[Federal Register Volume 59, Number 230 (Thursday, December 1, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-29576]


[[Page Unknown]]

[Federal Register: December 1, 1994]


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FEDERAL TRADE COMMISSION
[File No. 932 3316]

 

Olsen Laboratories, 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, two Kansas-based firms and an official 
from making false claims for Eez-Away, an arthritis pain treatment, or 
similar products. The consent agreement would require the responses to 
possess scientific substantiation before making any health or medical 
benefit claim for any personal or household product or service they 
market in the future, would require that they clearly identify any 
future infomercial they disseminate is paid advertising, and would 
prohibit misusing endorsements or testimonials.

DATES: Comments must be received on or before January 30, 1995.

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:
Beth Grossman or Lesley Fair, FTC/S-4002, Washngton, DC 20580. (202) 
326-3019 or 326-3081.

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 Olsen Laboratories, Inc., and Richfield 
Distributors, Inc., corporations, and Peter F. Olsen, individually 
and as an officer and director of said corporations; Agreement 
Containing Consent Order to Cease and Desist

    The Federal Trade Commission having initiated an investigation of 
certain acts and practices of Olsen Laboratories, Inc. and Richfield 
Distributors, Inc., corporations, and Peter F. Olsen, individually and 
as an officer and director of said corporations, hereinafter sometimes 
referred to as proposed respondents, and it now appearing that 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 Olsen Laboratories, Inc. and 
Richfield Distributors, Inc., by their duly authorized officers, and 
Peter F. Olsen, individually and as an officer and director of said 
corporations, and counsel for the Federal Trade commission that:
    1. Proposed respondent Olsen Laboratories, Inc. is a corporation 
organized, existing and doing business under and by virtue of the laws 
of the State of Delaware with its principal office and place of 
business located at 11088 Alhambra Street, Leawood, Kansas 66211.
    Proposed respondent Richfield Distributors, Inc. is a corporation 
organized, existing and doing business under and by virtue of the laws 
of the State of New York with its principal office and place of 
business located at 11088 Alhambra Street, Leawood, Kansas 66211.
    Proposed respondent Peter F. Olsen is an officer and director of 
Olsen Laboratories, Inc. and Richfield Distributors, Inc. He 
formulates, directs and controls the acts and practices of Olsen 
laboratories, Inc., and Richfield Distributors, Inc., and his address 
is the same as that of said corporations.
    2. Proposed respondents admit all the jurisdictional facts set 
forth in the draft complaint.
    3. Proposed respondents waive:
    (a) Any procedural steps;
    (b) The requirement that the Commission's decision contain a 
statement of findings of fact and conclusions of law; and
    (c) All rights to seek judicial review or otherwise to challenge or 
contest the validity of the order entered pursuant to this agreement.
    4. 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, it, together with the draft 
complaint contemplated thereby, 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.
    5. This agreement is for settlement purposes only and does not 
constitute an admission by proposed respondents that the law has been 
violated as alleged in the draft of complaint, or that the facts as 
alleged in the draft complaint, other than jurisdictional facts, are 
true.
    6. The 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 complaint 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' address as stated in this agreement shall constitute 
service. Proposed respondents waive any rights 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.
    7. Proposed respondents have read the proposed complaint and order 
contemplated hereby. Proposed respondents 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

I

    It is ordered that respondents, Olsen Laboratories, Inc. and 
Richfield Distributors, Inc., corporations, their successors and 
assigns, and their officers; and Peter F. Olsen, individually and as an 
officer and director of said corporations; and respondents' agents, 
representatives and employees, directly or through any corporation, 
subsidiary, division or other device, in connection with the 
manufacturing, labeling, advertising, promotion, offering for sale, 
sale, or distribution of Eez-Away Relief or any substantially similar 
product, in or affecting commerce, as ``commerce'' is defined in the 
Federal Trade Commission Act, do forthwith cease and desist from 
representing, in any manner, directly or by implication, that the 
product is a new or unique method of treatment for arthritis pain or is 
a breakthrough in the treatment of arthritis pain.
    For purposes of this provision, ``substantially similar product'' 
shall mean any external analgesic that contains menthol as the active 
ingredient.

II

    It is further ordered that respondents, Olsen Laboratories, Inc. 
and Richfield Distributors, Inc., corporations, their successors and 
assigns, and their officers; and Peter F. Olsen, individually and as an 
officer and director of said corporations; and respondents' agents, 
representatives and employees, directly or through any corporation, 
subsidiary, division or other device, in connection with the 
manufacturing, labeling, advertising, promotion, offering for sale, 
sale, or distribution of any drug in or affecting commerce, as ``drug'' 
and ``commerce'' are defined in the Federal Trade Commission Act, do 
forthwith cease and desist from representing, in any manner, directly 
or by implication, that:
    A. The product rapidly eliminates severe pain and physical 
disabilities suffered by those persons with arthritis or other similar 
conditions; or
    B. The product provides long-term pain relief; or
    C. The product increases the range of motion in the affected joints 
of those persons with arthritis or other similar conditions; or
    D. The product is more effective than other products in relieving 
pain or in treating the symptoms of those persons with arthritis or 
other similar conditions; or
    E. The product relieves the pain of those persons with arthritis or 
other similar conditions by penetrating through the skin to the 
affected joint; unless, at the time of making such representation, 
respondents possess and rely upon competent and reliable scientific 
evidence that substantiates the representation. For purposes of this 
provision, ``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.
    Provided that, with respect to any representation covered by 
subparts A, B and D of this part and any representation covered by 
subpart C of this part other than a representation that the product may 
temporarily increase the range of motion in the affected joints of 
people with arthritis by temporarily relieving minor pain in those 
joints, ``competent and reliable scientific evidence'' shall mean 
adequate and well-controlled, double-blind clinical testing conforming 
to acceptable designs and protocols and conducted by a person or 
persons qualified by training and experience to conduct such testing.

III

    It is further ordered that respondents, Olsen Laboratories, Inc. 
and Richfield Distributors, Inc., corporations, their successors and 
assigns, and their officers; and Peter F. Olsen, individually and as an 
officer and director of said corporations; and respondents' agents, 
representatives and employees, directly or through any corporation, 
subsidiary, division or other device, in connection with the 
manufacturing, labeling, advertising, promotion, offering for sale, 
sale, or distribution of any product or service for personal or 
household use in affecting commerce, as ``commerce'' is defined in the 
Federal Trade Commission Act, do forthwith cease and desist from making 
any representation, in any manner, directly or by implication, about 
the health or medical benefits of any such product or service unless, 
at the time of making such representation, respondents possess and rely 
upon competent and reliable scientific evidence that substantiates the 
representation. For purposes of this provision, ``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.

IV

    It is further ordered that respondents, Olsen Laboratories, Inc. 
and Richfield Distributors, Inc., corporations, their successors and 
assigns, and their officers; and Peter F. Olsen, individually and as an 
officer and director of said corporations; and respondents' agents, 
representatives and employees, directly or through any corporation, 
subsidiary, division or other device, in connection with the 
manufacturing, labeling, advertising, promotion, offering for sale, 
sale, or distribution of any product or service for personal or 
household use, in or affecting commerce, as ``commerce'' is defined in 
the Federal Trade Commission Act, do forthwith cease and desist from 
misrepresenting, in any manner, directly or by implication, that such 
product or service is a new or unique method of treatment for any 
disease or condition, or is a breakthrough in the treatment of any 
disease or condition.

V

    It is further ordered that respondents, Olsen Laboratories, Inc. 
and Richfield Distributors, Inc., corporations, their successors and 
assigns, and their officers; and Peter F. Olsen, individually and as an 
officer and director of said corporations; and respondents' agents, 
representatives and employees, directly or through any corporation, 
subsidiary, division or other device, in connection with the 
manufacturing, labeling, advertising, promotion, offering for sale, 
sale, or distribution of any product or service for personal or 
household use, in or affecting commerce, as ``commerce'' is defined in 
this Federal Trade Commission Act, do forthwith cease and desist from 
misrepresenting, in any manner, directly or by implication, the 
existence, contents, validity, results, conclusions or interpretations 
of any test or study.

VI

    It is further ordered that respondents, Olsen Laboratories, Inc. 
and Richfield Distributors, Inc., corporations, their successors and 
assigns, and their officers; and Peter F. Olsen, individually and as an 
officer and director of said corporations; and respondents' agents, 
representatives and employees, directly or through any corporation, 
subsidiary, division or other device, in connection with the 
manufacturing, labeling, advertising, promotion, offering for sale, 
sale, or distribution of any product or service for personal or 
household use, in or affecting commerce, as ``commerce'' is defined in 
the Federal Trade Commission Act, do forthwith cease and desist from 
representing, in any manner, directly or by implication, that any 
endorsement (as ``endorsement'' is defined in 16 CFR 255.0(b)) of such 
product or service represents the typical or ordinary experience of 
members of the public who use such product or service, unless 
respondents, at the time of making such representation, possess and 
rely upon competent and reliable evidence,, which when appropriate must 
be competent and reliable scientific evidence, that substantiates the 
representation. For purposes of this provision, ``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. Provided, however, that respondents may use such endorsements 
if the statements or depictions that comprise the endorsements are true 
and accurate, and if respondents disclose clearly and prominently and 
in close proximity to the endorsement what the generally expected 
performance would be in the depicted circumstances or the limited 
applicability of the endorser's experience to what consumers may 
generally expect to achieve, that is, that consumers should not expect 
to experience similar results.

VII

    It is further ordered that respondents, Olsen Laboratories, Inc. 
and Richfield DIstributors, Inc., corporations, their successors and 
assigns, and their officers; and Peter F. Olsen, individually and as an 
officer and director of said corporations; and respondents' agents, 
representatives and employees, directly or through any corporation, 
subsidiary, division or other device, in connection with the 
manufacturing, labeling, advertising, promotion, offering for 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 creating, producing, selling, or 
disseminating:
    A. Any advertisement that misrepresents, directly or by 
implication, that it is not a paid advertisement;
    B. Any commercial or video advertisement fifteen (15) minutes in 
length or longer or intended to fill a broadcasting or cablecasting 
time slot of fifteen (15) minutes in length or longer that does not 
display visually, in a clear and prominent manner and for a length of 
time sufficient for an ordinary consumer to read, within the first 
thirty (30) seconds of the commercial and immediately before each 
presentation of ordering instructions for the product or service, the 
following disclosure:

    ``THE PROGRAM YOU ARE WATCHING IS A PAID ADVERTISEMENT FOR [THE 
PRODUCT OR SERVICE].''

    Provided that, for the purposes of this provision, the oral or 
visual presentation of a telephone number or address for viewers to 
contact to place an order for the product or service shall be deemed to 
be a presentation of ordering instructions so as to require the display 
of the disclosure provided herein.

VIII

    Nothing in this Order shall prohibit respondent from making any 
representation for any drug that is permitted in labeling for any such 
drug under any tentative final or final standard promulgated by the 
Food and Drug Administration, or under any new drug application 
approved by the Food and Drug Administration.

IX

    It is further ordered that for five (5) years after the last date 
of dissemination of any representation covered by this Order, 
respondents, or their successors and assigns, shall maintain and upon 
request make available to the Federal Trade Commission for inspection 
and copying:
    A. All materials 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.

X

    It is further ordered that respondents Olsen Laboratories, Inc. and 
Richfield Distributors, Inc. shall notify the Commission at least 
thirty (30) days prior to any proposed change in their corporate 
structure, 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, or any other corporate 
change that may affect compliance obligations arising out of this 
Order.

XI

    It is further ordered that respondents Olsen Laboratories, Inc. and 
Richfield Distributors, Inc. shall:
    A. Within thirty (30) days of service of this Order, provide a copy 
of this Order to each of their current principals, officers, directors 
and managers, and to all personnel, agents, and representatives having 
sales, advertising, or policy responsibility with respect to the 
subject matter of this Order; and
    B. For a period of five (5) years from the date of entry of this 
Order, provide a copy of this Order to each of their principals, 
officers, directors, and managers, and to all personnel, agents, and 
representatives having sales, advertising, or policy responsibility 
with respect to the subject matter of this Order who are associated 
with it or any subsidiary, successor, or assign, within three (3) days 
after the person assumes his or her position.

XII

    It is further ordered that respondent Peter F. Olsen shall, for a 
period of seven (7) years from the date of entry of this Order, notify 
the Commission within thirty (30) days of the discontinuance of his 
present business or employment and of his affiliation with any new 
business or employment. Each notice of affiliation with any new 
business or employment shall include the respondent's new business 
address and telephone number, current home address, and a statement 
describing the nature of the business or employment and his duties and 
responsibilities.

XIII

    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.

Analysis of Proposed Consent Order To Aid Public Comment

    The Federal Trade Commission has accepted, subject to final 
approval, an agreement containing a consent order from Olsen 
Laboratories, Inc., Richfield Distributors, Inc., and Peter F. Olsen 
(``respondents''). Peter F. Olsen is an officer and director of the two 
corporate respondents.
    The proposed order has been placed on the public record for sixty 
(60) days for reception 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 or make final the agreement's proposed order.
    This matter concerns claims made by the respondents for Eez-Away 
Relief, and external analgesic, in program-length advertisements (or 
``infomercials'') and other advertising and promotional materials.
    The Commission's proposed complaint in this matter alleges that the 
respondents falsely represented that Eez-Away Relief is a major 
breakthrough in the treatment of arthritis pain and that scientific 
research proves that Eez-Away Relief is effective for the rapid 
elimination of severe pain and physical disabilities caused by 
arthritis.
    The proposed complaint further alleges that the respondents falsely 
represented that they possessed and relied upon a reasonable basis for 
their representations that Eez-Away Relief rapidly eliminates severe 
pain and physical disabilities caused by arthritis; that Eez-Away 
Relief provides long-term pain relief; that Eez-Away Relief 
significantly increases the range of motion in the affected joints of 
people with arthritis, including those with rheumatoid arthritis; that 
Eez-Away Relief is more effective than other over-the-counter 
medications in relieving arthritis pain; and that Eez-Away Relief 
relieves arthritis pain by penetrating through the skin to the affected 
joint.
    The proposed complaint also charges that the respondents falsely 
represented that they possessed and relied upon a reasonable basis for 
their representation that the testimonials or endorsements from 
consumers appearing in advertisements for Eez-Away Relief reflect the 
typical or ordinary experience of members of the public who use Eez-
Away Relief. Finally, the proposed complaint alleges that respondents 
falsely represented that the informercial ``30 Minutes'' is an 
independent television program and is not paid commercial advertising.
    The proposed consent order contains provisions designed to prevent 
the respondents from engaging in similar acts and practices in the 
future.
    Part I of the proposed order prohibits respondents from 
representing that Eez-Away Relief or any substantially similar product 
is a new or unique method of treatment for arthritis pain or is a 
breakthrough in the treatment of arthritis pain. A ``substantially 
similar product'' is defined to mean any external analgesic that 
contains menthol as an active ingredient.
    Part II of the proposed order prohibits respondents from 
representing that any drug: (A) Rapidly eliminates severe pain and 
physical disabilities suffered by those persons with arthritis or other 
similar conditions; (B) provides long-term paid relief; (C) increases 
the range of motion in the affected joints of those persons with 
arthritis or other similar conditions; (D) is more effective than other 
products in relieving pain or in treating the symptoms of those persons 
with arthritis or other similar conditions; or (E) relieves the pain of 
those persons with arthritis or other similar conditions by penetrating 
through the skin to the affected joint, unless respondents possess and 
rely upon competent and reliable scientific evidence to support the 
representation. Part II of the order further provides that for 
representations covered by II.A, II.B and II.D, and for representations 
covered by II.C. other than a representation that the product may 
temporarily increase the range of motion in the affected joints of 
people with arthritis by temporarily relieving minor pain in those 
joints, the substantiation must include adequate and well-controlled, 
double-blind clinical testing.
    Part III of the proposed order prohibits respondents from making 
any representation about the health or medical benefits of any product 
or service for personal or household use unless respondents possess 
competent and reliable scientific evidence to support the 
representation.
    Part IV of the proposed order prohibits respondents from 
misrepresenting that any product or service for personal or household 
use is a new or unique method of treatment for any disease or 
condition, or is a breakthrough in the treatment of any disease or 
condition.
    Part V of the proposed order prohibits respondents, in connection 
with the promotion or sale of any product or service for personal or 
household use, from misrepresenting the existence, contents, validity, 
results, conclusions or interpretations of any test or study.
    Part VI of the proposed order prohibits respondents from 
representing that any endorsement of any product or service for 
personal or household use represents that typical or ordinary 
experience of members of the public who use such product or service, 
unless the representation is substantiated. Part VI provides, however, 
that respondents may use such endorsements if the statements or 
depictions that comprise the endorsements are true and accurate, and if 
respondents disclose clearly and prominently and in close proximity to 
the endorsement what the generally expected performance would be in the 
depicted circumstances or the limited applicability of the endorser's 
experience to what consumers may generally expect to achieve, that is, 
that consumers should not expect to experience similar results.
    Part VII of the proposed order prohibits respondents from creating, 
producing, selling, or disseminating any advertisement that 
misrepresents that it is not a paid advertisement; or any video 
advertisement fifteen (15) minutes in length or longer that does not 
display visually, in a clear and prominent manner and for a length of 
time sufficient for an ordinary consumer to read, within the first 
thirty (30) seconds of the commercial and immediately before each 
presentation of ordering instructions for the product or service, the 
following disclosure:

    ``THE PROGRAM YOU ARE WATCHING IS A PAID ADVERTISEMENT FOR [THE 
PRODUCT OR SERVICE].''

    Part VIII of the proposed order provides that nothing in the 
proposed order prohibits respondents from making any representation for 
any drug that is permitted in labeling for any such drug under any 
tentative final or final standard promulgated by the Food and Drug 
Administration, or under any new drug application approved by the Food 
and Drug Administration.
    Part IX of the proposed order requires the respondents to maintain 
copies of all materials relied upon in making any representation 
covered by the order, and all materials that contradict, qualify, or 
call into question such representations.
    Part X of the proposed order requires that Olsen Laboratories, Inc. 
and Richfield Distributors, Inc. notify the Commission at least thirty 
(30) days prior to certain proposed changes in their corporate 
structure.
    Part XI of the proposed order requires that Olsen Laboratories, 
Inc. and Richfield Distributors, Inc. distribute copies of the order to 
certain personnel.
    Part XII of the proposed order requires that Peter F. Olsen, for a 
period of seven (7) years, notify the Commission within thirty (30) 
days of the discontinuance of his present business or employment and of 
his affiliation with any new business or employment.
    Part XIII of the proposed order requires that respondents file with 
the Commission one or more reports detailing their compliance with the 
order.
    The purpose of this analysis is to facilitate public comment on the 
proposed order, and it is not intended to constitute an official 
interpretation of the agreement and proposed order, or to modify any of 
their terms.
Benjamin I. Berman,
Acting Secretary.
[FR Doc. 94-29576 Filed 12-1-94; 8:45 am]
BILLING CODE 6750-01-M