Olsen Laboratories, Inc., et al.; Proposed Consent Agreement With Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 932 3316]

Olsen Laboratories, Inc., et al.; Proposed Consent Agreement With

Analysis To Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: In settlement of alleged violations of federal law prohibiting

unfair acts and practices and unfair methods of competition, this

consent agreement, accepted subject to final Commission approval, would

prohibit, among other things, two Kansas-based firms and an official

from making false claims for Eez-Away, an arthritis pain treatment, or

similar products. The consent agreement would require the responses to

possess scientific substantiation before making any health or medical

benefit claim for any personal or household product or service they

market in the future, would require that they clearly identify any

future infomercial they disseminate is paid advertising, and would

prohibit misusing endorsements or testimonials.

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

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,

room 159, 6th St. and Pa. Ave., NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT:

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

326-3019 or 326-3081.

SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal

Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Sec. 2.34 of the

Commission's rules of practice (16 CFR 2.34), notice is hereby given

that the following consent agreement containing a consent order to

cease and desist, having been filed with and accepted, subject to final

approval, by the Commission, has been placed on the public record for a

period of sixty (60) days. Public comment is invited. Such comments or

views will be considered by the Commission and will be available for

inspection and copying at its principal office in accordance with

Sec. 4.9(b)(6)(ii) of the Commission's rules of practice (16 CFR

4.9(b)(6)(ii)).

In the Matter of Olsen Laboratories, Inc., and Richfield

Distributors, Inc., corporations, and Peter F. Olsen, individually

and as an officer and director of said corporations; Agreement

Containing Consent Order to Cease and Desist

The Federal Trade Commission having initiated an investigation of

certain acts and practices of Olsen Laboratories, Inc. and Richfield

Distributors, Inc., corporations, and Peter F. Olsen, individually and

as an officer and director of said corporations, hereinafter sometimes

referred to as proposed respondents, and it now appearing that proposed

respondents are willing to enter into an agreement containing an order

to cease and desist from the use of the acts and practices being

investigated,

It is hereby agreed by and between Olsen Laboratories, Inc. and

Richfield Distributors, Inc., by their duly authorized officers, and

Peter F. Olsen, individually and as an officer and director of said

corporations, and counsel for the Federal Trade commission that:

1. Proposed respondent Olsen Laboratories, Inc. is a corporation

organized, existing and doing business under and by virtue of the laws

of the State of Delaware with its principal office and place of

business located at 11088 Alhambra Street, Leawood, Kansas 66211.

Proposed respondent Richfield Distributors, Inc. is a corporation

organized, existing and doing business under and by virtue of the laws

of the State of New York with its principal office and place of

business located at 11088 Alhambra Street, Leawood, Kansas 66211.

Proposed respondent Peter F. Olsen is an officer and director of

Olsen Laboratories, Inc. and Richfield Distributors, Inc. He

formulates, directs and controls the acts and practices of Olsen

laboratories, Inc., and Richfield Distributors, Inc., and his address

is the same as that of said corporations.

2. Proposed respondents admit all the jurisdictional facts set

forth in the draft complaint.

3. Proposed respondents waive:

(a) Any procedural steps;

(b) The requirement that the Commission's decision contain a

statement of findings of fact and conclusions of law; and

(c) All rights to seek judicial review or otherwise to challenge or

contest the validity of the order entered pursuant to this agreement.

4. This agreement shall not become part of the public record of the

proceeding unless and until it is accepted by the Commission. If this

agreement is accepted by the Commission, it, together with the draft

complaint contemplated thereby, will be placed on the public record for

a period of sixty (60) days and information in respect thereto publicly

released. The Commission thereafter may either withdraw its acceptance

of this agreement and so notify the proposed respondents, in which

event it will take such action as it may consider appropriate, or issue

and serve its complaint (in such form as the circumstances may require)

and decision, in disposition of the proceeding.

5. This agreement is for settlement purposes only and does not

constitute an admission by proposed respondents that the law has been

violated as alleged in the draft of complaint, or that the facts as

alleged in the draft complaint, other than jurisdictional facts, are

true.

6. The agreement contemplates that, if it is accepted by the

Commission, and if such acceptance is not subsequently withdrawn by the

Commission pursuant to the provisions of Sec. 2.34 of the Commission's

rules, the Commission may, without further notice to proposed

respondents: (1) Issue its complaint corresponding in form and

substance with the draft complaint and its decision containing the

following order to cease and desist in disposition of the proceeding;

and (2) make information public in respect thereto. When so entered,

the order to cease and desist shall have the same force and effect and

may be altered, modified or set aside in the same manner and within the

same time provided by statute for other orders. The order shall become

final upon service. Delivery by the U.S. Postal Service of the

complaint and decision containing the agreed-to order to proposed

respondents' address as stated in this agreement shall constitute

service. Proposed respondents waive any rights they may have to any

other manner of service. The complaint may be used in construing the

terms of the order, and no agreement, understanding, representation, or

interpretation not contained in the order or the agreement may be used

to vary or contradict the terms of the order.

7. Proposed respondents have read the proposed complaint and order

contemplated hereby. Proposed respondents understand that once the

order has been issued, they will be required to file one or more

compliance reports showing that they have fully complied with the

order. Proposed respondents further understand that they may be liable

for civil penalties in the amount provided by law for each violation of

the order after it becomes final.

Order

I

It is ordered that respondents, Olsen Laboratories, Inc. and

Richfield Distributors, Inc., corporations, their successors and

assigns, and their officers; and Peter F. Olsen, individually and as an

officer and director of said corporations; and respondents' agents,

representatives and employees, directly or through any corporation,

subsidiary, division or other device, in connection with the

manufacturing, labeling, advertising, promotion, offering for sale,

sale, or distribution of Eez-Away Relief or any substantially similar

product, in or affecting commerce, as ``commerce'' is defined in the

Federal Trade Commission Act, do forthwith cease and desist from

representing, in any manner, directly or by implication, that the

product is a new or unique method of treatment for arthritis pain or is

a breakthrough in the treatment of arthritis pain.

For purposes of this provision, ``substantially similar product''

shall mean any external analgesic that contains menthol as the active

ingredient.

II

It is further ordered that respondents, Olsen Laboratories, Inc.

and Richfield Distributors, Inc., corporations, their successors and

assigns, and their officers; and Peter F. Olsen, individually and as an

officer and director of said corporations; and respondents' agents,

representatives and employees, directly or through any corporation,

subsidiary, division or other device, in connection with the

manufacturing, labeling, advertising, promotion, offering for sale,

sale, or distribution of any drug in or affecting commerce, as ``drug''

and ``commerce'' are defined in the Federal Trade Commission Act, do

forthwith cease and desist from representing, in any manner, directly

or by implication, that:

A. The product rapidly eliminates severe pain and physical

disabilities suffered by those persons with arthritis or other similar

conditions; or

B. The product provides long-term pain relief; or

C. The product increases the range of motion in the affected joints

of those persons with arthritis or other similar conditions; or

D. The product is more effective than other products in relieving

pain or in treating the symptoms of those persons with arthritis or

other similar conditions; or

E. The product relieves the pain of those persons with arthritis or

other similar conditions by penetrating through the skin to the

affected joint; unless, at the time of making such representation,

respondents possess and rely upon competent and reliable scientific

evidence that substantiates the representation. For purposes of this

provision, ``competent and reliable scientific evidence'' shall mean

tests, analyses, research, studies, or other evidence based on the

expertise of professionals in the relevant area, that has been

conducted and evaluated in an objective manner by persons qualified to

do so, using procedures generally accepted in the profession to yield

accurate and reliable results.

Provided that, with respect to any representation covered by

subparts A, B and D of this part and any representation covered by

subpart C of this part other than a representation that the product may

temporarily increase the range of motion in the affected joints of

people with arthritis by temporarily relieving minor pain in those

joints, ``competent and reliable scientific evidence'' shall mean

adequate and well-controlled, double-blind clinical testing conforming

to acceptable designs and protocols and conducted by a person or

persons qualified by training and experience to conduct such testing.

III

It is further ordered that respondents, Olsen Laboratories, Inc.

and Richfield Distributors, Inc., corporations, their successors and

assigns, and their officers; and Peter F. Olsen, individually and as an

officer and director of said corporations; and respondents' agents,

representatives and employees, directly or through any corporation,

subsidiary, division or other device, in connection with the

manufacturing, labeling, advertising, promotion, offering for sale,

sale, or distribution of any product or service for personal or

household use in affecting commerce, as ``commerce'' is defined in the

Federal Trade Commission Act, do forthwith cease and desist from making

any representation, in any manner, directly or by implication, about

the health or medical benefits of any such product or service unless,

at the time of making such representation, respondents possess and rely

upon competent and reliable scientific evidence that substantiates the

representation. For purposes of this provision, ``competent and

reliable scientific evidence'' shall mean tests, analyses, research,

studies, or other evidence based on the expertise of professionals in

the relevant area, that has been conducted and evaluated in an

objective manner by persons qualified to do so, using procedures

generally accepted in the profession to yield accurate and reliable

results.

IV

It is further ordered that respondents, Olsen Laboratories, Inc.

and Richfield Distributors, Inc., corporations, their successors and

assigns, and their officers; and Peter F. Olsen, individually and as an

officer and director of said corporations; and respondents' agents,

representatives and employees, directly or through any corporation,

subsidiary, division or other device, in connection with the

manufacturing, labeling, advertising, promotion, offering for sale,

sale, or distribution of any product or service for personal or

household use, in or affecting commerce, as ``commerce'' is defined in

the Federal Trade Commission Act, do forthwith cease and desist from

misrepresenting, in any manner, directly or by implication, that such

product or service is a new or unique method of treatment for any

disease or condition, or is a breakthrough in the treatment of any

disease or condition.

V

It is further ordered that respondents, Olsen Laboratories, Inc.

and Richfield Distributors, Inc., corporations, their successors and

assigns, and their officers; and Peter F. Olsen, individually and as an

officer and director of said corporations; and respondents' agents,

representatives and employees, directly or through any corporation,

subsidiary, division or other device, in connection with the

manufacturing, labeling, advertising, promotion, offering for sale,

sale, or distribution of any product or service for personal or

household use, in or affecting commerce, as ``commerce'' is defined in

this Federal Trade Commission Act, do forthwith cease and desist from

misrepresenting, in any manner, directly or by implication, the

existence, contents, validity, results, conclusions or interpretations

of any test or study.

VI

It is further ordered that respondents, Olsen Laboratories, Inc.

and Richfield Distributors, Inc., corporations, their successors and

assigns, and their officers; and Peter F. Olsen, individually and as an

officer and director of said corporations; and respondents' agents,

representatives and employees, directly or through any corporation,

subsidiary, division or other device, in connection with the

manufacturing, labeling, advertising, promotion, offering for sale,

sale, or distribution of any product or service for personal or

household use, in or affecting commerce, as ``commerce'' is defined in

the Federal Trade Commission Act, do forthwith cease and desist from

representing, in any manner, directly or by implication, that any

endorsement (as ``endorsement'' is defined in 16 CFR 255.0(b)) of such

product or service represents the typical or ordinary experience of

members of the public who use such product or service, unless

respondents, at the time of making such representation, possess and

rely upon competent and reliable evidence,, which when appropriate must

be competent and reliable scientific evidence, that substantiates the

representation. For purposes of this provision, ``competent and

reliable scientific evidence'' shall mean tests, analyses, research,

studies, or other evidence based on the expertise of professionals in

the relevant area, that has been conducted and evaluated in an

objective manner by persons qualified to do so, using procedures

generally accepted in the profession to yield accurate and reliable

results. Provided, however, that respondents may use such endorsements

if the statements or depictions that comprise the endorsements are true

and accurate, and if respondents disclose clearly and prominently and

in close proximity to the endorsement what the generally expected

performance would be in the depicted circumstances or the limited

applicability of the endorser's experience to what consumers may

generally expect to achieve, that is, that consumers should not expect

to experience similar results.

VII

It is further ordered that respondents, Olsen Laboratories, Inc.

and Richfield DIstributors, Inc., corporations, their successors and

assigns, and their officers; and Peter F. Olsen, individually and as an

officer and director of said corporations; and respondents' agents,

representatives and employees, directly or through any corporation,

subsidiary, division or other device, in connection with the

manufacturing, labeling, advertising, promotion, offering for sale, or

distribution of any product or service in or affecting commerce, as

``commerce'' is defined in the Federal Trade Commission Act, do

forthwith cease and desist from creating, producing, selling, or

disseminating:

A. Any advertisement that misrepresents, directly or by

implication, that it is not a paid advertisement;

B. Any commercial or video advertisement fifteen (15) minutes in

length or longer or intended to fill a broadcasting or cablecasting

time slot of fifteen (15) minutes in length or longer that does not

display visually, in a clear and prominent manner and for a length of

time sufficient for an ordinary consumer to read, within the first

thirty (30) seconds of the commercial and immediately before each

presentation of ordering instructions for the product or service, the

following disclosure:

``THE PROGRAM YOU ARE WATCHING IS A PAID ADVERTISEMENT FOR [THE

PRODUCT OR SERVICE].''

Provided that, for the purposes of this provision, the oral or

visual presentation of a telephone number or address for viewers to

contact to place an order for the product or service shall be deemed to

be a presentation of ordering instructions so as to require the display

of the disclosure provided herein.

VIII

Nothing in this Order shall prohibit respondent from making any

representation for any drug that is permitted in labeling for any such

drug under any tentative final or final standard promulgated by the

Food and Drug Administration, or under any new drug application

approved by the Food and Drug Administration.

IX

It is further ordered that for five (5) years after the last date

of dissemination of any representation covered by this Order,

respondents, or their successors and assigns, shall maintain and upon

request make available to the Federal Trade Commission for inspection

and copying:

A. All materials that were relied upon in disseminating such

representation; and

B. All tests, reports, studies, surveys, demonstrations or other

evidence in their possession or control that contradict, qualify, or

call into question such representation, or the basis relied upon for

such representation, including complaints from consumers.

X

It is further ordered that respondents Olsen Laboratories, Inc. and

Richfield Distributors, Inc. shall notify the Commission at least

thirty (30) days prior to any proposed change in their corporate

structure, including but not limited to dissolution, assignment or sale

resulting in the emergence of a successor corporation, the creation or

dissolution of subsidiaries or affiliates, or any other corporate

change that may affect compliance obligations arising out of this

Order.

XI

It is further ordered that respondents Olsen Laboratories, Inc. and

Richfield Distributors, Inc. shall:

A. Within thirty (30) days of service of this Order, provide a copy

of this Order to each of their current principals, officers, directors

and managers, and to all personnel, agents, and representatives having

sales, advertising, or policy responsibility with respect to the

subject matter of this Order; and

B. For a period of five (5) years from the date of entry of this

Order, provide a copy of this Order to each of their principals,

officers, directors, and managers, and to all personnel, agents, and

representatives having sales, advertising, or policy responsibility

with respect to the subject matter of this Order who are associated

with it or any subsidiary, successor, or assign, within three (3) days

after the person assumes his or her position.

XII

It is further ordered that respondent Peter F. Olsen shall, for a

period of seven (7) years from the date of entry of this Order, notify

the Commission within thirty (30) days of the discontinuance of his

present business or employment and of his affiliation with any new

business or employment. Each notice of affiliation with any new

business or employment shall include the respondent's new business

address and telephone number, current home address, and a statement

describing the nature of the business or employment and his duties and

responsibilities.

XIII

It is further ordered that respondents shall, within sixty (60)

days after service of this Order, and at such other times as the

Federal Trade Commission may require, file with the Commission a

report, in writing, setting forth in detail the manner and form in

which they have complied with this Order.

Analysis of Proposed Consent Order To Aid Public Comment

The Federal Trade Commission has accepted, subject to final

approval, an agreement containing a consent order from Olsen

Laboratories, Inc., Richfield Distributors, Inc., and Peter F. Olsen

(``respondents''). Peter F. Olsen is an officer and director of the two

corporate respondents.

The proposed order has been placed on the public record for sixty

(60) days for reception of comments by interested persons. Comments

received during this period will become part of the public record.

After sixty (60) days, the Commission will again review the agreement

and the comments received and will decide whether it should withdraw

from the agreement or make final the agreement's proposed order.

This matter concerns claims made by the respondents for Eez-Away

Relief, and external analgesic, in program-length advertisements (or

``infomercials'') and other advertising and promotional materials.

The Commission's proposed complaint in this matter alleges that the

respondents falsely represented that Eez-Away Relief is a major

breakthrough in the treatment of arthritis pain and that scientific

research proves that Eez-Away Relief is effective for the rapid

elimination of severe pain and physical disabilities caused by

arthritis.

The proposed complaint further alleges that the respondents falsely

represented that they possessed and relied upon a reasonable basis for

their representations that Eez-Away Relief rapidly eliminates severe

pain and physical disabilities caused by arthritis; that Eez-Away

Relief provides long-term pain relief; that Eez-Away Relief

significantly increases the range of motion in the affected joints of

people with arthritis, including those with rheumatoid arthritis; that

Eez-Away Relief is more effective than other over-the-counter

medications in relieving arthritis pain; and that Eez-Away Relief

relieves arthritis pain by penetrating through the skin to the affected

joint.

The proposed complaint also charges that the respondents falsely

represented that they possessed and relied upon a reasonable basis for

their representation that the testimonials or endorsements from

consumers appearing in advertisements for Eez-Away Relief reflect the

typical or ordinary experience of members of the public who use Eez-

Away Relief. Finally, the proposed complaint alleges that respondents

falsely represented that the informercial ``30 Minutes'' is an

independent television program and is not paid commercial advertising.

The proposed consent order contains provisions designed to prevent

the respondents from engaging in similar acts and practices in the

future.

Part I of the proposed order prohibits respondents from

representing that Eez-Away Relief or any substantially similar product

is a new or unique method of treatment for arthritis pain or is a

breakthrough in the treatment of arthritis pain. A ``substantially

similar product'' is defined to mean any external analgesic that

contains menthol as an active ingredient.

Part II of the proposed order prohibits respondents from

representing that any drug: (A) Rapidly eliminates severe pain and

physical disabilities suffered by those persons with arthritis or other

similar conditions; (B) provides long-term paid relief; (C) increases

the range of motion in the affected joints of those persons with

arthritis or other similar conditions; (D) is more effective than other

products in relieving pain or in treating the symptoms of those persons

with arthritis or other similar conditions; or (E) relieves the pain of

those persons with arthritis or other similar conditions by penetrating

through the skin to the affected joint, unless respondents possess and

rely upon competent and reliable scientific evidence to support the

representation. Part II of the order further provides that for

representations covered by II.A, II.B and II.D, and for representations

covered by II.C. other than a representation that the product may

temporarily increase the range of motion in the affected joints of

people with arthritis by temporarily relieving minor pain in those

joints, the substantiation must include adequate and well-controlled,

double-blind clinical testing.

Part III of the proposed order prohibits respondents from making

any representation about the health or medical benefits of any product

or service for personal or household use unless respondents possess

competent and reliable scientific evidence to support the

representation.

Part IV of the proposed order prohibits respondents from

misrepresenting that any product or service for personal or household

use is a new or unique method of treatment for any disease or

condition, or is a breakthrough in the treatment of any disease or

condition.

Part V of the proposed order prohibits respondents, in connection

with the promotion or sale of any product or service for personal or

household use, from misrepresenting the existence, contents, validity,

results, conclusions or interpretations of any test or study.

Part VI of the proposed order prohibits respondents from

representing that any endorsement of any product or service for

personal or household use represents that typical or ordinary

experience of members of the public who use such product or service,

unless the representation is substantiated. Part VI provides, however,

that respondents may use such endorsements if the statements or

depictions that comprise the endorsements are true and accurate, and if

respondents disclose clearly and prominently and in close proximity to

the endorsement what the generally expected performance would be in the

depicted circumstances or the limited applicability of the endorser's

experience to what consumers may generally expect to achieve, that is,

that consumers should not expect to experience similar results.

Part VII of the proposed order prohibits respondents from creating,

producing, selling, or disseminating any advertisement that

misrepresents that it is not a paid advertisement; or any video

advertisement fifteen (15) minutes in length or longer that does not

display visually, in a clear and prominent manner and for a length of

time sufficient for an ordinary consumer to read, within the first

thirty (30) seconds of the commercial and immediately before each

presentation of ordering instructions for the product or service, the

following disclosure:

``THE PROGRAM YOU ARE WATCHING IS A PAID ADVERTISEMENT FOR [THE

PRODUCT OR SERVICE].''

Part VIII of the proposed order provides that nothing in the

proposed order prohibits respondents from making any representation for

any drug that is permitted in labeling for any such drug under any

tentative final or final standard promulgated by the Food and Drug

Administration, or under any new drug application approved by the Food

and Drug Administration.

Part IX of the proposed order requires the respondents to maintain

copies of all materials relied upon in making any representation

covered by the order, and all materials that contradict, qualify, or

call into question such representations.

Part X of the proposed order requires that Olsen Laboratories, Inc.

and Richfield Distributors, Inc. notify the Commission at least thirty

(30) days prior to certain proposed changes in their corporate

structure.

Part XI of the proposed order requires that Olsen Laboratories,

Inc. and Richfield Distributors, Inc. distribute copies of the order to

certain personnel.

Part XII of the proposed order requires that Peter F. Olsen, for a

period of seven (7) years, notify the Commission within thirty (30)

days of the discontinuance of his present business or employment and of

his affiliation with any new business or employment.

Part XIII of the proposed order requires that respondents file with

the Commission one or more reports detailing their compliance with the

order.

The purpose of this analysis is to facilitate public comment on the

proposed order, and it is not intended to constitute an official

interpretation of the agreement and proposed order, or to modify any of

their terms.

Benjamin I. Berman,

Acting Secretary.

[FR Doc. 94-29576 Filed 12-1-94; 8:45 am]

BILLING CODE 6750-01-M