Third Option Laboratories, Inc., et al.; Proposed Consent Agreement With Analysis to Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 942-3027]

Third Option 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

require, among other things, a Muscle Shoals, Alabama company and its

officers to pay $480,000 to be used either for refunds to consumers or

as disgorgement to the U.S. Treasury and to send a notice to consumers

advising them of the consent agreement, which settles allegations that

the respondents made a number of deceptive health claims for their

``Jogging in a Jug'' beverage. In future advertisements for that

beverage or similar products, the respondents would have to clearly and

prominently state that there is no scientific evidence that the product

provides any health benefits.

DATES: Comments must be received on or before July 10, 1995.

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

Secretary, Room 159, 6th St. and Pa. Ave., NW., Washington, D.C. 20580.

FOR FURTHER INFORMATION CONTACT:

Toby Milgrom Levin or Loren G. Thompson, FTC/S-4002, Washington, D.C.

20580. (202) 326-3156 or (202) 326-2049.

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: Third Option Laboratories, Inc., a

corporation, and William J. McWilliams, Danny Bishop McWilliams, and

Susan McWilliams Bolton, individually and as officers of said

corporation. File No. 942-3027.

Agreement Containing Consent Order to Cease and Desist

The Federal Trade Commission, having initiated an investigation of

certain acts and practices of Third Option Laboratories, Inc., a

corporation, and William J. McWilliams, Danny Bishop McWilliams, and

Susan McWilliams Bolton, individually and as officers of said

corporation (``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 acts and practices being

investigated,

It is hereby agreed by and between Third Option Laboratories, Inc.,

by its duly authorized officer, and William J. McWilliams, Danny Bishop

McWilliams, and Susan McWilliams Bolton, individually and as officers

of said corporation, and their attorney, and counsel for the Federal

Trade Commission that:

1. Proposed respondent Third Option Laboratories, Inc. is a

corporation organized, existing, and doing business

[[Page 25231]] under and by virtue of the laws of the State of Alabama,

with its office and principal place of business at 2806 Avalon Avenue,

Muscle Shoals, Alabama 35661.

Proposed respondents William J. McWilliams, Danny Bishop

McWilliams, and Susan McWilliams Bolton are owners and officers of said

corporation. They formulate, direct, and control the policies, acts and

practices of said corporation and their address is the same as that of

said corporation.

2. Proposed respondents admit all the jurisdictional facts set

forth in the draft of complaint

3. 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; 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 of

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 the jurisdictional facts,

are true.

6. 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 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 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 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 in 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. 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

I

It is ordered that respondents, Third Option Laboratories, Inc., a

corporation, its successors and assigns, and its officers, and William

J. McWilliams, individually and as an officer of said corporation,

Danny Bishop McWilliams, individually and as an officer of said

corporation, and Susan McWilliams Bolton, individually and as an

officer of said corporation, 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 Jogging in a Jug, 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 such product:

A. Cures or alleviates heart disease or its symptoms, including

arterial blockages;

B. Substantially lowers serum cholesterol or triglycerides;

C. Cures or alleviates arthritis or its symptoms;

D. Breaks down or eliminates calcium or other mineral or chemical

deposits in the circulatory system;

E. Improves the condition of the circulatory system;

F. Cleans internal organs;

G. Prevents or reduces the risk of cancer, leukemia, heart disease,

or arthritis;

H. Provides the same health benefits as a jogging regimen;

I. Cures or alleviates lethargy;

J. Cures or alleviates dysentery;

K. Cures or alleviates constipation;

L. Stabilizes blood sugar levels in insulin-dependent diabetics;

M. Aids in the recovery from viral diseases;

N. Cures or alleviates swelling of the legs or muscle spasms; or

O. Is approved by the United States Department of Agriculture.

II

It is further ordered that respondents, Third Option Laboratories,

Inc., a corporation, its successors and assigns, and its officers, and

William J. McWilliams, individually and as an officer of said

corporation, Danny Bishop McWilliams, individually and as an officer of

said corporation, and Susan McWilliams Bolton, individually and as an

officer of said corporation, 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 food, food or dietary supplement, or drug, as

``food'' and ``drug'' are defined in sections 12 and 15 of the Federal

Trade Commission Act, in or 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, regarding the performance, safety, benefits, or efficacy

of such product, 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 such

representation.

For purposes of this Order, ``component and reliable scientific

evidence'' shall mean tests, analyses, research, studies, or other

evidence based on the expertise of professionals in the relevant area,

that have 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.

III

It is further ordered that respondents, Third Option Laboratories,

Inc., a [[Page 25232]] corporation, its successor and assigns, and its

officers, and William J. McWilliams, individually and as an officer of

said corporation, Danny Bishop McWilliams, individually and as an

officer of said corporation, and Susan McWilliams Bolton, individually

and as an officer of said corporation, 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 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 has been tested,

approved, or endorsed by any person, firm, organization, or government

agency.

IV

It is further ordered that respondents, Third Option Laboratories,

Inc., a corporation, its successors and assigns, and its officers, and

William J. McWilliams, individually and as an officer of said

corporation, Danny Bishop McWilliams, individually and as an officer of

said corporation, and Susan McWilliams Bolton, individually and as an

officer of said corporation, 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 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 any

such product represents the typical or ordinary experience of members

of the public who use such product, unless such is the fact.

V

Nothing in this Order shall prohibit 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.

VI

Nothing in this Order shall prohibit respondents from making any

representation that is specifically permitted in labeling for any

product by regulations promulgated by the Food and Drug Administration

pursuant to the Nutrition Labeling and Education Act of 1990.

VII

It is further ordered that respondents, Third Option Laboratories,

Inc., a corporation, its successors and assigns, and its officers, and

William J. McWilliams, individually and as an officer of said

corporation, Danny Bishop McWilliams, individually and as an officer of

said corporation, and Susan McWilliams Bolton, individually and as an

officer of said corporation, and respondents' agents, representatives,

and employees, directly or through any partnership, corporation,

subsidiary, division or other device, in connection with the

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

sale or distribution of Jogging in a Jug 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

employing the name ``Jogging in a Jug'' or any other name that

communicates the same or similar meaning for such product; provided,

however, that nothing in this Order shall prevent the use of such name

if the material containing the name clearly and prominently contains

the following disclosure:

``THERE IS NO SCIENTIFIC EVIDENCE THAT JOGGING IN A JUG [OR OTHER

NAME] PROVIDES ANY HEALTH BENEFITS.''

For the purposes of this Order, ``clearly and prominently'' shall

mean as follows:

A. In a television or video advertisement less than fifteen (15)

minutes in length, the disclosure shall be presented simultaneously in

both the audio and visual portions of the advertisement, accompanying

the first presentation of the name. When the first presentation of the

name appears in the audio portion of the advertisement, the disclosure

shall immediately follow the name. When the first presentation of the

name appears in the visual portion of the advertisement, the disclosure

shall appear immediately adjacent to the name. The audio disclosure

shall be delivered in a volume and cadence sufficient for an ordinary

consumer to hear and comprehend it. The video disclosure shall be of a

size and shade, and shall appear on the screen for a duration,

sufficient for an ordinary consumer to read and comprehend it;

B. In a video advertisement fifteen (15) minutes in length or

longer, the disclosure shall be presented simultaneously in both the

audio and visual potions of the advertisement, accompanying the first

presentation of the name and immediately before each presentation of

ordering instructions for the product. When the name that triggers the

disclosure appears in the audio portion of the advertisement, the

disclosure shall immediately follow the name. When the name that

triggers the disclosure appears in the visual portion of the

advertisement, the disclosure shall appear immediately adjacent to the

name. The audio disclosure shall be delivered in a volume and cadence

sufficient for an ordinary consumer to hear and comprehend it. The

video disclosure shall be of a size and shade, and shall appear on the

screen for a duration, sufficient for an ordinary consumer to read and

comprehend it. 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 in conjunction

with the name shall be deemed a presentation of ordering instructions

so as to require the presentation of the disclosure provided herein;

C. In a radio advertisement, the disclosure shall immediately

follow the first presentation of the name and shall be delivered in a

volume and cadence sufficient for an ordinary consumer to hear and

comprehend it;

D. In a print advertisement, the disclosure shall be in close

proximity to the largest presentation of the name, in a prominent type

thickness and in a type size that is at least one-half that of the

largest presentation of the name; provided, however, that the type size

of the disclosure shall be no smaller than twelve (12) point type. The

disclosure shall be of a color or shade that readily contrasts with the

background of the advertisement;

E. On a product label, the disclosure shall be in close proximity

to the largest presentation of the name, in a prominent type thickness

and in a type size that is at least one-half that of the largest

presentation of the name; provided, however, that the type size of the

disclosure shall be no smaller than twelve (12) point type. The

disclosure shall be of a color or shade that readily contrasts with the

background of the label; and

F. On any packaging of the product shipped directly to consumers,

the disclosure shall appear on each side of the packaging on which the

name appears, in close proximity to the largest presentation of the

name. The total area of the disclosure shall be at least half that of

the name that triggers the disclosure. The disclosure shall be of a

[[Page 25233]] color or shade that readily contrasts with the

background of the packaging.

Nothing contrary to, inconsistent with, or in mitigation of the

above-required language shall be used in any advertising or labeling.

Nothing in this part shall apply to: (1) Advertising appearing on

items that are sold or given or caused to be sold or given by

respondents to consumers for their personal use and that display the

name ``Jogging in a Jug'' or any other name that communicates the same

or similar meaning; or (2) the use of such name in a nonpromotional

manner and solely for purposes of identification of the respondent

corporation, including the use of such name as part of respondents'

letterhead, on shipping labels, or on crates provided only to

purchasers for resale.

VIII

It is further ordered that respondents, Third Option Laboratories,

Inc., its successors and assigns, William J. McWilliams, Danny Bishop

McWilliams, and Susan McWilliams Bolton, 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 Associate Director for

Enforcement, Bureau of Consumer Protection, Federal Trade Commission,

6th and Pennsylvania Ave., NW, Washington, DC 20580, the sum of four

hundred and eighty thousand dollars ($480,000). Respondent shall make

this payment on or before the tenth day following the date of entry of

this Order. In the event of any 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 respondents shall, in the discretion of the Federal

Trade Commission, be used by the Commission to provide direct redress

to purchasers of Jogging in a Jug in connection with the acts or

practices alleged in the complaint, and to pay any attendant costs of

administration. If the Federal Trade Commission determines, in its sole

discretion, that redress to purchasers of this product is wholly or

partially impracticable or is 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. No

portion of the payment as herein provided shall be deemed a payment of

any fine, penalty, or punitive assessment.

IX

It is further ordered that respondents, Third Option Laboratories,

Inc., its successors and assigns, William J. McWilliams, Danny Bishop

McWilliams, and Susan McWilliams Bolton, shall, within thirty (30) days

after the date of service of this Order, send by first class mail,

postage prepaid and address correction requested, to the last address

known to respondents of each consumer who purchased Jogging in a Jug in

any manner directly from respondents since January 1, 1993, an exact

copy of the notice attached hereto as Attachment A. The mailing shall

not include any other documents.

X

It is further ordered that respondents, Third Option Laboratories,

Inc., its successors and assigns, William J. McWilliams, Danny Bishop

McWilliams, and Susan McWilliams Bolton, shall:

A. Within thirty (30) days after the date of service of this Order,

send by first class certified mail, return receipt requested, to each

purchaser for resale of Jogging in a Jug with which respondents have

done business since January 1, 1993 an exact copy of the notice

attached hereto as Attachment B. The mailing shall not include any

other documents;

B. In the event that respondents receive any information that

subsequent to its receipt of Attachment B any purchaser for resale is

using or disseminating any advertisement or promotional material that

contains any representation prohibited by this Order, respondents shall

immediately notify the purchaser for resale that respondents will

terminate the use of said purchaser for resale if it continues to use

such advertisements or promotional materials; and

C. Terminate the use of any purchaser for resale about whom

respondents receive any information that such purchaser for resale has

continued to use advertisements or promotional materials that contain

any representation prohibited by this Order after receipt of the notice

required by subparagraph B of this part.

XI

It is further ordered that respondents, Third Option Laboratories,

Inc., its successors and assigns, and William J. McWilliams, Danny

Bishop McWilliams, and Susan McWilliams Bolton, shall, for five (5)

years after the last correspondence to which they pertain, maintain and

upon request make available to the Federal Trade Commission for

inspection and copying:

A. Copies of all notification letters sent to consumers pursuant to

part IX of this Order;

B. Copies of all notification letters sent to purchasers for resale

pursuant to subparagraph A of part X of this Order; and

C. Copies of all communications with purchasers for resale pursuant

to subparagraphs B and C of Part X of this Order.

XII

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. Any advertisement making any representation covered by this

order;

B. All materials that were relied upon in disseminating such

representation; and

C. 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, and

complaints or inquiries from governmental organizations.

XIII

It is further ordered that respondents, Third Option Laboratories,

Inc., its successors and assigns, shall:

A. Within thirty (30) days after the date of service of this Order,

provide a copy of this Order to each of respondent's 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 seven (7) years from the date of service of this

Order, provide a copy of this Order to each of respondent's 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 within three (3) days

after the person assumes his or her position.

XIV

It is further ordered that respondents, William J. McWilliams,

Danny Bishop McWilliams, and Susan McWilliams Bolton, shall, for a

period of seven (7) years after the date of service of this Order,

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

[[Page 25234]] his or her present business or employment and of his or

her affiliation with any new business or employment involving the

manufacturing, labeling, advertising, marketing, promotion, offering

for sale, sale, or distribution of any food, food or dietary

supplement, or drug, as ``food'' and ``drug'' are defined in sections

12 and 15 of the Federal Trade Commission Act. Each notice of

affiliation with any new business or employment shall include

respondent's new business address and telephone number, current home

address, and a statement describing the nature of the business or

employment and his or her duties and responsibilities.

XV

It is further ordered that respondents, shall notify the Commission

at least thirty (30) days prior to any proposed change in the corporate

respondent, such as dissolution, assignment, or sale resulting in the

emergence of a successor corporation, the creation or dissolution of

subsidiaries, or any other change in the corporation which may affect

compliance obligations arising under this order.

XVI

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

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

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.

Attachment A

By First Class Mail, Postage Prepaid and Address Correction

Requested

[To Be Printed on Third Option Laboratories, Inc. Letterhead]

[date]

Dear Consumer: Our records indicate that you purchased Jogging

in a Jug from Third Option Laboratories, Inc. This letter is to

inform you of our settlement of a civil dispute with the Federal

Trade Commission (``FTC'') regarding certain claims made in our

advertising for Jogging in a Jug.

The FTC alleged that advertisements for Jogging in a Jug have

made false and unsubstantiated claims that the product can cure,

treat, or prevent: (1) Heart disease (including arterial blockages);

(2) arthritis; (3) cancer; (4) leukemia; (5) dysentery; (6)

constipation; (6) lethargy; (8) swelling of the legs; and (9) muscle

spasms. The FTC has also alleged that our claims that Jogging in a

Jug can ``clean'' internal organs, break down or eliminate deposits

in the circulatory system, aid in the recovery from viral diseases,

lower serum cholesterol and triglyceride levels, and stabilize blood

sugar levels in diabetics, are false and unsubstantiated. Finally,

the FTC has alleged that we have made false and unsubstantiated

claims that Jogging in a Jug provides the same health benefits as

jogging.

Our settlement with the FTC prohibits us from making these or

other claims for Jogging in a Jug or any other food, drug, or

supplement in the future unless the claims are supported by

competent and reliable scientific evidence. We deny the FTC's

allegations, but have agreed to send this letter as a part of our

settlement with the FTC.

Sincerely,

William J. McWilliams,

President, Third Option Laboratories, Inc.

Attachment B

By Certified Mail, Return Receipt Requested

[To Be Printed on Third Option Laboratories, Inc. letterhead]

[date]

Dear [purchaser for resale]: Third Option Laboratories, Inc.

recently settled a civil dispute with the Federal Trade Commission

(``FTC'') regarding certain claims for our product, Jogging in a

Jug. As a part of the settlement, we are required to make sure that

our distributors and wholesalers stop using or distributing

advertisements or promotional materials containing those claims.

The FTC alleged that the advertisements for Jogging in a Jug

have made false and unsubstantiated claims that the product can

cure, treat, or prevent: (1) Heart disease (including arterial

blockages); (2) arthritis; (3) cancer; (4) leukemia; (5) dysentery;

(6) constipation; (7) lethargy; (8) swelling of the legs; and (9)

muscle spasms. The FTC has also alleged that our claims that Jogging

in a Jug can ``clean'' internal organs, break down or eliminate

deposits in the circulatory system, aid in the recovery from viral

diseases, lower serum cholesterol and triglyceride levels, and

stabilize blood sugar levels in diabetics, are false and

unsubstantiated. Finally, the FTC has alleged that we have made

false and unsubstantiated claims that Jogging in a Jug provides the

same health benefits as jogging.

Our settlement with the FTC prohibits us from making these or

other claims for Jogging in a Jug or any other food, drug, or

supplement in the future unless the claims are supported by

competent and reliable scientific evidence. We deny the FTC's

allegations, but have agreed to send this letter as a part of our

settlement with the FTC.

We request your assistance by asking you to discontinue using,

relying on or distributing any of your current Jogging in a Jug

advertising or promotional material. Please also notify any of your

retail or wholesale customers who may have such materials to

discontinue using them. If you continue to use those materials, we

are required by the FTC settlement to stop doing business with you.

Thank you very much for your assistance.

Sincerely,

William J. McWilliams,

President, Third Option Laboratories, Inc.

Analysis of Proposed Consent Order to Aid Public Comment

The Federal Trade Commission has accepted an agreement to a

proposed consent order from Third Option Laboratories, Inc. (``Third

Option''), and William J. McWilliams, Danny Bishop McWilliams, and

Susan McWilliams Bolton, officers of Third Option.

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 or make final the agreement's proposed

order.

This matter concerns Jogging in a Jug, a juice and vinegar beverage

marketed by Third Option. The Commission's proposed complaint alleges

that the respondents falsely represented in its advertising and

promotional material that Jogging in a Jug would: (1) Cure or alleviate

heart disease and its symptoms, including arterial blockages; (2)

substantially lower serum cholesterol and triglycerides; (3) cure or

alleviate arthritis and its symptoms; (4) break down or eliminate

calcium or other mineral or chemical deposits in the circulatory

system; (5) improve the condition of the circulatory system; (6) clean

internal organs; (7) prevent or reduce the risk of cancer, leukemia,

heart disease, and arthritis; (8) provide the same health benefits as a

jogging regimen; (9) cure or alleviate lethargy; (10) cure or alleviate

dysentery; (11) cure or alleviate constipation; (12) stabilize blood

sugar levels in insulin-dependent diabetics; (13) aid in the recovery

from viral infections; and (14) cure or alleviate swelling of the legs

and muscle spasms. The proposed complaint further alleges that

respondents falsely represented that they relied on a reasonable basis

for these claims.

In addition, the proposed complaint alleges that respondents

falsely represented that Jogging in a Jug was approved by the United

States Department of Agriculture and that the testimonials or

endorsements from consumers contained in the advertisements and

promotional materials for Jogging in a Jug reflect the typical or

ordinary experiences of members of the public who use the product. The

proposed complaint further alleges that respondents falsely represented

that they relied on a reasonable basis for these claims.

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 the respondents from

making the [[Page 25235]] representations challenged as false in the

proposed complaint for Jogging in a Jug or any substantially similar

product.

Part II of the proposed order prohibits the respondents from making

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

of any food, food or dietary supplement, or drug, unless the

representation is true and respondents possess competent and reliable

scientific evidence that substantiates it.

Part III of the proposed order prohibits the respondents from

misrepresenting that any product has been tested, approved, or endorsed

by any person, firm, organization, or government agency.

Part IV of the proposed order prohibits the respondents from

misrepresenting that any endorsement for any product reflects the

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

product.

Parts V and VI of the order are safe harbor provisions. Part V

allows representations for any drug that is permitted in the labeling

for that drug under any tentative final or final standard promulgated

by the Food and Drug Administration (``FDA''), or under any new drug

application approved by the FDA. Part VI allows representations

permitted in labeling for any product by regulations promulgated by FDA

pursuant to the Nutrition Labeling and Education Act of 1990.

Part VII of the order requires that the respondents cease using the

name ``Jogging in a Jug'' or any name that communicates the same or

similar meaning unless the material containing such name clearly and

prominently contains the disclosure ``THERE IS NO SCIENTIFIC EVIDENCE

THAT JOGGING IN A JUG [OR OTHER NAME] PROVIDES ANY HEALTH BENEFITS.''

The terms of Part VII do not apply to: (1) The use of such name on

items that are sold or given or caused to be sold or given to consumers

for their personal use; or (2) the use of such name in a nonpromotional

manner and solely for purposes of identification of the respondent

corporation, including the use of such name as part of corporate

letterhead, on shipping labels, or on crates provided only to

purchasers for resale.

Part VIII of the order requires respondents to pay to the

Commission the sum of four hundred and eighty thousand dollars

($480,000). The Commission will then determine, in its sole discretion,

whether to use the payment to provide direct redress to consumers or to

pay the funds to the United States Treasury if redress is not

practicable.

Part IX of the order requires the respondents to send a letter

describing this settlement to identifiable past purchasers of Jogging

in a Jug. Part X of the order requires the respondents to send a

similar letter to their purchasers for resale. Part X further requires

the respondents to notify their purchasers for resale that if the

purchasers for resale do not stop using promotional materials

containing claims covered by the order, the respondents are required to

stop doing business with them. Part XI of the order requires that the

respondents maintain for five years copies of all communications with

consumers and purchasers for resale pursuant to the terms of Parts IX

and X.

Parts XII, XIII, XIV, XV, and XVI relate to the respondents'

obligation to maintain records, distribute the order to current and

future officers and employees, notify the Commission of changes in

employment or corporate structure, and file compliance reports with the

Commission.

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

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

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

way their terms.

Donald S. Clark,

Secretary.

Statement of Commissioner Mary L. Azcuenaga, Concurring in Part and

Dissenting in Part, Third Option Laboratories, Inc., File No. 942 3027

Today, the Commission accepts for public comment a consent

agreement to remedy various misrepresentations concerning the purported

health benefits of a drink called ``Jogging in a Jug.'' The record

shows that the claims are far removed from reality, and there is ample

reason to believe they violated section 5 of the FTC Act. I concur in

the complaint on which the order is based except to the extent that it

alleges as a violation the content of newspaper articles that are

reproduced in the respondents' promotional materials and those

materials accurately identify and reproduce such articles in their

original format without modification. Complaint 7 and Exhibit F.

Second, I dissent from Part VII of the order. Although the

complaint does not challenge as materially misleading the unadorned use

of the product's name, Jogging in a Jug (nor would I, given the absence

of evidence), Part VII of the order prohibits, in connection with the

advertising and sale of Jogging in a Jug (or any similar product), use

of the name Jogging in a Jug, or any other name communicating a similar

meaning, unless the name is accompanied clearly and prominently by a

disclosure stating: ``THERE IS NO SCIENTIFIC EVICENCE THAT JOGGING IN A

JUG [or other name] PROVIDES ANY HEALTH BENEFITS,'' and which includes

six extensive paragraphs minutely detailing what will constitute

``clearly and prominently'' for purposes of compliance with this

requirement.

The Commission in the past has used this form of relief, which can

substantially limit potentially lawful conduct, to remedy health claims

that seem more credible than those likely to be taken by reasonable

consumers here. For example, the Commission imposed a similar

requirement to remedy the pain relief claim it found to have been

conveyed by the name ``Aspercreme'' in Thompson Medical Co., 104 F.T.C.

648 (1984). The likelihood that a consumer would except that a product

named Aspercreme would contain aspirin and would rely on that claim to

his or her detriment seems to me far greater than the likelihood that a

consumer would rely to his or her detriment on an implied message that

a product called Jogging in a Jug would provide the health benefits of

jogging.

[FR Doc. 95-11556 Filed 5-10-95; 8:45 am]

BILLING CODE 6750-01-M