Synchronal Corporation, et al.; Proposed Consent Agreement With Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

[Dkt. 9251]

Synchronal Corporation, 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, Thomas L. Fenton, a former officer of

Synchronal Corporation, from disseminating a purported baldness cure

infomerical, for a product called Omexin; from misrepresenting that any

commercial is an independent program; and from making unsubstantiated

claims for any food, drug or device in the future.

dates: Comments must be received on or before April 25, 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: Lisa Kopchik, FTC/S-4002, Washington,

DC 20580. (202) 326-3139.

supplementary information: Pursuant to section 6(f) of the Federal

Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Sec. 3.25(f) of

the Commission's Rules of Practice (16 CFR 3.25(f)), notice is hereby

given that the following 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)).

Agreement Containing Consent Order To Cease and Desist

In the matter of:

Synchronal Corporation, Synchronal Group, Inc., Smoothline

Corporation, and Omexin Corporation, corporations,

Ira Smolev, individually and as a former officer and director of

Synchronal Corporation and Synchronal Group, Inc.,

Richard E. Kaylor, individually and as a former officer and director

of Synchronal Corporation, Synchronal Group, Inc., Smoothline

Corporation, and Omexin Corporation,

Thomas L. Fenton, individually and as a former officer and director

of Synchronal Corporation and Synchronal Group, Inc., and

Ana Blau a/k/a Anushka, and Steven Victor, M.D. individually.

The agreement herein, by and between Thomas L. Fenton, individually

and as a former officer and director of Synchronal Corporation and

Synchronal Group, Inc., hereinafter sometimes referred to as

respondent, and his attorneys, and counsel for the Federal Trade

Commission, is entered into in accordance with the Commission's Rule

governing consent order procedures. In accordance therewith the parties

hereby agree that:

1. Respondent Thomas L. Fenton is or was at relevant times herein

an officer and director of Synchronal Corporation and Synchronal Group,

Inc. He formulated, directed, and controlled the policies, acts and

practices of said corporations. His home address is 160 East 38th

Street, New York, New York 10036.

2. Respondent has been served with copies of the complaint and the

amended complaint issued by the Federal Trade Commission charging him

with violations of Sections 5(a) and 12 of the Federal Trade Commission

Act and the provisions of the Postal Reorganization Act, 39 U.S.C.

3009, and has filed an answer to said complaint denying said charges.

3. Respondent admits all the jurisdictional facts set forth in the

Commission's complaint and amended complaint in this proceeding.

4. Respondent waives:

(a) Any further procedural steps;

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

statement of findings of fact and conclusions of law;

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

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

and

(d) Any claim under the Equal Access to Justice Act.

5. This agreement shall not become a part of the public record of

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

this agreement is accepted by the Commission it will be placed on the

public record for a period of sixty (60) days and information in

respect thereto publicly released. The Commission thereafter may either

withdraw its acceptance of this agreement and so notify the respondent,

in which event it will take such action as it may consider appropriate,

or issue and serve its decision, in disposition of the proceeding.

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

constitute an admission by respondent of facts, other than

jurisdictional facts, or of violations of law as alleged in the

complaint and the amended complaint issued by the Commission.

7. This agreement contemplates that, if it is accepted by the

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

Commission pursuant to the provisions of 3.25(f) of the Commission's

Rules, the Commission may without further notice to respondent, (1)

issue its decision containing the following order to cease and desist

in disposition of the proceeding, and (2) make information public in

respect thereto. When so entered, the order to cease and desist shall

have the same force and effect and may be altered, modified or set

aside in the same manner and within the same time provided by statute

for other orders. The order shall become final upon service. Delivery

by the U.S. Postal Service of the decision containing the agreed-to

order to respondent's address as stated in this agreement shall

constitute service. Respondent waives any right he might have to any

other manner of service. The complaint and the amended complaint may be

used in construing the terms of the order, and no agreement,

understanding, representation, or interpretation not contained in the

order or in the agreement may be used to vary or contradict the terms

of the order.

8. Respondent has read the complaint, the amended complaint and the

order contemplated hereby. He understands that once the order has been

issued, he will be required to file one or more compliance reports

showing that he has fully complied with the order. Respondent further

understands that he may be liable for civil penalties in the amount

provided by law for each violation of the order after it becomes final.

Order

For the purposes of this Order:

1. ``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 by others in the profession to yield

accurate and reliable results.

2. ``Video advertisement'' shall mean any advertisement intended

for dissemination through television broadcast, cablecast, home video,

or theatrical release.

I

It is ordered, That respondent Thomas L. Fenton, individually and

as a former officer and director of Synchronal Corporation and

Synchronal Group, Inc., and respondent's 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 selling, broadcasting or otherwise

disseminating, or assisting others to sell, broadcast or otherwise

disseminate, in part or in while, the program-length television

advertisement for Omexin described and identified in the Complaint as

``Can You Beat Baldness?''

II

It is further ordered, That respondent Thomas L. Fenton,

individually and as a former officer and director of Synchronal

Corporation and Synchronal Group, Inc., and respondent's agents,

representatives and employees, directly or through any partnership,

corporation, subsidiary, division or other device, do forthwith cease

and desist from:

A. Representing, directly or by implication, in connection with the

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

distribution of Omexin or any other substantially similar hair loss

treatment product or service in or affecting commerce, as ``commerce''

is defined in the Federal Trade Commission Act, that:

1. Such product or service contains an ingredient that can or will

curtail hair loss for a large majority of balding men and women;

2. Such product or service contains an ingredient that can or will

promote the growth of significant numbers of new, pigmented terminal

hairs where hair has previously been lost for a large majority of men

and women;

3. Such product or service contains an ingredient that has been

scientifically proven to curtail hair loss for a large majority of men

and women;

4. Such product or service contains an ingredient that has been

scientifically proven to promote the growth of new, pigmented terminal

hairs where hair has previously been lost for a large majority of men

and women; or

5. Such product or service has successfully curtailed hair loss and

promoted new hair growth for thousands of balding men and women.

For purposes of this Order a ``substantially similar hair loss

treatment product or service'' shall be defined as any product or

service that is advertised or intended for sale over-the-counter to

treat, cure or curtail hair loss and which contains omentum or any

extract thereof.

B. Representing, 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 prevent, cure,

relieve, reverse, or reduce loss of hair;

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 an effective remedy for hair loss in a

substantial number of cases; or

4. Any test or study establishes that the product or service

relieves, cures, prevents or reverses hair loss,

unless such representation is true and unless, at the time of making

such representation, respondent possesses and relies 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 II.A and B

herein.

III

It is further ordered, That respondent Thomas L. Fenton,

individually and as a former officer and director of Synchronal

Corporation and Synchronal Group, Inc., and respondent's 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 misrepresenting, in any manner,

directly or by implication, the contents, validity, results,

conclusions, or interpretations of any test or study.

IV

It is further ordered, That respondent Thomas L. Fenton,

individually and as a former officer and director of Synchronal

Corporation and Synchronal Group, Inc., and respondent's 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 making any representation,

directly or by implication, regarding the performance, benefits,

efficacy or safety of any food, drug 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, respondent

possesses and relies upon competent and reliable scientific evidence

that substantiates the representation.

V

It is further ordered, That respondent Thomas L. Fenton,

individually and as a former officer and director of Synchronal

Corporation and Synchronal Group, Inc., and respondent's 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 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 other 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 a

presentation of ordering instructions so as to require the display of

the disclosure provided herein.

VI

It is further ordered, That respondent Thomas L. Fenton,

individually and as a former officer and director of Synchronal

Corporation and Synchronal Group, Inc., and respondent's 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 representing, directly or by

implication, that any endorsement (as ``endorsement'' is defined in 16

CFR 255.0(b)) of the product or service represents the typical or

ordinary experience of members of the public who use the product or

service, unless such is the fact.

VII

It is further ordered, That respondent Thomas L. Fenton,

individually and as a former officer and director of Synchronal

Corporation and Synchronal Group, Inc., shall, for three (3) years

after the date of the last dissemination to which they pertain,

maintain and upon request make available to the Federal Trade

Commission or its staff for inspection and copying:

A. All materials that were relied upon by respondent in

disseminating any representation covered by this order; and

(B) All reports, tests, studies, surveys, demonstrations or other

evidence in respondent's possession or control that contradict,

qualify, or call into question such representation, or the basis upon

which respondent relied upon for such representation, including

complaints from consumers.

VIII

It is further ordered, That respondent Thomas L. Fenton shall, for

a period of ten (10) 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. The expiration of the notice provision of this Part

VIII shall not affect any other obligation arising under this Order.

IX

It is further ordered, That respondent 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 he has complied with this Order.

Analysis of Proposed Consent Order To Aid Public Comment

The Federal Trade Commission has accepted an agreement to a

proposed consent order from Thomas L. Fenton.

The proposed consent 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 and take other appropriate action or make

final the agreement's proposed order.

This matter concerns advertising and promotional practices related

to the sale of the Omexin System for Hair (``Omexin''), which was

advertised on the ``Can You Beat Baldness?'' infomercial.

The Commission's Amended Complaint, issued on October 13, 1993,

charges that respondent Fenton falsely represented that Omexin will

curtail hair loss, will promote hair growth, is scientifically proven

to curtail hair loss and promote hair growth, and has successfully

curtailed hair loss and promoted hair growth for thousands of balding

men and women.

According to the allegations of the Amended Complaint, the

infomercial was falsely represented to be independent programming,

rather than a paid advertisement. The Amended Complaint further charges

that consumer testimonials on the infomercial were falsely represented

to reflect the typical experience of members of the public who used the

product.

The proposed consent order contains provisions which are designed

to remedy the advertising violations charged and to prevent the

respondent from engaging in similar acts and practices in the future.

Part I of the proposed order prohibits respondent from disseminating

the ``Can You Beat Baldness?'' infomercial.

With regard to Omexin or any substantially similar product, Part

II.A prohibits Fenton from making the claims alleged in the Complaint

to be false. Part II.B prohibits him from representing that any product

or service will prevent or reduce hair loss, will promote hair growth,

is an effective remedy for hair loss, or is proven through any test or

study to relieve hair loss unless the claim is true and substantiated

by competent and reliable scientific evidence. Part II.C forbids this

respondent from advertising or promoting any hair loss product unless

it is the subject of an approved New Drug Application by the Food and

Drug Administration.

Part III of the proposed order prohibits respondent from

misrepresenting the validity, results, conclusions, or interpretations

of any test or study. Part IV prohibits him from making any

representation about the performance, benefits, efficacy, or safety of

any food, drug, or device unless he possesses competent and reliable

scientific evidence that substantiates the representation.

Part V.A of the proposed order prohibits Fenton from disseminating

any advertisement that misrepresents that it is not a paid

advertisement. Part V.B requires that any advertisement fifteen minutes

or longer 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 seconds of the commercial and immediately before each

presentation of ordering instructions, the following disclosure: ``The

program you are watching is a paid advertisement for [the product or

service].'' Part V.B specifies that an oral or visual presentation of

an ordering address or telephone number shall also require the display

of this disclosure.

Under the terms of Part VI, Fenton may not represent that any

endorsement of a product or service represents the typical or ordinary

experience of members of the public, unless such is the fact.

Parts VII, VIII, and IX relate to respondent's obligation to

maintain records, notify the Commission of changes in business or

employment status, and file compliance reports with the Commission.

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

proposed order. It is not intended to constitute an official

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

way their terms.

Donald S. Clark,

Secretary.

[FR Doc. 94-4046 Filed 2-22-94; 8:45 am]

BILLING CODE 6750-01-M