[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