Home Shopping Network, Inc.; Home Shopping Club, Inc.; HSN Lifeway Health Products, Inc.; Proposed Consent Agreement With Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. D09272]

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

Lifeway Health Products, 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 or deceptive acts or practices and unfair methods of

competition, this consent agreement, accepted subject to final

Commission approval, would require, among other things, the St.

Petersburg, Florida-based television advertiser and two of its

subsidiaries to have competent and reliable scientific evidence before

making any claim that a food, dietary supplement, or drug can cure,

treat, or prevent any disease or has any effect on the structure or

function of the human body and before making any claims about the

performance, benefits, or efficacy of any smoking-cessation program,

product, or service. The consent agreement settles allegations that the

respondents made a number of health-related claims about four mouth

sprays without having the necessary evidence to back them up. The stop-

smoking spray and three vitamin sprays were marketed during an

advertising program called ``Spotlight on Ruta Lee'' which was produced

and disseminated by Home Shopping Club.

DATES: Comments must be received on or before September 23, 1996.

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: Lisa B. Kopchik, Federal Trade

Commission, 6th and Pennsylvania Avenue, NW, S-4002, Washington, DC

20580. (202) 326-3139. Joel Winston, Federal Trade Commission, 6th and

Pennsylvania Avenue, NW., S-4002, Washington, DC 20580, (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 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)).

This agreement herein, by and between Home Shopping Network, Inc.,

Home Shopping Club, Inc., and HSN Lifeway Health Products, Inc.,

corporations, hereinafter sometimes

[[Page 38739]]

referred to as respondents, and their attorneys, and counsel for the

Federal Trade Commission, is entered into in accordance with the

Commission's Rule governing consent order procedures. In accordance

therewith the parties hereby agree that:

1.a. Respondent Home Shopping Network, Inc. is a Delaware

corporation, with its principal office or place of business at 11831

30th Court North, St. Petersburg, Florida 34618-9090.

1.b. Respondent Home Shopping Club, Inc. is a Delaware corporation,

with its principal office or place of business at 11831 30th Court

North, St. Petersburg, Florida 34618-9090. Home Shopping Club, Inc. is

a wholly-owned subsidiary of Home Shopping Network, Inc.

1.c. Respondent HSN Lifeway Health Products, Inc. is a Delaware

corporation, with its principal office or place of business at 11831

30th Court North, St. Petersburg, Florida 34618-9090. HSN Lifeway

Health Products, Inc. is a wholly-owned second tier subsidiary of Home

Shopping Network, Inc.

2. Respondents have been served with a copy of the complaint issued

by the Federal Trade Commission charging them with violations of

Sections 5(a) and 12 of the Federal Trade Commission Act, and have

filed an answer to the complaint denying said charges.

3. Respondents admit all the jurisdictional facts set forth in the

Commission's complaint in this proceeding.

4. 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;

c. All rights to seek judicial review or otherwise to challenge or

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

and

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

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

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

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

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

respect thereto publicly released. The Commission thereafter may either

withdraw its acceptance of this agreement and so notify the

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

appropriate, or issue and serve its decision, in disposition of the

proceeding.

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

constitute an admission by respondents of facts, other than

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

complaint issued by the Commission.

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

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

Commission pursuant to the provisions of Section 3.25(f) of the

Commission's Rules, the Commission may, without further notice to

respondents, (1) issue its decision containing the following order to

cease and desist in disposition of the proceeding, and (2) make

information public in respect thereto. When so entered, the order to

cease and desist shall have the same force and effect and may be

altered, modified or set aside in the same manner and within the same

time provided by statute for other orders. The order shall become final

upon service. Delivery by the U.S. Postal Service of the decision

containing the agreed-to order to respondents' address as stated in

this agreement shall constitute service. 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.

8. Respondents have read the complaint and the 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. 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

Definitions

For the purposes 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.

I

It is ordered that respondents Home Shopping Network, Inc., Home

Shopping Club, Inc., and HSN Lifeway Health Products, Inc.,

corporations, their successors and assigns, by and through their

officers, 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. Sec. 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 cure, treat, or prevent any

disease, or have any effect 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.

II

It is further ordered that respondents Home Shopping Network, Inc.,

Home Shopping Club, Inc., and HSN Lifeway Health Products, Inc.,

corporations, their successors and assigns, by and through their

officers, 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

[[Page 38740]]

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 or efficacy 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.

III

Nothing in this order shall prohibit respondents from making any

representation for any product that is specifically permitted in

labeling for such product by regulations promulgated by the Food and

Drug Administration pursuant to the Nutrition Labeling and Education

Act of 1990.

IV

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.

V

It is further ordered that, for three (3) years after the last date

of dissemination of any representation covered by this order,

respondents Home Shopping Network, Inc., Home Shopping Club, Inc., and

HSN Lifeway Health Products, Inc., corporations, or their successors

and assigns, shall maintain and upon request make available to the

Federal Trade Commission for inspection and copying copies of all

advertisements which contain any such representation, including

videotape recordings of all such broadcast advertisements.

VI

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

of dissemination of any representation covered by this order,

respondents Home Shopping Network, Inc., Home Shopping Club, Inc., and

HSN Lifeway Health Products, Inc., corporations, 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 contradict, qualify, or

call into question such representation, or the basis relied upon for

such representation, including complaints from consumers.

VII

It is further ordered that respondents Home Shopping Network, Inc.,

Home Shopping Club, Inc., and HSN Lifeway Health Products, Inc.,

corporations, shall, 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.

VIII

It is further ordered that the respondents Home Shopping Network,

Inc., Home Shopping Club, Inc., and HSN Lifeway Health Products, Inc.,

their successors and assigns, shall notify the Commission at least

thirty (30) days prior to any change in the corporations that may

affect compliance obligations arising under this order, including but

not limited to a dissolution, assignment, sale, merger, or other action

that would result in the emergence of a successor corporation; the

creation or dissolution of a subsidiary, parent, or affiliate that

engages in the acts or practices subject to this order; the proposed

filing of a bankruptcy petition; or a change in the corporate name or

address. Provided, however, that, with respect to any proposed change

in the corporation about which the respondents learn less than thirty

(30) days prior to the date such action is to take place, respondents

shall notify the Commission as soon as practicable after obtaining such

knowledge. All notices required by this Part shall be sent by certified

mail to the Associate Director, Division of Enforcement, Bureau of

Consumer Protection, Federal Trade Commission, Washington, D.C. 20580.

IX

It is further ordered that respondents Home Shopping Network, Inc.,

Home Shopping Club, Inc., and HSN Lifeway Health Products, Inc.,

corporations, 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.

X

This order will terminate twenty (20) years from the date of its

issuance, or twenty (20) years from the most recent date that the

United States or the Federal Trade Commission files a complaint (with

or without an accompanying consent decree) in federal court alleging

any violation of the order, whichever comes later; provided, however,

that the filing of such a complaint will not affect the duration of:

A. Any Part in this order that terminates in less than twenty (20)

years;

B. This order's application to any respondent that is not named as

a defendant in such complaint; and

C. This order if such complaint is filed after the order has

terminated pursuant to this Part.

Provided, further, that if such complaint is dismissed or a Federal

court rules that the respondent did not violate any provision of the

order, and the dismissal or ruling is either not appealed or upheld on

appeal, then the order will terminate according to this Part as though

the complaint had never been filed, except that the order will not

terminate between the date such complaint is filed and the later of the

deadline for appealing such dismissal or ruling and the date such

dismissal or ruling is upheld on appeal.

Analysis of Proposed Consent Order To Aid Public Comment

The Federal Trade Commission has accepted an agreement to a

proposed consent order from Home Shopping Network, Inc. (``HSN''), Home

Shopping Club, Inc. (``HSC''), and HSN Lifeway Health Products, Inc.

(``Lifeway'').

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 Commission issued a complaint on March 2, 1995

charging that HSN, HSC and Lifeway created and disseminated a series of

television

[[Page 38741]]

advertisements called ``Spotlight on Ruta Lee'' on which the Life Way

Spray Products were sold. These advertisements featured Ruta Lee as a

celebrity show host and were seen on the Home Shopping Club, commercial

programming shown on the Home Shopping Network's cable and broadcast

channels.

The Commission's complaint against HSN, HSC, and Lifeway was

withdrawn from adjudication on May 14, 1996, prior to commencement of

the administrative hearing, so that the Commission can consider the

proposed order. Previously, the Commission had issued a consent order

against Ruta Lee and Live-Lee Productions, Inc. to settle charges

against Ruta Lee for her role in making and disseminating these

advertisements (Live-Lee Prods, Inc., Docket No. C-3620, Oct. 10,

1995).

HSN is a holding company for numerous subsidiaries which are

engaged primarily in the marketing, advertising, sale and distribution

of consumer products through broadcast and cable television. HSC, a

wholly-owned subsidiary of HSN, produces commercial television

programming. Lifeway is a wholly-owned ``second tier'' subsidiary of

HSN which sells vitamins and other health-related products.

According to the FTC complaint, the respondents made claims 1) that

the vitamins in the Life Way Spray Products are more fully absorbed by

the human body than vitamins taken in pill form; 2) that the Vitamin C

and Zinc Spray would heal mouth lesions, cold sores, and cracking of

the corners of the lips, and prevent common colds; 3) that the Vitamin

B-12 Spray would treat hangover symptoms and increase users' energy;

and 4) that the Antioxidant Spray would ensure the proper functioning

of the immune system, reduce the risk of contracting infectious

diseases, and prevent facial lines. The complaint also alleges that the

respondents made claims that the Smoke-Less Nutrient 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 a reasonable basis for these

representations at the time they were made.

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 cure, treat, or prevent any disease or have any effect 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 or efficacy of any

smoking cessation product, program, or service, unless, at the time

they make the representation, they possess and rely upon competent and

reliable scientific evidence that substantiates the representation.

Part III allows the respondents to make representations for any

product that are specifically permitted in labeling for that product by

regulations issued by the Food and Drug Administration (``FDA'') under

the Nutrition Labeling and Education Act of 1990. Part IV allows the

respondents to make representations for any drug that are permitted in

labeling for that drug under any tentative final or final FDA standard

or under any new drug application approved by the FDA.

Parts V through IX require the respondents to keep copies of

advertisements making representations covered by the order; to keep

records concerning those representations, including materials that they

relied upon when making the representations; to provide copies of the

order to certain of respondents' personnel; to notify the Commission of

changes in corporate structure; and to file compliance reports with the

Commission. Part X provides that the order will terminate after twenty

(20) years under certain circumstances.

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. 96-18858 Filed 7-24-96; 8:45 am]

BILLING CODE 6750-01-U