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L&S Research Corporation Proposed Consent Agreement (1994)
Case: L&S Research Corporation Proposed Consent Agreement (1994)
Subject Category: Consent Agreement
Agency Involved: FTC
Complaint Synopsis: The FTC claimed that L&S Research claimed that its products were effective in achieving results that were not supported by reliable scientific research.
Consent Details: L&S Research Corporation manufactured weight loss and body building supplements marketed under the Cybergencis trade name. The company agreed to stop advertising that the product would be effective in helping the user gain muscle or lose fat and that the product would work for all users. The company also agreed to stop using before and after photographs in the marketing of their products unless the photographs represent the typical experience of the users and the photographs are true representations. The company further agreed to pay a fine of $1.45 million, and maintain records of their compliance with the consent agreement.
Practical Importance to Business of MLM/Direct Sales/Direct Selling/Network Marketing/Party Plan/Multilevel Marketing: Photographs used to demonstrate a product's efficacy must properly demonstrate the typical experience of users, just as endorsements and client testimony are required to.
L&S Research Corporation Proposed Consent Agreement (1994) , File No. 912 3004 : L&S Research Corporation manufactured weight loss and body building supplements marketed under the Cybergencis trade name. The company agreed to stop advertising that the product would be effective in helping the user gain muscle or lose fat and that the product would work for all users. The company also agreed to stop using before and after photographs in the marketing of their products unless the photographs represent the typical experience of the users and the photographs are true representations. The company further agreed to pay a fine of $1.45 million, and maintain records of their compliance with the consent agreement.
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[Federal Register: July 27, 1994]
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FEDERAL TRADE COMMISSION
[File No. 912 3004]
L&S Research 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
require, among other things, the New Jersey corporation and its officer
to pay $1.45 million to the United States Treasury, would prohibit the
respondents from making misrepresentations regarding the efficacy of
their bodybuilding an weight loss products, and would require them to
possess competent and reliable scientific evidence to substantiate
future bodybuilding and weight loss claims.
DATES: Comments must be received on or before September 26, 1994.
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:
Richard Cleland or Nancy Warder, FTC/S-4002, Washington, D.C. 20580.
(202) 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 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)).
Before Federal Trade Commission
In the matter of L&S Research Corporation, a corporation, and
Scott Chinery, individually and as an officer of said corporation.
File No. 912-3004.
Agreement Containing Consent Order To Cease and Desist
The Federal Trade Commission, having initiated an investigation of
certain acts and practices of L&S Research Corporation, a corporation,
and Scott Chinery, individually and as an officer of said corporation,
and it now appearing that L&S Research Corporation, a corporation, and
Scott Chinery, individually and as an officer of said corporation,
hereinafter sometimes referred to as 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 L&S Research Corporation, by its
authorized officer, and Scott Chinery, individually and as an officer
of said corporation that,
1. (a) Proposed respondent L&S Research Corporation is a
corporation organized, existing, and doing business under and by virtue
of the laws of the State of New Jersey, with its office and principal
place of business located at 450 Oberlin Ave., S., in the City of
Lakewood, State of New Jersey.
(b) Proposed respondent Scott Chinery is an officer of said
corporation. He formulates, directs, and controls the policies, acts,
and practices of said corporation, and his principal place of business
is located at the above stated address.
2. Proposed respondents admit all the jurisdictional facts set
forth in the draft complaint here attached.
3. Proposed respondents waive:
(a) any further procedural steps;
(b) the requirement that the Commission's decision contain a
statement of facts or conclusion 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) all claims under the Equal Access to Justice Act.
4. This Agreement shall not become part of the public record in 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 the 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 the proposed respondents of facts, other
than jurisdictional facts, or of violations of law as alleged in the
draft complaint here attached, or that proposed respondents have
engaged in any other unlawful conduct.
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 the proposed
respondents, (1) issue its complaint corresponding in form and
substance with the draft of complaint here attached and its decision
concerning 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 to 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 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.
8. If it is accepted by the Commission, this Agreement constitutes
a full settlement between the Commission and proposed respondents as to
the activities alleged in the complaint to have constituted violations
of the Federal Trade Commission Act and which occurred prior to the
date of entry of the Order. As to those activities alleged in the
complaint, and which occurred prior to the date of entry of the Order,
the Commission hereby releases the proposed respondents from all other
further liability to the Commission.
Order
For purposes of this Order the following definitions apply:
A. ``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 by others in the profession to yield
accurate and reliable results.
B. ``Substantially similar product'' shall mean any product that is
substantially similar in composition, in terms of the types of
ingredients that it contains, or possesses substantially similar
properties.
I
It is ordered That respondents, L&S Research Corporation, a
corporation, its successors and assigns, and Scott Chinery,
individually and as an officer of said corporation, and respondents'
agents, representatives, and employees, directly or through any
corporation, subsidiary, division, or other device, in connection with
the manufacturing, labeling, advertising, promotion, offering for sale,
sale, or distribution of the product component of Cybergencis Total
Body Building System, Cybergencis for Hard Gainers, or any
substantially similar 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:
A. Any such product component causes a user of such product to
achieve greater or more rapid loss of fat or gain of muscle than a non-
user of such product; or
B. Any such product component works for all users.
II
It is further ordered That respondents, L&S Research Corporation, a
corporation, its successors and assigns, and Scott Chinery,
individually and as an officer of said corporation, and respondents'
agents, representatives, and employees, directly or through any
corporation, subsidiary, division, or other device, in connection with
the manufacturing, labeling, advertising, promotion, offering for sale,
sale, or distribution of Cybergenics Mega-Fat Burner Tablet (also known
as Super Fat-Loss Tablet) [referred to herein as Cybergenics Mega-Fat
Burner Tablet], or the product component of Cybertrim, Cybergenics
QuickTrim, or any substantially similar 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:
A. Any such product component or Cybergenics Mega-Fat Burner Tablet
causes a user of such product to maintain weight loss longer than a
non-user of such product; or
B. Any such product component or Cybergenics Mega-Fat Burner Tablet
provides a benefit to a maturing person who uses such product which
causes that person to lose more weight than a non-user of such product.
III
It is further ordered That respondents, L&S Research Corporation, a
corporation, its successors and assigns, and Scott Chinery,
individually and as an officer of said corporation, and respondents'
agents, representatives, and employees, directly or through any
corporation, subsidiary, division, or other device, in connection with
the manufacturing, labeling, advertising, promotion, offering for sale,
sale, or distribution of Cybergenics Mega-Fat Burner Tablet, or the
product component of Cybergenics Total Body Building System,
Cybergenics for Hard Gainers, Cybertrim, Cybergenics QuickTrim, or any
substantially similar product, (do forthwith cease and desist from
representing, directly or by implication, contrary to fact, that
scientific evidence demonstrates that:
A. Any such product intended for body building causes a user to
lose more fat or gain more muscle than a non-user of such product; or
B. Any such product intended for weight or fat loss causes a user
to lose more fat or weight than a non-user of such product.
IV
It is further ordered That respondents, L&S Research Corporation, a
corporation, its successors and assigns, and Scott Chinery,
individually and as an officer of said corporation and respondents'
agents, representatives, and employees, directly or through any
corporation, subsidiary, division, or other device, in connection with
the manufacturing, labeling, advertising, 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. Any such product or program causes, assists, or enables a user
to lose or control weight or fat loss, or maintain weight or fat loss,
or to suppress hunger or appetite;
B. Any such product or program causes, assists, or enables a user
to achieve muscle gain or development;
C. Any such product or program works for all users;
D. Chromium picolinate in any such product, or used in conjunction
with any such program, builds muscle, reduces fat, or lowers
cholesterol; or
E. Any such product or program intended for body building, weight
loss, or fat loss is more effective than other products or programs
intended for similar purposes; unless, at the time of making such
representation, respondents possess and rely upon competent and
reliable scientific evidence that substantiates the representation.
V
It is further ordered That respondents, L&S Research Corporation, a
corporation, its successors and assigns, and Scott Chinery,
individually and as an officer of said corporation, and respondents'
agents, representatives, and employees, directly or through any
corporation, subsidiary, division, or other device, in connection with
the manufacturing, labeling, advertising, 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 any endorsement (as ``endorsement'' is
defined in 16 CFR Sec. 255.0(b)), including ``before'' and ``after''
pictures) of a product or program represents the typical or ordinary
experience of members of the public who use the product or program,
unless at the time of making such representation, the representation is
true, and respondents possess and rely upon competent and reliable
evidence, which when appropriate must be competent and reliable
scientific evidence, that substantiates such representation, provided,
however, respondents may use such endorsements, including accurate
``before'' and ``after'' pictures, if the statements or depictions that
comprise the endorsements are true and accurate, and if respondents
disclose clearly and prominently and in close proximity to the
endorsement what the generally expected performance would be in the
depicted circumstances or the limited applicability of the endorser's
experience to what consumers may generally expect to achieve, that is,
that consumers should not expect to experience similar results.
VI
It is further ordered That respondents, L&S Research Corporation, a
corporation, its successors and assigns, and Scott Chinery,
individually and as an officer of said corporation, and respondents'
agents, representatives, and employees, directly or through any
corporation, subsidiary, division, or other device, in connection with
the manufacturing, labeling, advertising, 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. Any such product or program is new or unique; or
B. The ease of use of, or lack of effort required by, any such
product or program intended for weight or fat loss if achieving the
advertised results depends on adhering to a special diet or exercising.
VII
It is further ordered That respondents, L&S Research Corporation, a
corporation, its successors and assigns, and Scott Chinery,
individually and as an officer of said corporation, and respondents'
agents, representatives, and employees, directly or through any
corporation, subsidiary, division, or other device, in connection with
the manufacturing, labeling, advertising, 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.
VIII
It is further ordered That within five (5) business days of the
date of service of this Order, respondent L&S Research Corporation, or
its successors and assigns, shall pay the sum of one million four
hundred fifty thousand dollars ($1,450,000.00) to the United States
Treasury. Such payment shall be by cashier's check or certified check
made payable to the United States Treasury. In the event of default of
payment, which default continues for more than ten (10) days beyond the
due date of payment, and without any notice required to be given to the
respondents:
A. Respondent shall also pay interest as computed under 28 U.S.C.
Sec. 1961, which shall accrue on the unpaid balance from the date of
default until the date the balance is fully paid;
B. Individual respondent Scott Chinery shall become liable for the
full unpaid balance and interest; and
C. The Commission may draw the balance of the payment due on the
Irrevocable Standby Letter of Credit, which has been provided by
respondent as security for the payment provided for herein.
No portion of the payment herein described shall be deemed a
payment of any fine, penalty, or punitive assessment against
respondents with respect to the acts and practices which are the
subject of the Complaint and which occurred prior to issuance of the
Order.
IX
It is further ordered That the corporate respondent L&S Research
Corporation shall for five (5) years following the service of this
Order, notify the Commission at least thirty (30) days prior to any
change in the corporate respondent such as dissolution, assignment, or
sale resulting in the emergence of a successor corporation, the
creation or dissolution of subsidiaries, or any other change in the
corporation that may affect compliance obligations arising out of the
Order, or of any change in the position and responsibilities of the
individual respondent Scott Chinery in regard to L&S Research
Corporation or any subsidiary of which he is an officer. The expiration
of the notice provisions of this part shall not affect any other
obligation arising out of this Order. In addition, respondents shall
require, as a condition precedent to the closing of the sale or other
disposition of L&S Research Corporation or the right to the use of the
name Cybergenics or to market any of the products in its product line,
that the acquiring party file with the Commission, prior to the closing
of such sale or other disposition, a written agreement to be bound by
the provisions of this Order.
X
It is further ordered That the individual respondent Scott Chinery
promptly notify the Commission of the discontinuance of his present
business or employment and of his affiliation with a new business or
employment. In addition, for a period of five (5) years from the date
of service of this Order, the individual respondent shall promptly
notify the Commission of each affiliation with a new business or
employment. Each such notice shall include the individual respondent's
new business address and a statement of the business or employment in
which the respondent is newly engaged as well as a description of
respondent's duties and responsibilities in connection with the
business or employment. The expiration of the notice provisions of this
part shall not affect any other obligation arising under this Order.
XI
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 or 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.
XII
It is further ordered That respondent L&S Research Corporation
shall:
A. 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;
B. For a period of five (5) years from the date of entry of this
Order, provide a copy of this Order to each of respondent's 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 respondent or any subsidiary, successor, or assign, within three
(3) days after the person assumes his or her position; and that
respondent secure from each such person a signed statement
acknowledging receipt of said Order.
XIII
It is further ordered That the respondents herein shall within
sixty (60) days after service upon them of this Order, and at such
other times as the 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 respondents L&S Research Corporation and
Scott Chinery.
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 or make final the agreement's proposed
order.
Body Building Products
The Commission's complaint charges that the respondents deceptively
advertised Cybergenics Total Body Building System and Cybergenics for
Hard Gainers, two body building products. According to the complaint,
the respondents' advertisements made false and/or unsubstantiated
representations that either or both body building products: (1) cause
users to lose more body fat and gain more muscle than non-users; (2)
cause users to lose body fat and gain muscle more rapidly than non-
users; (3) cause users to gain more muscle than users of other body
building products; (4) have been demonstrated by scientific research to
cause users to gain more muscle than non-users; (5) work for all
people; and (6) are new and unique.
Weight Loss Products
The Commission's complaint also charges that the respondents
deceptively advertised there weight loss products, Cybergenics
CyberTrim, Cybergenics Mega-Fat Burner, and Cybergenics QuickTrim.
According to the complaint, the respondents' advertisements made false
and/or unsubstantiated representations that one or more of the wright
loss products: (1) cause users to lose body fat and weight more rapidly
than non-users; (2) cause users to lose weight and lose or burn more
body fat than non-users; (3) cause users to lose more body fat and
weight than users of all other weight loss products; (4) cause users to
lose weight more rapidly than the users of all other weight loss
products; (5) are superior to other appetite suppressants; (6) suppress
hunger and the biochemical message stimulated by the catabolism of fat;
(7) cause users to gain more muscle than non-users; (8) contain an
ingredient, chromium picolinate, that has been clinically proven to
reduce fat and lower cholesterol; (9) are new and unique; (10) cause
users to maintain weight loss longer than non-users; (11) cause
maturing women to lose more weight than non-users of the product; (12)
are easy to use; and (13) have been demonstrated by scientific evidence
to cause users to lose more fat and weight, and to gain more muscle,
than non-users.
Use of Testimonials
The Commission's complaint also charges that statements and
depictions, including ``before'' and ``after'' pictures, in the
respondents' advertisements for their body building and weight loss
products, represent that the testimonials from consumers who use the
advertised product reflect the typical or ordinary experience of
members of the public who use the products. According to the complaint,
the respondents did not have a reasonable basis for this
representation.
In addition, the complaint alleges that the use of a picture of a
man in an advertisement for Cybergenics Total Body Building System
``before'' and ``after'' he used the product for six months is false
and misleading. The man pictured in the advertisement, according to the
complaint, was a champion body builder prior to the time when the
``before'' picture was taken and, therefore, is not typical of users of
the product, and his results as shown in the ``after'' picture are not
typical of the experience of ordinary members of the public who use the
product.
Proposed Order
Part I of the proposed order prohibits representations that the
product component of either of the body building products named in the
complaint, or any substantially similar product:
(1) causes users to achieve greater or more rapid loss of fat or
gain of muscle than non-users of the product; or
(2) works for all users.
Part II of the proposed order prohibits representations that the
product component of any of the three weight loss products named in the
complaint, or any substantially similar product:
(1) causes users to maintain weight loss longer than non-users; or
(2) causes maturing women to lose more weight than non-users.
Part III prohibits respondents from representing that scientific
evidence establishes that the product component of any of the body
building and weight loss products named in the complaint causes users
to lose more fat or weight, or gains more muscle, than non-users.
Part IV requires the respondents to cease from making a number of
representations about any product or program unless they have
substantiation consisting of competent and reliable scientific
evidence. The claims that are prohibited unless substantiated are as
follows:
(1) that any product or program causes or assists users to lose fat
or weight or to maintain weight loss, or suppresses hunger or appetite;
(2) that any product or program causes or assists in muscle gain or
development;
(3) that any product or program works for all users;
(4) that chromium picolinate in any product or used in conjunction
with any program builds muscle, reduces fat, or lowers cholesterol; and
(5) that any product or program intended for body building, weight
loss, or fat loss is more effective than other products or programs
intended for similar purposes.
Part V of the proposed order requires respondents to have
substantiation, which when appropriate must consist of competent and
reliable scientific evidence, for believing that endorsements,
including ``before'' and ``after'' pictures, represent the typical or
ordinary experience of users of any product or program. However, the
respondents may use any endorsement if they disclose clearly and
prominently in close proximity to the endorsement what the generally
expected performance would be in the depicted circumstances, or that
consumers should not expect to achieve results similar to those of the
endorser.
Part VI prohibits the respondents from misrepresenting that any
product or program is new or unique, or that any product or program
intended for weight loss is easy to use if achieving the advertised
results requires a special diet or exercise.
Part VII requires the respondents to cease misrepresenting the
contents, validity, or results of any study in connection with the
marketing or any product or program.
Part VIII requires the respondents to pay $1,450,000 to the United
States Treasury and provides that none of this amount is deemed to be a
fine, penalty, or punitive assessment.
The remaining provisions are standard record keeping and reporting
provisions designed to ensure that the respondents remain in compliance
with the other provisions 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 in any
way their terms.
Donald S. Clark,
Secretary.
Concurring Statement of Commissioner Mary L. Azcuenaga in L&S Research
Corporation, File No. 912-3004
The Commission has strong evidence supporting the central
allegations in this complaint, and I have voted to accept the
consent agreement for public comment. In my view, however, the
complaint should not allege that the maintenance claim for Mega-Fat
Burner and the maturing women weight loss claim for QuickTrim were
false. I am inclined to believe that the claims are false but I
would prefer to have some corroborating evidence of falsity before
finding reason to believe that Section 5 of the FTC Act has been
violated. Because the available information shows only that there is
no evidence that these claims are true, it seems to me more
appropriate to allege that they are unsubstantiated.
In addition, the QuickTrim weight loss allegations seem
inconsistent in light of the evidence. The complaint alleges that
the weight loss claim for maturing women users of QuickTrim is false
but alleges that the same claim for all users of QuickTrim is
unsubstantiated. Yet we have no evidence indicating that the weight
loss claims are any more likely to be false for maturing women than
for users generally.
I therefore do not support the complaint to the extent that the
maintenance claim for Mega-Fat Burner and the maturing women weight
loss claim for QuickTrim are alleged to be false, not
unsubstantiated.