[Federal Register Volume 60, Number 60 (Wednesday, March 29, 1995)]
[Notices]
[Pages 16148-16154]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-7634]



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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