Jenny Craig, Inc.; Jenny Craig International, Inc.; Analysis to Aid Public Comment

FEDERAL TRADE COMMISSION

[Docket No. 9260]

Jenny Craig, Inc.; Jenny Craig International, Inc.; Analysis to

Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: The consent agreement in this matter settles alleged

violations of federal law prohibiting unfair or deceptive acts or

practices or unfair methods of competition. The attached Analysis to

Aid Public Comment describes both the allegations in the draft amended

complaint that accompanies the consent agreement and terms of the

consent order--embodied in the consent agreement--that would settle

these allegations.

DATES: Comments must be received on or before August 4, 1997.

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:

Jeffrey Klurfeld, Federal Trade Commission, San Francisco Regional

Office, 901 Market Street, Suite 570, San Francisco, CA 94103. (415)

356-5270.

Matthew Gold, Federal Trade Commission, San Francisco Regional Office,

901 Market Street, Suite 570, San Francisco, CA 94103. (415) 356-5270.

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

Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46, and section 3.25 of

the Commission's Rules of Practice (16 CFR 3.25), 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 May 29, 1997), 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, NW., Washington, DC 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, subject to

final approval, to a proposed consent order from Jenny Craig, Inc., and

Jenny Craig International, Inc. (hereinafter ``Jenny Craig'' or

``respondents''), marketers of the Jenny Craig Weight Loss Program. The

Jenny Craig Weight Loss Program is offered to the public nationwide

through company-owned and franchised clinics.

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

sixty (60) days for the 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 any 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.

The Commission's complaint alleged that the respondents deceptively

advertised: (1) their program's success in helping customers achieve

and maintain weight loss; (2) the time frame within which consumers

will achieve their desired weight loss goals; (3) the purchase price of

the program; and (4) the extent to which Jenny Craig customers would

recommend the program to others. The complaint further alleged that

respondents engaged in the deceptive practice of failing to warn

clients whom they monitor of the health importance of following the

diet protocol.

Weight Loss and Weight Maintenance Success Claims

The complaint against Jenny Craig alleges that the company failed

to possess a reasonable basis for claims it made regarding the success

of its customers in losing weight and maintaining the weight loss

achieved on the program. Through consumer testimonials and other

advertisements, Jenny Craig represented that its customers typically

are successful in reaching their weight loss goals and in maintaining,

either long-term or permanently, the weight loss achieved under the

Jenny Craig program.

The proposed consent order seeks to address the alleged success

misrepresentations cited in the accompanying complaint in several ways.

First, the proposed order, in Part I.A., requires the company to

possess a reasonable basis consisting of competent and reliable

scientific evidence substantiating any claim about the success of

participants on any diet program in achieving or maintaining weight

loss. To ensure compliance, the proposed order further specifies what

this level of evidence shall consist of when certain types of success

claims are made:

(1) In the case of claims that weight loss is typical or

representative of all participants using the program or any subset of

those participants, that evidence shall be based on a representative

sample of: (a) all participants who have entered the programs where the

representation relates to such persons; or (b) all participants who

have completed a

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particular phase of the program or the entire program, where the

representation only relates to such persons.

(2) In the case of claims that any weight loss is maintained long-

term, that evidence shall be based upon the experience of participants

who were followed for a period of at least two years after their

completion of the respondents' program, including any periods of

participation in respondents' maintenance program.

(3) In the case of claims that weight loss is maintained

permanently, that evidence shall be based upon the experience of

participants who were followed for a period of time after completing

the program that is either: (a) generally recognized by experts in the

field of treating obesity as being of sufficient length to constitute a

reasonable basis for predicting that weight loss will be permanent; or

(b) demonstrated by competent and reliable survey evidence as being of

sufficient duration to permit such a prediction.

Second, Part I.B. of the proposed order requires the respondents,

when making any claim that participants of any diet program have

successfully maintained weight loss, to disclose the fact that ``For

many dieters, weight loss is temporary.'' In addition, Part I.C.

requires respondents to disclose the following information relating to

that claim:

(1) the average percentage of weight loss maintained by those

participants (e.g., ``60% of achieved weight loss was maintained''),

(2) the duration over which the weight loss was maintained,

measured from the date that participants ended the active weight loss

phase of the program, and the fact that all or a portion of the time

period covered includes participation in respondents' maintenance

program(s) that follows active weight loss, if that is the case (e.g.,

``Participants maintain an average of 60% of weight loss 22 months

after active weight loss (includes 18 months on a maintenance

program)),'' and

(3) the proportion of the total participant population that those

participants represent, if the participant population referred to is

not representative of the general participant population for that

program (e.g., ``Participants on maintenance--30% of our clients--kept

off an average of 66% of the weight for one year (includes time on

maintenance program)).'' (In lieu of that factual disclosure,

respondents may state: ``Jenny Craig makes no claim that this result is

representative of all participants in the Jenny Craig program).''

Third, for maintenance success claims made in broadcast

advertisements of thirty-seconds or less duration, the proposed order,

in Part I.D., provides that Jenny Craig, in lieu of making the factual

disclosures set out in Part I.C., may (1) include in such

advertisements the statement ``Check at our centers for details about

our maintenance record,'' and (2) provide consumers at point-of-sale

with a document containing certain maintenance information, which

includes the factual disclosures required by Part I.C. The proposed

order specifies that this document must be signed by the client and

retained in the company's client file.

The proposed order makes clear that the alternative disclosure

requirement contained in Part I.D. does not relieve Jenny Craig of the

obligation to substantiate any maintenance success claim in accordance

with Part I.A. of the proposed order. In addition, the proposed order

specifies that, if Jenny Craig makes a maintenance success claim that

uses numbers or descriptive terms that convey a quantitative measure,

such as ``most of our customers maintain their weight loss long term,''

Jenny Craig would have to make all the disclosures required by Part

I.C. in the ad and provide the disclosures at point-of-sale.

Fourth, Part I.E. of the proposed order addresses weight-loss and

weight-loss maintenance success claims, made through endorsements or

testimonials, that are not representative of what Jenny Craig Weight

Loss Program participants generally achieve. Part I.E. requires

respondents to disclose either what the generally expected success

would be for Jenny Craig customers, or the limited applicability of the

endorser's experience to what consumers may generally expect to

achieve. The proposed order's treatment of testimonial claims is in

accordance with the Commission's ``Guides Concerning Use of

Endorsements and Testimonials in Advertising'' 16 CFR 255.2(a). Under

the proposed order, Jenny Craig may disclose ``generally expected

success'' by use of the following format in the relevant advertisement:

``Weight loss averages__lbs. over__weeks.'' Alternatively, respondents

may disclose in the advertisement the average number of pounds lost by

their customers, and provide to each potential customer, prior to

entering into an agreement, a form containing more detailed weight loss

information. Respondents may disclose ``limited applicability'' by use

of one of several alternative statements, such as ``This result is not

typical. You may be less successful.''

Finally, the proposed order, in Part I.L., generally prohibits the

company from misrepresenting the performance or efficacy of any weight

loss program.

Rate of Weight Loss Claims

The Commission's complaint further alleges that Jenny Craig failed

to possess a reasonable basis for its claim made during initial sales

presentations that consumers will typically reach their desired weight-

loss goals within the time frame set by the company's computer program.

To address this practice, Part I.I. of the proposed order prohibits

Jenny Craig from representing that prospective participants will reach

a specified weight within a specified period of time, unless

respondents possess and rely upon competent and reliable scientific

evidence substantiating the representation. Part I.J. of the proposed

order would prevent respondents from misrepresenting the rate or speed

at which any program participant has experienced or will experience

weight loss.

Price Claims

The Commission's complaint against Jenny Craig also alleges that

the company falsely represented that the price it advertised for its

diet program is the only cost associated with losing weight on the diet

program, when, in fact, there are substantial additional mandatory

expenses that far exceed the advertised price. The complaint further

alleges that respondents failed to disclose adequately to consumers the

existence and amount of all mandatory expenses associated with

participation in the diet program.

The proposed consent order seeks to address these practices in four

ways. First, Part I.F. of the proposed order prohibits untrue

representations that an advertised price for a weight loss program is

the only cost associated with losing weight on that program. Second,

for any advertisement containing a price at which any weight loss

program can be purchased, Part I.G. of the proposed order requires

Jenny Craig to disclose either the existence and amount of all

mandatory costs or fees associated with the program offered or a

statement identifying a list of all products or services that

participants must purchase at an additional cost. This disclosure must

be made orally under the proposed order if the price representation is

made orally in broadcast media.

Third, Part I.H. of the proposed order requires the respondents to

disclose over the telephone to callers who inquire or are told about

the cost of any weight loss program, the existence and amount of any

mandatory costs or fees

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associated with participation in the program. Finally, Part I.L.

generally prohibits the company from misrepresenting the price of any

weight loss program.

Health Risks Claims

According to the complaint, Jenny Craig provides its customers with

diet protocols that require the customers to come into one of proposed

respondents' centers once a week for monitoring of their progress,

including weighing in. In the course of regularly ascertaining weight

loss progress, respondents, in some instances, have been presented with

weight loss results indicating that customers are losing weight

significantly in excess of their projected goals, which is an

indication that they may not be consuming all of the food prescribed by

their diet protocol. According to the complaint, such conduct could, if

not corrected promptly, result in health complications. The

Commission's complaint alleges that Jenny Craig failed to disclose to

consumers who were losing weight significantly in excess of their

projected goals that failing to follow the diet protocol and consume

all of the food prescribed could result in health complications.

The proposed consent order seeks to address this allegation in two

ways. First, the proposed order, in Part I.K., requires Jenny Craig to

disclose in writing to all participants, when they enter the program,

that failure to follow the program protocol and eat all of the food

recommended may involve the risk of developing serious health

complications. Second, the proposed order, in Part I.L., generally

prohibits any misrepresentation concerning the safety of any weight

loss program.

Customer Satisfaction Claims

The complaint also alleges that Jenny Craig deceptively advertised

that ``nine out of ten'' Jenny Craig clients would recommend Jenny

Craig to their friends. The complaint further alleges that the

company's claim that competent and reliable studies or surveys

substantiate the ``nine out of ten'' claim was false.

The proposed order seeks to address these claims in two ways.

First, Part I.M. would require respondents to possess competent and

reliable evidence (which when appropriate must be competent and

reliable scientific evidence) for any representation that participants

on any weight loss program recommend or endorse the program. Second,

Part I.N. would prevent respondents from misrepresenting the existence,

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

test, study, or survey.

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. 97-14678 Filed 6-4-97; 8:45 am]

BILLING CODE 6750-01-M