WLAR Co., et al.; Proposed Consent Agreement With Analysis to Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 942-3263]

WLAR Co., 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 Falls Church, Virginia weight-loss

company from making false or unsubstantiated representations for their

weight-loss booklets or other weight-loss products or program, and

would require respondent and its owner to disclose in future ads making

weight-related claims for these or similar booklets that the products

consist solely of booklets or pamphlets.

DATES: Comments must be received on or before August 21, 1995.

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

Room 159, 6th Street and Pennsylvania Avenue NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Richard L. Cleland, FTC/S-4002,

Washington, DC 20580. (202) 326-3088.

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

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

the Commission's Rules of Practice (16 CFR 2.34), notice is hereby

given that the 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 Section 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 WLAR Co., a corporation, and Michael K. Craig,

individually and as an officer of said corporation. File No. 942

3263.

The Federal Trade Commission, having initiated an investigation of

certain acts and practices of WLAR Co., a corporation, and Michael K.

Craig, individually and as an officer of said corporation, hereinafter

sometimes referred to as proposed respondents, and it now appears 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 WLAR Co., by its authorized

officer, and Michael K. Craig, individually and as an officer of said

corporation, and their attorney, and counsel for the Federal Trade

Commission that:

1. Proposed respondent WLAR Co. is a corporation organized,

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

State of Delaware, with its office and principal place of business

located at 5622 Columbia Pike #106, in the City of Falls Church, State

of Virginia, 22041.

Proposed respondent Michael K. Craig is or was at relevant times

herein the sole owner, officer, and employee of said corporation.

Individually or in concert with others, he participated in and/or

formulated, directed, and controlled the acts and practices of said

corporation and his 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 into 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 of facts, other than

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

of complaint.

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 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, addressed to Arnold & Porter, 1200 New Hampshire Avenue,

N.W., Washington, D.C. 20036-6885, 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.

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

For purposes of this Order: [[Page 32325]]

1. ``Clearly and prominently'' shall mean as follows:

(a) In a television or videotape advertisement, the disclosure

shall be presented simultaneously in both the audio and video portions

of the advertisement. The audio disclosure shall be delivered in a

volume and cadence and for a duration 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 print advertisement, the disclosure shall be in close

proximity to the representation that triggers the disclosure and given

in at least twelve (12) point type.

(c) In a radio advertisement, the disclosure shall be delivered in

a volume and cadence sufficient for an ordinary consumer to hear and

comprehend it.

2. ``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.

3. ``Weight-loss product'' shall mean any product or program

designed or used to prevent weight gain or to produce weight loss,

reduction or elimination of fat, slimming, or caloric deficit in a user

of the product or program.

I

It is ordered that respondents, WLAR Co., a corporation, its

successors and assigns, and its officers; and Michael K. Craig,

individually and as an officer of WLAR Co.; and respondents' agents,

representatives and employees, directly or through any partnership,

corporation, subsidiary, division or other device, in connection with

the manufacturing, advertising, packaging, labeling, promotion,

offering for sale, sale, or distribution of Swedish 19, Swedish System,

BM Program, New Shape, Body Maker, 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:

A. Such product is new or is a new weight-loss discovery; or

B. Such product does not require dieting.

II

It is further ordered that respondents, WLAR Co., a corporation,

its successors and assigns, and its officers; and Michael K. Craig,

individually and as an officer of WLAR Co.; and respondents' agents,

representatives and employees, directly or through any partnership,

corporation, subsidiary, division or other device, in connection with

the manufacturing, advertising, packaging, labeling, promotion,

offering for sale, sale, or distribution of any weight-loss 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:

A. Such product causes fast or easy weight loss;

B. Such product is more effective than other products or programs

in controlling appetite or causing weight loss;

C. Purchasers of such products are successful in controlling

appetite, losing weight, or reducing body fat;

D. Such product causes users to develop a new set of eating habits,

thereby reducing caloric intake and causing significant and long-term

or permanent weight loss; or

E. Such product has any effect on users' weight, body size or

shape, body measurements, or appetite,

unless, 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, WLAR Co., a corporation,

its successors and assigns, and its officers; and Michael K. Craig,

individually and as an officer of WLAR Co.; and respondents' agents,

representatives and employees, directly or through any partnership,

corporation, subsidiary, division or other device, in connection with

the manufacturing, advertising, packaging, labeling, promotion,

offering for sale, sale, or distribution of any weight-loss 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 has been used

successfully by any number of persons 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.

IV

Nothing in Parts I through III of this Order shall prohibit

respondents from making representations which promote the sale of books

and other publications, provided that, the advertising only purports to

express the opinion of the author or to quote the contents of the

publication; the advertising discloses the source of the statements

quoted or derived from the contents of the publication; and the

advertising discloses the author to be the source of the opinions

expressed about the publication. This Part shall not apply, however, if

the publication or its advertising is used to promote the sale of some

other product as part of a commercial scheme.

V

It is further ordered that respondents, WLAR Co., a corporation,

its successors and assigns, and its officers; and Michael K. Craig,

individually and as an officer of WLAR Co.; and respondents' agents,

representatives and employees, directly or through any partnership,

corporation, subsidiary, division or other device, in connection with

the manufacturing, advertising, packaging, labeling, promotion,

offering for sale, sale, or distribution of Swedish 19, Swedish System,

BM Program, New Shape, Body Maker, 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 making

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

such product has any effect on weight or body size, unless respondents

disclose, clearly and prominently, and in close proximity to such

representation, that such product consists solely of a booklet or

pamphlet containing information and advice on weight loss.

VI

It is further ordered that respondents, WLAR Co., a corporation,

its successors and assigns, and its officers; and Michael K. Craig,

individually and as an officer of WLAR Co.; and respondents' agents,

representatives and employees, directly or through any partnership,

corporation, subsidiary, division or other device, in connection with

the manufacturing, advertising, packaging, labeling, promotion,

offering for sale, sale, or distribution of any weight-loss product, in

or affecting commerce, as ``commerce'' is defined in the Federal Trade

Commission Act, do forthwith cease and desist from making any

[[Page 32326]] representation, in any manner, directly or by

implication, that any such weight-loss product has any effect on weight

or body size, unless they disclose, clearly and prominently, and in

close proximity to such representation, that diet and/or increasing

exercise is required to lose weight; provided however, that this

disclosure shall not be required if respondents possess and rely upon

competent and reliable scientific evidence demonstrating that the

weight-loss product is effective without either dieting or increasing

exercise.

VII

It is further ordered that respondent, WLAR Co., shall:

A. Within thirty (30) days after 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 five (5) days from the date of issuance of this

Order, provide a copy of this Order to each of respondent's future

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 respondent or any subsidiary, successor, or assign,

within three (3) days after the person assumes his or her

responsibilities.

VIII

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 or its staff 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.

IX

It is further ordered that respondent, WLAR Co., shall notify the

Federal Trade Commission at least thirty (30) days prior to any

proposed change in its 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, the planned filing of a bankruptcy petition, or any other

corporate change that may affect compliance obligations arising out of

this Order.

X

It is further ordered that respondent, Michael K. Craig, shall, for

a period of three (3) years from the date of issuance 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 involving the advertising, offering for sale,

sale, or distribution of any weight-loss product. 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 duties and responsibilities.

XI

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's

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 an agreement, subject to

final approval, to a proposed consent order from proposed respondents

WLAR Co. and Michael K. Craig.

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 for five weight-loss products,

marketed under the names ``Swedish 19,'' ``Body Maker,'' ``BM

Program,'' ``New Shape,'' and `'Swedish System'' (collectively referred

to herein as `'the Swedish 19 products''). These products are booklets

or pamphlets containing advice on dieting and exercise.

The Commission's Complaint charges that proposed respondents WLAR

Co. and Michael K. Craig falsely represented that users of the Swedish

19 products are not required to consciously diet to lose weight and

that BM Program, New Shape, and Body Maker are new weight-loss

discoveries. The Complaint also alleges that the proposed respondents

falsely represented that they possessed a reasonable basis when they

made the following claims: (1) the Swedish 19 products cause fast and

easy weight loss; (2) the Swedish 19 products are more effective than

other products or programs in controlling appetite and causing weight

loss; (3) purchasers of the Swedish 19 products are successful in

controlling appetite, losing weight, and reducing body fat; (4) Swedish

19, Swedish System, BM Program, and Body Maker cause users to develop a

new set of eating habits, thereby reducing caloric intake and causing

significant and long-term or permanent weight loss; and (5) thousands

of girls have successfully lost weight by using Swedish 19, Swedish

System, New Shape, and Body Maker. Finally, the Complaint alleges that

respondents' failure to disclose in advertisements that the Swedish 19

products consist only of booklets or pamphlets containing advice

concerning techniques for reducing caloric intake and/or exercise, and

that reducing caloric intake and/or increasing exercise is required to

lose weight was a deceptive practice.

The proposed consent order contains provisions designed to remedy

the violations charged and to prevent proposed respondents from

engaging in similar acts in the future.

Part I of the proposed order prohibits proposed respondents from

representing that the Swedish 19 products, or substantially similar

products, are new or are a new weight-loss discovery, or that such

products do not require dieting. Part II requires proposed respondents

to possess competent and reliable scientific evidence before making

representations that any weight-loss product causes fast or easy weight

loss; is more effective than other products or programs in controlling

appetite or causing weight loss; causes users to develop a new set of

eating habits, thereby reducing caloric intake and causing significant

and long-term or permanent weight loss; or has any effect on users'

weight, body size or shape, body measurements, or appetite; or that

purchasers of such products are successful in controlling appetite,

losing weight, or reducing body fat. Part III requires proposed

respondents to have substantiation for any representation that any

weight-loss product has been used successfully by any number of

persons.

Part IV of the proposed order provides that nothing in Parts I

through III [[Page 32327]] prohibits proposed respondents from making

representations which promote the sale of books and other publications,

provided that, the advertising only purports to express the opinion of

the author or to quote the contents of the publication; the advertising

discloses the source of the statements quoted or derived from the

contents of the publication; and the advertising discloses the author

to be the source of the opinions expressed about the publication. The

proposed order further provides that Part IV does not apply to any

publication or its advertising that is used to promote the sale of some

other product as part of a commercial scheme.

Part V prohibits proposed respondents from representing that the

Swedish 19 products, or any substantially similar product, has any

effect on weight or body size, unless respondents disclose prominently

that the product consists solely of a booklet or pamphlet containing

information and advice on weight loss. Part VI requires proposed

respondents to disclose that diet or exercise are required to lose

weight in connection with any representation about the effect of a

weight-loss product on weight or body size, unless they have competent

and reliable scientific evidence to the contrary.

Part VII requires WLAR Co. to distribute a copy of the order to

certain current and future company personnel. Part VIII requires

proposed respondents to maintain, for five (5) years, all materials

that support, contradict, qualify, or call into question any

representations they make that are covered by the proposed order. Under

Part IX of the proposed order, WLAR Co. is required to notify the

Federal Trade Commission at least thirty (30) days prior to any

proposed change in its corporate structure that may affect compliance

with the order's obligations. Part X requires that Michael K. Craig,

for a period of three (3) years, notify the Commission of any change in

his business or employment or of his affiliation with any new business

or employment involving the advertising, offering for sale, sale, or

distribution of any weight-loss product. Part XI obligates proposed

respondents to 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.

Benjamin I. Berman,

Acting Secretary.

[FR Doc. 95-15191 Filed 6-20-95; 8:45 am]

BILLING CODE 6750-01-M