Phaseout of America, Inc.; Products & Patents, Ltd.; Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 932-3180]

Phaseout of America, Inc.; Products & Patents, Ltd.; 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 Lynbrook,

New York-based company to possess competent and reliable scientific

evidence to substantiate all claims about the performance, efficacy, or

benefits of any smoking-cessation or cigarette-modification product.

The agreement also prohibits the company from making claims challenged

as false in the future. The agreement settles allegations that

advertising claims for PhaseOut, a device marketed as helping smokers

to stop smoking and making cigarettes less harmful are unsubstantiated.

DATES: Comments must be received on or before February 3, 1997.

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: Lesley Anne Fair, Federal Trade

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

20580. (202) 326-3081. Shira Modell, Federal Trade Commission, S-4002,

6th and Pennsylvania Ave., NW, Washington, DC 20580. (202) 326-3116.

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 above-captioned 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. The following Analysis to Aid

Public Comment describes the terms of the consent agreement, and the

allegations in the accompanying complaint. An electronic copy of the

full text of the consent agreement package can be obtained from the

Commission Actions section of the FTC Home page (for November 14,

1996), on the World Wide Web, at ``http://www.ftc.gov/os/actions/htm.''

A paper copy can be obtained from the FTC Public Reference Room, Room

H-130, Sixth Street and Pennsylvania Avenue, N.W., Washington, D.C.

20580, either in person or by calling (202) 326-3627. 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)).

Analysis of Proposed Consent Order To Aid Public Comment

The Federal Trade Commission has accepted an agreement to a

proposed consent order from Phaseout of America, Inc. and Products &

Patents, Ltd. This matter concerns advertising for PhaseOut, a device

which punches one or more small holes in cigarettes and which was

advertised as both aiding in smoking cessation and making cigarettes

less harmful.

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 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.

The Commission's complaint in this matter challenges three sets of

representations made by respondents regarding the performance of

PhaseOut: its ability to reduce smokers' intake of smoke constituents,

allow smokers to quit smoking, and reduce health risks for smokers who

continue smoking.

According to the Commission's complaint, the respondents made

unsubstantiated representations that PhaseOut reduces by certain

specified percentages the amount of nicotine, tar, and carbon monoxide

that smokers, get, and does so without changing a cigarette's taste or

draw; and that smokers using PhaseOut will not compensate for its

effects by increasing the number of cigarettes they smoke per day. The

complaint also alleges that the respondents misrepresented that a

particular study conducted at The Johns Hopkins University proves that

PhaseOut significantly reduces the amount of tar, nicotine, and carbon

monoxide smokers get under normal smoking conditions. According to the

complaint, the study was conducted under carefully controlled

conditions that did not reflect how smokers actually smoke. The

complaint explains that the study did not take into account

compensatory smoking--the tendency of some smokers who switch to lower

yield cigarettes to smoke more cigarettes or to smoke each one more

intensively (e.g., taking bigger or more frequent puffs), often without

realizing it.

The complaint further alleges that the respondents made

unsubstantiated representations that PhaseOut enables smokers to quit

and to do so without withdrawal symptoms; and that the respondents

falsely claimed that PhaseOut's effectiveness in enabling smokers to

quit smoking is proven by the Johns Hopkins study.

The complaint also alleges that the respondents made

unsubstantiated representations that PhaseOut significantly reduces the

risk of smoking-related health problems, including lung cancer and

heart disease, for smokers who continue to smoke and that it also

provides immediate health benefits including reduced congestion,

coughing or windedness. The complaint further challenges the related

misrepresentation that the Johns Hopkins study proves that smokers who

use PhaseOut and continue to smoke significantly reduce their risk of

smoking-related health problems.

In addition, the complaint alleges that the respondents represented

without substantiation that testimonials contained in advertisements

for PhaseOut reflect the typical or ordinary experience of consumers

who use the product.

The proposed consent order contains provisions designed to remedy

the violations charged and to prevent the respondents from engaging in

similar acts and practices in the future.

Part I of the order prohibits the respondents from making the

representations challenged as false in the proposed complaint about the

Johns Hopkins study's findings concerning PhaseOut.

[[Page 64527]]

Part II requires respondents to possess competent and reliable

scientific evidence to substantiate claims that any smoking-cessation

or cigarette-modification product: (A) reduces the amount of nicotine,

tar, carbon monoxide, or any other component of cigarette smoke that

smokers get from smoking a cigarette; (B) is effective in enabling or

helping smokers to quit smoking; (C) reduces the risk of smoking-

related health problems for smokers who continue to smoke; (D) reduces

the amount of nicotine, tar, carbon monoxide, or any other component of

cigarette smoke that smokers get without changing a cigarette's taste

or draw; (E) is effective in enabling or helping smokers to quit

smoking without withdrawal symptoms; or (F) provides immediate health

benefits, such as reduced congestion, coughing or windedness, for

smokers who continue to smoke. Part II also requires respondents to

possess competent and reliable scientific evidence to substantiate

claims that smokers using any such product will not compensate for the

product's effects by increasing the number of cigarettes they smoke per

day.

Part III requires respondents to possess competent and reliable

scientific evidence to substantiate any performance, benefit or

efficacy claims for smoking-cessation or cigarette- modification

products.

Part IV prohibits the respondents from misrepresenting the

existence, contents, validity, results, conclusions, or interpretations

of any test or study.

Part V requires respondents either to possess competent and

reliable scientific evidence to substantiate claims that any

endorsement reflects the typical or ordinary experience of consumers

who use the product; or to clearly and prominently disclose either: a)

what the generally expected results would be, or b) that consumers

should not expect to experience similar results.

Part VI requires respondents to send a postcard to identifiable

past purchasers of PhaseOut notifying them of the Commission's action

in this case and advising them that PhaseOut has not been proven to

reduce the risk of smoking-related diseases or to make cigarettes

``safer.'' Part VI also requires respondents to send a letter to their

purchasers for resale requesting the names and addresses of their

customers and notifying them that if the purchasers for resale do not

stop using advertising and promotional materials containing claims

covered by this order, the respondents are required to stop doing

business with them. Part VII requires the respondents to maintain for

five years copies of all communications with consumers and purchasers

for resale pursuant to the terms of Part VI.

The proposed order also requires respondents to maintain materials

relied upon to substantiate the claims covered by the order, to

distribute copies of the order to certain current officers and

employees, to notify the Commission of any changes in corporate

structure that might affect compliance with the order, and to file one

or more reports detailing compliance with the order. The order also

contains a provision stating that it will terminate after twenty (20)

years absent the filing in federal court, by either the United States

or the FTC, of a complaint against the respondents alleging a violation

of the order.

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 any of

their terms.

Donald S. Clark,

Secretary.

[FR Doc. 96-30943 Filed 12-4-96; 8:45 am]

BILLING CODE 6750-01-P