[Federal Register Volume 66, Number 119 (Wednesday, June 20, 2001)]
[Notices]
[Pages 33093-33095]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-15546]


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FEDERAL TRADE COMMISSION

[File No. 002 3229]


Panda Herbal International, 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 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 July 16, 2001.

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

FOR FURTHER INFORMATION CONTACT: Michael Bloom or Donald D'Amato, 
Federal Trade Commission, Northeast Region, One Bowling Green, Suite 
318, New York, NY 10004. (212) 607-2801 or 607-2802.

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 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 June 14, 2001), on the 
World Wide Web, at ``http://www.ftc.gov/os/2001/06/index.htm.'' A paper 
copy can be obtained from the FTC Public Reference Room, Room H-130, 
600 Pennsylvania Avenue, NW., Washington, DC 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, DC 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 
section 4.9(b)(6)(ii) of the Commission's Rules of Practice (16 CFR 
4.9(b)(6)(ii)).

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 Panda Herbal 
International, Inc. (``Panda''), a corporation, and Everett L. Farr 
III, individually and as an officer of the corporation (``proposed 
respondents'').
    The proposed consent order has been placed on the public record for 
thirty (30) days for the receipt 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 comments received and will decide whether it should 
withdraw from the agreement and take appropriate action or make final 
the agreement's proposed order.
    This matter involves proposed respondents' making of health-related 
advertising claims on the Internet and elsewhere for their Herbal 
Outlook (a dietary supplement that contains St.

[[Page 33094]]

John's Wort) and HerbVeil 8 (a topical ointment) products. The proposed 
compliant alleges that proposed respondents violated Sections 5 and 12 
of the Federal Trade Commission Act by making deceptive claims for 
these products.
    The proposed complaint alleges that respondents' claims that 
ingestion of Herbal Outlook is effective in the treatment of HIV/AIDS, 
herpes simplex, tuberculosis, influenza, and hepatitis B infections are 
unsubstantiated. Further, the proposed complaint alleges that 
responents deceptively fail to disclose significant adverse drug 
interactions in light of respondents' implied drug compatibility claim 
(``ingestion of St. John's Wort, an ingredient in Herbal Outlook, is 
effective in the treatment of HIV/AIDS''). The proposed complaint also 
alleges that respondents' claim that ingestion of St. John's Wort, an 
ingredient in Herbal Outlook, has no known contraindications or drug 
interactions is false because there is substantial information 
available documenting significant adverse drug interactions. In 
addition, the proposed complaint alleges that respondents' HerbVeil 8 
claims that topical application of HerbVeil 8 is effective in the 
treatment of carcinomas, adenocarcinomas, and melanomas are 
unsubstantiated.
    For purposes of the proposed order, a ``covered product or 
service'' means any service, program, dietary supplement, food, drug, 
or device.
    The proposed order defines ``Herbal Outlook product'' as 
respondents' Herbal Outlook or any other covered product or service for 
which the term ``Hypericum Perforatum'' or ``St. John's Wort'' appears 
on the covered product or service label or in any advertising or 
promotion, and any covered product or service containing ``Hypericum 
Perforatum'' or ``St. John's Wort.''
    Part I of the proposed consent order prohibits proposed respondents 
from representing that ingestion of any Herbal Outlook product or any 
covered product or service is effective in the treatment of HIV/AIDS, 
herpes simplex, tuberculosis, influenza, or hepatitis B infections, 
unless, at the time the representation is made, respondents possess and 
rely upon competent and reliable scientific evidence that substantiates 
the representation.
    The proposed order defines ``HerbVeil 8 product'' as respondents' 
HerbVeil 8 or any covered product or service for which the term 
``HerbVeil 8'' appears on the product label or in any advertising or 
promotion, any covered product or service containing ``HerbVeil 8,'' 
and any covered product or service promoted for the topical treatment 
of any cancer. Part II of the proposed consent order prohibits proposed 
respondents from representing that application of any HerbVeil 8 
product, or any covered product or service, is effective in the 
treatment of any cancer unless, at the time the representation is made, 
respondents possess and rely upon competent and reliable scientific 
evidence that substantiates the representation. Part III of the 
proposed consent order prohibits proposed respondents from representing 
that ingestion of any Herbal Outlook product has no known 
contraindications or drug interactions.
    Part IV provides that in any advertisement, promotional material, 
or product label for any Herbal Outlook product, that contains any 
representation about the efficacy, performance, or safety of such 
product, and in any discussion, communicated via electronic mail or any 
telephone line, that contains any representation about the efficacy, 
performance, or safety of any Herbal Outlook product, proposed 
respondents shall make clearly and prominently, the following 
disclosure:

    Warning: St. John's Wort can have potentially dangerous 
interactions with some prescription drugs. Consult your physician 
before taking St. John's Wort if you are currently taking 
anticoagulants, oral contraceptives, anti-depressants, anti-seizure 
medications, drugs to treat HIV or prevent transplant rejection, or 
any other prescription drug. This product is not recommended for use 
if you are or could be pregnant unless a qualified health care 
provider tells you to use it. The product may not be safe for your 
developing baby.

unless respondents possess competent and reliable scientific evidence 
that such product produces no adverse drug interactions or side 
effects. This disclosure was developed after discussions with the Food 
and Drug Administration. FDA has announced that it intends to initiate 
a rulemaking for dietary supplements for women who are or who may 
become pregnant. In the event that FDA issues a final rule requiring a 
warning for pregnant women on dietary supplements, respondents may 
substitute that warning for the disclosure on that topic required under 
the proposed order. Part IV specifies that the product label 
requirements of this Part shall not apply to products that are shipped 
to consumers or purchasers for resale less than thirty (30) days after 
the date of service of this order, and that with regard to products 
shipped after thirty (30) days of the date of service of this order, 
respondents may affix the disclosure clearly and prominently by sticker 
or other device on the labels of products manufactured prior to thirty 
(30) days after the service of this order.
    Part V provides that proposed respondents, in connection with the 
advertising or sale of any Herbal Outlook product, HerbVeil 8 product, 
or any covered product or service, shall not make any representation 
that such product or service is effective in the mitigation, treatment, 
prevention, or cure of any disease or illness, or about the health 
benefits, performance, safety, or efficacy of any such product or 
service, unless, at the time the representation is made, proposed 
respondents possess and rely upon competent and reliable scientific 
evidence that substantiates the representation.
    The proposed order defines ``purchaser for resale'' as any 
purchaser of any proposed respondents' Herbal Outlook product or 
HerbVeil 8 product, who: (a) Is a distributor of, or operates a 
wholesale or retail business that sells, any such product(s); or (b) 
orders twenty (20) or more units of any such products(s) in any three 
(3) month period. Parts VI A and VI B of the proposed consent order 
require proposed respondents to deliver to the Commission lists 
containing information regarding purchasers for resale and consumers of 
Herbal Outlook, respectively. Parts VI C and VI D require proposed 
respondents to deliver to the Commission lists containing information 
regarding purchasers for resale and consumers of HerbVeil 8, 
respectively. Parts VI E and VI F require proposed respondents to send 
a notice to all purchasers of Herbal Outlook and HerbVeil 8 informing 
them of the Commission's complaint allegations and the terms of the 
settlement. Part VII of the proposed order requires proposed 
respondents to provide refunds upon request to consumer purchasers of 
HerbVeil 8. Part VIII requires proposed respondents to submit a report 
specifying the steps it has taken to comply with Part VI (notice 
provisions) and Part VII (refund provision).
    Part IX requires proposed respondents to take reasonable steps to 
monitor and ensure that all employees and agents engaged in sales, 
order verification, and other customer service functions comply with 
Parts I through V of the order and requires proposed respondents to 
terminate any employee who knowingly engages in conduct that violates 
these parts of the order. Part X A requires proposed respondents to 
send each purchaser for resale for a period of five years following 
entry of the order, the notice provisions required by Part VI E (to the 
extent such

[[Page 33095]]

purchasers for resale have not already received such notice pursuant to 
Part VI E). Part X B requires proposed respondents to institute a 
purchaser for resale order compliance surveillance program and Part X C 
states that proposed respondents must terminate sales to those 
purchasers for resale they know or should know are violating Parts I 
through V of the proposed order. Part XI would allow proposed 
respondents to make any representation for any drug that is permitted 
by the FDA in the drug's labeling, and would allow proposed respondents 
to make any representation that is specifically permitted in the 
labeling for any product by regulations promulgated by the FDA pursuant 
to the Nutrition Labeling and Education Act of 1990.
    Part XII of the proposed order contains record keeping requirements 
for materials that substantiate, qualify or contradict claims covered 
by the proposed order. Part XIII of the proposed order requires 
distribution of a copy of the order to current and future officers, 
employees, and agents. Part XIV provides for Commission notification 
upon a change in the proposed corporate respondent and Part XV requires 
Commission notification when the proposed individual respondent changes 
his business or employment. Part XVI requires the proposed respondents 
to file with the Commission a report demonstrating compliance with the 
terms and provisions of the order. Part XVII provides for the 
termination of the order after twenty (20) years under certain 
circumstances.
    The purpose of this analysis is to facilitate the public comment on 
the proposed order, and it is not intended to constitute an official 
interpretation of the agreement and the proposed order or to modify in 
any way their terms.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 01-15546 Filed 6-19-01; 8:45am]
BILLING CODE 6750-01-M