal Trade Commission,
be used to provide direct redress to consumers. If the Federal Trade
Commission determines that consumer redress is impracticable or
otherwise unwarranted, any funds not so used shall be paid to the
United States Treasury.
The purpose of this analysis is to facilitate public comment of the
proposed Order. It is not intended to constitute an official
interpretation of the agreement and proposed Order or to modify in any
way their terms.
Donald S. Clark,
Secretary.
[FR Doc. 94-1561 Filed 1-24-94; 8:45 am]
BILLING CODE 6750-01-M