Taleigh Corporation, et al.; Proposed Consent Agreement With Analysis to Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 912 3232]

Taleigh 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, two marketing corporations and the owner

from misrepresenting that any product is new or unique, the existence

or conclusions of any test or study, or that an endorsement for any

product represents the typical experience of people who use it. The

consent agreement would require the respondents to possess scientific

evidence to substantiate any representation regarding the performance,

benefits, efficacy or safety of any weight-loss or stop-smoking

product, or of any food, dietary supplement, drug, or device. In

addition, the consent agreement would require the owner to post a

$300,000 performance bond, or to establish an escrow account in the

amount of $300,000, as a condition of advertising, promoting, selling

or distributing any weight-loss or smoking deterrent or cessation

product.

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

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

Room 159, 6th St. and Pa. Ave., N.W., Washington, D.C. 20580.

FOR FURTHER INFORMATION CONTACT:

Joel Winston or Richard Cleland, FTC/S-4002, Washington, D.C. 20580.

(202) 326-3153 or 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 [[Page 16149]] 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)).

In the Matter of: Raleigh Corporation, and Choice Diet Products,

Inc., corporations; and William J. Santamaria, individually and as

an officer and director of said corporations.

Agreement Containing Consent Order To Cease and Desist

The Federal Trade Commission having initiated an investigation of

Taleigh Corporation, a Florida corporation, Choice Diet Products, Inc.,

a New York corporation, and William J. Santamaria, individually and as

an officer of said corporations (``proposed respondents''), and it now

appearing that proposed respondents are willing to enter into an

agreement containing an order to cease and desist from the use of the

acts and practices being investigated,

It is hereby agreed by and between Taleigh Corporation, a Florida

corporation, by its duly authorized officer, Choice Diet Products,

Inc., a New York corporation, by its duly authorized officer, and

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

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

Commission that:

1. Proposed respondent Taleigh Corporation, formerly known as

Taleigh, Inc., a Florida corporation, is organized, exists and does

business under and by virtue of the laws of the State of Florida. At

times relevant hereto, its office and principal place of business was

located at 4800 N.W. Boca Raton Boulevard, Boca Raton, FL 33431.

Proposed respondent Choice Diet Products, Inc., a New York

corporation, is organized, exists and does business under and by virtue

of the laws of the State of New York. At times relevant hereto, its

office and principal place of business was located at 4800 N.W. Boca

Raton Boulevard, Boca Raton, FL 33431.

Proposed respondent William J. Santamaria is an officer of said

corporations. He formulates, directs and controls the policies, acts

and practices of said corporation and his address is 20640 Baybrooke

Court, Boca Raton, FL 33498.

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 circumstances may require) and

decision in disposition of this 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 of 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 subsequently withdrawn by the

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

Rules, the Commission may, without further notice to the 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 with 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

respondent's 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 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

For purposes of this Order:

1. ``Clearly and prominently'' as used herein shall mean as

follows:

(a) In a television or videotape advertisement: (1) an audio

disclosure shall be delivered in a volume and cadence and for a

duration sufficient for an ordinary consumer to hear and comprehend it;

and (2) a 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 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. ``Purchase price'' shall mean all amounts paid to respondents in

cash or by check, or charged to a consumer's credit card account or

debited from a consumer's checking account, including, where

applicable, sales tax, and any charges not authorized by consumers to

be charged to their charge card accounts or debited from their checking

accounts, provided however, with regard to Part XIV, purchase price

shall not include shipping or handling charges if such charges are not

included in respondents' guarantee or refund offer.

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

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

reduction or [[Page 16150]] elimination of fat, slimming, or caloric

deficit in a user of the product or program.

5. ``Smoking deterrent or cessation product'' shall mean any

product or program designed to aid or assist the user to stop or reduce

the cigarette urge, break the cigarette habit, or stop or reduce

smoking.

I

It is ordered that respondents, Taleigh Corporation and Choice Diet

Products, Inc., corporations, their successors and assigns, and their

officers; and William J. Santamaria, individually and as an officer and

director of the corporate respondents; 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 FormulaTrim 3000, MegaLoss

1000, MegaLoss 3000, MiracleTrim, or any other weight-loss product

containing phenylpropanolamine as the active ingredient, 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 or assists in causing rapid weight loss;

B. Such product causes or assists in causing substantial weight

loss without the need to exercise or reduce caloric intake;

C. Such product is new or unique or contains a new or unique

ingredient;

D. Such product causes the burning of more body fat than five hours

of aerobics, running ten miles nonstop, swimming two and a half miles,

exercising six hours nonstop, or any similar exercise activity; or

E. Such product contains an active ingredient that, prior to the

sale of such product, was available only through doctors.

II

It is further ordered that respondents, Taleigh Corporation and

Choice Diet Products, Inc., corporations, their successors and assigns,

and their officers; and William J. Santamaria, individually and as an

officer and director of the corporate respondents; 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

weight-loss product has any effect on weight or body size, unless

respondents disclose, clearly and prominently, and, in a television or

videotape advertisement, simultaneously in both the audio and video

portions of the advertisement, that reducing caloric intake 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 such

product is effective without reducing caloric intake and/or increasing

exercise.

III

It is further ordered that respondents, Taleigh Corporation and

Choice Diet Products, Inc., corporations, their successors and assigns,

and their officers; and William J. Santamaria, individually and as an

officer and director of the corporate respondents; 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 product or

program, 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 or program causes or assists in causing weight

loss, or assists in maintaining weight loss;

B. Such product or program causes or assists in causing weight loss

without exercise or reducing caloric intake;

C. Such product or program causes the burning of more body fat than

any amount of exercise activity; or

D. Such product or program causes or assists the user to stop or

reduce smoking easily;

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 the representation.

IV

It is further ordered that respondents, Taleigh Corporation and

Choice Diet Products, Inc., corporations, their successors and assigns,

and their officers; and William J. Santamaria, individually and as an

officer and director of the corporate respondents; 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 Nicotain, or any

substantially similar product or program, 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 or program enables users to stop smoking easily; or

B. Such product or program works through a mechanism substantially

similar or equivalent to a prescription smoking deterrent patch.

V

It is further ordered that respondents, Taleigh Corporation and

Choice Diet Products, Inc., corporations, their successors and assigns,

and their officers; and William J. Santamaria, individually and as an

officer and director of the corporate respondents; 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 Nicotain, or any

other smoking deterrent cessation product, in or affecting commerce, as

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

forthwith cease and desist from making, in any manner, directly or by

implication, any misrepresentation, including through the name of the

product, concerning the nature or mechanism of operation of such

product, including, but not limited to, that such product contains

nicotine or works through a mechanism substantially similar or

equivalent to a prescription smoking deterrent patch.

VI

It is further ordered that respondents, Taleigh Corporation and

Choice Diet Products, Inc., corporations, their successors and assigns,

and their officers; and William J. Santamaria, individually and as an

officer and director of the corporate respondents; and respondents'

agents, representatives, and employees, directly or through any

partnership, corporation, subsidiary, division, or other device, in

[[Page 16151]] connection with the manufacturing, advertising,

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

distribution of any product or program, 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:

A. Such product or program is new or unique or contains a new or

unique ingredient;

B. Consumers who order the product or program will receive a

personal consultation from a physician, medical professional or weight-

loss counselor; or

C. Any endorsement (as ``endorsement'' is defined in 16 C.F.R.

Sec. 255.0(b)) of such product or program represents the typical or

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

program.

VII

It is further ordered that respondents, Taleigh Corporation and

Choice Diet Products, Inc., corporations, their successors and assigns,

and their officers; and William J. Santamaria, individually and as an

officer and director of the corporate respondents; 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 product or

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

Federal Trade Commission Act, do forthwith cease and desist from

failing to disclose, clearly and prominently, a material connection,

where one exists, between a person providing an endorsement of any

product or program, as ``endorsement'' is defined in 16 C.F.R.

Sec. 255.0(b), and any respondent, or any other individual or entity

manufacturing, labeling, advertising, promoting, offering for sale,

selling, or distributing such product or program. For purposes of this

Order, ``material connection'' shall mean any relationship that might

materially affect the weight or credibility of the endorsement and

would not reasonably be expected by consumers.

VIII

It is further ordered that respondents, Taleigh Corporation and

Choice Diet Products, Inc., corporations, their successors and assigns,

and their officers; and William J. Santamaria, individually and as an

officer and director of the corporate respondents; 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 product or

program, 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.

IX

It is further ordered that respondents, Taleigh Corporation and

Choice Diet Products, Inc., corporations, their successors and assigns,

and their officers; and William J. Santamaria, individually and as an

officer and director of the corporate respondents; 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 product or

program, 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 or program does not cause any dangerous side

effects, nervous jitters, or insomnia;

B. Such product or program burns, reduces, or diminishes body fat;

or

C. Such product or program significantly shrinks fat cells;

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

and rely upon competent and reliable scientific evidence that

substantiates the representation.

X

It is further ordered that respondents, Taleigh Corporation and

Choice Diet Products, Inc., corporations, their successors and assigns,

and their officers; and William J. Santamaria, individually and as an

officer and director of the corporate respondents; 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, smoking deterrent or cessation product, food, food or dietary

supplement, drug, or device, as ``food,'' ``drug,'' and ``device'' are

defined in Section 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, in any

manner, directly or by implication, any representation regarding the

performance, benefits, efficacy, or safety of any such product, unless,

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

upon competent and reliable scientific evidence that substantiates the

representation.

XI

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.

XII

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.

XIII

It is further ordered that respondents, Taleigh Corporation and

Choice Diet Products, Inc., corporations, their successors and assigns,

and their officers; and William J. Santamaria, individually and as an

officer and director of the corporate respondents; 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 product or

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

Federal Trade Commission Act, do forthwith cease and desist from

charging a consumer's credit card account or debiting a consumer's

checking account in an amount in excess of the amount affirmatively

authorized by the consumer.

XIV

It is further ordered that respondents, Taleigh Corporation and

Choice Diet Products, Inc., corporations, their successors and assigns,

and their [[Page 16152]] officers; and William J. Santamaria,

individually and as an officer and director of the corporate

respondents; 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 product or program, in or affecting commerce, as

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

forthwith cease and desist from:

A. Representing, directly or by implication, that consumers can

receive a refund, through such terms as ``money back guarantee'' or

similar terms, unless respondents refund the full purchase price at the

consumer's request in accordance with the provisions of this Part;

B. Failing to disclose, clearly and prominently, any material

limitations or conditions that apply to a guarantee, warranty or refund

policy;

C. Failing to comply, where applicable, with the requirements of

Section 166 of the Truth in Lending Act, 15 U.S.C. Sec. 1666e and 12

CFR 226.12(e)(1); and

D. Failing to refund the full purchase price in accordance with the

terms of a guarantee, warranty or refund policy within a reasonable

period of time after a consumer complies with the conditions for

receiving a refund. For purposes of this Part, ``a reasonable period of

time'' shall be:

(1) That period of time specified in respondents' solicitation if

such period is clearly and prominently disclosed to the consumer in the

solicitation; or

(2) If no period of time is clearly and prominently disclosed, a

period of thirty (30) days following the date that the consumer

complies with the conditions for receiving a refund.

For purposes of determining whether a consumer has complied with the

conditions for receiving a refund, the date for determining whether the

consumer has returned the product or program within the specified time

shall be the date the consumer mails or causes the product or program

to be shipped to the respondents or respondents' designated agents.

XV

It is further ordered that respondents, Taleigh Corporation and

Choice Diet Products, Inc., corporations, their successors and assigns,

and their officers; and William J. Santamaria, individually and as an

officer and director of the corporate respondents; 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 product or

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

Federal Trade Commission Act, do forthwith cease and desist from

violating any provision of The Mail or Telephone Order Merchandise

Rule, 16 CFR Part 435, as amended, effective March 1, 1994, 58 F.R.

49095.

XVI

It is further ordered that respondent William J. Santamaria, and

respondent Santamaria's agents, representatives, and employees,

directly or through any partnership, corporation, subsidiary, division,

joint venture or other device, do forthwith cease and desist from

advertising, promoting, offering for sale, selling, or distributing any

weight-loss product or smoking deterrent or cessation product to the

general public, unless, prior to advertising, promoting, offering for

sale, selling, or distributing to the general public any such product,

respondent Santamaria first obtains a performance bond in the principal

sum of three hundred thousand dollars ($300,000). Said bond shall be

conditioned upon compliance by respondent Santamaria with the

provisions of the Federal Trade Commission Act, and with the provisions

of this Order. The bond shall be deemed continuous and remain in full

force and effect as long as respondent Santamaria continues to

advertise, promote, offer for sale, sell, or distribute any weight-loss

product or smoking deterrent or cessation product, directly or

indirectly, to the general public, and for at least five (5) years

after he has ceased any such activity. The bond shall cite this Order

as the subject matter of the bond and provide surety against respondent

Santamaria's failure to pay consumer redress or disgorgement as set

forth herein. Such performance bond shall be an insurance agreement

providing surety issued by a surety company that is admitted to do

business in a state in which respondent Santamaria is doing business

and that holds a Federal Certificate of Authority as Acceptable Surety

on Federal Bond and Reinsuring.

Respondent Santamaria shall provide a copy of such performance bond

to the associate director of the Federal Trade Commission's Division of

Enforcement, 6th Street & Pennsylvania Avenue, N.W., Washington, D.C.

20580, prior to the commencement of any business for which such bond is

required.

Provided, however, in lieu of a performance bond, respondent

Santamaria may establish and fund, pursuant to the terms set forth

herein, an escrow account in the principal sum of three hundred

thousand dollars ($300,000) in cash, or such other assets of equivalent

value, which the Commission, or its representative, in its sole

discretion may approve. Respondent Santamaria shall maintain such

amount in that account for so long as he continues to advertise,

promote, offer for sale, sell, or distribute any weight-loss product or

smoking deterrent or cessation product, directly or indirectly, to the

general public, and for at least five (5) years after he has ceased any

such activity. Respondent Santamaria shall pay all costs associated

with the creation, funding, operation, and administration of the escrow

account. The Commission, or its representative, shall, in its sole

discretion, select the escrow agent. The escrow agreement shall be in

substantially the form attached to this Order as Exhibit A.

The performance bond or escrow agreement shall provide that the

surety company or escrow agent, within thirty days following receipt of

notice that a final judgment or an order of the Commission against

respondent Santamaria for consumer redress or disgorgement in an action

brought under the provisions of the Federal Trade Commission Act has

been entered, or, in the case of an order of the Commission, has become

final, finding that he has violated the terms of this Order or the

Federal Trade Commission Act, and determining the amount of consumer

redress or disgorgement to be paid, shall pay to the Commission so much

of the performance bond or funds of the escrow account as does not

exceed the amount of consumer redress or disgorgement ordered, and

which remains unsatisfied at the time notice is provided to the surety

company or escrow agent, provided that, if respondent Santamaria has

agreed to the entry of a court order or an order of the Commission, a

specific finding that Santamaria violated the terms of this Order or

the provisions of the Federal Trade Commission Act shall not be

necessary. A copy of the notice provided for herein shall be mailed to

respondent Santamaria at his last known address.

Respondent Santamaria may not disclose the existence of the

performance bond or escrow account to any consumer, or other purchaser

or prospective purchaser, to whom a [[Page 16153]] covered product is

advertised, promoted, offered for sale, sold, or distributed, without

also disclosing at the same time and in a like manner that the

performance bond or escrow account is required by order of the Federal

Trade Commission in settlement of charges that respondent Santamaria

engaged in false and misleading representations.

XVII

It is further ordered that respondents, Taleigh Corporation and

Choice Diet Products, Inc., shall:

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

copy of this Order to each of respondents' current principals,

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

representatives having sales, advertising, or policy responsibility

with respect to the subject matter of this Order; and

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

Order, provide a copy of this Order to each respondents' 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 respondents or any subsidiary, successor, or assign,

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

responsibilities.

XVIII

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 are 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.

XIX

It is further ordered that respondents, Taleigh Corporation and

Choice Diet Products, Inc., shall notify the Federal Trade Commission

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

corporate structures, 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 for a bankruptcy petition, or any other corporate

change that may affect compliance obligations arising out of this

Order.

XX

It is further ordered that respondent, William J. Santamaria,

shall, for a period of seven (7) 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. 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 of

employment and his duties and responsibilities.

XXI

It is further ordered that respondents, Taleigh Corporation and

Choice Diet Products, Inc., corporations, their successors and assigns,

and their officers; and William J. Santamaria, individually and as an

officer and director of the corporate respondents; shall, within sixty

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

Federal Trade Commission may require, file with the Commission a

report, in writ ing, 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

Taleigh Corporation, Choice Diet Products, Inc., and William J.

Santamaria.

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 trade practices related to the

sale of several weight-loss pills and a smoking cessation product. The

Commission's Complaint alleges that proposed respondents Taleigh

Corporation, Choice Diet Products, Inc., and William J. Santamaria made

a number of false claims regarding the speed and ease with which

consumers can burn fat and lose substantial amounts of weight with

proposed respondents' weight-loss pills--MegaLoss, FormulaTrim, and

MiracleTrim. The Complaint also alleges that proposed respondents

falsely promoted these products as new or unique, as causing weight

loss without the need for users to diet or exercise, and as providing

the same weight-loss benefits as exercise. With respect to MiracleTrim,

the Complaint also alleges that respondents falsely represented that

consumers who ordered MiracleTrim would receive a personal weight-loss

consultation from a qualified professional.

With respect to MegaLoss, the Complaint also alleges that proposed

respondents represented that the product would not cause nervous

jitters or insomnia, or have any dangerous side effects, and that,

prior to the sale of MegaLoss, the active ingredient in the product was

not available without a prescription. The Complaint further alleges

that respondents represented that FormulaTrim and MegaLoss would ``burn

fat'' and that MegaLoss and MiracleTrim would significantly shrink

millions of fat cells.

The Complaint also alleges that proposed respondents falsely and

misleadingly represented that they possessed and relied upon a

reasonable basis when they made the claims set forth above. The

Complaint further alleges that proposed respondents falsely represented

that the MegaLoss and FormulaTrim pills are scientifically proven to

cause significant weight loss. The Complaint also charges that proposed

respondents failed to disclose adequately that certain consumer

endorsers appearing in their advertising had a material connection to

proposed respondents, in that the consumers had been compensated or

offered significant compensation for their endorsement.

The Complaint further alleges that proposed respondents have

engaged in several unfair and deceptive trade practices, including: (1)

Debiting consumers' bank accounts or billing consumers' credit card

accounts without their authorization; (2) offering a money-back

guarantee in their ads and then denying refunds or failing to make

timely refunds to consumers who have returned the product within the

required time period; (3) failing to deliver products at all or failing

to deliver products within a reasonable period of time; and (4)

violating the Truth in Lending Act by not processing credit charges in

a timely fashion.

Regarding Nicotain, a purported smoking cessation product, the

Complaint charges proposed respondents with representing falsely

[[Page 16154]] and without a reasonable basis that Nicotain enables

smokers to stop smoking quickly and easily, and that it works through

the same mechanism as a prescription smoking deterrent patch.

With respect to the advertising for both the weight loss pills and

Nicotain, the Complaint alleges that proposed respondents falsely

represented that consumer testimonials appearing in the ads reflect the

typical or ordinary experience of members of the public who have used

the products.

The proposed consent order ontains provisions designed to remedy

the violations charged and to prevent the proposed respondent from

engaging in similar acts in the future.

Part I of the proposed order prohibits proposed respondents from

representing that MegaLoss, FormulaTrim, and MiracleTrim, or any other

weight-loss product containing phenylpropanolamine as the active

ingredient: (1) Causes or assists in causing rapid weight loss; (2)

causes or assists in causing substantial weight loss without the need

to exercise or reduce caloric intake; (3) is new or unique or contains

a new or unique ingredient; (4) causes the burning of more body fat

than certain strenuous exercise; or (5) contains an active ingredient

that, prior to the sale of such product, was available only through

doctors.

Part II requires the 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 III prohibits proposed respondents from making

the types of weight-loss, fat burning and smoking cessation claims

alleged in the complaint to be false and unsubstantiated, unless the

claims are true and substantiated by competent and reliable scientific

evidence. Part IV prohibits proposed respondents from representing that

Nicotain or any substantially similar product (a) will enable smokers

to stop smoking easily, or (b) works through a mechanism substantially

similar to a prescription smoking deterrent patch. Part V prohibits any

misrepresentation concerning the nature or mechanism of operation of

any smoking cessation product.

Part VI prohibits proposed respondents from misrepresenting that:

(1) Any product or program is new or unique, or contains a new or

unique ingredient; (2) consumers who order any product or program will

receive a personal consultation from a physician or medically trained

weight-loss counselor; or (3) the results claimed in consumer

testimonials constitute the typical or ordinary experience of members

of the public who use the advertised product or program.

Part VII of the proposed order requires proposed respondents to

disclose, clearly and prominently, a material connection, where one

exists, between any endorser and the proposed respondents.

Part VIII prohibits proposed respondents from misrepresenting the

contents, validity, results, conclusions, or interpretations of any

test or study. Part IX requires that proposed respondents have

competent and reliable scientific evidence to substantiate the

following categories of claims for any product or program: (1) Any

representations regarding dangerous side effects, nervous jitters,

insomnia, or any other adverse health effects; (2) any representations

that the product or program burns, reduces, or diminishes body fat; and

(3) any representations that the product or program will significantly

shrink fat cells. Part X requires proposed respondents to possess

scientific substantiation before making representations regarding the

performance, benefits, efficacy, or safety of any weight-loss product,

smoking deterrent or cessation product, food, food or dietary

supplement, drug, or device.

Parts XI and XII contain safe harbors for claims that are permitted

on the labeling of foods and drugs under the applicable FDA

regulations.

Part XIII bans proposed respondents' practice of charging a

consumer's credit card account of debiting a consumer's checking

account in excess of the amount affirmatively authorized by the

consumer. Under Part XIV, proposed respondents are prohibited from

misrepresenting the terms of a money-back guarantee and from failing to

provide a refund when a consumer has complied with the conditions

stated in the advertisement for obtaining a refund. Part XV prohibits

proposed respondents from failing to comply with the requirements of

the Commission's Mail or Telephone Order Merchandise Rule, as amended,

effective March 1, 1994.

Part XVI requires that as a condition of advertising, promoting,

offering for sale, selling, or distributing any weight-loss product or

smoking deterrent or cessation product, proposed respondent Santamaria

either obtain a performance bond or establish an escrow account in the

amount of $300,000.

Part XVII requires proposed respondents to maintain, for five (5)

years, all materials that support, contradict, qualify, or call into

question any representations they make which are covered by the

proposed order. Part XVIII requires the proposed corporate respondents

to distribute a copy of the order to current and future principals,

officers, directors, and managers, as well as to any employees having

sales, advertising, or policy responsibility with respect to the

subject matter of the order. Under Part XIX of the proposed order, the

proposed corporate respondents must notify the Federal Trade Commission

at least thirty (30) days prior to certain proposed changes in their

structures. Part XX requires that proposed respondent Santamaria, for a

period of seven (7) years, notify the Commission of any change in his

business or employment. Part XXI obliges 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 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. 95-7634 Filed 3-28-95; 8:45 am]

BILLING CODE 6750-01-M