[Federal Register Volume 65, Number 71 (Wednesday, April 12, 2000)]
[Notices]
[Pages 19766-19768]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-9074]


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FEDERAL TRADE COMMISSION

[File No. 982 3180]


CMO Distribution Centers of America, Inc., et al.; Analysis To 
Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the

[[Page 19767]]

draft complaint that accompanies the consent agreement and the terms of 
the consent order--embodied in the consent agreement--that would settle 
these allegations.

DATES: Comments must be received on or before May 5, 2000.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary, 
Room 159, 600 Pennsylvania Ave., NW, Washington, D.C. 20580.

FOR FURTHER INFORMATION CONTACT: Tom Carter, Federal Trade Commission, 
Southwest Region, 1999 Bryan St., Suite 2150, Dallas, TX. 75201-6803. 
(214) 979-9372

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Section 2.34 of 
the Commission's Rules of Practice (16 CFR 2.34), notice is hereby 
given that the above-captioned 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 thirty (30) days. The following Analysis to Aid 
Public Comment describes the terms of the consent agreement, and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home Page 
(for April 5, 2000), on the World Wide Web, at ``http://www.ftc.gov/
ftc/formal.htm.'' A paper copy can be obtained from the FTC Public 
Reference Room, Room H-130, 600 Pennsylvania Avenue, NW, Washington, 
D.C. 20580, either in person or by calling (202) 326-3627.
    Public comment is invited. Comments should be directed to: FTC/
Office of the Secretary, Room 159, 600 Pennsylvania, Ave., NW, 
Washington, D.C. 20580. Two paper copies of each comment should be 
filed, and should be accompanied, if possible, by a 3\1/2\ inch 
diskette containing an electronic copy of the comment. 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 
Seciton4.9(b)(6)(ii) of the Commission's Rules of Practice (16 CFR 
4.9(b)(6)(ii)).

Analysis or Proposed Consent Order To and Public Comment

    The Federal Trade Commission has accepted, subject to final 
approval, and agreement to a proposed Consent Order (``proposed 
order'') from CMO Distribution Centers of America, Inc., and Kalon 
Samulonis, individually and as an officer of CMO Distribution Centers 
of America, Inc.
    The proposed consent order has been placed on the public record for 
thirty (30) days for the reception of comments by interested persons. 
Comments received during this period will become part of the public 
record. After thirty (30) days, the Commission will again review the 
agreement and will decide whether it should withdraw from the agreement 
or make final the agreement's proposed order.
    This matter concerns advertisements on the Internet for a product 
called ``CMO,'' described as a form of cetylmyristoleate, said to be 
derived from beef. CMO is purportedly useful in the treatment of cure 
of arthritis and other diseases. According to the proposed respondents' 
advertising, CMO affects the human immune system in one of two courses 
of treatment, each lasting less than three weeks. The proposed 
respondent claimed their product permanently relieves the symptoms of 
osteoarthritis and reheumatoid arthritis and reverses the effects of 
the disease. CMO was also claimed to be useful for the treatment, 
mitigation, prevention, and cure of most forms of arthritis and a 
number of other diseases.
    The Commission's complaint charges that the proposed respondents 
engaged in deceptive advertising in violation of Section 5 and 12 of 
the FTC Act by making unsubstantiated claims that their CMO products: 
(1) Are effective in the mitigation, treatment, prevention, and cure of 
all forms of arthritis, except gouty arthritis; (2) relieve all 
symptoms of arthritis, including pain, impaired mobility, swelling, and 
deformity; (3) are as effective as, or superior to, prescription 
medications for the treatment of arthritis and the relief of arthritis 
symptoms; (4) are effective in the treatment of multiple sclerosis, 
leukemia, lupus, emphysema, cancer, benign prostate hyperplasia, 
silicone breast disease, asthma, fibromyalgia, and scleroderma; and (5) 
are completely safe and without harmful side effects, even at extremely 
high doses.
    The complaint further alleges that the proposed respondents made 
false claims that: (1) Clinical studies prove that CMO is a safe and 
effective treatment for virtually all forms of arthritis except gouty 
arthritis; (2) CMO is accepted by the medical community; (3) Time 
magazine reported in its October 28, 1996 issue that CMO\TM\ is one of 
the most promising developments in arthritis research; and (4) the 
Arthritis Foundation has not commented on CMO, except to suggest that 
when taking CMO, patients should consult their physicians before 
reducing steroids or other medications.
    The proposed order contains provisions designed to remedy the 
violations charged and to prevent proposed respondents from engaging in 
similar acts in the future.
    Paragraph I of the proposed order prohibits proposed respondents 
from making any representation that CMO or any similar product: (1) Is 
effective in the mitigation, treatment, prevention, or cure of 
arthritis; (2) provides significant relief from symptoms of arthritis, 
including pain, swelling, impaired mobility, or deformity; (3) is as 
effective as, or superior to, prescription medications for the 
treatment of arthritis or the relief of arthritis symptoms: (4) is 
effective in the treatment of multiple sclerosis, leukemia, lupus, 
emphysema, cancer, benign prostate hyperplasia, silicone breast 
disease, asthma, fibromyalgia, or scleroderma; or (5) is safe or has 
not adverse side effects, unless, at the time the representation is 
made, respondents possess and rely upon competent and reliable 
scientific evidence that substantiates the representation.
    Paragraph II of the proposed order prohibits proposed respondents 
from making any representations about the performance, safety, 
efficacy, or health benefits of CMO or any other food, dietary 
supplement, or drug, unless the claims are substantiated by competent 
and reliable scientific evidence.
    Paragraph III of the proposed order prohibits proposed respondents 
from using the name ``cmocure,'' using the word ``cure'' in an address 
or telephone number, or using any other name, address, or telephone 
number in marketing a food, dietary supplement, drug, or program, to 
represent a cure for any disease or health-related condition, unless 
the respondents possess and rely upon competent, reliable scientific 
evidence substantiating the representation.
    Paragraph IV of the proposed order prohibits the proposed 
respondents from misrepresenting that a product or program is endorsed 
or approved by any governmental, professional, or private organization 
or association, or complies with standards or guidelines established by 
such organization or association.
    Paragraph V of the proposed order prohibits proposed respondents 
from misrepresenting the existence, contents, validity, results, 
conclusions, or interpretations of any test, study, or research.
    Paragraph VI of the proposed order prohibits proposed respondents 
from representing that the experience represented by any user 
testimonial or endorsement of any product or program represents the 
typical or ordinary

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experience of members of the public who use the product or program, 
unless the representation is true, and competent and reliable 
scientific evidence substantiates that claim, or respondents clearly 
and prominently disclose either: (1) What the generally expected 
results would be for users or the product or program; or (2) 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.
    Paragraph VII of the proposed order provides that proposed 
respondents are not prohibited from making representations which are 
specifically permitted by regulations of the Food and Drug 
Administration pursuant to the Nutrition Labeling and Education Act of 
1990. Paragraph VIII of the proposed order provides that proposed 
respondents are not prohibited from making representations for a drug 
that are permitted under tentative final or final standards issued by 
the Food and Drug Administration or under any new drug application 
approved by that agency.
    Paragraph IX of the proposed order requires that proposed 
respondents: (1) Not disseminate to any distributor any material 
containing any representations prohibited by the order; (2) not 
authorize any distributor to make any representations prohibited by the 
order; (3) send a required notice to each distributor with whom 
proposed respondents have done business since January 1, 1996, 
requesting that the distributor cease using advertising or promotional 
materials containing unsubstantiated claims for CMO, requesting 
distributors not to make unsubstantiated oral representations, 
informing the distributor of this settlement, and not including any 
other documents in the mailing; (4) for a period of three (3) years 
following service of the order, send the required notice to each 
distributor who has not previously received the notice; the notices 
shall be sent with the first shipment of respondents' products to the 
distributor; (5) require distributors to submit to proposed respondents 
all advertising and promotional materials and claims for any products 
or programs covered by the order for review prior to their 
dissemination and publication, and not authorize distributors to 
disseminate materials and claims unless they comply with the order; 
alternatively, proposed respondents must furnish to distributors 
marketing materials that comply with the order and require the 
distributors to submit for review all advertising and promotional 
materials for a particular product covered by the order that contain 
representations that are not substantially similar to the 
representations for the same product or program contained in the 
marketing materials most recently provided to the distributors by 
proposed respondents; and (6) use reasonable efforts to monitor 
distributors' advertising and promotional activities, immediately 
terminate the right of any distributor who disseminates advertisements 
or marketing material or makes oral representations prohibited by the 
order, and immediately provide information to the Federal Trade 
Commission about any such distributor and the materials used. 
``Distributor'' is defined in the proposed order to mean any person who 
purchased a product covered by the order from the respondents for 
resale or at a discounted or wholesale price unavailable to the general 
public at the time of the purchase, or who has purchased more than 
twelve bottles or packages of a covered product from respondents within 
a twelve-month period.
    Paragraph X of the proposed order requires the proposed respondents 
to send a prescribed notice to each person, other than a distributor, 
who purchased respondents' CMO products and can be identified through a 
diligent search of respondents' records. The notice offers a refund of 
the purchase price and any shipping or handling charges to customers 
who purchased respondents' CMO product for personal use or the use of a 
family member and who make a request for a refund within ninety days of 
the date of the notice. Paragraph XI of the proposed order requires the 
proposed respondents to submit a report to the Federal Trade Commission 
specifying the actions they have taken to comply with the provisions of 
Paragraph X. Paragraph XII of the proposed order requires proposed 
respondents to retain for five years after the last correspondence to 
which they pertain and to make available to the Federal Trade 
Commission on request, copies of notification letters, communications 
with distributors, and other materials relating to the requirements of 
Paragraph IX and Paragraph X.
    Paragraph XIII of the proposed order contains record keeping 
requirements for materials that substantiate, qualify, or contradict 
covered claims and requires proposed respondents to keep and maintain 
all advertisements and promotional materials containing any 
representation covered by the proposed order. In addition, Paragraph 
XIV requires distribution of a copy of the consent decree to current 
and future officers and agents. Further, Paragraph XV requires the 
filing of a compliance report. Paragraph XVI of the proposed order 
requires the respondents to notify the Federal Trade Commission in 
advance of any change in the corporation that may affect compliance 
obligations arising under the order.
    Finally, Paragraph XVII of the proposed order provides for the 
termination of the order after twenty years under certain 
circumstances.
    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 in any 
way their terms.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 00-9074 Filed 4-11-00; 8:45 am]
BILLING CODE 6750-01-M