Source: https://casetext.com/case/ftc-v-simeon-management-corporation
Timestamp: 2019-12-13 04:10:18
Document Index: 277894666

Matched Legal Cases: ['§ 53', '§ 12530', '§ 301', '§ 12530', '§ 355', '§ 301', '§ 321', '§ 321']

F.T.C. v. Simeon Management Corporation, 391 F. Supp. 697 | Casetext
F.T.C. v. Simeon Management Corporation
391 F. Supp. 697 (N.D. Cal. 1975)
F.T.C.v.Simeon Management Corporation
United States District Court, N.D. CaliforniaMar 11, 1975
In this case the district court denied the FTC's application for such an injunction against advertising by…
The public equities on one side of the equation include possible harm to consumers, cost of the product, and…
In Simeon Management, the district court denied a preliminary injunction to prevent a weight loss clinic from advertising that its program included the use of a certain prescription drug which was itself ineffective.
Summary of this case from F.T.C. v. Pantron I Corp.
Calvin J. Collier, Gen. Counsel, Gerald Harwood, Asst. Gen. Counsel, James P. Timony, Atty., Federal Trade Commission, Washington, D.C., for petitioner; Raymond J. Lloyd, Regional Director, Alfred Lindeman, San Francisco Regional Office, Federal Trade Commission, San Francisco, Cal., of counsel.
Melvin K. Najarian, Josef D. Cooper, Cooper Scarpulla, San Francisco, Cal., Marvin Gross, Los Angeles, Cal., Darrel P. Simpson, Medical Weight Loss, Inc., Los Angeles, Cal., Leo Shaw, Asaro Keagy, San Diego, Cal., for respondents.
Sections 13(a) and (b) of the Federal Trade Commission Act (the Act), 15 U.S.C. § 53(a) and (b), provide that the Federal Trade Commission (the FTC) may seek a preliminary injunction restraining the dissemination of advertisements whenever the FTC has reason to believe (1) that a person, partnership, or corporation is disseminating false or misleading advertisements or is violating or about to violate any provision of law enforced by the FTC and (2) that it would be in the public interest to enjoin the dissemination of such advertisements pending the issuance of an administrative complaint by the FTC and until there is a final administrative or court ruling on the complaint. The FTC is entitled to preliminary injunctive relief upon a proper showing that, weighing the equities and considering the FTC's likelihood of ultimate success, the granting of the injunction would be in the public interest.
Statutory references to the Act are to the applicable sections of Title 15, United States Code.
"(a) Whenever the Commission has reason to believe —
In the case at bar, petitioner, the FTC, issued an administrative complaint against respondents on October 15, 1974. In the administrative complaint, the FTC alleged that respondents were violating Sections 45 and 52 of the Act by disseminating false and misleading advertisements. The FTC now seeks a preliminary injunction restraining respondents from advertising their obesity and weight control treatments as long as respondents use the drug Human Chorionic Gonadotropin (HCG), or any other drug, in their treatment, and as long as HCG or such other drug has not been approved by the Food and Drug Administration (FDA) for use in weight reduction.
The complaint was issued by a split vote of the Commission. Two of the five Commissioners voted against the issuance of the complaint.
In evaluating a motion for a preliminary injunction under the Act, the Court does not apply the traditional equity standards of judicial review. Section 53 of the Act permits the issuance of a preliminary injunction upon a proper showing that weighing the equities, and considering the FTC's likelihood of ultimate success, such action would be in the public interest. The statute does not define "proper showing" and there is sparse judicial interpretation of the requisites of a "proper showing". The legislative history of Section 53 makes it clear that since the FTC is a public agency, suing on behalf of the public, it is excused from making the traditional equity showing of irreparable injury. Joint Statement of the Committee Conference, H.R. Rep. No. 93-617, 93d Cong., 2d Sess. (1973), page 31.
There is a split in judicial opinion whether the Court, in evaluating the motion for a preliminary injunction, need only determine that the FTC has reason to believe that the alleged violation has taken place (Federal Trade Commission v. Rhodes Pharmacal Co., 191 F.2d 744 (7th Cir. 1971) or whether the Court must also balance the equities. FTC v. National Health Aids, 108 F. Supp. 340 (D.C.Md. 1952). Considering that the statute specifically directs the Court to weigh the equities and considering the extraordinary and important nature of injunctive relief, I am of the view that the District Court must do more than determine if the administrative agency had reasonable cause to believe that the alleged violation had taken place. Reasonable belief of a violation is enough to justify the FTC seeking a preliminary injunction, but in evaluating the motion for preliminary injunction the District Court must look to the FTC's reasonable cause to believe that a violation has taken place, and must also as a separate factor weigh the equities in favor of granting or denying the preliminary injunction. FTC v. National Health Aides, supra.
Simeon Weight Clinics Foundation Declares War on Weight. Medically Supervised Weight Loss. Lose weight safely, quickly and effortlessly through our proven weight reduction program.
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Medical Weight Reduction. Bariatrics individual program is a safe and practical method for the entire family to lose weight. . . .
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Featuring Dr. A.T.W. Simeon's "Pounds Inches" Method. HCG Weight Clinics Foundation can improve your appearance and attractiveness — and help you stay that way.
III. THE ISSUES A. Alleged Violations of the Act
The FTC contends that respondents have violated Sections 45 and 52 of the Act. As amended by the Magnuson-Moss Warranty — Federal Trade Commission Improvement Act which became effective January 4, 1975 (P.L. 93-637, 93d Cong., 2d Sess. (1974)), Section 45 provides in pertinent part:
"(a)(1) Unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are declared unlawful."
Section 52 as amended by the Magnuson-Moss Warranty — Federal Trade Commission Improvement Act provides:
Since respondents' clinics are registered with the State of California as a pre-paid health plan under the Knox-Mills Health Plan Act (California Government Code § 12530 et seq.), the clinics have the right to advertise their availability. The FTC does not take issue with the fact that the clinics advertise, but rather with the type of advertisements respondents use. Specifically, the FTC contends that respondents' advertisements are false and deceptive because:
3. The advertisements contravene the spirit of the Food, Drug and Cosmetic Act ( 21 U.S.C. § 301 et seq.) by promoting a weight reduction treatment based on a drug that has not been FDA approved for weight control.
Respondents' claim that their advertisements are not aimed at inducing the purchase of a drug, but rather deal with a treatment program is a distinction without a difference in this case. Although respondents' advertisements do not specifically mention HCG or the injection regimen, HCG injections are a crucial component in the treatment program. Anyone accepted into the program is placed on daily HCG injections and a portion of the treatment fee goes toward the cost of these injections. The hypodermic injection of HCG legally constitutes a sale transaction although the injection is administered by a physician or nurse and the drug is never directly placed in the hands of the purchaser. Ratigan v. United States, 88 F.2d 919 (9th Cir. 1937). Therefore, anyone responding to the advertised treatment program will, in fact, purchase the drug HCG. Dissemination of advertisements publicizing this drug-based treatment is enough to meet the requirement of Section 52 that the advertisement in or affecting commerce is likely to induce the purchase of a drug. Mueller v. United States, 262 F.2d 443 (5th Cir. 1958).
C. Likelihood of Success on the Merits 1. Misrepresentations
I also find that it is unlikely that the Commission will determine that the advertisements misrepresent the fact that the weight reduction program is medically approved. Although HCG has not been approved by the FDA for use in weight loss, this does not mean that the treatment program does not have the approval of the medical community. Although the majority of physicians do not believe that HCG physiologically promotes weight loss, many physicians with extensive practices in weight control do believe that HCG has a psychological or placebo effect that is beneficial in the weight treatment program. For example, the Court-appointed expert witness, Dr. John Karam, the Associate Director of the Metabolic Research Unit for the University of California, indicated that he thought the program as a whole was effective and that in the context of the counseling program and the diet, the HCG injections might be "functionally effective".
A placebo is a substance having no pharmacological effect, but which is given to a patient who supposes it to be an effective medicine for the condition for which it is prescribed. Because of the patient's belief in the drug, the substance will often prove to be an effective medicine.
Both respondents' and the FTC's experts agree that it is not general medical practice to inform a patient whether or not a drug is FDA approved. Respondents manage the clinics and advertise the availability of the treatment program. Licensed physicians and nurses prescribe and administer the actual treatment. Although it is perfectly proper for a prepaid health plan to advertise under the Knox-Hill Act (California Government Code § 12530 et seq.), under the medical canons of ethics, the individual doctor is precluded from advertising. Since the individual doctors are responsible for the treatment, the FTC, by insisting on the inclusion of what the treatment will entail in the advertisements, is asking the individual physicians to advertise what it is they, not the respondents, will do. Not only would this be contrary to medical ethics, it is beyond the scope of the FTC's powers. The direct control of medical practice has been left to the states and is beyond the power of the federal government. Linder v. United States, 268 U.S. 5, 45 S.Ct. 446, 69 L.Ed. 819 (1925).
Furthermore, forcing respondents to advertise that HCG was no more effective than diet alone, would destroy a valuable psychological component of the program. Although there is no scientific evidence to indicate that HCG physiologically promotes weight loss, there is medical consensus that HCG has a psychological or placebo effect that makes it easier for a patient to maintain the strict, 500 calorie diet. Placebos are widely used in medical practice. Their benefits are derived from the fact that the patient believes the drug will work. A physician does not normally inform a patient that a placebo is being used since this would destroy the effectiveness of the drug. If respondents were forced to advertise that the HCG was not any more effective than diet alone, they would be forced to destroy the patient's belief in the drug and the medically acknowledged beneficial placebo effects that result from this belief. Rather than protecting the public, this disclosure might actually harm the overweight and obese individuals who have heretofore been able to stick to the Simeons method and lose weight precisely because they believed that HCG was helping them.
I find that the FTC does not have a good likelihood of ultimately establishing that respondents violate Sections 45 and 52 of the Act because their advertisements fail to state that their treatment program is based on a drug that has not been approved by the FDA for weight loss. The Federal Food, Drug and Cosmetic Act ( 21 U.S.C. § 355) authorizes the FDA to restrain the introduction into interstate commerce of any new drug unless the drug has been approved by the FDA.
Under the Food, Drug and Cosmetic Act ( 21 U.S.C. § 301 et seq.), it is illegal to market and label a "new drug" for a use that is not FDA approved. As defined by the Food, Drug and Cosmetic Act ( 21 U.S.C. § 321(p)), a new drug is a drug that has not been "generally recognized among experts * * * as safe and effective for use under the conditions prescribed, recommended, or suggested in the labeling thereof". The FTC argues that HCG is a "new drug" within the meaning of the FDA Act and has not been FDA approved for weight loss. The FTC contends that it is, therefore, unfair and false to permit the dissemination of advertisements for a treatment which is based on this unapproved "new drug" within the meaning of the Food, Drug and Cosmetic Act.
Even assuming arguendo that HCG is a new drug under the definition of new drug ( 21 U.S.C. § 321(p)), the California physician in his private treatment of a California patient with HCG is engaging in a manifestly different quantitative and qualitative act than introducing or delivering for introduction into interstate commerce. The FDA interpretation of the 1938 Act and its 1962 Amendments does not treat the use of HCG by a treating and prescribing physician as being in interstate commerce. The FDA has stated:
Pursuant to Rule 52 of the Federal Rules of Civil Procedure this Memorandum Opinion constitutes the Court's Findings of Fact and Conclusions of Law, and pursuant thereto: