[Federal Register Volume 60, Number 99 (Tuesday, May 23, 1995)]
[Notices]
[Pages 27305-27309]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-12587]



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FEDERAL TRADE COMMISSION
[Dkt. 9263]


National Dietary Research, 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 Florida-based corporation and its owner 
from making claims regarding weight loss, hunger reduction, calorie 
absorption, cholesterol reduction, effects on cellulite or body 
measurements, or any other health benefits of any product or program 
they advertise or sell, unless the respondents possess competent and 
reliable scientific evidence to substantiate the claims. Also, the 
consent agreement would prohibit the respondents from misrepresenting 
test results, from representing that any advertisement is something 
other than a paid advertisement, and from representing that an 
endorsement is typical of the experience of consumers who use the 
product, unless the claim is substantiated. In addition, the consent 
agreement would require National Dietary Research to pay $100,000 to 
the Commission.

DATES: Comments must be received on or before July 24, 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: Joel Winston or Richard Cleland, FTC/
S-4002, Washington, DC 20580. (202) 326-3153 or 326-3088.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Sec. 3.25(f) of 
the Commission's rules of practice (16 CFR 3.25(f)), notice is hereby 
given that the following [[Page 27306]] consent agreement containing a 
consent order(s) 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)).

Agreement Containing Consent Order to Cease and Desist

    In the matter of National Dietary Research, Inc., a corporation; 
The William H. Morris Company, a corporation; and William H. Morris, 
individually and as an officer of said corporations. Docket No. 
9263.
    The agreement herein, by and between National Dietary Research, 
Inc., and The William H. Morris Company, corporations, by their duly 
authorized officer; and William H. Morris, individually and as an 
officer of said corporations, hereinafter sometimes referred to as 
respondents, and their attorneys, and counsel for the Federal Trade 
Commission, is entered into in accordance with the Commission's rule 
governing consent order procedures. In accordance therewith the parties 
hereby agree that:
    1. Respondent National Dietary Research, Inc. is a corporation 
organized, existing, and doing business under and by virtue of the laws 
of the State of Florida, with its office and principal place of 
business located at 1377 K Street, NW., Suite 553, Washington, DC 
20005.
    Respondent The William H. Morris Company is a corporation 
organized, existing, and doing business under and by virtue of the laws 
of the State of Florida, with its office and principal place of 
business located at 2804 Smitter Road, Tampa, Florida, 33618.
    Respondent William H. Morris is an officer of said corporations. He 
formulates, directs, and controls the policies, acts, and practices of 
said corporations. His home address is 2906 Smitter Road, Tampa, 
Florida, 33618.
    2. Respondents have been served with a copy of the complaint issued 
by the Federal Trade Commission charging them with violations of 
sections 5(a) and 12 of the Federal Trade Commission Act, and have 
filed answers to said complaint denying said charges.
    3. Respondents admit all the jurisdictional facts set forth in the 
Commission's complaint in this proceeding.
    4. 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) Any claim under the Equal Access to Justice Act.
    5. This agreement shall not become a 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 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 
respondents, in which event it will take such action as it may consider 
appropriate, or issue and serve its decision, in disposition of the 
proceeding.
    6. This agreement is for settlement purposes only and does not 
constitute an admission by respondents that the law has been violated 
as alleged in the complaint, or that the facts as alleged in the 
compliant, other than jurisdictional facts, are true.
    7. 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. 3.25(f) of the 
Commission's rules, the Commission may without further notice to 
respondents, (1) Issue 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 decision 
containing the agreed-to order to respondents' addresses as stated in 
this agreement shall constitute service. Respondents waive any right 
they might 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 in the agreement may be used to vary or to contradict the 
terms of the order.
    8. 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. 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.
    9. If it is accepted by the Commission, this Agreement constitutes 
a full settlement between the Commission and respondents as to the 
activities alleged in the complaint to have constituted violations of 
the Federal Trade Commission Act and which occurred prior to the date 
of entry of the order. As to those activities alleged in the complaint, 
and which occurred prior to the date of entry of the order, the 
Commission hereby releases the respondents from all other further 
liability to the Commission.
Order

I
    It is ordered That respondents National Dietary Research, Inc., a 
corporation, its successors and assigns, and its officers, agents, 
representatives, and employees, The William H. Morris Company, a 
corporation, its successors and assigns, and its officers, agents, 
representatives, and employees, and William H. Morris, individually and 
as an officer of the corporate respondents, 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 program 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 or program

a. Provides any weight loss benefit;
b. Is an effective treatment for obesity;
c. Reduces hunger or is an effective appetite suppressant;
d. Decreases the intestinal absorption of calories;
e. Reduces, can reduce or helps reduce serum cholesterol;
f. Provides, can provide or helps provide any other health benefit; or
g. Has any effect on cellulite or on the user's body measurements,

unless, at the time they make such representation, respondents possess 
and rely upon competent and reliable scientific evidence that 
substantiates the representation. For purposes of this Order, 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 [[Page 27307]] manner by persons qualified to do so, using 
procedures generally accepted in the profession to yield accurate and 
reliable results.
II
    It is further ordered That respondents National Dietary Research, 
Inc., a corporation, its successors and assigns, and its officers, 
agents, representatives, and employees, The William H. Morris Company, 
a corporation, its successors and assigns, and its officers, agents, 
representatives, and employees, and William H. Morris, individually and 
as an officer of the corporate respondents, 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 program 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,

a. The existence, contents, validity, results, conclusions, or 
interpretations of any test or study;
b. The amount of fiber or any other nutrient or dietary constituent 
contained in or provided by the product or program, whether described 
in quantitative or qualitative terms;
c. That the product or program contains or provides a high, rich, 
excellent or superior source of fiber or any other nutrient or dietary 
constituent using those words or words of similar meaning; or
d. The research activities or other activities of National Dietary 
Research or any other organization affiliated with respondents.
III
    It is further ordered That respondents National Dietary Research, 
Inc., a corporation, its successors and assigns, and its officers, 
agents, representatives, and employees, The William H. Morris Company, 
a corporation, its successors and assigns, and its officers, agents, 
representatives, and employees, and William H. Morris, individually and 
as officer of the corporate respondents, 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 program 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 any advertisement that misrepresents, in any 
manner, directly or by implication, that it is not a paid 
advertisement.
IV
    It is further ordered That respondents National Dietary Research, 
Inc., a corporation, its successors and assigns, and its officers, 
agents, representatives, and employees, The William H. Morris Company, 
a corporation, its successors and assigns, and its officers, agents, 
representatives, and employees, and William H. Morris, individually and 
as an officer of the corporate respondents, 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 program 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 a product or program 
represents the typical or ordinary experience of members of the public 
who use the product or program, unless at the time of making such 
representation, the representation is true, and respondents possess and 
rely upon competent and reliable evidence, which when appropriate must 
be competent and reliable scientific evidence, that substantiates such 
representation, provided, however, 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 they 
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.
V
    Nothing in this Order shall prohibit respondents from making any 
representation that is specifically permitted in labeling for any 
product by regulations promulgated by the Food and Drug Administration 
pursuant to the Nutrition Labeling and Education Act of 1990.
VI
    Nothing in this Order shall prohibit 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.
VII
    It is further ordered That no later than the date that this Order 
becomes final, respondents National Dietary Research, Inc., a 
corporation, its successors and assigns, The William H. Morris Company, 
a corporation, its successors and assigns, and William H. Morris, 
individually and as officer of the corporate respondents, shall deposit 
into an escrow account, to be established by the Commission for the 
purpose of receiving payment due under this Order (``escrow account''), 
the sum of one hundred thousand dollars ($100,000).
    The funds paid by respondents, together with accrued interest, 
shall, in the discretion of the Commission, be used by the Commission 
to provide direct redress to purchasers of Food Source One in 
connection with the acts or practices alleged in the complaint, and to 
pay any attendant costs of administration. If the Commission 
determines, in its sole discretion, that redress to purchasers of this 
product is wholly or partially impracticable or is otherwise 
unwarranted, any funds not so used shall be paid to the United States 
Treasury. 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. No portion of the payment as 
herein provided shall be deemed a payment of any fine, penalty, or 
punitive assessment.
    At any time after this Order becomes final, the Commission may 
direct the escrow agent to transfer funds from the escrow account, 
including accrued interest, to the Commission to be distributed as 
herein provided. The Commission, or its representative, shall, in its 
sole discretion, select the escrow agent.
    Respondents relinquish all dominion, control and title to the funds 
paid into the escrow account, and all legal and equitable title to the 
funds vested in the Treasurer of the United States and in the 
designated consumers. Respondents shall make no claim to or demand for 
return of the funds, directly or indirectly, through counsel or 
otherwise; and in the event of bankruptcy of respondents, respondents 
acknowledge that the funds are not part of the debtor's estate, nor 
does the estate have any claim or interest therein. [[Page 27308]] 
VIII
    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:

1. All materials that were relied upon to substantiate any 
representation covered by this Order; and
2. All test reports, studies, surveys, demonstrations or other evidence 
in their possession or control, or of which they have knowledge, that 
contradict, qualify, or call into question such representation or the 
basis upon which respondents relied for such representation, including 
complaints from consumers.
IX
    It is further ordered That the corporate respondents shall notify 
the Federal Trade Commission at least thirty (30) days prior to any 
proposed change in the corporations such as dissolution, assignment, or 
sale resulting in the emergence of a successor corporation, the 
creation or dissolution of subsidiaries or any other change in the 
corporations which may affect compliance obligations arising under this 
Order.
X
    It is further ordered That the corporate respondents shall 
distribute a copy of this Order to each of their operating divisions 
and to each of their officers, agents, representatives, or employees 
engaged in the preparation or placement of advertisements, promotional 
materials, product labels or other such sales materials covered by this 
Order.
XI
    It is further ordered That the individual respondent shall, for a 
period of five (5) years from the date of issuance of this Order, 
notify the Commission within thirty (30) days in the event of the 
discontinuance of his present business or employment, the activities of 
which include the advertising, offering for sale, sale, or distribution 
of consumer products, and of his affiliation with any new business or 
employment involving such activities. Each notice of affiliation with 
any new business or employment shall include 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.
XII
    It is further ordered That respondents shall, within sixty (60) 
days after service of this Order upon them 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 or intend to comply with this Order.
Analysis of Proposed Consent Order To Aid Public Comment

    The Federal Trade Commission has accepted, subject to final 
approval, an agreement to a proposed consent order from National 
Dietary Research, Inc., William H. Morris Company and William H. 
Morris, the president and sole owner of the corporate respondents. The 
respondents sell various tablets made of compressed fiber and other 
ingredients, which are advertised for their alleged weight loss and 
cholesterol lowering benefits.
    On November 9, 1993, the Commission issued an administrative 
complaint in this matter (described below), and a complaint and 
corresponding motion for preliminary injunctive relief was filed in the 
U.S. district Court for the Middle District of Florida, Tampa Division 
on November 17, 1993. The administrative complaint was withdrawn from 
adjudication on January 23, 1993 for the purpose of considering the 
proposed consent agreement. The preliminary injunctive action was 
dismissed without prejudice on February 20, 1995.
    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 advertising claims made in connection with the 
sale of two of the respondents' products, Food Source One (``FS-1''), a 
purported weight loss and cholesterol lowering tablet containing small 
amounts of dietary fiber and other ingredients, and Vancol 5000 
(`'Vancol''), a purported cholesterol lowering tablet containing small 
amounts of psyllium fiber, chromium picolinate and other ingredients.
    The Commission's complaint in this matter charges the respondents 
with making unsubstantiated claims, in advertisements and promotional 
materials, regarding the efficacy of FS-1 for weight loss and lowering 
serum cholesterol and unsubstantiated claims regarding the efficacy of 
Vancol for lowering serum cholesterol. With regard to FS-1, the 
complaint alleges that the respondents have represented, directly or by 
implication, that the product: Causes significant weight loss; causes 
significant weight loss without dieting or otherwise changing normal 
eating patterns; is an effectives treatment for obesity; reduces hunger 
and is an effective appetite suppressant; decreases the intestinal 
absorption of calories; and may significantly reduce serum cholesterol. 
The complaint charges that the respondents failed to possess and rely 
upon a reasonable basis for these representations.
    The complaint alleges that the respondents also represented, 
directly or by implication, that: Scientific studies of certain 
ingredients contained in FS-1, including studies published in the 
British Journal or Nutrition and the American Journal of Clinical 
Nutrition, demonstrate that FS-1 causes significant weight loss; 
scientific studies of certain ingredients contained in FS-1, including 
a study published in the British Journal of Nutrition, demonstrate that 
FS-1 causes significant weight loss without dieting; FS-1 has a high 
fiber content; National Dietary Research is a bona fide, independent 
research organization that has conducted research seeking nutritional 
solutions to world-wide health problems; and certain of the 
respondents' advertisements for FS-1 are independent newspaper stories 
and not paid advertisements. The complaint alleges that these 
representations are false and misleading.
    With regard to Vancol, the complaint alleges that the respondents 
have represented, directly or by implication, that the product 
significantly reduces serum cholesterol and that it significantly 
reduces serum cholesterol without dieting or otherwise changing normal 
eating patterns. The complaint charges that the respondents failed to 
possess and rely upon a reasonable basis for these representations. The 
complaint also alleges that the respondents represented, directly or by 
implication, that scientific studies of certain ingredients contained 
in Vancol demonstrate that Vancol significantly reduces serum 
cholesterol. The complaint charges that this representation is false 
and misleading.
    In addition to the above-mentioned complaint allegations, the 
complaint also alleges that through the use of statements in certain 
advertisements for [[Page 27309]] FS-1 and Vancol, the respondents have 
represented, directly or by implication, that testimonials from 
consumers appearing in advertisements for FS-1 and Vancol reflect the 
typical or ordinary experience of members of the public who have used 
the products. The complaint charges that the respondents failed to 
possess and rely upon a reasonable basis for these representations.
    The proposed order contains provisions designed to remedy the 
alleged violations. The proposed order also provides for consumer 
redress of $100,000. In the event that consumer redress is not 
feasible, the proposed order provides that the funds will be deposited 
in the United States Treasury.
    Part I of the proposed order requires the respondents to cease from 
making any representation that any product or program provides any 
weight loss benefit, is an effective treatment for obesity, reduces 
hunger or suppresses the appetite, decreases the intestinal absorption 
of calories, reduces serum cholesterol, provides, can provide or helps 
provide any other health benefit or has any effect on cellulite or on 
the user's body measurements, unless they possess and rely upon 
competent and reliable scientific evidence that substantiates the 
representation. Part II(a) of the order prohibits the respondents from 
misrepresenting the existence, contents, validity, results, 
conclusions, or interpretations of any test or study. Part II (b) and 
(c), respectively, prohibit misrepresentation of the amount of fiber or 
any nutrient contained in a product and prohibit false claims that a 
product is a high source of fiber or any other nutrient. Part II(d) 
prohibits misrepresentation of the research activities or other 
activities of National Dietary Research or any other organization 
affiliated with the respondents.
    Part III of the proposed order prohibits the respondents from 
disseminating any advertisement for any product or program that 
misrepresents, in any manner, that it is not a paid advertisement. Part 
IV of the order prohibits representations that testimonials represent 
the typical or ordinary experience of consumers who use the product, 
unless the representations are true and the respondents have competent 
and reliable evidence that substantiates such representations. An 
additional provision in this Part permits the respondents to use a 
truthful, non-typical testimonial, if they disclose clearly and 
prominently in close proximity to the testimonial 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.
    Parts V and VI of the proposed order contain provisions permitting 
certain claims that are approved for labels by the FDA, under either 
the Nutrition Labeling and Education Act, a tentative final or final 
monograph, or any new drug application approved by the FDA.
    Part VII of the proposed order requires the respondents to pay 
$100,000 in consumer redress, or if that is impracticable, to pay the 
same amount to the U.S. Treasury.
    Parts VIII, IX, X, XI and XII of the proposed order are compliance 
reporting provisions that require the respondents to: retain all 
records that would bear on the respondents' compliance with the order; 
to notify the Commission of any changes in the structure of the 
corporate respondents that may affect their compliance obligations 
under the order, or any changes in the business affiliations of the 
individual respondent relating to the advertising, offering for sale, 
sale or distribution of consumer products; to distribute copies of the 
order to the corporate respondents' operating divisions and to those 
persons responsible for the preparation and review of advertising 
material covered by the order; and to report to the Commission their 
compliance with the terms of the order.
    The purpose of this analysis is to facilitate public comment on 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. 95-12587 Filed 5-22-95; 8:45 am]
BILLING CODE 6750-01-M