Nu Skin International, Inc., et al; Proposed Consent Agreement With Analysis To Aid Public Comment

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