Live-Lee Productions, Inc.; Proposed Consent Agreement With Analysis to Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 942-3058]

Live-Lee Productions, Inc.; 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 Los Angeles based corporation, and Ruta

Lee, who directs and controls the corporation, from making claims for

any food, dietary supplement or drug unless they have competent and

reliable scientific evidence to support the claims.

DATES: Comments must be received on or before September 1, 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:

Lisa B. Kopchik or Joel Winston, FTC/S-4002, Washington, DC 20580.

(202) 326-3139 or (202) 326-3153.

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: Live-Lee Productions, Inc., a corporation, and

Ruta Lee, individually and as an officer and director of said

corporation, File No. 942-3058.

Agreement Containing Consent Order to Cease and Desist

The Federal Trade Commission having initiated an investigation of

certain acts and practices of Live-Lee Productions, Inc., a

corporation, and Ruta Lee, individually and as an officer and director

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 Live-Lee Productions, Inc., a

corporation, by its duly authorized officer, and Ruta Lee, individually

and as an officer and director of said corporation, and counsel for the

Federal Trade Commission that:

1. Proposed respondent Live-Lee Productions, Inc. is a corporation

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

of the States of Texas, with its offices and principal place and

business at 2761 Laurel Canyon Boulevard, Los Angeles, California

90046.

Proposed respondent Ruta Lee is an officer and director of said

corporation. She formulates, directs, and controls the policies, acts,

and practices of said corporation. She resides at 2436 Shirley Avenue,

Fort Worth, Texas 76109.

2. Proposed respondents admit all the jurisdictional facts set

froth in the draft of the 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.

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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

the complaint contemplated thereby, will be placed in 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 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 to 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' addresses as stated in this agreement shall constitute

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

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

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

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

to vary or contradict the terms of the order.

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 Live-Lee Productions, Inc., a

corporation, its successors and assigns, and its officers; and Ruta

Lee, individually and as an officer and director 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, advertising, packaging,

labeling, promotion, offering for sale, sale or distribution of Life

Way Vitamin C and Zinc Spray, Life Way Antioxidant Spray, Life Way

Vitamin B-12 Spray, or any other food, food or dietary supplement, or

drug, as ``food'' and ``drug'' are defined in section 15 of the Federal

Trade Commission Act, 15 U.S.C. 55, 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:

A. That such product:

1. Is more fully absorbed by the human body than any other product;

2. Heals lesions in the mouth, cold sores on the mouth, or cracking

of the corners of the lips;

3. Prevents common colds;

4. Effectively treats symptoms related to hangovers;

5. Increases energy;

6. Ensures the proper functioning of the immune system;

7. Reduces the risk of contracting infectious diseases;

8. Prevents facial lines; or

B. That use of the product can or will have any effect on the

user's health, or on the structure or function of the human body,

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

and rely upon competent and reliable scientific evidence that

substantiates the representation. For the purpose of this Order,

``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 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;

Provided that it shall be a defense hereunder that the respondents

neither knew nor had reason to know of the inadequacy of substantiation

for the representations.

II

It is further ordered that respondents Live-Lee Productions, Inc.,

a corporation, its successors and assigns, and its officers; and Ruta

Lee, individually and as an officer and director 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, advertising, packaging,

labeling, promotion, offering for sale, sale or distribution of Life

Way Smoke-Less Nutrient Spray or any other smoking cessation product,

program, 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, in any manner, directly or by

implication:

A. That such product, program, or service enables smokers,

regardless of how long they have smoked or how much they smoke, to stop

smoking easily;

B. That such product, program, or service satisfies the

physiological urge to smoke a cigarette, or eliminates the quivering,

anxiety and weight gain attendant with quitting smoking; or

C. Regarding the performance, benefits, efficacy or safety of any

such product, program, or service,

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

and rely upon competent and reliable scientific evidence that

substantiates the representation;

Provided that it shall be a defense hereunder that the respondents

neither knew nor had reason to know of the inadequacy of substantiation

for the representation.

III

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

of dissemination of any representation covered by this Order,

respondents Live-Lee Productions, Inc., a corporation, its successors

and assigns, and its officers; and Ruta Lee individually and as an

officer and director of said corporation, 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

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contradict, qualify, or call into question such representation, or the

basis relied upon for such representation, including complaints from

consumers.

IV

It is further ordered that respondents Live-Lee Productions, Inc.

shall, 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.

V

It is further ordered that respondent Live-Lee Productions, Inc.

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.

VI

It is further ordered that respondent Ruta Lee shall, for a period

of five (5) years from the date of issuance of this Order, notify the

Commission within thirty (30) days of the discontinuance of her present

business or employment and of her affiliation with any new business or

employment which involves the sale of consumer products. 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 her duties and responsibilities.

VII

It is further ordered that respondents Live-Lee Productions, Inc.,

a corporation, its successors and assigns, and its officers; and Ruta

Lee, individually and as an officer and director of said corporation,

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 an agreement to a

proposed consent order from Live-Lee Productions, Inc. (``Live-Lee'')

and Ruta Lee (``Lee'').

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

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

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

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

and the comments received and will decide whether it should withdraw

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

This matter involves alleged deceptive representations for three

spray vitamin products and a spray smoking cessation product. The

products at issue are Life Way Vitamin C and Zinc Spray, Life Way

Antioxidant Spray, Life Way Vitamin B-12 Spray, and Life Way Smoke-Less

Nutrient Spray. The complaint charges that Lee performed the functions

of an advertising agency by creating and disseminating the

representations, and that she received a royalty for each unit of

product that was sold. The claims were made on television

advertisements called ``Spotlight on Ruta Lee.'' These advertisements

were broadcast on the Home Shopping Club, commercial programming shown

on the Home Shopping Network.

Live-Lee is Lee's closely-held corporation, which is engaged in the

business of providing the services of Ruta Lee in connection with the

marketing, advertising, sale and distribution of consumer products. Lee

is an officer, director, and sole shareholder of Live-Lee.

According to the FTC complaint, Lee made claims that the vitamins

in the spray products are more fully absorbed by the human body than

vitamins taken in pill form; and that the vitamins would heal mouth

lesions, cold sores, and cracking of the corners of the lips; prevent

common colds; treat hangover symptoms; increase users' energy; ensure

the proper functioning of the immune system; reduce the risk of

contracting infectious diseases; and prevent facial lines. The

complaint also alleges that Lee made claims that the smoking cessation

spray would enable smokers, regardless of how long they have smoked or

how much they smoke, to stop smoking easily; and would satisfy the

physiological urge to smoke a cigarette and eliminate the quivering,

anxiety and weight gain that go along with quitting smoking. The

complaint alleges that the respondents did not have substantiation for

these representations at the time they were made. The complaint further

alleges that the respondents knew or should have known that the

representations were not substantiated.

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

representing that any food, food or dietary supplement, or drug can or

will have any effect on the user's health, or on the structure or

function of the human body, unless, at the time they make the

representation, they possess and rely upon competent and reliable

scientific evidence that substantiates the representation.

Part II of the proposed order prohibits respondents from making any

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

any smoking cessation product, program, or service, unless they have

competent and reliable scientific evidence that substantiates the

representation. With respect to both Parts I and II, the proposed order

provides a defense to respondents if they neither knew nor had reason

to know of the inadequacy of the substantiation for the representation.

Part III requires that the respondents keep records concerning

claims covered by the order, including materials that they relied upon

when making the claims.

Part IV requires respondent Live-Lee to provide a copy of the order

to each of its 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 the

order.

Part V requires respondent Live-Lee to notify the Commission of any

change in its corporate structure that might affect its compliance with

the order.

Part VI requires respondent Ruta Lee for 5 years to notify the

Commission of any change in her business or employment or her

affiliation with any new business or employment that involves the sale

of consumer products.

Part VII requires respondents to file compliance reports with the

Commission.

On March 3, 1995, the Commission issued a complaint against Home

Shopping Network, Inc.; Home Shopping Club, Inc.; and HSN Lifeway

Health Products, Inc. for their role in making and disseminating the

same allegedly deceptive representations (Docket No. 9272). That case

is now

[[Page 34543]]

pending before an Administrative Law Judge.

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.

[FR Doc. 95-16256 Filed 6-30-95; 8:45 am]

BILLING CODE 6750-01-M