National Dynamics Corporation, et al.

Text (OCR of the scan at left; may contain errors)

IN THE MATTER OF NATIONAL DYNAMICS CORPORATION, ET AL.

ORDER, ETC., IN REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION ACT Docket 8803. Complaint, Nov. 21, 1969—Decision, Feb. 16, 1973. Order requiring a New York City seller of battery additive, VX-6, and other articles of merchandise, among other things to cease misrepre- ‘senting earnings and profits from resale of its products; failing to maintain adequate records which substantiate its earnings claims: representing that any product has been approved,.by a laboratory or . other organization or person; and misrepresenting the results of scientific tests.

COMPLAINT* Pursuant to the provisions of the Federal Trade Commission Act, and by virtue of the authority vested in it by said Act, the Federal Trade Commission, having reason to believe that National Dynamics Corporation, a corporation, and Elliott Meyer, individually and as an officer of said corporation, hereinafter referred to as respondents, have violated the provisions of said Act, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint stating its charges in that respect as follows: “Reported as amended by the hearing examiner's order dated July 7, 1970. 488 Complaint PARAGRAPH 1. Respondent National Dynamics Corporation is a corporation organized, existing and doing business under and by virtue of the laws of the State of Florida, with its office and principal place of business located at 220 East 23rd Street, in ~—the city of:New York, State of New York. Respondent Elliott Meyer is an officer of the corporate respondent. He formulates, directs and controls the acts and practices of the corporate respondent, including the acts and practices hereinafter set forth. His address is the same as that of the corporate respondent.

Par. 2. Respondents are now, and for some time last past have been, engaged in the advertising, offering for sale and sale of the battery additive, VX-—6, and other articles of merchandise to the public.

Par. 3. In the course and conduct of their business, respondents now cause, and for some time last past have caused, their said products, when sold, to be shipped from their place of business. in the State of New York to purchasers thereof located in various other States of the United States, and maintain, and at all times mentioned herein have maintained, a substantial course of trade in said products in commerce as “commerce” is defined in the Federal Trade Commission Act.

Par. 4. In the course and conduct of their aforesaid business, and for the purpose of including the purchase of said battery additive, respondents have made numerous statements and representations in circulars, periodicals and other materials with respect to the nature of their business, the earnings of their customers, the users of their product and the testing of it. Typical and illustrative of the statements and representations in said advertising, but not all inclusive thereof, are the following: You see, to help me round out my VX-6 sales organization, I need someone right in your area right now.

* * * * * * * National advertising pre-sells VX-6 for you. Full-page magazine and newspaper ads read by millions of motorists. a * * * * * * We have a completely staffed and equipped engineering department to help you with any special sales and promotional matters that may come up. Don’t hestitate to get our help in selling large users, or to make usc of our engineering facilities to help you close any important orders. Our engineering department has been instrumental in getting some very big orders for a lot of our men.

* * *k ok * + * Complaint 82 F.T.C.

Railroad Products Division.

_* * * * © * * * - A's a Franchise Distributor—We guarantee to protect you on business developed, on accounts opened and ON REPEAT SALES—There will bs only ONE FRANCHISE PER COUNTY so, if you desire additional counties later on or now, advise us immediately so we may prepare you for the ultimate goal—Exclusive State Distributor for VX-6 Battery Additive!! * * * * * * * Our men made MORE THAN $4,000,000 PROFITS and haven’t even scratched the surface yet! These aren’t Miracle Men—THEY’RE NOT EVEN HIGH-POWERED SALESMEN! ;

Picture of an individual $1,554.00 One Week INDUSTRIAL—‘I sell VX-6 to plants for fork lifts and other trucks. Then they buy for all vehicles and fleets.!—R.D. Kelly, Canada. * * * x. * * * I talk big figures, $10,000, $15,000, $25,000 a year * * * VX-6 is the Aladdin’s Lamp of Specialty Selling.

* * % * * * * Certificate of approval issued to VX-6 by Independent Testing Laboratories.

* * * % * % * Tested Approved.

* - * * “KS . * * * Laboratory Reports.

Don’t forget—this wonder-working product (1) breaks up hardened, dense crystalized sulphate, converts it into ACTIVATED material for greater charging current, (2) insulates lead grids so they are not* readily corroded by damaging acid, (8) reduces shedding from plates, (4) cuts down internal heat, (5) makes separators last longer, (6) gives an uninterrupted flow of steady current, (7) reduces oxidation, (8) -puts.a.stop.to warping and buckling of plates, (9) eliminates undercharging in normal battery use, (10) reduces evaporation of ‘water loss’ and thus does away with frequent checking while on the road.

Par. 5. Through the use of the aforesaid statements and representations, and others of similar import and meaning, but not specifically set out herein, respondents represent, and have represented, directly or by implication, that: (1) Respondents have a nationwide sales force, a separate division for handling railroad products and an engineering department; and that they are seeking persons to join their nationwide sales force.

(2) Respondents use national advertising to promote the sale *By hearing examiner’s order dated July 7, 1970, the word ‘‘not’” was inserted between the words “are” and “readily”. :

188 Complaint of the product to consumers and that consumer demand has been created for said product.

(3) Respondents have technical departments and trained professional personnel to assist distributors in the sale of their ~-product to: consumers.

(4) Respondents give exclusive franchises to distributors who receive protection in their areas of operation. (5) Distributors of the product, VX-6, will regularly earn $1,554.00 per week, $25,000 per year and various other high amounts.

(6) Laboratories and certain users have approved and fully tested the product as to performance.

(7) Each of the use or performance representations made by respondents for the product has been substantiated by respondents through competent scientific tests or by authenticated, controlled and duly recorded user tests or both. Par. 6. In truth and in fact:

1. Respondents do not maintain a nationwide sales force, a special division for handling railroad products and an engineering department and they are not seeking persons to join a nationwide sales force. Respondents’ primary sales effort is to induce socalled “distributors” to buy a quantity of their product for resale to the public. There is virtually no organized, directed sales force. 2. Respondents do not use national advertising to promote the sale of the product to consumers and there is little, if any, existing consumer demand. Respondents’ advertising and promotional efforts are directed almost exclusively to the so-called “distributors.” 38. Respondents do not have technical departments and trained professional personnel to assist distributors in the sale of the product to consumers. Respondents’ operation is concerned solely with sales to distributors and prospective distributors. 4. Respondents do not give exclusive franchises and distributors who receive franchises are not given protection by respondents in their areas of operation. Respondents continue to make sales where franchise distributors are located. 5. Distributors of the battery additive, VX-—6, do not realize the aforestated earnings; but, on the contrary, few, if any, attain such earnings.

6. Laboratories and certain users have not approved and have Complaint 82 F.T.C.

not fully tested the product. Some of the laboratories were either non-existent or had not. authorized-the use of a seal of approval. Testing of the product had not been accomplished or was incomplete and named users had not approved and tested said product. 7. Use or performance representations made by respondents for the product have not been substantiated by respondents through competent scientific tests or by authenticated, controlled and duly recorded user tests.

Therefore, the statements and representations referred ‘to in Paragraphs Four and Five hereof were, and are, false, misleading and deceptive.

Par. 7. Through use of published testimonials respondents represent, directly or by implication, that they are the statements of persons or organizations currently using respondents’ product and that respondents have been given permission to publish such statements; whereas, in truth and in fact, in many instances, such testimonials are statements by persons or organizations who only used the product in the remote past and did not give permission for publication.

Therefore, the use of said testimonials was, and is, false, misleading and deceptive. con Par. 8. In the conduct of their business, and at all times mentioned herein, respondents have been in substantial competition in commerce, with corporations, firms and individuals, in the sale of products of the same general kind and nature as that sold by the respondents.

PAR. 9. The use by respondents of the aforesaid false, mislead- ° ing and deceptive statements, representations and practices has had, and now has, the capacity and tendency to mislead members of the purchasing public into the erroneous and mistaken belief that said representations were and are true and into the purchase of substantial quantities of respondents’ Product by reason of said erroneous and mistaken belief. Par. 10. The aforesaid acts and practices of respondents, as herein alleged, were, and are, all to the prejudice and injury of the public and of respondents’ competitors and constituted, and now constitute, unfair methods of competition in commerce and unfair and deceptive acts and practices in commerce in violation of Section 5 of the Federal Trade Commission Act. NATIONAL DYNAMICS CORP., ET AL. 495 488 Initial Decision Mr. Michael C. McCarey and Mr. Jeffrey Tureck supporting the complaint.

Mr. Solomon H. Friend and Mr. Jerold W. Dorfman, New York, LN. ¥. for respondents.

INITIAL DECISION By DONALD R. MOORE, HEARING EXAMINER MAY 24, 1971 CONTENTS Page PRELIMINARY STATEMENT 493 FINDINGS OF FACT . 495 I.. RESPONDENTS AND THEIR BUSINESS “495 II, CREDIBILITY QUESTIONS 497 III. REPRESENTATIONS AS TO THE NATURE AND SCOPE 500 OF RESPONDENTS’ BUSINESS A. “Nationwide Sales Force” 500 B. Specialized Division and Technical 502 Assistance C. National Advertising and Consumer Demand 504 IV. REPRESENTATIONS AS TO EXCLUSIVE 507 _ FRANCHISES - Vv. REPRESENTATIONS AS TO EARNINGS - 511 VI. USE OF TESTIMONIALS 518 VII. REPRESENTATIONS AS TO TESTING 517 SUMMARY AND ANALYSIS 541 CONCLUSIONS 542 ORDER See «BAA PRELIMINARY STATEMENT The complaint in this proceeding was issued on November 21, 1969, and was served on respondents on December 10; 1969. The complaint charges respondents with misrepresentation in the advertising and sale of a battery additive designated VX-6, in violation of Section 5 of the Federal Trade Commission Act. On January 19, 1970, respondents filed an answer in which they essentially denied the allegations of the complaint. After a series of prehearing conferences and several postponements—occasioned largely by successive substitutions of counsel 494 FEDERAL TRADE COMMISSION DECISIONS’ Initial Decision 82 F.T.C.

supporting the complaint as a result of illness, resignation, and -reassignment—25 hearings weré held between September 21, 1970, and January 21, 1971. Several recesses were necessary because of a variety of scheduling difficulties, including the unavailability of certain witnesses, religious holidays, and conflicts in the calendar of the examiner and of counsel.

At the hearings, testimony and other evidence were offered in support of and in opposition to the allegations of the complaint. Such testimony and evidence have been duly recorded and filed. The parties were represented by counsel and were afforded full opportunity to be heard, to examine and to cross-examine witnesses, and to introduce evidence bearing on the issues. After the presentation of evidence, proposed findings of fact and conclusions of law and a proposed form of order were filed by counsel supporting the complaint and by counsel for respondents. Counsel supporting the complaint filed a brief in support of their proposed findings, while counsel for respondents incorporated their brief in their proposed conclusions of law. Reply briefs were filed by counsel for both parties. Those proposed findings not adopted either in the form proposed_or in substance are rejected as lacking support in the record or as involving immaterial matters. Having heard and observed the witnesses and having carefully reviewed the entire record in this proceeding, together with the proposed findings and briefs filed by the parties, the hearing examiner makes findings of fact, enters his resulting conclusions, and issues an approprite order as follows. . a As required by Section 3.51(b) (1) of the Gommission’s Rules of Practice, the findings of fact include references to the principal supporting items of evidence in the record. Such references are intended to serve as convenient guides to the testimony and to the exhibits supporting the findings of fact, but they do not necessarily represent complete summaries of the evidence considered in arriving at such findings. Where reference is made to proposed findings submitted by the parties, such references are intended to include their citations to the record unless otherwise indicated. References to the record are made in parentheses, and certain abbreviations are used as follows:

CB—Brief of Counsel Supporting Complaint in Support of Proposed Findings of Fact, Conclusions of Law, and Order to Cease and Desist.

NWALLUINAL DINAMLUS UCUNP., BL AL. 499 488 Initial Decision CPF—Proposed Findings of Fact, Conclusions of Law and Order filed by Counsel Supporting Complaint.

CRB—Complaint Counsel’s Reply to Respondents’ Proposed Findings of Fact, Conclusions of Law and Proposed Order. ~CX=—Cominission Exhibit. -~~ .

RPF—Respondents’ Proposed Findings of Fact, Conclusions of Law and Proposed Order.

RRB—Respondents’ Reply Brief in Opposition to Complaint Counsel’s Findings of Fact, Conclusions of Law and Proposed Order.

RX—Respondents’ Exhibit.

Tr.— Transcript.

References to the proposed findings and briefs of counsel are to page numbers, preceded by one of the abbreviations listed ‘above. References to testimony sometimes cite the name of the witness and the transcript page number without the abbreviation “Tr.”— for example, Meyer 284.

FINDINGS OF FACT J. Respondents and Their Business ' Respondent National Dynamics Corporation (“National Dynamics” or “corporate respondent”), is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Florida, with its office and principal place of business located at 220 East 23rd Street, in the city of New York, State of New York. National Dynamics was incorporated in May 1957 by respondent Elliott Meyer and others.

Respondent Elliott Meyer has been president of the _corporate respondent since its inception. In that capacity, as well as in his capacity as an important stockholder—now, in effect, the sole stockholder—he has formulated, directed, and controlled the acts and practices of the corporate respondent. Mr. Meyer’s address is the same as that of the corporate respondent. ‘Except for respondents’ contention that the complaint should he dismissed as to Elliott Meyer because of “no evidence” that he ‘‘acted in his individual capacity” (RPF 30), there is no dispute as to the facts recited in this section. Record references for the facts here found, as well as for additional background facts, include the following: Complaint, Paragraphs One. Two, and Three; respondents’? answer, Par. 1; Tr. 9-10, 185-87, 316-18, 321-22; Meyer 280-84, 287-90, 310, 312-14, 3438-47, 355-56, 389-90, 1282-89, 1445-50, 1465-70, 1474-81; Cooper 2174; CXs 116 I-J, 158 A-I, 154 A-E, 158 A, 214 A-F, 215 A-G, 216 A-D. For comparison of National Dynamics advertising and that of Auto Electrolite, see CXs 92 A-B, 287 A-B; CXs 17 A-B, 288 A-B, 289; CXs 20 A-D, 290 A-D. Initial Decision 82 F.T.C.

Mr. Meyer’s stock ownership in National Dynamics has ranged frém zero to 100 percent. Mr. Meyer owned 100 percent of the stock during the first year of National Dynamics’ existence. Subsequently his interest went down to 33 percent, but he acknowledged that he formulated, directed, and controlled the acts and practices of the corporation during this period. Thereafter, all of the stock was acquired by another corporation, but Mr. Meyer continued to serve as president and to direct the activities of the company. In 1964 the stock of the corporate respondent was acquired by a corporation in which Mr. Meyer owned 50 percent of the voting stock. Since 1965, Mr. Meyer has beén in complete control of the corporate respondent as sole stockholder and chairman of the board of a holding company which owns all of the stock of the corporate respondent.

Thus, despite the corporate organization and the involvement of other corporations and other individuals, the record reflects domination and control by Mr. Meyer individually. In addition, Mr. Meyer has been since 1968 the sole shareholder and president and chairman of the board of directors of another corporation, Auto Electrolite Corporation, which sells a battery additive, advertising for which is-similar to the advertising for VX-6. National Dynamics and Auto Electrolite have offices at the same address, and personnel of National Dynamics carry on the business activities of Auto Electrolite as well. Auto Electrolite had gross sales of $212,113 in 1969.

Respondents are now, and for more than 10 years have been, engaged in the advertising, offering for sale, sale, and distribution - of the battery additive VX-6 and other articles of merchandise to the public. The business of respondents is substantial. During 1968 the total gross sales of National Dynamics amounted to $825,000. Total gross sales in 1969 were $1,000,000, of which sales of VX-6 accounted for $900,000.

In the course and conduct of their business, respondents now cause, and for more than 10 years have caused, their products, when sold, to be shipped from their place of business in the State of New York to purchasers located in various other States of the United States; and they maintain, and for more than 10 years have maintained, a substantial course of trade in such products in commerce, as “commerce” is defined in the Federal Trade Commission Act. © Respondents are and have been in substantial competition in commerce with corporations, firms, and individuals engaged in the - 488 Initial Decision sale of products of the same general kind and nature as that sold by the respondents. Although the evidence to support this allegation is somewhat sketchy (Meyer 374-74A; Halter 709-10; Miller 2097-99, 2102, 2107, 2129-30), there appears to be no real ~-doubt that,respondents sold VX-6 in competition with products of the same general kind and nature. Respondents did not deny the allegation (Answer, Par. 6), and their proposed findings and their reply brief do not.address themselves to this matter. In the course and conduct of their business and for the purpose of inducing the purchase of their battery additive VX-—6, respondents have made numerous statements and representations in circulars, periodicals, and other materials with respect to the nature of their business, the earnings of their customers, the users of their product, and the testing of it. (The manner and form of respondents’ publication and use of the challenged representations are set forth in CX 309 A-N (Par. 1-3, 5-13) ; in certain stipulations (Tr. 323-26, 334-38, 377-78); and in the testimony of Mr. Meyer (Tr. 374 K-374 L). Although respondents contend in their answer (Par. 2) that the representations quoted in Paragraph Four of the complaint were “reproduced out of context,” the record fails to substatiate this contention. II. Credibility Questions Misrepresentations allegedly contained in respondents’ advertising will be considered in the sections that follow. First, however, it is desirable to consider questions of credibility involved in several of these sections so as to avoid the necessity for repetitive comments. The credibility problem arises because of conflicts between the testimony of respondent Elliott Meyer, the president of the corporate respondent, and that of Donald Meany,.a former employee of respondents.

Except for the fact that the testimony of Mr. Meany represents either the only evidence or the principal evidence to support some of the allegations of the complaint,? the verbiage devoted to it— ' both in the transcript and in the submittals of counsel—is hardly justified by its subject matter.

Mr. Meany’s testimony dealt with the handling of respondents’ business correspondence; the question of specialized departments ? Mr. Meany’s testimony was presented as newly discovered evidence (Tyr. 2195-2232). Without his dubious testimony on several of the allegations, the examiner is left to wonder what proof complaint counsel may have had in support of the allegations before Mr. Meany volunteered as a witness.

Initial Decision 82 F.T.C.

or divisions and the technical assistance available to distributors; respondents’ franchise .arrangements; and the extent of Mr. Meyer’s participation in the operation of National Dynamics. Mr. Meany’s testimony was also apparently designed to impeach the testimony of Mr. Meyer that certain records of respondents had been destroyed or damaged as a result of a fire (Tr. 1276-81, 1302, 1332, 1422-23). In fact, this initially appeared to be the primary purpose of calling Mr. Meany as a witness. However, even if his testimony (Tr. 3580-3609, 3666-75) were accepted at face value, it does not constitute convincing evidence that damage to records was as limited as he suggested.

Because complaint counsel have made such an issue of the matter—and this is because Mr. Meany’s testimony is crucial to certain aspects of their case—the credibility question must be resolved. The mere fact that complaint counsel felt impelled to make such a labored defense of Mr. Meany’s credibility (CPF 14-20; CB 34-87) tends in itself to detract from the weight of his testimony. In any event, in the opinion of the examiner, Mr. Meany’s testimony does not measure up to the standard of “reliable, probative, and substantial evidence” upon which a finding of fact must be based (Rule 3:51(b))}. The reasons for this determination are manifold.

First, and perhaps most important, Mr. Meany was employed: by respondents in a clerical capacity for only some ten months in 1970 (Tr. 3553), whereas the advertising representations that his testimony purported to challenge were circulated during a prior period of time. Both the timing of his employment and the capacity in which he was employed are factors that materially detract from his testimony on crucial issues of fact. Second, when this circumstance is coupled with evidence, developed in the course of his cross-examination (Tr. 3615-92), that calls into question his morality and his emotional stability and that also suggests the possibility of bias and prejudice against respondents (Tr. 3637-38, 3625-29, 3609-12, 3644-49, 3684), his testimony becomes of dubious value—hardly sufficient to constitute a predicate for findings that respondents engaged in acts and practices violative of the law.

Mr. Meany’s admission of homosexual acts (Tr. 3637-38) is merely one facet of a personal history of emotional instability that disqualifies him as a reliable witness on matters of crucial significance. By his own admission, he falsified the employment application that he filed with respondents and initially undertook NATIONAL DYNAMICS CORP., ET AL. 499 488 Initial Decision to continue the same deception on the witness stand (Tr. 8616-18). Although Mr. Meany ultimately answered with apparent candor further questions reflecting adversely on himself, the examiner is _ unable, on the basis of the entire testimony, including observation of Hfis deméanor on the stand, to vive’ full faith and credit to Mr. Meany’s statements.

No useful purpose would be served by a lengthy discussion of the question whether, standing alone, Mr. Meany’s admission of homosexual acts may provide a basis for questioning his credibility. Research indicates that in a jury case in a federal court, an objection to such a question would probably be sustained on the ground of relevance.* But here the question was asked and answered without objection (Tr. 3637): It may be stated parenthetically that complaint counsel’s discussion of the law on this subject (CB 34-37) is somewhat of an oversimplification, ignoring the distinction frequently drawn between discrediting information elicited on cross-examination and the introduction of collateral evidence on the subject.’ Be that as it may, the problem here is whether the admission should be disregarded in assessing the credibility of the witness.

Despite respectable authority to the contrary, the examiner believes that it is a factor that may be taken into account as bearing on the emotional stability of the witness and as seemingly illustrative of an “anything goes” philosophy on his part. When there is also evidence suggestive of bias and prejudice against respondents despite protestations to the contrary, the fabric of his testimony is not such as to inspire confidence in its reliability. Under the circumstances presented by this record, the familiar rule authorizing an adverse inference from a party’s failure to call a rebutting witness (CB 15-16) is not applicable to-bolster Mr. Meany’s testimony. Neither is the picture materially changed by a stipulation that another of respondents’ employees would give testimony “substantially the same” as. that of Mr. Meany (Tr. 3698-99).

The examiner finds unpersuasive the lengthy argument of complaint counsel attacking the credibility of Mr. Meyer (CPF 35-52). * United States v. Nuccio, 373 ¥.2d 168, 171 (2d Cir. 1967), cert. denied, 387 U.S. 906: United States v. Bowe, 360 F.2d 1; 15 (2d Cir. 1966), cert. denied, 385 U.S. 961; Salgado v. United States, 278 F.2d 830, 831 (Ist Cir. 1960) ; United States v. Provoo, 215 F.2d 531, 535-37 (2d Cir. 1954) ; see also Tinker v. United States, 417 F.2d 542, 544 (D.C. Cir. 1969), cert. denied, 396 U.S. 864.

4TII Wigmore on Evidence, §§ 922-924, 977-87, (8d ed. 1940); 58 Am. Jur, Witnesses &§§ 758-760.

Initial Decision 82 F.T.C.

Obviously Mr. Meyer was not a disinterested witness, and there may be some basis for discounting some of his testimony on the basis of his natural bias. The examples of inconsistency and faulty memory relied on by complaint counsel are not impressive. In view of the period covered and the mass of detailed information involved, the fact that Mr. Meyer was unable to furnish specific details concerning many matters is hardly surprising. The examiner finds no substantial basis for rejecting his testimony. III. Representations As to The Nature and Scope of Respondents’ Business A. “Nationwide Sales Force”

The first representation challenged by the complaint (Paragraph Five (1)) is that respondents have represented that they have a “nationwide sales force” and that they are seeking persons to join this nationwide sales force. This representation was made in sales letters containing such statements as these: * * * T urgently need a man in your area to help me round out my National VX-6 Sales Organization. (CX 14 A) ak Ok [T]o help me round out my Nationwide VX-6 sales organization, I need someone right in your area right now. (CX 17 A) In alleging these representations to be false and misleading, the complaint (Paragraph Six (1)) alleges—and complaint counsel purpose a corresponding finding (CPF 33)—that: Respondents do not maintain a nationwide sales ‘force,..*.*.* and they are not seeking persons to join a nationwide sales force. Respondents’ primary sales effort is to induce so-called “distributors” to buy a quantity of their product for resale to the public. There is virtually no organized, directed sales force.

Complaint counsel concede that respondents solicit and secure distributors from all parts of the country—numbering 12,000 in 1969—but they contend that “this group of salesmen is not organized, nor in any way directed, nor a sales force.” This contention they profess to base on evidence that they characterize as “for the most part circumstantial” (CPF 38-34), but their proposed findings are based more on unsupported opinion than on documented facts. Their so-called circumstantial evidence is as follows: (1) A statement, without any record citation, that “In essence, respondents sell to anyone who will buy their product, and once 488 ; Initial Decision a customer does buy, respondents are not particularly interested in anything else but selling him more.”

(2) Their ipse dixit that it is “obvious” that with only 12 or 15 executives and employees, respondents could not “organize and ' ~direct” these 12,000 distributors ‘even, if-they wanted to do so”— and “respondents did not want to do so.” 3. The testimony of a former employee that he was instructed to “skim” incoming mail. .

(4) The fact that whereas the sales manager “described his duties * * * as ‘overseeing the general sales and work[ing] with our distributors’, he “did not describe his job as organizing or directing a sales organization of some 12,000 sellers of VX-6.” (5) The facts that respondents are direct mail sellers; that they purchase mailing lists to acquire names of prospective salesmen; that they correspond by form letter; that they do not sell on consignment; and that they do not extend credit. (6) Their unsubstantiated conclusion that respondents “have neither the time, facilities, personnel, nor desire to organize or direct a 12,000-man sales force.” (CPF 33-34). Merely to state such a basis for a proposed finding of misrepresentation is to expose its insufficiency. The examiner finds no misrepresentation here. Respondents have 12,000 distributors throughout the United States (CPF 33-34). Respondents furnished to these distributors advertising literature, sales aids, demonstration kits, booklets, advertising mats, TV scripts, and radio scripts. Respondents processed and answered inquiries from distributors and offered sales assistance by mail, by telephone, and by personal visit. The testimony of one employee concerning the “skimming” of mail from distributors—even if fully credited (see supra, pp. 6-8 [pp. 497-500 - herein] )—does not prove that respondents’ distributor network is not a ‘“nationwide sale force.”

This case is to be distinguished from a line of Commission cases involving sellers who falsely represent that they are seeking “employees” when they are actually seeking to sell merchandise. Such is not the thrust of the complaint’s allegations regarding respondents’ sale force. In any event, the fact that respondents’ distributors are independent contractors rather than employees does not prove that respondents do not have a nationwide sales force. .

As a matter of fact, both the allegations of the complaint and the contentions of complaint counsel are self-contradictory. The same Initial Decision 82 F.T.C.

paragraph of the complaint that alleges that respondents “are not: seeking persons to-join a-nationwide sales force” also alleges that respondents’ “primary sales effort is to induce so-called ‘distributors’ to buy a quantity of their product for resale to the public.” Similary, complaint counsel contend, on the one hand, that respondents are interested only in selling more VX-6 to their distributors and, on the other hand, that respondents do not want to organize and direct these distributors so as to obtain reorders. Whatever may have been the theory of the complaint regarding respondents’ alleged misrepresentation of a “nationwide sales force,” the evidence fails to show any misrepresentation, and the charge should be dismissed.

B. Specialized Divisions and Technical Assistance Other challenged representations are to the effect that respondents have a separate division for handling railroad products, an engineering department, and technical departments with trained professional personnel to assist distributors in the sale of their product to consumers. (Complaint, Paragraph Five (1), (8)) These representations were contained in respondents’ advertising as follows: - We have a completely staffed and equipped engineering department to help you with any special sales and promotional matters that may come up. Don’t hesitate to get our help in sellling large users, or to make use of our engineering facilities to help you close any important orders. Our engineering department has been instrumental in getting some very big orders for a lot of our men. (CX 111 D; see CX 48 D) Naturally, if there is ever a need for technical information ‘in reférence to batteries or VX-6—our trained staff of technicians are always at your service. (CX 62 C) I, and the rest of my staff of technicians, have been instructed to give you all the cooperation and assistance possible. (CX 87 B) You'll have full access to our Engineering and Industrial Departments, at no extra cost to you in engaging and closing of any important orders that will prove beneficial and profitable to all of us. (CX 95 B) RAILROAD PRODUCTS DIVISION. (CX 9A) The evidence to support the allegations that these representations were false, misleading, and deceptive (Complaint, Paragraph Six (1), (3) ), is hardly substantial. Although the evidence tending to substantiate the challenged representations is not altogether satisfactory either, the burden is on counsel supporting the complaint to prove that respondents have not maintained a railroad 488 Initial Decision products division, an engineering department, or any technical departments with trained professional personnel to assist distributors in selling VX-6. This burden they have failed to carry. There is credible evidence that respondents have had a railroad products division and an engineering or technical service depart- - tment staffed by Orrin White, I: J. Luman, Edward J. Halter, Frank Murphy, and Ed Griffin and that, in addition, respondents have utilized private laboratories on a consultant or contract basis, particularly Industrial Testing Laboratories, which is in the same building as respondents’ office. The record establishes that extensive sales were made to railroads; that there was a special industrial package of VX-6 utilized by railroads; that there was advertising specially directed to railroads; that National Dynamics was a member of the Association of Railroad Suppliers; that Messrs. White, Griffin, Murphy, and Halter visited railroads throughout the country for the purpose of assisting distributors in making sales to railroads, as well as in making direct sales to railroads; and that they otherwise provided technical assistance to distributors in person and by correspondence (Meyer 357-61, 368-74, 1290-1307, 1318-23, 1506-10; Halter 685-86, 693-96, 712-49, 753-57, 797-98; Murphy 4835-39, 4860-61; Rogers 1845- 1932; Tr. 647-55; RXs 1-6, 10-16; CXs 242 A-G, 248-249 J, 265 A-B, 280 A-D).

In addition to questioning the credibility of Mr. Meyer and noting the evidentiary indication that most. of the named individuals are now no longer connected with National Dynamics (CPF 35-54), complaint counsel rely primarily on the testimony of Donald Meany, a former employee of National Dynamics. Mr. Meany testified that he did “not know of any railroad products division of National Dynamics;” that there was neither an engineering department nor a technical department; although there was a technical manual; and that there was no one who worked in an engineering or technical capacity (Tr. 3557-58). Mr. Meany was employed by National Dynamics from January 1970 until mid-November 1970 (Tr. 3553), and thus his knowledge concerning respondents and their business is limited to that period, whereas the challenged representations were disseminated prior to that time. In view of this time factor, and in view of the limitations of the positions that Mr. Meany held—primarily that of bookkeeper and correspondence clerk (Tr. 3553-56) —his testimony hardly measures up to substantial evidence of false advertising on the part of respondents. In addition, as noted supra (pp. Initial Decision 82 F.T.C.

6-8, [pp. 497-500 herein]), his reliability as a witness is subject to question.

. Against this background, the-substantiality of complaint counsel’s case regarding these representations. is hardly aided by the fact that Mrs. Dorothy Ladden would have offered testimony which would have been “substantially the same as the testimony of Mr. Donald Meany” (Tr. 3698-99).

Moreover, the fact that Mr. Meyer’s testimony leaves in doubt the question of how recently Mr. White and Mr. Luman have been associated with respondents in their business (CPF 36-40, 52-54) does not prove the case. At most, there may be a question whether respondents would be warranted in continuing these representations now that Mr. Halter is apparently the only person engaged in railroad sales and technical consultations. Although the term “engineering” may have been loosely used and the nature and the scope of the railroad products division and the technical service department may have been exaggerated, the fact remains that there is evidence of the existence of specialized persons engaged in the activities so designated. There is no evidence whatever of any failure on respondents’ part to furnish technical information or sales assistance to their distributors. The complaint makes the flat: allegation that these departments were nonexistent and that there were no specialized personnel to assist distributors. This allegation has not been proved. C. National Advertising and Consumer Demand The complaint alleges that respondents have represented that they “use national advertising to promote the sale of the product [VX-—6] to consumers and that consumer demand has been created for said product” (Paragraph Five (2)); whereas, “Respondents do not use national advertising to promote the sale of the product to consumers and there is little, if any, existing consumer demand. Respondents’ advertising and promotional efforts are directed almost exclusively to the so-called ‘distributors’.” (Paragraph Six (2)) Respondents did make the representations alleged. For example— National advertising pre-sells VX-6 for you. Full-page magazine and newspaper ads read by millions of motorists * * *. (CX 8 A) [O]ur advertising and publicity campaign * * * is designed to pre-sell VX-6 for you. (CX 4 B) 488 Initial Decision * * * [S]o many more folks are hearing about VX-6 through our nationwide advertising campaign * * * . (CX 23 A, CX 85 A) We have a multi-million dollar advertising, publicity and promotional campaign going in high gear right now! But all of this national advertising - —.is.aimed right at your local level! (CX 48 B) OUR NATIONAL ADVERTISING CAMPAIGNS! This helps pre-sell VX-6 for you! Each day, the motoring public is becoming more and more aware of VX-6 * * * . (CX 62 L) VX-6 is backed up with national advertising in magazines and newspapers to pre-sell your customers. (CX 112 B) Complaint counsel have failed to prove that these representations are false and misleading.

There is no doubt that respondents engaged in national advertising; the only question is whether respondents used such*advertising “to promote the sale of the product to consumers.” Although most of respondents’ newspaper and magazine advertising (CX 114) as well as their direct-mail literature, was designed primarily to obtain distributors to resell VX-—6, there is no substantial evidentiary basis for finding that such advertising does not also have some impact on the consumer. As a matter of fact, Mr. Meyer . testified that such advertising had a dual purpose—(1) to attract distributors and (2) to give exposure of VX-6 to the consuming public (Tr. 1402-05, 1538, 1545). 7 The nationally-circulated magazines in Which CX 114 appeared are listed at Tr. 333-40; 377-78. Contrary to. CPF 55-56, the record does not reflect that CX 114 was the only magazine advertisement used, nor does it show that a majority of the magazines in which it appeared were ‘oriented toward sales and salesmen.”’ Complaint counsel’s assumption (CPF 56) that the “exposure” of VX-6 in such publications “was quité-limited” is | not well-founded.

Moreover, consumer-oriented advertising was published and broadcast throughout the country—some placed directly by respondents; some placed on a cooperative basis with distributors; some placed by distributors on their own. (See CXs 57-60; CXs 103 A-B, 104 A-—C; Meyer 374 I-R, 379-91, 1402-88, 1538-49.) The fact that the publication or broadcast of some advertisements was paid for in whole or in part by distributors does not detract from the fact that consumer-oriented advertising was disseminated on a national basis (CX 9 B).

The inadequacy of the proof is pointed up by the fact that Initial Decision 82 F.T.C.

complaint counsel would predicate a finding that respondents could not have engaged in national advertising sufficient to presell VX-6 or to create an appreciable national market for the product on an inference that, with only $1 million in sales during 1969, “respondents might have had some difficulty in squeezing the enormous outlays required for such an advertising effort out of their somewhat modest budget” (CPF 55). Similarly, the inference respecting limitations on cooperative advertising (CPF 56-58; CX 219 A)—an inference resting on a shaky foundation— fails to prove the point contended for. (Cooper 2157-71, 2182-83) The fact is that respondents did use consumer-oriented national advertising of various kinds. This is established not only by the testimony of Mr. Meyer and by stipulations entered into between counsel but is also documented by the advertising actually used and by financial data indicating the extent of such advertising. Mr. Meyer testified that respondents did have a national advertising campaign that included advertisements in newspapers and magazines, television and radio commercials, direct mailing of consumer-oriented literature by respondents and by VX-6 distributors, point-of-purchase displays, and general public relations program. (Tr. 374—K, 384), In 1969, respondents distributed 2400 advertising mats, 91 radio commercials, and 11 television films. The advertising mats were used in 89 states; the radio commercials were broadcast in 16 states, and the TV advertisements in 4 states. (RX 26) It is true that, compared to some advertising budgets, respondents’ payments for TV and radio advertising were minimal. Cash payments for such advertising in 1968 and 1969 totaled about $4,000 (CX 124. I; RX 25 A~Z-18), but this was supplemented by some advertising that was broadcast on a “barter” basis (Meyer 385-86). Such broadcast advertising, coupled with published advertising, provides sufficient basis for respondents’ claims concerning national advertising to overcome the allegation that these claims were false and misleading.

Finally, the allegation that “there is little, if any, existing consumer demand” was not proved. Obviously, some consumer demand has been: created, and sales figures show that such demand is substantial enough to constitute more than a “little.” The record does not establish that distributors have been stuck with their VX-—6 inventory, so that it may be presumed that they resold most of it. As a matter of fact, Mr. Meyer testified without contradiction that over 10 million units of VX-6 had been sold since 1957 (Tr. NATIONAL DYNAMICS CORP., ET AL. ous 488 Initial Decision 1564). In addition, respondents have made a substantial number of direct sales to consumers, primarily industrial consumers. Out of a total of 18,000 customers in 1969, 6,000 were direct-buying consumers -(Tr. 172-73), including some of the industrial customers listed at Tr. 646-55.

The allegations of Paragraph Six (2) must be dismissed failure of proof.

IV. Representations As To Exclusive Franchises The evidence substantiates the allegation (Complaint, Paragraph Five (4)) that respondents have represented, directly or by implication, that they give exclusive franchises to distributors, who receive protection in their areas of operation. Respondents advertised as follows:

Just as soon as you prove to yourself the money making potential of VX-6, you can qualify for an exclusive territory. (CX 31 D) * * * You can work up to an over-ride on the sales of new men in your territory—or even up to statewide distributorship with VX-6! We guarantee to protect you on new business you develop—on new accounts you open—AND ON YOUR REPEAT SALES! Every account you open, is all yours as long as you remain active with us! (CX 48 D) * * * [T]here will -be only ONE FRANCHISE PER COUNTY * * *. (CX 95 B) The complaint alleges that contrary to these representations, respondents “do not give exclusive franchises;” “distributors who receive franchises are not given protection by respondents in their areas of operation;” and respondents “continue to make sales where franchise distributors are located.” (Complaint, Paragraph . . Six (4)).

Respondents’ franchise agreement reads in pertinent part as follows:

Please accept this letter as our written agreement designating you our distributor for VX-6 for the terrritory of You can have this agreement remain in effect for one year, and can renew for another year upon writing to us within 30—90 days before the expiration date. ‘ Since franchise territories are awarded by quota, your next order for—— dozen VX-6, at $—— per dozen should be sent to us by . If you don’t reorder the quota amount within this period, this agreement will then be void as of that date. To keep this agreement in effect, you must order the Initial Decision 82 F.T.C.

quota amount per month. * * * If for some reason you don’t maintain the monthly quota, this agreement will end on the 10th day of the month that quota wasn’t met. *-* *° - * * * [TWle agree to continue servicing individual agents in the territory, if any, for a period of 42 days from this date * * *. During this time, we will establish a % credit for you on any orders originating from your territory. After 42 days we send all orders and inquiries from your territory, directly to you for your handling.” (CX 101 A; CXs 291-298).

As a Government witness, respondent Elliott Meyer disclaimed detailed knowledge concerning respondents’ franchise operation but testified in effect that it was pursuant to the franchise agreement (CX 101 A; Tr. 362-65, 394-99, 1829-30). After he indicated that he had records to illustrate the franchise operation, counsel stipulated as follows:

* * * [T]he company has records which show that they have at different times forwarded the names and addresses of customers and prospective customers to franchisees serving the area from which the customers and prospective customers came, and that the company has made payments and given credits to franchisees on sales and shipments made by respondent to the customers in the franchisee’ s territory. (Tr. 1331; misspellings corrected.) ~.

The only evidence indicating that franchises were not “exclusive” consists of 8 franchise agreements (CXs 291-298) purporting to show that in four instances in 1965, respondents had allocated the same territory to two distributors during overlapping periods of time as follows:

Hartford County, Connecticut, was assigived-to one: distributor ° on July 28, 1965 (CX 291) and to another distributor on August 30, 1965 (CX 292).

Morgan County, Indiana, was assigned to « one distributor on October 19, 1965 (CX 294) and to another distributor on November 3, 1965 (CX 293).

Maricopa County, Arizona, was assigned to one distributor on July 26, 1965 (CX 296) and to another distributor on September 7,1965 (CX 295).

Volusia-and Seminole Counties in Florida were assigned to one distributor on October 18, 1965 (CX 298), and Seminole County was assigned to. another distributor on November 12, 1965 (CX 297).

After having these agreements identified by respondent Elliott Mever in the course of redirect examination, (Tr. 1511-13), com- NATIONAL DYNAMmIwa Uren. —- 488 Initial Decision plaint counsel took the position that they “speak for themselves” and elected to ask no questions about them (Tr. 1527). These 8 franchise agreements were among approximately 100 ‘ --.such agreements in the investigational file (Tr. 1515, 1526-27). They wéré obtained by a Commission attorney-examiner in January 1967 (see reverse of CXs 291-298). Respondents objected to their offer in evidence on the ground, among others, that they had not been listed as exhibits in advance pursuant to the prehearing order (Tr. 1513). Complaint counsel explained that it was not until after the trial began that they realized that these 8 franchise agreements overlapped as to time period (Tr. 1517-18). After argument, respondents’ objections were overruled, and the documents were received in evidence (Tr. 1524-25). In the course of recross-examination by respondents’ counsel, Mr. Meyer undertook to explain the overlapping of dates as to CXs 291-94 and 297-98. His “understanding” was that in each instance the original franchisee had advised respondents of his inability or unwillingness to continue the franchise (Tr. 1575-76, 1587-88, 1593-95). As to CXs 295 and 296, Mr. Meyer said there was no overlapping because CX 296, by its terms, expired if a reorder was not received by September 7, 1965.° He assumed that this is what happened, so that the county was awarded to another distributor (CX 295) on that date. (Tr. 1586-87, 1593-94) This testimony came in over the objection of complaint counsel that it was hearsay (Tr. 1577-85).° The source of Mr. Meyer’s information was Marvin Cooper who was respondents’ sales manager during the period in question (Tr. 1595-96, 2152-53). Mr. Meyer telephoned Mr. Cooper to get the information during the luncheon recess (Tr. 1579~80, 1592). Mr. Meyer did not know the basis of Mr. Cooper’s knowledge, but he testified that a record is kept of when franchise agreements expire and that; in. addition, within a week or two after a franchise is awarded, the sales department contacts the franchisee (Tr. 1592). During the colloquy, complaint counsel indicated that the Government would be calling Mr. Cooper “but not to explain these documents” (Tr. 1584). Respondents’ counsel stated that if com- +The reverse of CXs 291-98 surests that the Government had 115 franchise agreements. Mr. Meyer did not know how many franchised distributors respondents had (Tr. 397-98). * Complaint counsel’s contention that, if no reorder had been received, the agreement would not have expired until September 10 (CPF 62; CRB 2) is rejected as contrary to the azreement. © The examiner put counsel for both sides on notice that the hearsay nature of Mr. Meyer's testimony would have to be taken into account in determining its weight (Tr. 1581, 1585, 1597-99).

‘ Initial Decision 82 F.T.C.

plaint counsel failed to inquire of Mr. Cooper about CXs 291-298, he would do so (Tr. 1584, 1598-99).

Mr. Cooper. was later. called as a Government witnéss (Tr. 2151-86); but, unaccountably, neither counsel questioned him on the subject of the “overlapping” franchise agreements. The only additional evidence that complaint counsel offered to support the franchise allegations was the testimony of former employee Donald Meany,’ who testified to the effect that during his employment by respondents (January-November 1970), he had “never seen” any credits given or any orders or inquiries forwarded to franchised distributors. He did acknowledge that before a county franchise was awarded, a check was made to determine if the county was already franchised. The import of his testimony was that a franchise for a county was not offered if it had already been allocated to another distributor. (Tr. 3575-78). The charge that respondents failed to honor their franchise agreements is not supported by “reliable, probative, and substantial evidence,” as required by Rule 3.51 (b). The 8 franchise agreements showing overlapping assignments of territories (CXs 291-298) constitute the only evidence in support of the allegation that franchises are not exclusive, as: represented. However, they do not,-by any means, constitute conclusive proof that the same territory was assigned to two different distributors at the same time. They permit, but they do not compel, such an inference. At most, their introduction in evidence might be viewed as having shifted to respondents the burden of going forward with the evidence to explain the conflicting territorial allocations. But the burden of proof remained..with complaint counsel; and the 4 instances of overlap (not 8 instances, as stated by complaint counsel at CRB 2-4; compare CPF 59) do not prove that respondents engaged in such a practice, particularly when such an inference is contradicted by the testimony of Mr. Meyer and Mr. Meany.

Respondents undertook their burden of going forward with the evidence by offering the hearsay explanations of respondent Elliott Meyer. Complaint counsel argue that Mr. Meyer’s testimony is unrealible hearsay which should not be credited and that respondents’ failure to call the hearsay source (Marvin Cooper) to testify creates an inference that his testimony would have been adverse ‘See footnote 2, supra, p. 6 [p. 497 herein], and accompanying text. As previously noted (supra, p. 8 [p. 499 herein]), counsel stipulated that another employee would have substantiated Mr. Meany’s testimony.

488 Initial Decision to respondents. Since Mr. Cooper was called as a Government witness but was not examined by either counsel on the subject, the adverse inference rule relied on by complaint counsel cuts two ways. With the burden of proof upon complaint counsel, their ' —~position is Jikewise subject to the same adverse inference that they would invoke against respondents. By the same token, their failure to call the original franchisees to testify whether, in fact, they had abandoned their franchises before they were reassigned permits an inference that their testimony would have been adverse to the Government’s contentions.

Moreover, there is at least a substantial question whether only 4 such overlaps in 1965, out of at least 100 franchise agreements then in effect, constitute proof of a practice that warrants issuance of a cease and desist order in 1971.

Finally, against the stipulation conceding the existence of evidence that respondents otherwise complied with their franchise commitments (supra, p. 18-19 [p. 511 herein]), and Mr. Meyer’s testimony to the same effect, the testimony of Donald Meany to the contrary does not satisfy the burden of proof imposed on complaint counsel. Their interpretation of the phrase “at different times” contained in the stipulation and their speculation as to respondents’ noncompliance with the franchise terms (CPF 62; CRB 2) are not persuasive.

The allegations respecting franchises-should be dismissed for failure of proof.

V. Representations As To Earnings As alleged by the complaint (Paragraph Five (5)), respondents have represented, directly or by implication, that distributors of the product VX-6 will regularly earn $1,554 per week, $25,000 © per year, and various other high amounts. For example, in one advertising brochure (CX 2 A—-D), under the heading:

Our men made MORE THAN $4,000,000 PROFITS and haven’t even scratched the surface yet! These aren’t Miracle Men—THFEY’RE NOT EVEN HIGH-POWERED SALESMEN!, respondents attributed earnings to named and pictured individuals as follows: , $1554 one week.

Initial Decision 82 F.T.C.

$148 one day. 7 . ¥ $2316.96 one week-~ 9° © > > oo a.

$1028 one month $500 one week $350 one week.

Other representations included the following: I talk big figures, $10,000, $15,000, $25,000 a year * * * VX-6 is the Aladdin’s Lamp of Specialty Selling. (CX 4 A) I’m going to show you how to enjoy an income of $1,000 or more a month * * * without ever risking a penny of your own money. Sounds almost too good to be true, doesn’t it? And yet, thousands of men all across the country are doing it right now! Ordinary men, with no special education or background. Most of them started with no selling experience whatsoever, (CX 1 A) One Quick Phone Call—At My Expense—And You Can Choose How Much You Want to Earn This Year—( ) $2,000.00 ( ) $5,000.00 ( ) $10,000.00 ( ) $15,000.00 ( ) $25,000.00. (CX 31 A) , The fellows who are making $10, $15, even $20 per hour with VX-6 aren’t some kind of Super Salesmen that could sell refrigerators to eskimos. They’re ordinary men, from all_walks of life. (CX 81 C) You too can make $1,000.00 a month with VX-6 * * *, (CX 2 B) IT’S NOT TOO LATE! What do you want to make of your life? * * * An independent business of your own? * * * An income of $15,000 to $50,000 per year? * * * Part-time earnings of $10, $15, $20 per hour? Money for a bigger or better home, a second car, college for your children, retirement for yourself and your wife? * * * These dreams can be a reality once you get on the job as an authorized VX-6 Distributor!.(CX 36 B) HERE’S HOW TO MAKE $46.00 A DAY—EASY! (CX 48 D) HERE’S HOW TO MAKE $95.00 A DAY—EASY! (CX 48 D) These advertising representations have the capacity and tendency to lead members of the public to believe that a substantial number of distributors of VX-6 will regularly earn in excess of $12,000 per year, even as much as $80,000 a year. Although the record fails to support the allegation (Complaint, Paragraph Six (5)) that no distributor realizes the earnings claimed in respondents’ advertising, there is basis for a finding that “few * * * attain such earnings.”

None of the specific earnings claims was disproved,* and there was no testimonial or documentary evidence as to the actual S But see CXs 113, 114: CX 299, CPF 44-45. 488 Initial Decision earnings of any VX-—6 distributors. However, it was stipulated that of 12,000 distributors who purchased VX-6 from respondents during the calendar year 1969, not more than 60 distributors, or one-half of one percent of the total number of distributors, “made “profits in excess of $10,000 through the-resale of * * * VX-6;” that of these 60, not more than 20 made profits in excess of $15,000; that not more than 5 made profits in excess of $25,000; and that no distributor made profits in excess of $75,000 (Tr. 172-73). Thus, the evidence is to the effect that while it may be possible for a distributor to realize earnings of the magnitude stated in respondents’ advertising, the representation that a substantial number of distributors have made and can make the high profits indicated is false, misleading, and deceptive. For example, whereas respondents have represented that by reselling VX-6, “thousands of men all across the country” were enjoying “an income of $1,000 or more a month,” the fact is that not more than 60 made profits of such magnitude in 1969. Respondents’ argument (RPF 12) that representations of specified earnings for one week or for one month do not imply annual earnings on such a basis is rejected, as is the distinction sought to be drawn between part-time and full-time distributors. Respondents seek to relate the maximum number of 60 who may have earned more than $10,000 a year to an estimated 200 full-time distributors ‘rather than to the 12,000 distributors cited in the stipulation. (Compare RPF 12 with CRB 4-7.) VI. Use of Testimonials The complaint alleges (Paragraph Seven) that: — Through use of published testimonials respondents represent, directly or by implication, that they are the statements of persons or organizations currently using respondents’ product and that respondents have been given permission to publish such statements; whereas, in truth and in fact, in many instances, such testimonials are statements by persons or organizations who only used the product in the remote past and did not give permission for publication.

‘In support of these allegations, complaint counsel presented evidence respecting 4 testimonials published by respondents (CXs 41 C, 41 F, 41 J, and 41 P). As published, none of the testimonials bore a date. , Regarding CX 41 C, the record shows only that this testimonial was written prior to 1966, when the writer left the employment Initial Decision 82 F.T.C.

of the organization on whose letterhead he wrote. There is no -- evidence that respondents had been’ advised by anyone that their use of the testimonial was or is in any way questionable. (Martin 523-49).

As to the 3 remaining testimonials, the examiner finds as follows:

1. By publishing and circulating as late as 1969 testimonials from which the dates of origin had been deleted, respondents represented that the testimonials were recent statements of persons contemporaneously using VX-—6; that respondents were authorized to publish them; and that the opinions expressed as to the merits of VX-6 were the opinions of the writers as of the time they were published and circulated. 2. The testimonials were written from 5 to 10 years ago— CX 41 F in 1962; CX 41 J, about 1961; and CX 41 P in 1966. The originals were dated.

3. Although none of the testimonialists repudiated the truth or accuracy of their statements as of the time they wrote them—in fact, they affirmed them—they did not use or endorse VX-6 at the time they testified (September 1970) and had not for some time prior thereto. However, in response to inquiries, one had confirmed the validity of his testimonial numerous times—most recently in 1968, at the same time that he requested respondents to discontinue using it (CXs 165-166). Respondents err when they contend that the writers “continued to subscribe to the opinions expressed in the letters” (RPF 14). 4. None of the testimonialists had authorized respondents to publish the testimonials, but each had given his testimonial to a VX-6 distributor. Two of them had specifically or tacitly authorized the distributor to use the testimonial to promote the sale of VX-6. The third testimonialist (P. J. Mortellite) understood that his letter (CX 41 J) was simply for the distributor’s files, but the fact is that the letter was addressed to National Dynamics, and Mr. Mortellite agreed that a reasonably prudent business man would assume that respondents had the right to use it for advertising purposes.

5. Two of the testimonialists had notified respondents of their objections to continued use of their testimonials—D. A. Downey in 1968; Mr. Mortellite in 1968 or 1969. Both were satisfied by respondents’ assurances that their testimonials would be deleted in the next publication of the testimonial booklet. They understood NATIONAL DYNAMICS CORP., ET AL. 515 488 Initial Decision that existing copies would continue to be used. The third testimonialist (Wiley W. Hunter) had made no request that respondents stop using his letter.

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86.277306 415 1 3 1 1 10 1708 739 37 38 85.128922 C,5 1 3 1 1 11 1768 739 40 37 92.327095 F,5 1 3 1 1 12 1828 739 33 36 96.813995 J,4 1 3 1 2 0 552 789 1312 41 -1 5 1 3 1 2 1 552 793 27 30 92.200684 P5 1 3 1 2 2 599 793 69 31 93.209618 ands 1 3 1 2 3 690 793 80 32 91.723045 CXs5 1 3 1 2 4 793 794 172 36 90.472473 165-166)5 1 3 1 2 5 995 803 61 21 96.437195 ares 1 3 1 2 6 1078 802 38 22 96.762131 as5 1 3 1 2 7 1138 793 152 31 95.475464 follows:5 1 3 1 2 8 1321 792 155 37 96.598747 Downey5 1 3 1 2 9 1498 792 147 36 91.500626 446-87;5 1 3 1 2 10 1669 789 195 33 92.813370 Mortellite4 1 3 1 3 0 550 842 951 38 -1 5 1 3 1 3 1 550 843 146 36 0.000000 501-22;5 1 3 1 3 2 715 843 140 31 96.625458 Hunter5 1 3 1 3 3 872 844 169 35 67.470886 488-501;5 1 3 1 3 4 1060 842 122 38 96.706444 Meyers 1 3 1 3 5 1201 843 167 36 57.908577 1260-79;5 1 3 1 3 6 1388 842 63 31 95.691826 RX5 1 3 1 3 7 1471 842 30 31 95.691826 9.2 1 4 0 0 0 595 899 1066 40 -1 3 1 4 1 0 0 595 899 1066 40 -1 4 1 4 1 1 0 595 899 1066 40 -1 5 1 4 1 1 1 595 900 73 32 96.423737 Thes 1 4 1 1 2 684 901 163 32 95.953903 evidences 1 4 1 1 3 863 902 178 31 96.609512 warrants5 1 4 1 1 4 1058 901 207 37 96.322296 conclusory5 1 4 1 1 5 1282 900 154 39 96.656715 findings5 1 4 1 1 6 1453 910 40 22 96.703812 as5 1 4 1 1 7 1510 899 151 32 96.665184 follows:2 1 5 0 0 0 547 956 1335 1406 -1 3 1 5 1 0 0 549 956 1314 491 -1 4 1 5 1 1 0 598 956 1264 42 -1 5 1 5 1 1 1 598 960 27 30 95.976547 1.5 1 5 1 1 2 653 959 243 39 96.060020 Respondents5 1 5 1 1 3 917 959 184 38 96.060020 published5 1 5 1 1 4 1123 959 68 31 96.414642 ands 1 5 1 1 5 1212 959 192 31 96.477402 circulated5 1 5 1 1 6 1424 968 44 22 96.164841 on5 1 5 1 1 7 1489 968 21 22 96.290039 a5 1 5 1 1 8 1529 957 216 33 96.234169 nationwide5 1 5 1 1 9 1765 956 97 32 96.371063 basis4 1 5 1 2 0 549 1006 1314 35 -1 5 1 5 1 2 1 549 1009 215 32 96.464516 testimonials 1 5 1 2 2 787 1010 123 31 96.174789 letters5 1 5 1 2 3 932 1010 150 31 96.681999 without5 1 5 1 2 4 1103 1010 60 31 96.854187 thes 1 5 1 2 5 1185 1009 261 32 96.520248 authorizations 1 5 1 2 6 1470 1008 39 32 96.257904 of5 1 5 1 2 7 1529 1008 60 32 96.873421 thes 1 5 1 2 8 1611 1007 154 32 95.991760 writers.5 1 5 1 2 9 1790 1006 73 32 96.828117 Thea 1 5 1 3 0 550 1057 1312 35 -1 5 1 5 1 3 1 550 1058 75 32 96.116425 facts 1 5 1 3 2 641 1059 79 32 96.396393 that5 1 5 1 3 3 736 1061 70 31 92.926353 two5 1 5 1 3 4 823 1060 286 32 91.881737 testimonialists5 1 5 1 3 5 1126 1059 206 32 92.903000 authorized5 1 5 1 3 6 1351 1059 112 32 8.661118 VX-—65 1 5 1 3 7 1482 1058 232 32 95.630127 distributors5 1 5 1 3 8 1732 1057 130 31 96.474899 known4 1 5 1 4 0 549 1106 1313 41 -1 5 1 5 1 4 1 549 1110 37 30 95.626785 to5 1 5 1 4 2 609 1109 96 32 95.626785 them5 1 5 1 4 3 730 1111 36 31 95.731026 to5 1 5 1 4 4 791 1120 60 21 96.337753 uses 1 5 1 4 5 877 1109 94 32 96.671318 theirs 1 5 1 4 6 996 1110 123 31 96.235352 letters5 1 5 1 4 7 1145 1109 35 31 96.747025 in5 1 5 1 4 8 1207 1109 146 38 95.265068 making5 1 5 1 4 9 1378 1109 91 31 96.103409 sales5 1 5 1 4 10 1497 1109 58 31 96.654022 did5 1 5 1 4 11 1582 1109 62 31 96.482315 not5 1 5 1 4 12 1669 1106 193 33 96.482315 constitute4 1 5 1 5 0 550 1156 1312 41 -1 5 1 5 1 5 1 550 1159 259 32 96.642982 authorizations 1 5 1 5 2 826 1161 37 30 96.202171 to5 1 5 1 5 3 880 1160 232 37 96.292603 respondents5 1 5 1 5 4 1130 1160 36 31 96.567032 to5 1 5 1 5 5 1183 1169 61 22 96.310936 uses 1 5 1 5 6 1261 1159 60 32 96.919296 thes 1 5 1 5 7 1338 1159 123 31 96.154831 letters5 1 5 1 5 8 1480 1158 35 31 96.481796 in5 1 5 1 5 9 1532 1158 61 32 95.937103 thes 1 5 1 5 10 1610 1166 151 23 96.347633 manners 1 5 1 5 11 1777 1156 85 38 96.617714 they4 1 5 1 6 0 550 1205 1312 42 -1 5 1 5 1 6 1 550 1208 69 33 95.856224 did.5 1 5 1 6 2 643 1209 32 31 95.856224 It5 1 5 1 6 3 697 1209 29 32 96.248230 is5 1 5 1 6 4 748 1220 45 21 96.248230 no5 1 5 1 6 5 814 1210 145 31 96.530212 defenses 1 5 1 6 6 981 1209 59 31 96.352036 for5 1 5 1 6 7 1063 1209 233 38 95.954575 respondents5 1 5 1 6 8 1318 1210 37 30 96.667412 to5 1 5 1 6 9 1378 1218 62 28 96.310776 says 1 5 1 6 10 1463 1208 79 31 96.432976 that5 1 5 1 6 11 1564 1208 85 37 96.903473 they5 1 5 1 6 12 1672 1205 131 40 96.123184 agreed5 1 5 1 6 13 1825 1207 37 30 96.578415 to4 1 5 1 7 0 549 1255 1311 41 -1 5 1 5 1 7 1 549 1258 188 32 96.172142 withdraws 1 5 1 7 2 754 1259 59 31 96.172142 thes 1 5 1 7 3 830 1259 237 32 95.951218 testimonials5 1 5 1 7 4 1085 1268 39 22 96.743759 as5 1 5 1 7 5 1144 1268 84 22 96.353981 soon5 1 5 1 7 6 1247 1268 41 22 96.353981 as5 1 5 1 7 7 1306 1259 84 37 96.648483 they5 1 5 1 7 8 1408 1258 142 32 96.511490 learned5 1 5 1 7 9 1570 1257 40 32 96.702980 of5 1 5 1 7 10 1627 1256 61 32 96.764923 thes 1 5 1 7 11 1706 1255 154 32 93.594025 writers’4 1 5 1 8 0 550 1305 1312 42 -1 5 1 5 1 8 1 550 1309 205 37 96.193748 objections.5 1 5 1 8 2 781 1310 244 37 95.673454 Respondents5 1 5 1 8 3 1050 1309 89 32 95.673454 have5 1 5 1 8 4 1163 1319 45 21 96.054405 no5 1 5 1 8 5 1233 1308 97 39 96.493103 rights 1 5 1 8 6 1354 1310 37 30 96.708954 to5 1 5 1 8 7 1416 1308 134 38 96.426590 imposes 1 5 1 8 8 1576 1317 43 21 95.734665 on5 1 5 1 8 9 1645 1305 217 33 96.341339 individuals4 1 5 1 9 0 550 1355 1311 42 -1 5 1 5 1 9 1 550 1358 78 31 96.239464 who5 1 5 1 9 2 645 1358 89 32 96.469421 have5 1 5 1 9 3 752 1361 61 30 96.333603 not5 1 5 1 9 4 832 1359 205 32 96.374207 authorized5 1 5 1 9 5 1056 1359 96 31 96.288406 them5 1 5 1 9 6 1171 1360 36 30 96.288406 to5 1 5 1 9 7 1227 1358 140 39 96.426682 publish5 1 5 1 9 8 1387 1358 95 31 96.594086 theirs 1 5 1 9 9 1501 1358 124 31 95.568916 letters5 1 5 1 9 10 1644 1356 61 32 96.690842 thes 1 5 1 9 11 1724 1355 137 32 96.386879 burden4 1 5 1 10 0 550 1408 614 39 -1 5 1 5 1 10 1 550 1408 38 31 96.628899 of5 1 5 1 10 2 608 1409 201 38 96.109489 protesting5 1 5 1 10 3 829 1409 86 31 95.923080 such5 1 5 1 10 4 937 1409 227 38 95.913528 publication.3 1 5 2 0 0 548 1464 1334 640 -1 4 1 5 2 1 0 595 1464 1267 45 -1 5 1 5 2 1 1 595 1467 30 30 96.494591 2.5 1 5 2 1 2 652 1467 255 42 96.255104 Respondents’5 1 5 2 1 3 922 1477 61 21 96.442413 uses 1 5 2 1 4 997 1467 36 30 95.770523 in5 1 5 2 1 5 1048 1466 223 43 95.770523 advertising5 1 5 2 1 6 1284 1467 38 30 96.409271 of5 1 5 2 1 7 1335 1466 155 31 96.407051 undated5 1 5 2 1 8 1504 1464 218 33 90.764473 testimonials 1 5 2 1 9 1738 1464 124 31 97.004143 letters4 1 5 2 2 0 550 1514 1312 40 -1 5 1 5 2 2 1 550 1517 142 31 95.505997 written5 1 5 2 2 2 715 1517 36 31 96.777542 in5 1 5 2 2 3 774 1518 59 30 96.761253 thes 1 5 2 2 4 856 1518 131 30 96.277657 remote5 1 5 2 2 5 1010 1518 81 36 45.654846 past5 1 5 2 2 6 1105 1520 10 14 45.654846 ®5 1 5 2 2 7 1138 1516 141 32 96.439453 created5 1 5 2 2 8 1302 1514 63 33 96.823227 thes 1 5 2 2 9 1386 1515 222 39 96.721840 impression,5 1 5 2 2 10 1633 1515 170 36 96.158180 contrary5 1 5 2 2 11 1826 1514 36 30 96.427734 to4 1 5 2 3 0 550 1565 1312 39 -1 5 1 5 2 3 1 550 1566 84 37 96.153755 fact,5 1 5 2 3 2 655 1566 79 32 96.164711 that5 1 5 2 3 3 753 1566 83 38 96.164711 they5 1 5 2 3 4 856 1577 92 20 96.695488 were5 1 5 2 3 5 970 1568 119 29 96.183662 recent5 1 5 2 3 6 1111 1566 208 31 96.182259 statements5 1 5 2 3 7 1342 1566 40 31 96.612862 of5 1 5 2 3 8 1402 1575 148 28 93.199997 persons5 1 5 2 3 9 1573 1565 289 37 92.166771 contemporane-4 1 5 2 4 0 550 1613 1312 42 -1 5 1 5 2 4 1 550 1616 100 37 96.708221 ously5 1 5 2 4 2 673 1617 103 38 92.257286 using5 1 5 2 4 3 798 1617 112 30 64.335915 VX-65 1 5 2 4 4 933 1617 69 30 96.606667 ands 1 5 2 4 5 1025 1616 80 31 96.614105 that5 1 5 2 4 6 1127 1616 60 31 96.614105 thes 1 5 2 4 7 1210 1616 210 31 96.248505 statements5 1 5 2 4 8 1446 1614 228 39 96.417511 represented5 1 5 2 4 9 1699 1613 60 31 93.285645 thes 1 5 2 4 10 1784 1622 78 22 92.115463 con-4 1 5 2 5 0 550 1663 1312 41 -1 5 1 5 2 5 1 550 1667 268 37 92.644554 temporaneous5 1 5 2 5 2 833 1666 162 38 96.005211 opinions5 1 5 2 5 3 1010 1666 39 31 96.653297 of5 1 5 2 5 4 1062 1666 59 31 96.549744 thes 1 5 2 5 5 1136 1665 157 32 96.455002 authors.5 1 5 2 5 6 1309 1665 73 31 96.490494 Thes 1 5 2 5 7 1396 1665 76 31 96.439423 facts 1 5 2 5 8 1486 1664 79 31 96.595711 that5 1 5 2 5 9 1580 1663 90 32 95.944901 until5 1 5 2 5 10 1686 1673 20 22 96.852486 a5 1 5 2 5 11 1722 1672 86 29 96.370239 years 1 5 2 5 12 1822 1672 40 21 96.370239 or4 1 5 2 6 0 550 1711 1312 43 -1 5 1 5 2 6 1 550 1716 70 30 96.887169 two5 1 5 2 6 2 638 1716 123 31 96.781693 before5 1 5 2 6 3 781 1716 59 31 96.708061 thes 1 5 2 6 4 861 1716 179 38 96.525719 hearings,5 1 5 2 6 5 1063 1716 232 37 96.207268 respondents5 1 5 2 6 6 1315 1715 70 31 95.538895 had5 1 5 2 6 7 1406 1714 70 32 95.223404 had5 1 5 2 6 8 1498 1724 44 21 95.223404 no5 1 5 2 6 9 1564 1713 115 32 96.597466 notices 1 5 2 6 10 1701 1712 80 31 96.745636 that5 1 5 2 6 11 1803 1711 59 32 96.873093 thea 1 5 2 7 0 549 1761 1313 42 -1 5 1 5 2 7 1 549 1765 284 32 91.468285 testimonialists5 1 5 2 7 2 853 1776 44 21 96.986053 no5 1 5 2 7 3 916 1766 123 37 96.338127 longer5 1 5 2 7 4 1058 1765 84 32 93.239082 used5 1 5 2 7 5 1162 1765 112 32 81.528008 VX-65 1 5 2 7 6 1293 1764 69 32 96.479126 ands 1 5 2 7 7 1382 1774 44 21 96.299202 no5 1 5 2 7 8 1447 1764 122 38 96.117775 longer5 1 5 2 7 9 1589 1761 174 33 95.539162 endorsed5 1 5 2 7 10 1783 1761 28 31 95.945190 it5 1 5 2 7 11 1831 1761 31 31 96.158646 is4 1 5 2 8 0 550 1811 1332 43 -1 5 1 5 2 8 1 550 1825 45 21 96.945480 no5 1 5 2 8 2 609 1815 154 32 95.239784 defense.5 1 5 2 8 3 779 1816 129 38 96.150269 Again,5 1 5 2 8 4 924 1815 233 38 96.255440 respondents5 1 5 2 8 5 1171 1815 91 31 96.853378 have5 1 5 2 8 6 1277 1824 44 21 96.321289 no5 1 5 2 8 7 1336 1814 98 38 96.277100 rights 1 5 2 8 8 1448 1815 37 30 93.289658 to5 1 5 2 8 9 1500 1812 214 39 57.242149 impose-thes 1 5 2 8 10 1725 1811 137 32 92.554886 burdens 1 5 2 8 11 1879 1827 3 3 89.003685 -4 1 5 2 9 0 550 1861 1311 41 -1 5 1 5 2 9 1 550 1865 38 31 96.099312 of5 1 5 2 9 2 604 1865 84 31 96.231110 such5 1 5 2 9 3 706 1866 113 31 96.667114 notices 1 5 2 9 4 836 1876 43 21 93.294113 on5 1 5 2 9 5 897 1863 566 39 91.391693 testimonialists—particularly5 1 5 2 9 6 1480 1863 101 32 96.534714 those5 1 5 2 9 7 1598 1862 91 37 96.926308 who,5 1 5 2 9 8 1708 1872 40 21 96.878181 as5 1 5 2 9 9 1766 1861 95 36 96.182976 here,4 1 5 2 10 0 550 1910 1311 44 -1 5 1 5 2 10 1 550 1914 88 33 96.901878 have5 1 5 2 10 2 660 1917 61 30 96.399612 not5 1 5 2 10 3 742 1916 205 31 96.513809 authorized5 1 5 2 10 4 970 1915 232 39 96.512115 respondents5 1 5 2 10 5 1225 1916 37 30 96.931328 to5 1 5 2 10 6 1284 1914 140 39 96.134216 publish5 1 5 2 10 7 1447 1914 94 31 96.672577 theirs 1 5 2 10 8 1564 1911 238 33 95.989479 testimonials5 1 5 2 10 9 1826 1910 35 31 96.859161 in4 1 5 2 11 0 549 1960 1313 43 -1 5 1 5 2 11 1 549 1965 59 34 96.803337 thes 1 5 2 11 2 632 1965 79 31 96.455032 firsts 1 5 2 11 3 733 1965 107 38 96.120049 place.5 1 5 2 11 4 868 1965 32 31 96.071648 It5 1 5 2 11 5 924 1965 29 31 96.335335 is5 1 5 2 11 6 979 1965 243 37 96.568008 respondents’5 1 5 2 11 7 1248 1965 86 37 96.756027 duty5 1 5 2 11 8 1359 1965 35 30 96.487305 to5 1 5 2 11 9 1420 1973 127 22 96.580193 ensures 1 5 2 11 10 1573 1962 79 31 96.771095 that5 1 5 2 11 11 1677 1961 61 32 93.238876 thes 1 5 2 11 12 1763 1960 99 32 92.729942 testi-4 1 5 2 12 0 548 2010 1314 44 -1 5 1 5 2 12 1 548 2015 149 32 91.806305 monials5 1 5 2 12 2 724 2016 82 37 96.964569 they5 1 5 2 12 3 834 2015 140 39 96.345215 publish5 1 5 2 12 4 1003 2015 119 31 96.165825 reflects 1 5 2 12 5 1148 2014 93 32 95.587494 facts5 1 5 2 12 6 1270 2014 67 31 95.238930 ands 1 5 2 12 7 1366 2013 162 38 96.452919 opinions5 1 5 2 12 8 1556 2012 155 31 96.649284 existent5 1 5 2 12 9 1738 2011 38 31 95.833786 at5 1 5 2 12 10 1803 2010 59 31 95.833786 thea 1 5 2 13 0 549 2064 709 40 -1 5 1 5 2 13 1 549 2066 85 32 96.397636 times 1 5 2 13 2 654 2067 39 31 96.397636 of5 1 5 2 13 3 712 2067 215 37 95.831261 publications 1 5 2 13 4 949 2066 69 32 96.184029 ands 1 5 2 13 5 1040 2064 218 33 96.184029 circulation.3 1 5 3 0 0 547 2114 1318 248 -1 4 1 5 3 1 0 596 2114 1266 47 -1 5 1 5 3 1 1 596 2124 174 32 96.691544 Research5 1 5 3 1 2 790 2124 134 31 95.839874 reveals5 1 5 3 1 3 944 2124 184 37 95.839874 relatively5 1 5 3 1 4 1145 2123 71 32 96.523293 few5 1 5 3 1 5 1234 2114 235 41 96.373009 Commissions 1 5 3 1 6 1489 2131 97 22 96.726891 cases5 1 5 3 1 7 1606 2130 44 22 96.364609 on5 1 5 3 1 8 1669 2120 61 32 96.364609 thes 1 5 3 1 9 1748 2119 114 32 96.692070 issues4 1 5 3 2 0 548 2169 1314 43 -1 5 1 5 3 2 1 548 2174 83 31 96.513123 here5 1 5 3 2 2 650 2175 186 37 96.546638 presented5 1 5 3 2 3 859 2174 201 38 96.254143 respecting5 1 5 3 2 4 1078 2172 246 32 96.318481 testimonials.5 1 5 3 2 5 1346 2172 72 31 96.641281 Thes 1 5 3 2 6 1439 2181 98 22 96.252930 cases5 1 5 3 2 7 1558 2170 69 33 96.211876 ands 1 5 3 2 8 1649 2169 213 33 96.447639 authorities4 1 5 3 3 0 549 2218 1313 45 -1 5 1 5 3 3 1 549 2224 90 31 96.841118 cited5 1 5 3 3 2 655 2224 46 38 96.803917 by5 1 5 3 3 3 716 2224 199 39 17.055954 complaint.5 1 5 3 3 4 923 2223 140 32 17.055954 counsels 1 5 3 3 5 1079 2223 150 38 96.365463 supports 1 5 3 3 6 1243 2222 61 32 96.760017 thes 1 5 3 3 7 1320 2222 89 38 96.676888 legal5 1 5 3 3 8 1426 2220 193 40 96.527161 principles5 1 5 3 3 9 1636 2229 93 29 96.458176 upon5 1 5 3 3 10 1746 2218 116 32 96.576752 which4 1 5 3 4 0 547 2268 1315 44 -1 5 1 5 3 4 1 547 2274 99 31 96.550430 these5 1 5 3 4 2 678 2274 154 38 95.933601 findings5 1 5 3 4 3 865 2274 68 31 96.875114 ands 1 5 3 4 4 967 2273 60 32 96.842064 thes 1 5 3 4 5 1060 2273 195 38 96.661774 applicable5 1 5 3 4 6 1288 2272 104 32 96.337730 orders 1 5 3 4 7 1426 2281 60 22 95.968979 ares 1 5 3 4 8 1519 2270 121 32 95.968979 based:5 1 5 3 4 9 1685 2268 177 33 95.941711 Tri-State4 1 5 3 5 0 548 2318 1317 44 -1 5 1 5 3 5 1 548 2324 174 37 93.298088 Printers,5 1 5 3 5 2 751 2325 83 37 91.703873 Inc.,5 1 5 3 5 3 865 2325 41 31 92.228760 535 1 5 3 5 4 937 2323 121 32 92.228760 F.T.C.5 1 5 3 5 5 1090 2325 97 34 95.300705 1019,5 1 5 3 5 6 1219 2323 98 36 95.300705 1029,5 1 5 3 5 7 1351 2323 85 30 88.525085 10375 1 5 3 5 8 1475 2321 144 38 96.841614 (1967);5 1 5 3 5 9 1651 2320 145 31 96.685867 Bureaus 1 5 3 5 10 1826 2318 39 38 96.641266 of2 1 6 0 0 0 549 2394 1314 62 -1 3 1 6 1 0 0 549 2394 1314 62 -1 4 1 6 1 1 0 575 2394 1288 28 -1 5 1 6 1 1 1 575 2399 9 12 19.159470 ®5 1 6 1 1 2 594 2400 163 22 96.497772 Respondents5 1 6 1 1 3 779 2400 99 19 96.502975 concedes 1 6 1 1 4 900 2400 53 19 96.548294 that5 1 6 1 1 5 975 2400 40 18 96.772537 thes 1 6 1 1 6 1036 2399 157 20 96.217133 testimonials5 1 6 1 1 7 1216 2399 22 19 95.305763 in5 1 6 1 1 8 1264 2400 61 18 95.305763 issues 1 6 1 1 9 1348 2404 61 13 96.073044 were5 1 6 1 1 10 1432 2397 94 19 93.146301 written5 1 6 1 1 11 1553 2397 40 19 89.608826 ‘‘in5 1 6 1 1 12 1618 2397 40 18 96.430092 thes 1 6 1 1 13 1681 2397 90 18 95.873642 remote5 1 6 1 1 14 1793 2394 70 23 96.428543 past”4 1 6 1 2 0 549 2433 134 23 -1 5 1 6 1 2 1 549 2433 71 20 90.238785 (RPF5 1 6 1 2 2 637 2435 46 21 96.482231 14). Initial Decision 82 F.T.C.

Engraving, Inc., 39 F.T.C. 192, 198-99 (1944); Cigarette Advertising Guides, 2 CCH Trade Reg. Rep. {17894 (1955). The examiner is issuing an order (Par. 3, infra) that is different both from Paragraph 9 of the tentative order appended to the complaint and from Paragraph 9 of the revised order proposed by complaint counsel (CPF 92; CB 41). The tentative order appended to the complaint reads as follows: 9. Using, publishing or referring to any testimonial or endorsement which is not of current origination and its use expressly authorized in writing. The revised order proposed by complaint counsel reads as follows:

9. Using, publishing, or referring to any testimonial or endorsement unless such testimonial or endorsement is genuine in all respects, dated, and represents the current opinion of the author, and unless its use is expressly authorized in writing.

Complaint counsel state that their revised order is designed “to make it fairer for respondents and at the same time to add to the protection of the public.” They further explain: Respondents can be restricted to using only recently executed testimonials. However, as long as the testimonials are dated, and still reflect the current opinion of the authors, there is no overpowering reason to require respondents to have new testimonial letters executed every few years. So the order has been changed to eliminate the requirement that testimonials be of current origination. In addition, since the record indicates that all of respondents’ testimonials are not genuine, a requirement of authenticity has been added to this provision of the order. (CB 41) It seems to the examiner that both forms of order are unnecessarily restrictive—one in requiring that testimonials be “of current origination” and the other in requiring that they be dated. The point is that at the time a testimonial is published and circulated, it should reflect the facts then existent respecting the testimonialist’s use of the product and his opinion thereof. If the testimonial does this, it is immaterial when the testimonialist purchased the product or wrote the testimonial.

The order being issued by the examiner, in addition to requiring express authorization, would simply require, in effect, that “respondents have good reason to believe that the person or organization named” in a testimonial “subscribes to the facts and opinions therein contained” at the time of publication and circulation. Because the facts in this case do not show any flagrant dereliction on the part of respondents, this less onerous and more 488 Initial Decision practicable order seems preferable to the other versions. The standard of “good reason to believe” is adopted from the Cigarette Guides, supra.

The proposed order of complaint counsel poses an additional ' ~problem in-yequiring that testimonials be “genuine.” There is no question that testimonials should be genuine, but complaint counsel have cited no basis for such a specific requirement here. Their statement that not all of respondents’ testimonials are genuine (CB 41) is wholly undocumented, and the examiner is aware of no evidence proving the lack of genuineness of any of respondents’ testimonials (compare CRB 9). In any event, no such issue was presented by the pleadings.

VII. Representatives as to Testing The complaint contains several allegations respecting the testing of VX-6 (Paragraph Five (6)—(7) and Paragraph Six (6)—(7) ). First, respondents are charged with having represented, directly or by implication, that ‘Laboratories and certain users have approved and fully tested the product as to performance,” whereas— (1) Laboratories and certain users have not approved and have not fully tested the product.

(2) Some of the laboratories were either non- vexistent or had not authorized the use of a seal of approval. - (3) Testing of the product had not been accomplished or was incomplete and named users had not approved and tested. said product. Second, a closely related charge is to the effect that respondents have represented, contrary to fact, that: Each of the use or performance representations made by respondents for the product has been substantiated by respondents throtigh -competent scientific tests or by authenticated, controlled and duly recorded user tests or both.

The complaint does not specifically allege that the affirmative representations of testing constituted representations that the tests referred to were “competent scientific tests” or “authenticated, controlled; and duly recorded user tests.” The charging paragraph. relating to the testing and approval of XV-6 (Paragraph Six (6)) does not deal with this standard for testing. This standard appears to be applied only with respect to the implied representations of testing allegedly arising from the making of performance claims. As the case developed, there emerged the Initial Decision 82 F.T.C.

novel theory that merely by claiming that VX-6 would perform in stated ways, respondents impliedly represented, contrary to fact, that each performance claim had been substantiated through competent scientific tests or by proper user tests. Despite this apparent dichotomy, the issue posed is the same, whether the representations of testing were made directly or by implication. The question is whether the tests advertised by respondents were competent scientific tests or authenticated, controlled and duly recorded user tests. Nevertheless, these two aspects of the case initially require separate consideration. It is necessary to consider first the nature of the affimative representations respecting tests, as well as the facts respecting certain of the preliminary challenges to these representations. It is beyond dispute that respondents represented that VX-6 not only had been “tested,” but that it had been “tested and approved.” By the depiction of laboratory seals and otherwise, the basic representation was that VX-6 had been tested and approved by laboratories. For example— The cartons in which VX-6 is sold bear the words “Tested” and “Approved,” accompanied by laboratory seals. The cartons formerly used’ contained the seals of. Underwriters Laboratories,” American Testing Laboratories, and Public Service Testing Laboratories (CX 155). The carton used since 1965 or 1966 (CX 218) has substituted the seal of National Testing Laboratories for that of Public Service Testing Laboratories. (Tr. 374 A-—G; see Tr. 334, 337-38, 1723-25.) A depiction of the carton, showing the words “Tested” and “Approved,” as well as_the seals, appears in | CXs 24 D, 33 B, 36 A—B, 37 B, 39 D, and 62 P, In addition, the words “Tested and Approved,” usually accompanied by laboratory seals, appear in numerous advertisements (CXs 6 A, 49 D, 57-60, 78, 75, 115). One advertisement specifically states: ‘Tested and Approved by Independent Laboratories” (CX 32 D), and there are various other references to laboratory testing, seals, and reports (CXs 31 E, 113, 114). Respondents also disseminated a simulated certificate bearing the words, “Certificate of Approval to VX-—6 by Independent Testing Laboratories” and the imprints of the seals of Underwriters Laboratories, American Testing Laboratories, and Na- Complaints 1 3 1 1 2 901 2485 93 20 95.581429 counsels 1 3 1 1 3 1019 2486 68 20 95.619644 made5 1 3 1 1 4 1110 2493 29 13 96.100777 no5 1 3 1 1 5 1163 2487 69 19 95.889854 claims 1 3 1 1 6 1256 2486 55 20 95.347473 that5 1 3 1 1 7 1336 2488 155 22 94.707108 respondents5 1 3 1 1 8 1515 2488 102 20 95.849533 misused5 1 3 1 1 9 1642 2488 40 20 96.926476 thes 1 3 1 1 10 1706 2488 48 21 96.654716 seals 1 3 1 1 11 1780 2490 26 18 95.636383 of5 1 3 1 1 12 1831 2488 175 20 96.501183 Underwriters4 1 3 1 2 0 687 2516 1318 27 -1 5 1 3 1 2 1 687 2516 162 22 95.825516 Laboratories5 1 3 1 2 2 871 2518 50 21 95.825516 (Tr.5 1 3 1 2 3 938 2520 78 21 91.678116 4398).5 1 3 1 2 4 1035 2520 48 19 96.033600 Thes 1 3 1 2 5 1100 2521 176 20 96.633545 Underwriters5 1 3 1 2 6 1293 2522 48 19 96.645119 seals 1 3 1 2 7 1358 2522 69 19 96.654175 hears5 1 3 1 2 8 1444 2522 40 20 96.654175 thes 1 3 1 2 9 1501 2523 76 19 96.472641 words5 1 3 1 2 10 1595 2523 139 19 66.091354 “Classified5 1 3 1 2 11 1752 2530 26 13 96.792412 as5 1 3 1 2 12 1797 2526 23 17 96.510384 to5 1 3 1 2 13 1840 2524 54 18 96.225792 Fires 1 3 1 2 14 1911 2523 94 19 96.464218 Hazard4 1 3 1 3 0 684 2551 83 22 -1 5 1 3 1 3 1 684 2551 83 22 83.689667 Only.” 488 Initial Decision tional Testing Laboratories (CX 43). They represented further that:

* * * [M]Jany leading national testing laboratories have tested and approved VX-6. (CX 1 B) 5 1 4 1 1 2 494 539 153 33 0.000000 ~~-VX-65 1 4 1 1 3 664 539 58 38 85.139648 has5 1 4 1 1 4 736 540 170 38 92.162582 undergone5 1 4 1 1 5 923 542 51 24 96.695587 thes 1 4 1 1 6 991 545 78 23 96.460358 most5 1 4 1 1 7 1086 544 158 31 94.158974 strenuous5 1 4 1 1 8 1264 542 159 32 42.572933 tests.and.5 1 4 1 1 9 1441 530 74 37 96.295563 came5 1 4 1 1 10 1535 542 131 31 96.976730 through5 1 4 1 1 11 1686 542 71 26 96.275513 with5 1 4 1 1 12 1779 542 94 36 96.826370 flying4 1 4 1 2 0 556 582 308 32 -1 5 1 4 1 2 1 556 582 103 26 94.986374 colors.5 1 4 1 2 2 685 583 65 29 96.785545 (CX5 1 4 1 2 3 772 584 32 25 92.634323 315 1 4 1 2 4 829 584 35 30 92.634323 C)2 1 5 0 0 0 553 648 1319 140 -1 3 1 5 1 0 0 553 648 1319 140 -1 4 1 5 1 1 0 601 648 1271 41 -1 5 1 5 1 1 1 601 648 244 38 79.314423 Respondents5 1 5 1 1 2 875 650 216 37 79.314423 reproduced5 1 5 1 1 3 1119 650 59 31 96.350517 thes 1 5 1 1 4 1206 651 71 31 95.819618 tests 1 5 1 1 5 1306 651 121 37 96.609970 reports 1 5 1 1 6 1455 650 46 32 96.609970 of5 1 5 1 1 7 1522 650 169 32 96.827927 National5 1 5 1 1 8 1723 650 149 39 96.651764 Testing4 1 5 1 2 0 553 697 1318 41 -1 5 1 5 1 2 1 553 697 250 33 96.509605 Laboratories5 1 5 1 2 2 832 698 79 37 96.659180 (CX5 1 5 1 2 3 935 701 42 30 93.128014 395 1 5 1 2 4 1001 700 117 37 89.439636 B-C),5 1 5 1 2 5 1141 700 87 31 95.687607 with5 1 5 1 2 6 1251 710 20 22 95.687607 a5 1 5 1 2 7 1294 710 103 22 96.504044 covers 1 5 1 2 8 1420 710 88 28 95.415123 pages 1 5 1 2 9 1539 701 79 36 96.722427 (CX5 1 5 1 2 10 1642 702 43 30 96.521614 395 1 5 1 2 11 1711 701 49 37 96.706764 A)5 1 5 1 2 12 1790 701 81 31 96.706764 that4 1 5 1 3 0 554 749 499 39 -1 5 1 5 1 3 1 554 749 214 36 96.697975 proclaimed5 1 5 1 3 2 787 749 35 31 96.599022 in5 1 5 1 3 3 841 750 97 38 95.825653 large5 1 5 1 3 4 957 752 96 36 96.504684 type:2 1 6 0 0 0 704 825 1055 70 -1 3 1 6 1 0 0 704 825 1055 70 -1 4 1 6 1 1 0 704 825 1055 29 -1 5 1 6 1 1 1 704 825 298 26 96.264297 INDEPENDENTS 1 6 1 1 2 1023 827 269 26 96.293953 LABORATORY5 1 6 1 1 3 1313 827 123 25 92.216179 TESTS5 1 6 1 1 4 1456 827 92 27 90.414017 VX-65 1 6 1 1 5 1570 827 189 26 96.202957 BATTERY4 1 6 1 2 0 1060 869 306 26 -1 5 1 6 1 2 1 1060 869 196 26 93.237129 ADDITIVES 1 6 1 2 2 1279 869 13 16 92.429718 *5 1 6 1 2 3 1316 870 13 15 80.249069 *5 1 6 1 2 4 1354 869 12 15 91.980026 *2 1 7 0 0 0 553 923 1316 91 -1 3 1 7 1 0 0 553 923 1316 91 -1 4 1 7 1 1 0 553 923 1316 48 -1 5 1 7 1 1 1 553 923 123 32 96.723747 Under5 1 7 1 1 2 696 924 59 32 96.730721 thes 1 7 1 1 3 778 926 70 31 96.800011 seals 1 7 1 1 4 872 926 39 31 96.149445 of5 1 7 1 1 5 934 926 166 32 96.149445 National5 1 7 1 1 6 1125 926 151 45 96.392906 Testing5 1 7 1 1 7 1296 927 260 37 96.591553 Laboratories,5 1 7 1 1 8 1581 927 60 32 96.491142 thes 1 7 1 1 9 1666 937 104 22 96.500656 covers 1 7 1 1 10 1794 928 75 31 96.744011 also4 1 7 1 2 0 553 974 619 40 -1 5 1 7 1 2 1 553 974 160 32 96.618706 contains5 1 7 1 2 2 727 974 60 32 96.408653 thes 1 7 1 2 3 801 975 184 39 95.813362 following5 1 7 1 2 4 999 977 88 31 96.713814 text:5 1 7 1 2 5 1170 975 2 3 11.587524 ,2 1 8 0 0 0 552 1049 1316 70 -1 3 1 8 1 0 0 552 1049 1316 70 -1 4 1 8 1 1 0 552 1049 1316 31 -1 5 1 8 1 1 1 552 1049 71 27 96.156517 This5 1 8 1 1 2 658 1051 70 26 96.476425 Tests 1 8 1 1 3 763 1051 154 28 95.789108 PROVES5 1 8 1 1 4 953 1053 58 25 93.286980 ands 1 8 1 1 5 1048 1052 212 28 90.374718 CERTIFIES5 1 8 1 1 6 1298 1052 66 27 93.178963 that5 1 8 1 1 7 1402 1052 88 27 79.134590 VX-65 1 8 1 1 8 1526 1052 195 27 93.147835 BATTERY5 1 8 1 1 9 1755 1053 113 27 92.820740 ADDI-4 1 8 1 2 0 628 1092 202 27 -1 5 1 8 1 2 1 628 1092 94 27 90.364799 TIVES 1 8 1 2 2 742 1092 13 15 86.964371 *5 1 8 1 2 3 780 1093 13 14 86.964371 *5 1 8 1 2 4 817 1094 13 13 92.752579 *2 1 9 0 0 0 551 1159 1314 170 -1 3 1 9 1 0 0 551 1159 1314 170 -1 4 1 9 1 1 0 553 1159 722 29 -1 5 1 9 1 1 1 553 1159 137 26 95.621254 Restores5 1 9 1 1 2 710 1160 105 26 96.701172 Active5 1 9 1 1 3 835 1161 66 26 96.409431 Life5 1 9 1 1 4 922 1163 28 24 93.259468 to5 1 9 1 1 5 973 1162 107 26 87.310417 *‘Dead5 1 9 1 1 6 1102 1162 173 26 96.377144 Batteries’!4 1 9 1 2 0 553 1217 1312 44 -1 5 1 9 1 2 1 553 1226 112 25 96.658745 Breaks5 1 9 1 2 2 682 1228 89 25 93.302315 Downs 1 9 1 2 3 790 1228 177 31 90.187485 Sulphation5 1 9 1 2 4 985 1229 260 27 91.579735 Corrosion—Thes 1 9 1 2 5 1263 1229 140 32 96.645767 Primary5 1 9 1 2 6 1420 1229 96 26 96.789993 Causes 1 9 1 2 7 1531 1217 34 38 97.016617 of5 1 9 1 2 8 1582 1231 127 30 96.774277 Battery5 1 9 1 2 9 1729 1230 136 26 95.652702 Failure!4 1 9 1 3 0 551 1293 954 36 -1 5 1 9 1 3 1 551 1293 150 32 96.573479 Improves5 1 9 1 3 2 718 1295 50 25 96.043594 thes 1 9 1 3 3 788 1295 156 26 96.387444 Electrical5 1 9 1 3 4 967 1295 127 33 96.320976 Storage5 1 9 1 3 5 1114 1296 146 33 96.469025 Capacity5 1 9 1 3 6 1277 1298 33 25 95.829933 of5 1 9 1 3 7 1328 1305 18 18 96.960152 a5 1 9 1 3 8 1366 1297 139 31 96.671623 Battery!2 1 10 0 0 0 553 1360 1312 73 -1 3 1 10 1 0 0 553 1360 1312 73 -1 4 1 10 1 1 0 553 1360 1312 37 -1 5 1 10 1 1 1 553 1360 109 27 96.249176 Allows5 1 10 1 1 2 686 1370 17 18 97.005417 a5 1 10 1 1 3 729 1362 125 32 96.408157 Battery5 1 10 1 1 4 878 1365 30 24 95.920517 to5 1 10 1 1 5 934 1363 136 27 93.298759 Performs 1 10 1 1 6 1098 1365 227 32 93.002243 Satisfactorily5 1 10 1 1 7 1349 1367 32 23 96.702377 at5 1 10 1 1 8 1405 1365 51 25 63.408669 30°5 1 10 1 1 9 1486 1365 97 26 96.465218 Below5 1 10 1 1 10 1610 1365 147 31 93.180031 Freezing5 1 10 1 1 11 1783 1365 82 26 92.121750 Tem-4 1 10 1 2 0 624 1404 1238 29 -1 5 1 10 1 2 1 624 1404 239 29 90.959084 peratures—As5 1 10 1 2 2 896 1404 72 26 96.542130 Wells 1 10 1 2 3 1004 1405 42 25 96.455215 As5 1 10 1 2 4 1079 1406 102 26 96.455215 Under5 1 10 1 2 5 1216 1406 139 25 96.693031 Extreme5 1 10 1 2 6 1389 1406 80 25 96.031738 Heat5 1 10 1 2 7 1501 1406 175 25 96.579483 Conditions5 1 10 1 2 8 1710 1407 32 25 95.892395 of5 1 10 1 2 9 1777 1407 85 25 96.348305 168°!2 1 11 0 0 0 551 1468 837 41 -1 3 1 11 1 0 0 551 1468 837 41 -1 4 1 11 1 1 0 551 1468 837 41 -1 5 1 11 1 1 1 551 1468 87 26 93.227341 Gives5 1 11 1 1 2 658 1470 214 31 91.665108 Recuperative5 1 11 1 1 3 892 1471 57 38 93.202713 ands 1 11 1 1 4 972 1472 269 33 92.706001 Self-Recharging5 1 11 1 1 5 1261 1473 127 36 96.916267 Ability!2 1 12 0 0 0 550 1536 711 36 -1 3 1 12 1 0 0 550 1536 711 36 -1 4 1 12 1 1 0 550 1536 711 36 -1 5 1 12 1 1 1 550 1536 13 13 31.139366 *5 1 12 1 1 2 587 1536 13 14 31.139366 *5 1 12 1 1 3 625 1536 13 14 86.491867 *5 1 12 1 1 4 659 1537 59 25 96.778755 ands 1 12 1 1 5 737 1537 134 26 60.915035 Extends5 1 12 1 1 6 892 1539 46 24 96.137711 thes 1 12 1 1 7 958 1539 68 30 96.535744 Life5 1 12 1 1 8 1047 1541 32 30 96.535744 of5 1 12 1 1 9 1097 1549 18 17 95.475418 a5 1 12 1 1 10 1133 1541 128 31 96.061104 Battery2 1 13 0 0 0 550 1602 1313 74 -1 3 1 13 1 0 0 550 1602 1313 74 -1 4 1 13 1 1 0 550 1602 1313 37 -1 5 1 13 1 1 1 550 1602 232 33 89.524246 *Mechanically5 1 13 1 1 2 804 1605 92 25 96.197289 sounds 1 13 1 1 3 918 1605 145 27 96.582222 batteries5 1 13 1 1 4 1084 1608 68 25 96.407990 that5 1 13 1 1 5 1174 1608 75 25 95.787560 have5 1 13 1 1 6 1270 1608 93 25 96.089149 failed5 1 13 1 1 7 1387 1608 56 25 95.734634 dues 1 13 1 1 8 1465 1610 30 23 95.734634 to5 1 13 1 1 9 1517 1608 150 26 93.271515 excessive5 1 13 1 1 10 1692 1608 171 31 91.608276 sulphation4 1 13 1 2 0 622 1644 139 32 -1 5 1 13 1 2 1 622 1644 139 32 96.611221 deposits.2 1 14 0 0 0 549 1710 1313 93 -1 3 1 14 1 0 0 549 1710 1313 93 -1 4 1 14 1 1 0 595 1710 1267 44 -1 5 1 14 1 1 1 595 1710 72 32 96.817467 Thes 1 14 1 1 2 692 1713 71 30 96.402351 tests 1 14 1 1 3 790 1715 120 36 96.749565 reports 1 14 1 1 4 935 1714 39 31 96.227333 of5 1 14 1 1 5 1000 1715 123 31 96.430824 Public5 1 14 1 1 6 1150 1716 142 31 96.241814 Services 1 14 1 1 7 1320 1716 148 38 96.792480 Testing5 1 14 1 1 8 1495 1716 252 32 96.323524 Laboratories5 1 14 1 1 9 1783 1716 79 37 96.323524 (CX4 1 14 1 2 0 549 1761 1313 42 -1 5 1 14 1 2 1 549 1761 62 30 93.186981 2215 1 14 1 2 2 633 1761 106 38 72.617180 A-D)5 1 14 1 2 3 764 1772 74 22 96.607651 was5 1 14 1 2 4 856 1763 75 31 96.441475 also5 1 14 1 2 5 950 1764 84 32 95.844704 used5 1 14 1 2 6 1054 1765 36 31 96.822586 in5 1 14 1 2 7 1110 1766 233 37 96.202721 advertising,5 1 14 1 2 8 1363 1765 88 32 96.693443 with5 1 14 1 2 9 1469 1766 60 31 96.462425 thes 1 14 1 2 10 1549 1766 118 31 96.639168 words5 1 14 1 2 11 1690 1767 172 30 72.287338 “Tested”2 1 15 0 0 0 548 1811 1383 43 -1 3 1 15 1 0 0 548 1811 1383 43 -1 4 1 15 1 1 0 548 1811 1383 43 -1 5 1 15 1 1 1 548 1811 68 31 96.922058 ands 1 15 1 1 2 632 1812 234 38 48.410110 “Approved”5 1 15 1 1 3 882 1824 42 21 95.920952 on5 1 15 1 1 4 939 1815 59 30 96.564812 thes 1 15 1 1 5 1013 1825 103 21 96.564812 covers 1 15 1 1 6 1131 1826 99 28 96.418762 page,5 1 15 1 1 7 1246 1816 163 38 96.823921 together5 1 15 1 1 8 1427 1816 83 31 96.539444 with5 1 15 1 1 9 1527 1816 59 32 96.661560 thes 1 15 1 1 10 1593 1816 312 32 27.323860 Laboratories’.5 1 15 1 1 11 1924 1824 7 13 0.000000 °2 1 16 0 0 0 521 1861 1341 548 -1 3 1 16 1 0 0 548 1861 82 31 -1 4 1 16 1 1 0 548 1861 82 31 -1 5 1 16 1 1 1 548 1861 82 31 92.505264 seal.3 1 16 2 0 0 521 1911 1341 396 -1 4 1 16 2 1 0 521 1911 1340 43 -1 5 1 16 2 1 1 521 1946 2 4 84.718178 _5 1 16 2 1 2 595 1911 72 31 96.238403 Thes 1 16 2 1 3 683 1912 81 38 96.035255 only5 1 16 2 1 4 781 1914 180 31 96.718575 references 1 16 2 1 5 977 1916 36 30 96.760750 to5 1 16 2 1 6 1030 1916 164 31 96.330750 so-called5 1 16 2 1 7 1213 1926 82 21 96.745735 users 1 16 2 1 8 1310 1917 90 31 96.279030 tests5 1 16 2 1 9 1417 1926 152 28 96.406197 appears5 1 16 2 1 10 1586 1918 37 30 95.934280 to5 1 16 2 1 11 1640 1917 42 31 96.822876 be5 1 16 2 1 12 1700 1917 62 31 96.023628 CX5 1 16 2 1 13 1781 1917 20 31 94.255348 95 1 16 2 1 14 1819 1917 42 36 96.305443 A,4 1 16 2 2 0 547 1960 1315 41 -1 5 1 16 2 2 1 547 1960 35 30 96.494774 in5 1 16 2 2 2 605 1961 114 32 96.546555 which5 1 16 2 2 3 742 1963 232 38 96.194885 respondents5 1 16 2 2 4 997 1964 202 33 96.610474 advertised5 1 16 2 2 5 1221 1965 79 32 96.589546 that5 1 16 2 2 6 1323 1975 64 22 96.247681 ones 1 16 2 2 7 1411 1965 156 33 96.247681 railroads 1 16 2 2 8 1591 1965 70 33 93.237381 had5 1 16 2 2 9 1686 1966 176 32 41.850605 “success-4 1 16 2 3 0 546 2010 1315 43 -1 5 1 16 2 3 1 546 2010 90 38 96.500511 fully5 1 16 2 3 2 653 2012 113 32 95.854446 tested5 1 16 2 3 3 784 2013 68 31 95.854446 ands 1 16 2 3 4 872 2013 84 32 92.921577 used5 1 16 2 3 5 975 2014 134 32 56.119595 VX-6”5 1 16 2 3 6 1128 2015 59 32 96.900307 for5 1 16 2 3 7 1205 2016 19 31 95.531891 35 1 16 2 3 8 1244 2025 103 28 96.676277 years5 1 16 2 3 9 1366 2016 69 31 96.179382 ands 1 16 2 3 10 1455 2016 80 31 96.726379 that5 1 16 2 3 11 1552 2016 152 31 96.748520 another5 1 16 2 3 12 1725 2016 136 32 75.813797 “tested4 1 16 2 4 0 545 2061 1317 43 -1 5 1 16 2 4 1 545 2061 112 32 89.414642 VX-65 1 16 2 4 2 680 2062 58 32 95.848885 for5 1 16 2 4 3 760 2064 20 31 96.011063 45 1 16 2 4 4 803 2064 125 37 96.011063 years”5 1 16 2 4 5 952 2065 69 31 96.031647 ands 1 16 2 4 6 1046 2065 222 39 96.193527 “approved”5 1 16 2 4 7 1294 2066 46 32 96.202049 its5 1 16 2 4 8 1364 2076 61 22 96.767693 uses 1 16 2 4 9 1448 2066 35 32 96.452629 in5 1 16 2 4 10 1508 2067 47 31 96.188560 its5 1 16 2 4 11 1579 2067 103 31 96.188560 trucks 1 16 2 4 12 1707 2067 70 31 96.658295 ands 1 16 2 4 13 1802 2077 60 21 96.390411 cara 1 16 2 5 0 546 2112 1316 42 -1 5 1 16 2 5 1 546 2112 180 38 96.761482 batteries,5 1 16 2 5 2 745 2124 39 22 96.401245 as5 1 16 2 5 3 802 2115 75 31 95.625961 wells 1 16 2 5 4 896 2125 39 21 95.625961 as5 1 16 2 5 5 953 2115 36 31 96.676071 in5 1 16 2 5 6 1009 2116 154 32 96.505905 railroads 1 16 2 5 7 1183 2117 106 32 96.598328 diesel5 1 16 2 5 8 1309 2117 181 32 96.314865 batteries.5 1 16 2 5 9 1512 2118 39 30 96.217857 In5 1 16 2 5 10 1573 2118 60 31 95.757774 CX5 1 16 2 5 11 1654 2119 64 30 93.268974 2215 1 16 2 5 12 1741 2118 42 36 91.615105 D,5 1 16 2 5 13 1802 2118 60 31 96.347763 thea 1 16 2 6 0 545 2163 1316 42 -1 5 1 16 2 6 1 545 2163 149 37 95.884743 products 1 16 2 6 2 718 2174 75 22 96.104637 was5 1 16 2 6 3 820 2167 227 36 96.796860 represented5 1 16 2 6 4 1074 2177 38 22 95.373474 as5 1 16 2 6 5 1141 2168 151 32 89.225052 “ROADS 1 16 2 6 6 1320 2168 206 32 96.255974 TESTED”5 1 16 2 6 7 1553 2168 36 31 95.983368 in5 1 16 2 6 8 1621 2169 121 36 95.983368 10,0005 1 16 2 6 9 1771 2178 90 27 95.714241 cars,4 1 16 2 7 0 543 2214 1317 43 -1 5 1 16 2 7 1 543 2214 133 37 96.875137 trucks,5 1 16 2 7 2 703 2214 112 39 96.924736 boats,5 1 16 2 7 3 841 2217 165 37 96.646187 tractors,5 1 16 2 7 4 1033 2220 64 30 95.359421 etc.5 1 16 2 7 5 1126 2218 253 39 96.666061 Additionally,5 1 16 2 7 6 1407 2219 234 38 96.463356 respondents5 1 16 2 7 7 1667 2219 193 32 96.634315 circulated4 1 16 2 8 0 544 2261 643 46 -1 5 1 16 2 8 1 544 2265 215 32 96.482292 testimonials 1 16 2 8 2 774 2266 122 33 96.592987 letters5 1 16 2 8 3 911 2261 85 44 96.592987 (CX5 1 16 2 8 4 1011 2270 41 29 92.997002 415 1 16 2 8 5 1068 2270 119 37 67.191971 A-P).3 1 16 3 0 0 544 2316 1316 93 -1 4 1 16 3 1 0 591 2316 1269 43 -1 5 1 16 3 1 1 591 2316 82 31 95.895416 Just5 1 16 3 1 2 691 2326 39 22 95.895416 as5 1 16 3 1 3 749 2317 101 32 96.461761 there5 1 16 3 1 4 868 2328 63 22 96.682144 cans 1 16 3 1 5 953 2319 42 31 96.735565 be5 1 16 3 1 6 1015 2329 45 22 96.917801 no5 1 16 3 1 7 1080 2320 140 39 96.160728 disputes 1 16 3 1 8 1241 2321 108 31 96.156082 about5 1 16 3 1 9 1369 2321 245 38 93.301910 respondents’5 1 16 3 1 10 1637 2322 223 37 92.723816 representa-4 1 16 3 2 0 544 2365 1316 44 -1 5 1 16 3 2 1 544 2365 105 37 96.719154 tions,5 1 16 3 2 2 667 2376 39 21 96.839691 so5 1 16 3 2 3 722 2367 29 31 95.709465 it5 1 16 3 2 4 767 2367 30 31 95.709465 is5 1 16 3 2 5 814 2367 75 32 96.851921 also5 1 16 3 2 6 905 2368 136 38 96.409752 beyond5 1 16 3 2 7 1060 2370 140 38 96.511772 disputes 1 16 3 2 8 1217 2370 80 32 93.209320 that5 1 16 3 2 9 1314 2370 112 32 75.304764 VX-65 1 16 3 2 10 1444 2370 70 32 96.786636 had5 1 16 3 2 11 1532 2370 87 32 93.280937 been5 1 16 3 2 12 1639 2370 221 39 92.094345 laboratory- Initial Decision 82 F.T.C.

tested—by at least 6 commercial testing laboratories—and that it was also subjected to testing in a municipal government facility (CXs 89 B-C, 40, 221 BC; 226 A=W, 227 A-B, 229 A-J, 231 A-B, 232 A-E, 301 A~B, 302 A—D; see also RX 24). Leaving for later consideration the question of whether these tests meet established standards of scientific competency, we turn now to the various other issues posed by the complaint on the subject of testing.

First, the evidence supports the allegation that laboratories have not “approved” VX-6. In general, the test reports tend to support various advertising claims made for VX-6, but the record is clear that no laboratory either approved the product or the advertising claims for it as such. (See RPF 16; 4405-08.) Second, the record fails to substantiate the allegation that neither “certain users’ nor “named users” had “approved and tested” VX-~—6. Despite a proposed finding to this effect (CPF 64), complaint counsel have not cited any evidence to support it. In response to respondents’ plea that the allegations be “stricken”’ (RPF 14--15), complaint counsel simply cite the railroad advertisement (CX 9 A, supra, p. 33 [p. 519 herein]) plus a reference to “strenuous tests” in CX 31 C (supra, p. 82 [p. 519 herein]) and make the undocumented assertion that “these representations * * * are false’ (CRB 11). They cite no proof, and the examiner is aware of none.

Third, the record fails to yield a definitive answer to the question whether VX-6 had been “fully tested’—or even to the question of what the term means. It is fair to say that it was not “fully tested” by any single laboratory; there were suggestions for supplemental and more extensive tests. But respondents can make a persuasive case that the combination of laboratory tests and user tests justifies a representation that VX-6 has been fully tested. Moreover, there is no evidence that respondents actually so claimed; the record fails to establish any standard for a “fully tested” product; and the proposed orders do not deal with the subject.

Fourth, despite the allegation in the complaint and complaint counsel’s cor responding proposed finding that “Some of the laboratories were * * * non-existent” (CPF 64), this was stricken as an issue when complaint counsel conceded that they were not charging that the laboratories that tested VX-—6 were fictitious but only that one of the laboratories (Botco Laboratories) had gone out of business (Tr. 187-97, 252-53).

| 488 Initial Decision Fifth, the record fails to contain “reliable, probative, and substantial evidence” (Rule 3.51(b)) to support the allegation that respondents used laboratory seals in advertising without authorization. The only instance cited by complaint counsel relates to the ~—seal_of Public Service Testing Laboratories ‘(CPF 84-85), but the testimony of its president, Michael Di Martino, fails to clearly establish that respondents did not have such authorization. Although Mr. Di Martino first stated that his laboratory had not authorized the use of its seal or its test report (CX 221 B-C) in advertising (Tr. 1605-06, 1612-13), he acknowledged on crossexamination that the laboratory had authorized respondents to use the report and the seal for limited advertising purposes (Tr. 1732-40, 1748-67, 1772-78, 1844). (Compare CPF 84-85 with RPF 15-16.) In any event,.the record indicates that the use of the Public Service seal was discontinued several years ago. (Compare CX 155 with CX 218; see Tr. 334, 337-88, 374 A-G, 1613-16, 1723-25.) Sixth, the evidence fails to support the allegation that “testing of the product had not been accomplished or was incomplete.” The question whether testing was “incomplete” is similar to the question whether VX-6 was “fully tested” (supra). With the allegations of Paragraph Six (6) disposed of, the next question is whether respondents, by representing that VX-—6 had been “‘tested,”. thereby further represented (1) that the tests were ‘‘competent scientific tests” or “authenticated, controlled and duly recorded user tests” and (2) that such tests substantiated each of. the “use or performance representations” for VX-6 (Complaint, Paragraph Five (7) and Paragraph Six (7)). As to representations concerning laboratory tests, it is altogether reasonable to infer that the public, or a substantial segment thereof, would expect such tests to be competent sciéntific tests. | The examiner so finds.

Similarly, a representation that a product has been tested has the capacity and tendency to lead the public to believe that such tests substantiate the use or performance claims made for the product, particularly where the product has been advertised as “tested and approved.” This was virtually conceded by respondents’ counsel (Tr. 254—55).

A representation.that a product has been tested and approved in actual use is in a different category. Complaint counsel have not shown that respondents’ advertised that their performance claims were substantiated by “authenticated, controlled and duly recorded Initial Decision 82 F.T.C.

user tests.” Respondents did publish user testimonials CX 41 A—P; thay referred to “road tests” (GX -221 D); and they advertised that railroads had tested and approved VX-6 (CX 9 A, supra, p. 88). In fact, the railroad advertisement is the only representation of a so-called user test included among the 58 challenged representations listed by complaint counsel (CPF 22-30; see No. 28 at CPF 26).

There is no evidence of any public understanding that user tests meet the specifications contained in the complaint. As a matter of fact, the Government’s expert marketing witness, called to testify regarding user tests, acknowledged that there were no established standards for such tests, although he expressed his opinion of what criteria should be used in assessing their validity (Goodman 3387-91, 3337-60).

Moreover, it is significant that no such standard was applied either by the examiner or by the Commission in the case of Pioneers Inc., 52 F.T.C. 1851 (1956). In that case, in which charges of false and misleading advertising of the battery additive AD-X2 were dismissed for failure of proof, the hearing examiner relied on user testimony to resolve a conflict in the scientific evidence. The examiner commented:: - - From a scientific viewpoint there are of course valid objections to this user testimony. The most serious is that usually controls were not maintained, that is, untreated batteries maintained along with the treated, so that any differences in the behavior of the two groups could be observed. A further objection is that usually adequate records were not maintained. But after recognizing the validity of these objections and discounting the testimony accordingly, there still remains a very substantial body of reliable and probative evidence attesting the merit of the product. And such evidence would appear to be particularly significant and helpful in the present case, in view of the conflict in the scientific evidence. (52 F.T.C., at 1866; see 1369-70).

Thus, although respondents represented that VX-—6 had been successfully tested in use, they did not represent that their advertising claims were substantiated by authenticated, controlled and duly recorded user tests.

Before considering the validity of the tests that respondents rely on as substantiating both their testing claims and their performance claims, it is necessary to consider a further issue raised by Paragraph Five (7) and Paragraph Six (7) of the complaint—that is, whether, in the absence of affirmative claims that VX-6 has been tested, the. dissemination of performance NATIONAL DYNAMICS CORP., ET AL. 523 488 Initial Decision claims necessarily implies that such claims have been substantiated by valid laboratory tests or by valid user tests. Because of the plethora of specific affimative claims that VX-6 ~-had, been «tested (supra, pp. 31-33 [pp.. 518-20. herein]), it hardly seems necessary to reach this issue of implied claims of testing. Nevertheless, with evident “reason to believe” that respondents had made affirmative claims of testing, the Commission injected this admittedly new concept as an issue in the case. Although this is not readily apparent from the text of the complaint, the provisions of Paragraph 8 of the tentative order appended to the complaint make it abundantly clear that the theory of the case is that even in the absence of any specific or clearly implied representations of testing, it is an unfair practice to advertise performance claims for a product unless the advertiser has substantiated them by tests meeting a specified standard. This was recognized by counsel and by the examiner from the outset of the proceeding, although respondents objected to retaining such an issue in the case both on legal grounds and on pragmatic grounds (Tr. 84-87, 202-23, 225-28, 253-79). Both parties have now extensively briefed and argued the issue, and it should be resolved.

In condsidering whether performance claims necessarily imply that they have been substantiated by proper tests, we begin with the fact that the record is wholly devoid of evidence that any member of the public so interprets the performance representations made by respondents concerning VX-6. According to complaint counsel, such evidence is unnecessary. They contend that the implied representation of testing is an inference that the examiner and the Commission may draw from the reading of the advertising claims. In their brief; complaint — counsel contend that “performance claims, by their very nature, create an implication that tests were performed to substantiate them.” This implication of testing, they argue, is the “logical interpretation to be given to performance claims.” (CB 1) Complaint counsel concede that to infer such a representation from the making of performance claims is a new theory that is without precedent, except that such allegations have been made in 3 other cases ''! now in litigation. They acknowledge that these cases constitute thé first time the theory of implied representations 1 Virestune Tire & Rubber Co., Docket No. 8818 [81 F.T.C. 398]; Pfizer, Inc., Docket No. 8819 (dismissed by Hearing Examiner Bennett April 16, 1971) [81 F.T.C, 23]; B. I. du Pont de Nemours & Co. (Notice of intention to issue complaint), File No. 702 3285. Tnitial Decision 82 F.T.C.

of.testing has been litigated in a Commission proceeding, but they insist that there are ‘decided cases that lend support to their interpretation of performance claims as incorporating an implied claim of testing.

The argument that the examiner and the Commission may now so interpret performance claims without any evidence of such public understanding is not persuasive. The Commission has been dealing with advertising claims for more than half-century, but until it issued the complaint in this case, it had never taken such a position. Complaint counsel urge that the Commission “has a special expertise in determining the meaning of advertisements and the inferences to be drawn therefrom” and that, therefore, “the Commission’s interpretation of the performance claims in this case must be given the utmost consideration” (CB 3-4). These principles are applicable to the Commission sitting in its adjudicative capacity, but the issuance of a complaint is not an adjudicative act. The theory of implied representations of testing is merely an allegation; the Commission had “reason to believe” that performance claims involved implied representations of testing. At this stage, however, the examiner must adjudicate the question. 7 The adjudicative determination here made is a narrow one—that the record in this case does not permit an inference that performance claims per se involve an implied representation of substantiation by testing. This determination has been made with full awareness that consumer testimony as to the meaning of advertisements is not ordinarily required—that the Coiriiission may draw its own inferences from its examination of the advertisement.” But decisions to this effect are subject to limitations based on fundamental principles of fairness so well-recognized that no elaborate citation of authority is required: The inference drawn must be one that is reasonably implied; it may not be arbitrary." On this record, the examiner considers the inference contended for would be unreasonable and its adoption arbitrary and unwarranted.'* The record is silent as to the nature of the revelation that Y Niresh Industries v. FTC, 278 F.2d 387, 342 (ith Cir.), cert. denied, 364 U.S. 888 (1960) : Mohr v. FTC, 272 F.2d 401, 405 (9th Cir. 1959), cert. denied, 362 U.S. 920 (1960); Charles of the Ritz Dist. Corp. v. FTC, 143 F.2d 676, 680 (2d Cir. 1944): Zenith Radio Corp. v. FTC, 1438 I'.2d 29, 81 (7th Cir. 1944).

™ Leach v. Carlile, 258 U.S. 138, 140 (1922) ; Galf Oil Co. v. FTC, 150 F.2d 106, 108 (5th Cir. 1945) ; ALP.W. Paper Co. v. F'T'C, 149 F.2d 424, 426 (2d Cir. 1945). 4 Compare the General Motors case, 66 F.T.C. 267, 272 (1964) (consent order), where an order avainst representations, direct or implied, “that any product has been tested, either alone or in comparison with other products, and that NATIONAL DYNAMICS CORP., ET AL. 525 488 Initial Decision led the Commission and its staff to believe, after 50 years, that the public—or a substantial segment thereof—now infers that merely by making performance claims for a product, an advertiser thereby - assures the public that he has “competent -scientific tests” or “authenticated, controlled and duly recorded user tests” to back up such performance representations.

Even complaint counsel seem unsure of the validity of their position. Not only do they point out other inferences that the public may draw from a performance claim, but they simply argue that it is “not unrealistic to assume” an inference of testing (CB 1-3). Moreover, the exact application of this new theory is left in some doubt by their brief. The first 17 pages of the brief are devoted to an argument that “the public does infer from the making of performance claims that valid tests were run to substantiate the claims” (CB 17). Nevertheless, in proposing revision of Paragraph 8 of the tentative order appended to the complaint, complaint counsel seem to have receded in large measure from the theory they espoused in the first 17 pages of the brief. Paragraph 8 of the tentative order appended to the complaint would prohibit respondents from:

Representing, directly or by implication, that any product has various uses or performance characteristics or will accomplish certain results unless each said use, performance or accomplishment claim has been fully and completely substantiated through * * * [proper] tests. ~~ ~ - Complaint counsel’s revision would forbid any representation, direct or implied, that:

use or performance claims have been substantiated by * * * [proper] tests unless each use or performance claim has been so substantiated * * * . In explanation of this proposed modification, complaint. counsel say that Paragraph 8 of the tentative order appended to the complaint— appears to assume that all use or performance claims imply that substantiating tests were run. This is an unnecessarily broad, and possibly incorrect, assumption. The order should prohibit false claims of testing, rather than unsubstantiated performance claims, since without the implication of testing an unsubstantiated performance claim is perfectly permissible. (CB 40-41). There is no explanation of the manner in which, in the absence such test proves or supports a claim as to the performance of such product, unless such representations clearly and accurately reflect the test results and unless the tests themselves are so devised and conductd as to constitute a creditable basis for any such representation,” contained a proviso that: “This paragraph shall not prohibit any advertisement which does not reasonably imply that a test has been made.” Initial Decision 82 F.T.C.

of specific claims of testing, it may be determined whether a performance representation also impliedly represents that it has been substantiated by testing.

Complaint counsel’s proposed modification of the order does make clear, however, that the issue here is an evidentiary question—whether there are implied representations of testing. In this setting, we do not reach the related question of whether, in the absence of express or implied representations of testing, the mere dissemination of performance claims nevertheless constitutes an actionable unfair practice if those claims are not substantiated by proper tests, regardless of the truth or falsity of such claims. This was an issue in the Pfizer case, supra, but it is not an issue that is presented on this record. Accordingly, this inital decision does not deal with it.

On the evidentiary question, the examiner finds the arguments of complaint counsel unpersuasive and the cases cited in their brief essentially inapposite. The inferences drawn in the cases cited are clearly distinguishable. For example, the inference in the Bristol-Myers case, 46 F.T.C. 162, 173 (1949), aff'd. 185 F. 2d 58 (4th Cir. 1950) was “unmistakable.” Similarly, the inferences of testing drawn from the use of a laboratory seal and © the Good Housekeeping seal’* and from the representation that products were certified and approved by a science institute '* are clearly in-a different category from the inference contended for here. The arguments founded on cases involving commercial warranties, express and implied (CB 14— 16), do not resolve the issue. vee :

Complaint counsel here seek to extend a principle expounded, obiter dictum, by Commissioner Elman in the Universe Co. (Kirchner) case, 63 F.T.C. 1282, 1294-95 (1963), aff’d. 337 F. 2d 751 (9th Cir. 1964). He there stated:

* * * One who affirmatively advertises a product to be safe, in a context in which the prospective user’s health or safety may be adversely affected if the claim is false, implicitly represents that he has a reasonable and substantial foundation in fact for making the claim. It should be noted, first, that this dictum is limited to products related to health and safety. Second, and more important, the only inference that the Commissioner would draw from a representation of safety is the further representation that the advertiser “has a % Topval Corp., 54 F.T.C. 1862 (1958) (consent order). 4% Nationwide Industries, Docket No. C-1356 [74 F.T.C. 78] (July 9, 1968) (consent order). ANCRALUANEMAD VANTIN AU Ueto Lb Fhbie ast 488 Initial Decision reasonable and substantial foundation in fact for making the claim” (63 F.T.C., at 1295)—not that valid tests were conducted. In any event, although legal precedents provide some guidelines, the question presented is essentially one of fact. The difficulty is _ thatsthe record contains no facts-upon which this examiner can base a finding that, without any express or clearly implied claims of testing, the public reads into respondents’ performance claims a representation that such claims have been substantiated by valid tests.

Complaint counsel argue that it “cannot be inferred that the interpretation of advertising advanced here is invalid merely because it came 53 years after the first advertising case had been ‘decided by the Commission” (CB 7). The examiner has drawn no such inference, but it would be just as logical as—perhaps.more so than—the inference they propose in an evidentiary vacuum. Such a belatedly—discovered interpretation of advertising demands some evidentiary basis beyond the ipse dixit of counsel. It is altogether possible that public understanding of performance claims may embrace an implied representation of testing, but the fact that the existence of such public understanding has escaped the expertise of the Commission for 53 years must be considered in assessing counsel’s argument that their theory of implied testing representations “‘should be accepted because it is correct” (CB 17). Finally, the argument that the adoption-of this theory would simplify the Commission’s enforcement burden in this age of consumerism is immaterial. It affords no proper basis for resolving such an important question.

We revert now to the question of what tests respondents’ advertised claims of testing were based on, after which we shall consider whether such tests were valid and whether. they substantiated respondents’ performance claims.

The laboratory test reports that respondents relied on involved the following laboratories:

American Testing Laboratories, Inc. (CX 40), Botco Laboratories (CX 226 A—W; see also RXs 21-24), Electrical Testing Laboratories, Inc. (CX 227 B), as interpreted and summarized by Industrial Testing Laboratories:** (CX 227 A), The testimony of Wilson J. H. Rogers (Tr. 1845-1937) concerning other work of Industrial Testing Laboratories is also cited by. respondents as constituting scientific support for their advertising claims. :

a Initial Decision 82 F.T.C.

National Testing Laboratories, Tne. (CXs 39 B-C, 232 A-E, .*» 801 A~B, 302 A-D),. .

Public Service Testing Laboratories, Ine. (CX 221 A-C), and Stillwell & Gladding, Inc. (CX 231 A-B). Respondents also relied on a test report entitled “New York Department of Sanitation Test Program” (CX 229 A-J) and a report by Edward M. Halter of a test conducted at the Naval Base in Torrence, California (CX 233 A-B). These reports are not laboratory reports; they are more in the nature of reports of user tests. Since, for a variety of reasons, these reports may be largely disregarded for decisional purposes, the examiner, in the interest of brevity, will not discuss the numerous points 6f controversy concerning them.*8 In addition to the laboratory tests of VX-6 as a basis for the challenged advertising claims, respondents point to more than 60 documents attesting to the efficacy of VX-6. Respondents refer to these letters as reports of user tests or field tests. The users reporting satisfactory results included the following: Operators of a trucking fleet in Albany, New York—“pleasing results” with VX-6; better starting power and brighter lights; battery failure virtually eliminated (CX 41 B).- Engineer for a television network, Birmingham, Alabama—eliminated starting problems with old battery; “convinced of the Product's capabilities” (CX 41 C; see p. 26 [p. 513 herein], supra). Plant manager for a construction company, Dublin, Georgia-—_VX-6 restored power to a “dead” battery (CX 41 D). Radio station program director, Rocky Mount, North Carolina—VX-6 “improved the efficiency” of a battery used in, _ mobile _transmitter—no battery failure (CX 41 E).

Mechanic for fleet of ice cream delivery trucks, Cincinnati, Ohio—battery performance improved (CX 41 G).

Engineer of taxicab fleet (location not shown)—battery troubles “reduced to an unbelievable minimum” (CX 41 J).

Operator of school buses and tour buses, Platteville, Wisconsin—VX-6 installed in fleet of 21 buses; “very pleased with the performance of VX-6;” recommends its use (CX 41 K).

Funeral home, Fort Pierce, Florida—VX-6 used in all rolling stock for 3% years and found to be “entirely satisfactory.” (CX 41 L). Neon sign company, Fall River, Massachusetts—“pleased with * * * performance” of VX~6 in delivery trucks (CX 41 M). % The Government’s expert witnesses concluded that neither report was descriptive of a competent scientific test (Tr. 2465-66, 4051, 4191-93). Other record references to CX 229 A-J are as follows: Meyer 1215; Donnelly 2050-71, Flynn 2071-84; Murphy 4806-15, 4840-56, 4862-67; Hamer 2350-2405, 2462-68, 2603-2749: see also Tr. 2667-68, 2684-87. Testimony regarding CX 233 A-B is found at Tr. 696-708, 750-51, 837-38 (Halter), 4050-96 (Hamer). See CPF 64-68, 79; RPF 22.

488 Initial Decision Construction company, Eunice, Louisiana—VX~6 installed in trucks, cars, and heavy equipment; VX-6 found “to be everything it claims to be” (CX 41 N).

Plant engineer, concrete products company, College Park, Georgia— _ VX-6 installed in truck fleet and other equipment with satisfactory results ~(CX*41-0).°:

Distributor for bottling company, London, “Ontario, Canada—VX- 6 installed in fleet of delivery trucks and in lift trucks; experience satisfactory; “amazing” results (CX 102).

Food wholesaler, Lufkin, Texas—results with VX-6 in “fleet of trucks and cars * * * amazingly good;” battery expense zero for 15 months after installation of VX-6 (CX 284).

Motor freight transportation company, Redfield, South Dakota—vwell satisfied with VX-6 installed in all trucks; “25,000 miles with no battery cost maintenance” (CX 285).

Equipment supervisor, construction company, Providence, Rhode Island— unserviceable battery restored to use by use of VX-6 (CX 237). . Used car dealer, Minneapolis, Minnesota—power restored to “dead” battery by use of VX-6 (CX 241).

Great Northern Railroad Company, St. Paul, Minnesota—use of VX-6 “very satisfactory” (CX 242 A-G).

Taxi service, Troy, New York—VX-6 used in taxicab fleet and funeral limousine; 65,000 to 75,000 miles without battery failure (CX 243). Bottling company, Tyler, Texas—no battery trouble in truck fleet or in fork lifts since installation of VX~6 (CX 250). Transportation supervisor, utility company, Indianapolis, Indiana—“tests so far bear out the facts that this additive does what is claimed for it— extend battery life, brings old batteries back” (CX 252). Fuel oil company, Clearwater, Florida—VX=6-tested on automotive and heavy equipment batteries with “very satisfactory results” (CX 259). Transportation department, wholesale fruits and produce company, Delaware, Ohio—VX-6 used in the batteries of 12 trucks for 5 years with complete satisfaction (CX 260).

Coal and fuel oil company, Scranton, Pennsylvania—VX-6 used for 3 years; battery life doubled (CX 261).

Maine Central Railroad Company, Portland, Maine—battery_ treated with | VX-6 in September 1958 still in service at the end of April 1960; performance satisfactory (CX 265 A-B).

Construction company, Middletown, Connecticut—VX-6 used with success (CX 266).

President of bait corporation, East Dublin, Georgia—“dead” battery restored to service through use of VX-6 (CX 267). Lee Petty, racing driver—-VX-6 used to his satisfaction (CK 269 A-B). This was a paid testimonial (Meyer 1237). Iron and fence company, Savannah, Georgia—disearded battery restored to service through use of VX-6 (CX 271). : Welding and equipment company, Sutter, California—junk” battery restored to service with the use of VX-6 (CX 273). Boats and boating column in Clearwater Sun, Clearwater, Florida— > Initial Decision 82 F.T.C.

VX-6 restored to service a 2-year sold battery that would not hold charge (CX 274). :

Funeral home, Tulsa, Oklahoma—trouble- free battery service following the use of VX-6 (CX 275).

Taxicab company, Sacramento, California—VX-6 used satisfactorily in 11 batteries (CX 276).

Used car dealer, Sacramento, California—100 percent satisfied with VX-6 after use in entire used car inventory (CX 278). House furnishing company, Mason City, Iowa—batteries “rejuvenated” by VX-6 (CX 279).

District storekeeper, Great. Northern Railway, Superior, Wisconsin— Large batteries “rejuvenated” with VX-6 (RX 5). Reports regarding satisfactory tests or usage of VX-6 were also presented from a variety of government agencies, federal, state, and local. Among them were the following: Director of maintenance for school buses and trucks, Grandview, Missouri—“very well satisfied with VX6” (CX 41 H). Chief Petty Officer, U.S. Naval Air Station, Memphis, Tennessee (CXs. 222, 223 A-C). The writer later became a distributor of VX-6 (Meyer 416).

Fleet Captain, Marine Laboratory, University of Miami (CX 224). Supply Chief, U.S. Marine Corps Recruiting Station, New York City (CX 225).

Department of Sanitary Engineering, District of Columbia (CX 230). Mayor, city of Greenfield, Indiana (CX 236). City Manager, Gallipolis, Ohio (CX 244). Commissioners of Roads and Revenues of Laurens County, Georgia (CX 247). eee District Tire and Battery Clerk, Greenfield Highway District, Greenfield, Indiana (CX 251).

Fire Chief, North Wilbraham, Massachusetts (CX 256). Supervisor of Transportation, Bumcombe County Public Schools, Asheville, North Carolina (CX 257).

Assistant Superintendent of Maintenance, Baltimore City Fire Department, Baltimore, Maryland (CX 283).

Sheriff, Bridgeport, Connecticut (RX 19 A). The record also contains reports of tests and satisfactory results in use from various persons connected with National Dynamics. For example, in February 1966, Orrin White reported on the satisfactory use of VX-6 by the Maine Central Railroad and its subsidiary, the Portland Terminal Company (CXs 245 A-B, 246 A-B).

488 ; Initial Decision Similarly, Ed Griffin reported successful tests or use of VX-6 by International Harvester Company, Maine Central Railroad, Nevada Northern Railway, Great Northern Railroad, Tidewater Oil Company, United Parcel Service, and United Fruit Company ~ —-€CX,.280 ASB).

Edward M. Halter,?* who was a vx 6 distributor and also a consultant for respondents, attested to the satisfactory results obtained with VX-6 in tests and in actual use (CX 41 A, CX 282; CX 233 A-B; Tr. 685-838; RXs 1, 3).

A distributor in Lynchburg, Virginia, reported on his personal experience with the product, as well as a test made on a police car (CX 254 A-B).

Another basis for respondents’ “user test” defense is a stipulation reading as follows:

* * * T[F]rom 1958 to the present National Dynamics Corporation and its distributors have received orders from and shipped battery additive VX6, often in significant quantities, to various industrial users and various federal, state, and municipal governmental agencies, departments and installations.

Respondents were informed by their distributors that these orders, and in many cases reorders, were placed only after an evaluation was made by, for and/or with the purchaser of the performance of the product in relation to certain of the claims made for the product. Respondents do not have personal knowledge. or_data as to the details or procedures involved in such evaluations, but were informed by their distributors merely that these customers would not order or reorder unless they were satisfied that the product was useful or performed as claimed. (Tr. 647).

The stipulation includes “a list of industrial users and governmental agencies illustrative of the industrial users and governmental agencies * * * referred to.” (Tr. 647-55) ee Preliminary to a consideration of the validity of the laboratory tests, it should be observed that the record establishes that, except for Botco Laboratories, which went out of business in 1962, upon the death of its owner, the laboratories listed are well-established independent testing laboratories. For example, Stillwell & Gladding Thes 1 8 1 1 2 648 2166 122 19 96.222527 examiners 1 8 1 1 3 785 2166 85 21 94.940636 rejects5 1 8 1 1 4 886 2166 130 22 92.601036 complaints 1 8 1 1 5 1030 2166 113 19 84.721062 counsel’s5 1 8 1 1 6 1159 2165 79 20 96.383812 attacks 1 8 1 1 7 1255 2172 28 13 96.353088 on5 1 8 1 1 8 1301 2166 43 19 93.288773 Mr.5 1 8 1 1 9 1362 2164 104 20 92.280411 Halter’s5 1 8 1 1 10 1481 2163 132 22 96.116150 credibility5 1 8 1 1 11 1633 2162 69 23 96.207336 (CPF5 1 8 1 1 12 1719 2163 80 21 95.560944 79-81)5 1 8 1 1 13 1819 2169 25 12 95.560944 as4 1 8 1 2 0 529 2197 1315 22 -1 5 1 8 1 2 1 529 2199 175 19 94.255264 unwarranted.5 1 8 1 2 2 721 2199 35 19 96.663841 On5 1 8 1 2 3 774 2199 38 19 96.721245 thes 1 8 1 2 4 826 2199 62 20 96.345078 basis5 1 8 1 2 5 903 2200 24 18 96.761581 of5 1 8 1 2 6 942 2199 40 20 96.896645 thes 1 8 1 2 7 997 2200 80 19 96.172958 records 1 8 1 2 8 1092 2200 47 19 96.217262 ands 1 8 1 2 9 1154 2200 44 19 87.375000 Mr.5 1 8 1 2 10 1215 2199 103 19 91.013916 Halter’s5 1 8 1 2 11 1333 2199 127 19 96.451393 demeanor5 1 8 1 2 12 1474 2205 26 13 96.775345 as5 1 8 1 2 13 1516 2205 13 13 96.792534 a5 1 8 1 2 14 1544 2198 105 21 96.189384 witness,5 1 8 1 2 15 1666 2197 40 19 96.687416 thes 1 8 1 2 16 1721 2197 123 19 96.440529 examiner4 1 8 1 3 0 532 2232 1313 25 -1 5 1 8 1 3 1 532 2232 58 19 96.593147 finds5 1 8 1 3 2 607 2239 28 12 96.547264 no5 1 8 1 3 3 651 2239 81 13 96.334969 reasons 1 8 1 3 4 750 2235 23 18 96.436066 to5 1 8 1 3 5 788 2234 72 19 96.216492 doubts 1 8 1 3 6 876 2234 43 23 93.275475 Mr.5 1 8 1 3 7 936 2234 104 19 90.921509 Halter’s5 1 8 1 3 8 1051 2234 103 22 90.113922 honesty5 1 8 1 3 9 1170 2234 46 19 96.248985 ands 1 8 1 3 10 1232 2234 120 21 87.320740 sincerity.5 1 8 1 3 11 1369 2233 136 22 95.914047 Complaints 1 8 1 3 12 1521 2232 114 20 59.886745 counsel's5 1 8 1 3 13 1651 2232 85 19 96.183746 doubts5 1 8 1 3 14 1753 2237 92 17 96.344849 appear4 1 8 1 4 0 531 2261 1314 34 -1 5 1 8 1 4 1 531 2268 22 17 94.983932 to5 1 8 1 4 2 575 2267 27 18 94.933189 he5 1 8 1 4 3 624 2267 68 19 94.919235 based5 1 8 1 4 4 714 2274 29 13 95.032181 on5 1 8 1 4 5 766 2274 13 13 95.032181 a5 1 8 1 4 6 802 2261 231 34 92.574760 misinterpretation5 1 8 1 4 7 1057 2268 24 19 96.131012 of5 1 8 1 4 8 1104 2268 44 20 91.161995 Mr.5 1 8 1 4 9 1171 2268 104 19 90.750259 Halter’s5 1 8 1 4 10 1298 2268 126 21 96.219620 testimony5 1 8 1 4 11 1451 2268 120 21 96.169250 (compares 1 8 1 4 12 1596 2267 38 19 95.908401 Tr.5 1 8 1 4 13 1659 2267 40 19 95.908401 7205 1 8 1 4 14 1723 2265 57 19 96.240898 with5 1 8 1 4 15 1806 2265 39 19 95.587128 Tr.4 1 8 1 5 0 531 2295 1314 29 -1 5 1 8 1 5 1 531 2301 104 21 83.173721 727-29),5 1 8 1 5 2 652 2301 49 19 89.980186 Thes 1 8 1 5 3 715 2302 124 19 96.280426 confusion5 1 8 1 5 4 856 2295 94 26 96.566895 evident5 1 8 1 5 5 964 2303 24 18 96.757736 in5 1 8 1 5 6 1003 2302 40 19 96.381859 thes 1 8 1 5 7 1058 2302 70 20 96.675026 latter5 1 8 1 5 8 1144 2304 56 20 96.185471 parts 1 8 1 5 9 1215 2302 25 19 96.185471 of5 1 8 1 5 10 1254 2302 36 19 96.777397 his5 1 8 1 5 11 1306 2302 127 22 96.731789 testimony5 1 8 1 5 12 1450 2302 19 19 96.807602 is5 1 8 1 5 13 1484 2301 156 20 96.596619 attributable5 1 8 1 5 14 1656 2303 23 17 95.892578 to5 1 8 1 5 15 1696 2300 40 20 93.169609 thes 1 8 1 5 16 1751 2300 94 20 82.659653 fatizue4 1 8 1 6 0 530 2334 1314 24 -1 5 1 8 1 6 1 530 2335 24 18 95.424042 of5 1 8 1 6 2 570 2341 13 13 94.977448 a5 1 8 1 6 3 601 2336 141 21 94.731995 66-year-olds 1 8 1 6 4 761 2343 54 12 94.731995 man5 1 8 1 6 5 832 2338 26 18 95.665283 at5 1 8 1 6 6 876 2336 38 20 95.665283 thes 1 8 1 6 7 930 2337 44 19 96.725388 ends 1 8 1 6 8 991 2337 25 19 96.584526 of5 1 8 1 6 9 1033 2343 13 13 96.179451 a5 1 8 1 6 10 1064 2337 55 21 86.584389 long5 1 8 1 6 11 1135 2337 44 21 96.080566 days 1 8 1 6 12 1196 2343 30 13 96.080566 on5 1 8 1 6 13 1244 2336 39 19 96.083565 thes 1 8 1 6 14 1299 2336 78 20 95.989716 stand.5 1 8 1 6 15 1398 2337 25 18 95.475174 In5 1 8 1 6 16 1441 2336 40 19 96.161369 thes 1 8 1 6 17 1497 2336 98 22 96.364128 opinions 1 8 1 6 18 1613 2335 26 19 96.813049 of5 1 8 1 6 19 1656 2335 41 19 96.813049 thes 1 8 1 6 20 1714 2334 130 22 96.595856 examiner,4 1 8 1 7 0 528 2368 1315 24 -1 5 1 8 1 7 1 528 2369 38 19 93.133713 thes 1 8 1 7 2 590 2370 117 19 92.005409 witness’s5 1 8 1 7 3 731 2370 114 22 96.393410 difficulty5 1 8 1 7 4 871 2372 23 18 95.730431 in5 1 8 1 7 5 919 2371 157 21 72.995277 articulating5 1 8 1 7 6 1099 2370 113 19 95.851959 scientific5 1 8 1 7 7 1238 2373 110 19 93.445847 concepts5 1 8 1 7 8 1378 2370 49 21 74.421677 (Ty.5 1 8 1 7 9 1455 2371 50 20 94.811050 786)5 1 8 1 7 10 1534 2370 54 19 93.868103 does5 1 8 1 7 11 1615 2371 40 18 89.681656 not5 1 8 1 7 12 1682 2370 99 21 48.921616 impusn_5 1 8 1 7 13 1808 2368 35 19 92.098572 his4 1 8 1 8 0 526 2403 442 24 -1 5 1 8 1 8 1 526 2403 113 21 95.888580 standings 1 8 1 8 2 652 2410 25 12 94.836250 as5 1 8 1 8 3 690 2411 11 11 94.836250 a5 1 8 1 8 4 718 2404 129 22 95.547295 “practical5 1 8 1 8 5 861 2405 107 22 74.361465 expert.” Initial Decision . 82 F.T.C.

has been in existence for more than 100 years (Maltese 2039); Public Service Testing Laboratories has been in business for 25 years (Di Martino 1601); and Electrical Testing Laboratories was specifically recognized by one of the Governmental’s expert witnesses as a reputable laboratory that might have done some work on behalf of the National Bureau of Standards (Hamer 2833-34, 4037-38). Industrial Testing Laboratories has been in business since 1876, although it acquired new management in 1958 (Rogers 1846, 1858). National Testing Laboratories was organized in 1956 (Konstandt 1939). The record is silent as to American Laboratories.

In the case of Botco Laboratories, complaint counsel not only contend that its test (CX 226 A-W) was neither scientific nor competent, but they also refer to an “uncanny correlation” between certain data and language in this report and that of the New York Sanitation Department test report (CX 229 A-J), which, together with other circumstances, leads them to find a “‘cloud of suspicion” that the Botco test was, in whole or in part, less than original work” (CPF 72-74). However, there is no evidence that the Botco Laboratories was other than a reputable laboratory. As a matter of fact, an official of the National Better Business Bureau gave at least tacit consent to respondents’ selection of Botco Laboratories to conduct a test of VX-6 and report its findings to the National Better Business. Bureau. The Bureau “did not approve” Botco or pass judgment on its competency, but its vice-president had no reason to believe that Botco was other than a reputable laboratory. (Miller 2088-89, 2095-96, 2123) _ By their own admission complaint counsel did 1 no more than to create “suspicion” regarding Botco. This is even less probative than respondents’ suggestion that Yale University and a prominent chemistry professor were associated with the Botco test (Meyer 556-58, 1312-13, 1529-30; Murphy 4815-18, 4830-82). The examiner also rejects as unfounded complaint counsel’s contentions (1) that Mr. Botwick had little or no experience in the field of electro-chemistry and, specifically, in lead-acid storage ‘batteries (CPF 69) and (2) that his recommendations for further testing (CX 226 W) demonstrate that the product “had not been fully tested” in the areas covered by his report (CPF 70; see Hamer 2493). The proposal was that the laboratory “investigate other matters * * * not covered” in CX 226 A—-W and furnish “additional information and data” (CX 226 W; emphasis added). NALIUNAL VYNAMIUS UCURFP., HL AL. voo 488 Initial Decision The tests relied on by respondents were reviewed and appraised by two Government experts on the lead-acid storage battery: Dr. Walter J. Hamer, formerly chief of the Electro-Chemistry Section _of the National Bureau of Standards, now a consultant for the Bureau;-ahd Dr. Joseph C. White, Director of the Electro-Chemistry Branch, Chemistry Division, Naval Research Laboratory. Dr. Hamer testified in person, while the testimony of Dr. White was stipulated. The qualifications of Dr. Hamer are found at Tr. 2236-86 and in CX 303 A-G (see also Tr. 2327). Dr. White’s qualifications are set forth at Tr. 4189-91). There is no question of their expertise on the subject of the lead-acid storage battery. Dr. Hamer was involved in the testing of 20 or 30 battery additives some 20 years ago, including an additive involved in the case of Pioneers, Inc., Docket No. 6190, 52 F.T.C. 13851 (1956), but he has had no recent experience in that field (Tr. 2252-55, 2286-87, 2302). Dr. White has never performed or supervised tests on battery additives (Tr. 4190). All that complaint counsel have established through such expert testimony is that the reports of the laboratory tests and other tests relied on by respondents are “not descriptive of competent scientific tests” (Hamer 2350 et seq., passim; White 4191). This was the net of Dr. Hamer’s testimony, although it was considerably qualified by cross-examination in some instances.*° The weight of his testimony is also materially lessened by a demonstration bias against battery additives such as VX-6. It is apparent that he harbors a deep-seated and sincere belief—not just a healthy scientific skepticism—that such products are worthless (see infra). Before dealing with Dr.. Hamer’s testimony in more detail, the basis of Dr. White’s opinion should. be set forth. . His stipulated testimony is that respondents’ laboratory reports are not, singly or in the aggregate, descriptive of competent scientific tests in that, although there are indications that some of the scientific principles and procedures required by the scientific community were followed to some degree in some of these tests, none of these tests as described by the test reports and testimony adequately and sufficiently conform to these scientific principles and procedures. (Tr. 4191). It would unduly and unnecessarily extend this initial decision to include a documented analysis of all of the tests involved and the thousands of pages of testimony devoted to them—even if *° See, for example, Tr. 2761-68, 3154, 3185, 3194-3204. Initial Decision 82 F.T.C.

time had permitted. Accordingly, the examiner will briefly summarize the salient facts. _ . .

Fach of the labor atory representatives ¥ who testified vouched for the scientific validity of his laboratory’s test, although in some instances they noted limitations on the generalizations that might properly be drawn, while Dr. Hamer was usually skeptical. Thus— The president of Public Service Testing Laboratories testified that the test described in CX 221 B-C was conducted in accordance with sound scientific procedures, but that the test involving a single battery, had not been “extensive enough” to permit generalization (Di Martino 1603—06, 1646-1700, 1781). After detailing the deficiencies he found in CX 221 B-C, Dr. Hamer said that the report “does not constitute a description of a competent and scientific test” (Tr. 8768-72). However, he noted that all he had was the test report and that he had not had access to the laboratory notebooks or other test data (Tr. 3779-80, 3806- 09). He also conceded that as to both this test report and the National Testing reports, the difference between his opinion and the observations and conclusions in the reports represented an honest difference of opinion between scientists (Tr. 3798-3800, 3810-11).

A series of tests conducted by ‘National Testing Laboratories (CXs 39 B-C, 232 A-E, 301 A-B, and 302 A-D), involving the use of 20 batteries, was designed to “update” the findings of the Public Service report (CX 221 A-—D, supra). The president and technical director of National Testing described the tests as “a limited sampling of performance tests that the additive can do.” He characterized the reports’ conclusions as “accurate” and said they confirmed the findings of the Public Service test. (Konstandt 1955-56, 1973-99, 2004-07, 2015) Although initially, Dr. Hamer was severely critical of the National tests, describing most of the performance tests as essentially meaningless and concluding that the reports were not descriptive of competent scientific tests, he nevertheless found acceptable, with some qualifications, many of the conclusions favorable to VX-6 (Tr. 3071-3204, 3712-61). The Stillwell & Gladding test (CX 231 A-B) was conducted at the request of Industrial Testing Laboratories. Described as “preliminary in nature,” it essentially involved a single battery. While the test results were favorable to VX-6, only limited generalizations of “probability” may be drawn. (Maltese 2025-30, 488 Initial Decision 2033) The report was reviewed by Industrial Testing Laboratories, which found it adequate but “far from conclusive” (Rogers 1853, 1873-79, 1916-17).

After a detailed critique, in which he cited the lack of controls —in the test, Dr. Hamer said he did not consider that CX 231 A-B reflected ‘a Gécompetent scientific test (Tr. 8976-3989). As to the American Testing Laboratories report (CX 40), Dr. Hamer said that even though it appeared to meet his criteria for a scientific test, the report was “‘filled with fallacies” and was not descriptive of a competent scientific test (Tr. 3817-3972). There was no other testimony about this test; the laboratory director who signed the report died in 1969 (Tr. 252-53). Concerning the Electrical Testing Laboratories report (CX 227 B), Dr. Hamer found it to be a competent scientific test that demonstrated that VX-6 reduced the corrosion of lead in ‘a sulphuric acid solution containing silver nitrate. He took the position, however, that the test had no relevance to a lead-acid storage battery because the test solution contained silver nitrate. (Tr. 4010-4049; see Rogers 1853-54, 1870-72, 1927-28.) The Botco Laboratories report (CX 226 A-W) involved the most extensive tests, utilizing 80 batteries—60 new batteries and 20 used batteries. (CX 226 F.) Its conclusions tend to support respondents’ claims regarding the effectiveness of VX-6. As previously noted, the author of- the report is dead, and there is virtually no definitive background information about Mr. Botwick *' or his laboratory. The record does establish that respondents paid at least $3,000 for the test (Meyer 4819-29; RXs 32-34); that the test protocol was established in consultation with the National Better Business Bureau (Miller 2096-2117; RXs 21-23; Meyer 13708-1402, 1531; Murphy 4816); and that respondents had the Botco report reviewed by two othet labora- — tories, both of which in effect approved it (RX 24 **; Meyer 1533- 85; Rogers 1858-70, 1919-1921, 1930).

Regarding the Botco report (CX 226 A-W), Dr. Hamer was asked on direct examination whether the report was descriptive | of a competent and scientific test. He first answered that it was not a competent scientific test “mainly because there are no data included in the report.”” When the variance between question and 2 Mr. Murphy thought Mr. Botwick had a Ph.D. degree. (Tr. 4815-16). : *- Dr. Hamer scoffed at this laboratory report. It did not change his adverse opinion (Tr. 2515-16).

Initial Decision 82 F.T.C.

answer 2° was called to his attention, he stated that the report was not a good description of a competent scientific test. (Tr. ‘2494-95; see also Tr. 2506-2507.) ~ Dr. Hamer conceded that it was possible that even though the report may not be descriptive of a competent scientific test, the test itself may nevertheless have been such a test, but he said that there was nothing in the report to indicate that to him. His basic objection was the lack of data to support its conclusions. (Tr. 2495-96; see Tr. 2487-93, 2752-2761, 2817-28, 2858-63.) On cross-examination, Dr. Hamer did characterize the Botco test as a scientific test but stated that the report was not scientific because it did not contain enough specific data. He described the Botco report as a summary of tests and test conclusions but not a report of the “test results” (Tr. 2761, 2766). He then acknowledged that:

The fact that a report is not scientific does not necessarily mean that the test reported on was not scientific (Tr. 2767-68). The fact that the data was not tabulated in the report does not mean that it did not exist (Tr. 2761-62). There might be data that he had not seen (Tr. 2828).

It is impossible for a scientist to pass judgment on the validity of a test without having access to the evidence on which the conclusions are based (Tr. 2762-63; see Miller 2089-938, 2116-17, 2135-48). There was not enough data in the Botco report for him to evaluate the conclusions drawn or to make an informed judgment as to their scientific validity (Tr. 2817-18, 2828).

The record indicates that there were backup data sheets for the Botco report (Miller 2089-93, 2116-17, 2135-48) . Nevertheless, Dr. Hamer later repeated his earlier statement that the Botco test was not a scientific test. His reason this time was that “some of the conclusions are not in keeping with scientific facts” (Tr. 2774-76).

This basis for his opinion bears scrutiny. It involves the bias mentioned supra. Throughout Dr. Hamer’s testimony, particularly that relating to the Botco report, it is evident that some of his conclusions are predicated on opinions that he acknowledged are contrary to other reputable authority. For example— 1. Dr. Hamer does not consider that sulphation is a major cause of battery failure despite such a finding in the Pioneers case, supra, 35 1 8 1 1 2 777 2536 41 20 91.428513 Sees 1 8 1 1 3 831 2536 39 20 93.586411 Tr.5 1 8 1 1 4 883 2538 107 19 79.559334 2465-66. ANAL AUANEAAE LINEAL YUL oy Lid fhidse wu 488 Initial Decision 52 F.T.C., at 1852-53 (Tr. 3102-03, 3180-87, 3718, 3992-93). Examiner Pack reported 15 years ago in Pioneers: While Dr. Walter J. Hamer, Chief of the Electro-chemistry Section of th __National Bureau of Standards, expressed the opinion (not without support froni*other- witnesses) that relatively-few battery failures are due to sulfation, this view is opposed to the great weight of the evidence. It is impossible upon the present record to fix percentages as to the various causes of battery failure, but it appears certain that sulfation, if not the major cause, is at least one of the major causes. 2. Two other basic preconceptions that persist throughout Dr. Hamer’s testimony are (1) that a sulphate solution such as VX-6 (see formula, CX 309 G, M) could not dissolve or reduce ““pernicious sulphation” and (2) that it would lessen the conductivity of the sulphuric acid solution that constitutes the electrolyte in the battery. Dr. Hamer initially referred to these opinions as scientific laws or rules. On cross-examination, however, he grudg- — ingly acknowledged that there was respectable scientific opinion to the contrary. (Tr. 2482-85, 2776-77, 2798-2800, 2803-09, 2812-16, 3061-70; see Rogers 1849-51; 1861-62, 1901-16; also Pioneers, Inc., supra, 52 F.T.C., at 353, 1358-61.) 3. Dr. Hamer’s doubts about the efficacy of—or even the need for— a battery additive such as VX-6 appears to be based in significant part on his opinion that pernicious sulphation can be eliminated in a mechanically sound battery by simply subjecting the battery to a charge (Tr. -2852-58, 2891, 3713, 3996-98). He conceded, however, that there were “reliable” opinions to the contrary (Tr. 2891-95, 3052-59, 3991-93). The weight of Dr. Hamer’s testimony is also lessened by the fact that he misread or misinterpreted certain test data (Tr. 2769-74, 2819-21) and insisted on giving a strained,-tortuous -_interpretation to some of the conclusions. For example, Dr. Hamer interpreter Observation No. 12 in the Botco report ** as meaning that VX-6 prevented the formation of lead sulphate—a process necessary to battery operation, although he ultimately admitted it could be read to refer to the formation of “pernicious sulphation” (Tr. 2480-81, 2778-81, 2787-2801, 2878-91). “1 Observation 12 reads as follows:

“In those cells treated with VX-6, both in the new batteries and in the mechanically sound sulphated batteries, the conversion of the desirable soft, spongy, porous mass of material of the grid surface of the negative plate into a harder, brittle, less porous—that is, sulphated condition, is inhibited. Accordinyly, we can conclude that this inhibition will add to the usable life of a battery.” (CX 226 U) Initial Decision 82 F.T.C.

Nor is confidence engendered by Dr. Hamer’s description of the _Manner in which he reviewed and: evaluated the test reports and his evasive answers to questions about his use or nonuse of textbooks or other authorities (Tr. 2810, 2896-2908, 3155, 3191, 3758-60, 3804—08).

Finally, with perhaps two exceptions, he conceded that on their face, the procedures described in the test reports appeared to meet his definition of a scientific test as “one which is conducted with objectivity under controlled conditions with the purpose of determining the truth or falsity of a hypothesis, or to determine the properties or characteristics of an object, a system or a process” (Tr. 2346). In some cases, he was critical of the “controls, or the lack thereof. He said all the test data should be recorded but did not specify that it must be in the report itself, although this is preferable (Tr. 2347-50, 2604).

Despite the doubts engendered by certain aspects of Dr: Hamer’s testimony, when his testimony is considered in conjunction with that of Dr. White (supra), it may be found that at least some of respondents’ test reports are not descriptive of competent scientific tests. Even without expert testimony, one would tend to want more than is offered by the reports of American (CX 40), Public Service (CX 221 B-C), and Stillwell & Gladding (CX 231 A-B). But respondents did not limit themselves to these tests but went on to more elaborate tests, such as Botco (CX 226 A~W) and National (CXs 39 B-C, 232 A-E, 301 A-B, 302 A-D). On the basis of the whole record, the examiner cannot reject these reports as nondescriptive of scientific tests. They are not without laws, but the reservations in the evaluations of both expert ‘witnesses do not permit the finding sought by complaint counsel. Nor can the examiner so lightly dismiss the Electrical Testing report (CX 227 A-B) as “irrelevant,” as Dr. Hamer would do. Within limitations, it has a bearing on the claims for VX-6. In any event, as Dr. Hamer noted, to find that test reports are not descriptive of competent scientific tests is not equivalent to finding that the tests reported were not competent scientific tests. Dr. Hamer’s criticism of most of the reports—particularly Botco— was primarily based on the fact that the reports themselves did not contain sufficient detailed data to permit him to properly evaluate the observations and conclusions reported. He could not state, however, that such data did not originally exist in laboratory notebooks or other records. With admittedly incomplete data in their possession, the experts could not make an unequivocal 488 Initial Decision declaration that the tests themselves were not competent scientific tests.

Moreover, even if test data preferably should be found within the four corners of a test report, there is an obvious difference ~--between a report prepared for a businessman and one intended for presentation to the scientific community. One further point worth noting is that Dr. Hamer acknowledged that some of his exceptions to the reports represented honest differences of opinion between scientists (e.g., Tr. 3798~3800, 3810-11; see Tr. 3396, 3405-08, 4161-77). In summary, then, respondents had a basis for advertising that VX-6 had been laboratory-tested.

Now, as to the user tests, counsel stipulated that both Dr. Hamer and Dr. White would testify to the effect that neither the so-called user tests in evidence nor any tests described by Mr. Halter or by Mr. Rogers are, singly or in the aggregate, descriptive of competent scientific tests since, as described in the test reports and testimony, they were not conducted in accordance with the scientific principles and procedures required by the scientific community, including the fact that adequate controls were absent in each test °° (Tr. 4099-4100, 4192-93).

Recognizing that the terms “competent scientific test” and “authenticated, controlled and duly recorded user test” are not synonymous, neither expert witness expressed any opinion as to whether these alleged tests constitute valid or competent user tests. Finally, the stipulated testimony of both experts is that all of the laboratory and user tests, taken in the aggregate, do not constitute a competent scientific test (Tr. 4100, 4193). Despite this stipulated testimony, as well as the testimony of Dr. Walter Goodman (Tr. 3302-3409), the examiner finds that. although the so-called user tests were not “controlled” or “duly recorded” user tests, nor “competent scientific’ tests, as those terms are used in the complaint, they constituted a reasonable basis for respondents to advertise that VX-6 had been subjected to user tests or tested in actual use. No question was raised as to their authenticity.

Finally, then, there remains the question whether the laboratory tests and the user tests, separately or collectively, substantiate the performance claims that respondents made for VX-6. ** Both stipulations noted that CX 238 is not descriptive of a competent scientific test because, although controls are present, the test procedures are not described and no conclusions in regard to the efficacy of VX-6 are reached. Initial Decision 82 F.T.C.

The expert witnesses took the position, in effect, that assuming the validity of all the test reports and the correctness of their conclusions, the tests’ substantiated all of the 10 performance claims specifically challenged by the complaint, with perhaps one exception. As quoted in the complaint (p. 4) these are to the effect that VX—6 (1) breaks up hardened, dense crystalized sulphate, converts it into AC- TIVATED material for greater charging current, (2) insulates lead grids so they are not readily corroded by damaging acid, (3) reduces shedding from plates, (4) cuts down internal heat, (5) makes separators last longer, (6) gives an uninterrupted flow of steady current, (7) reduces oxidation, (8) puts a stop to warping and buckling of plates, (9) eliminates undercharging in normal battery use, (10) reduces evaporation or “water loss” and thus does away with frequent checking while on the road. Dr. White listed as unsupported by the test reports only duration-of-effect representations, such as . Ends battery troubles forever.

. Assures like-new operation of batteries for the life of the car. - Makes new batteries trouble-free for 5 years or more. . Gives years and years of dependable battery service. . Reserve power is endless. .

5 1 5 1 6 2 811 1514 103 27 96.377777 Makes5 1 5 1 6 3 939 1524 15 17 96.560234 a5 1 5 1 6 4 977 1516 123 32 96.011696 battery5 1 5 1 6 5 1121 1518 58 25 96.055145 lasts 1 5 1 6 6 1204 1527 16 16 96.055145 a5 1 5 1 6 7 1246 1516 134 32 88.865967 lifetime.5 1 5 1 6 8 1397 1527 15 5 23.976479 ~4 1 5 1 7 0 770 1560 864 36 -1 5 1 5 1 7 1 770 1578 6 6 82.674072 .5 1 5 1 7 2 799 1560 100 32 96.297493 Every5 1 5 1 7 3 917 1569 69 18 96.066055 man5 1 5 1 7 4 1004 1570 57 23 96.503349 you5 1 5 1 7 5 1081 1562 50 25 95.601265 sells 1 5 1 7 6 1151 1563 60 25 95.601265 will5 1 5 1 7 7 1230 1563 75 26 96.052246 have5 1 5 1 7 8 1324 1572 17 18 95.934212 a5 1 5 1 7 9 1360 1564 126 31 95.934212 lifetime5 1 5 1 7 10 1507 1566 127 30 92.250061 battery.4 1 5 1 8 0 751 1605 1282 39 -1 5 1 5 1 8 1 751 1605 24 25 87.702171 8.5 1 5 1 8 2 797 1605 93 27 84.306702 VX-65 1 5 1 8 3 916 1611 141 27 96.879631 prevents5 1 5 1 8 4 1082 1609 146 26 96.076843 sulfation5 1 5 1 8 5 1254 1611 77 24 95.777069 from5 1 5 1 8 6 1358 1611 134 32 96.719223 forming5 1 5 1 8 7 1516 1613 49 25 95.986893 for5 1 5 1 8 8 1591 1613 49 25 96.874626 thes 1 5 1 8 9 1667 1613 52 31 96.319847 life5 1 5 1 8 10 1746 1614 33 30 95.772888 of5 1 5 1 8 11 1806 1614 48 25 96.110924 thes 1 5 1 8 12 1880 1623 60 17 86.791512 car.5 1 5 1 8 13 1972 1614 61 30 88.681747 (Tr.4 1 5 1 9 0 712 1647 544 36 -1 5 1 5 1 9 1 712 1647 143 33 26.576981 4191-92;5 1 5 1 9 2 877 1649 153 31 95.500381 emphasis5 1 5 1 9 3 1050 1650 29 25 96.614891 in5 1 5 1 9 4 1099 1651 157 32 96.533081 original).2 1 6 0 0 0 751 1283 18 301 -1 3 1 6 1 0 0 751 1283 18 301 -1 4 1 6 1 1 0 751 1283 18 301 -1 5 1 6 1 1 1 751 1283 18 301 0.000000 Aaah5 1 6 1 1 2 747 1327 29 68 25.429070 wnd5 1 6 1 1 3 747 1278 29 33 25.471680 we2 1 7 0 0 0 707 1712 1340 750 -1 3 1 7 1 0 0 710 1712 1337 246 -1 4 1 7 1 1 0 760 1712 1274 47 -1 5 1 7 1 1 1 760 1712 61 33 93.263321 Dr.5 1 7 1 1 2 838 1714 166 32 91.531960 Hamer’s5 1 7 1 1 3 1018 1716 60 31 96.993317 lists 1 7 1 1 4 1091 1717 40 31 96.958885 of5 1 7 1 1 5 1143 1717 123 32 96.734367 claims5 1 7 1 1 6 1281 1718 80 31 96.392715 that5 1 7 1 1 7 1374 1719 43 31 96.208115 he5 1 7 1 1 8 1431 1719 207 33 96.594154 considered5 1 7 1 1 9 1654 1722 244 37 96.617325 unsupported5 1 7 1 1 10 1915 1722 46 37 97.000771 by5 1 7 1 1 11 1975 1722 59 32 96.534706 thea 1 7 1 2 0 712 1764 1323 47 -1 5 1 7 1 2 1 712 1764 71 30 96.658226 tests 1 7 1 2 2 805 1766 141 37 96.454758 reports5 1 7 1 2 3 968 1776 75 22 96.454758 was5 1 7 1 2 4 1064 1768 205 38 96.443504 essentially5 1 7 1 2 5 1292 1768 148 38 96.610062 similar,5 1 7 1 2 6 1464 1772 124 37 96.794403 excepts 1 7 1 2 7 1611 1771 80 32 96.794403 that5 1 7 1 2 8 1714 1772 43 31 96.601006 he5 1 7 1 2 9 1781 1772 75 31 96.574677 also5 1 7 1 2 10 1880 1773 155 38 96.519310 initially4 1 7 1 3 0 712 1813 1335 46 -1 5 1 7 1 3 1 712 1813 206 37 96.489174 questioned5 1 7 1 3 2 944 1815 60 32 96.776085 thes 1 7 1 3 3 1031 1817 103 31 96.042557 ninth5 1 7 1 3 4 1161 1818 104 31 95.642143 claims 1 7 1 3 5 1292 1818 103 33 96.335915 listed5 1 7 1 3 6 1422 1819 35 32 96.348259 in5 1 7 1 3 7 1485 1820 59 31 93.227173 thes 1 7 1 3 8 1571 1821 330 38 42.993828 complaint—that.5 1 7 1 3 9 1921 1822 126 32 52.549141 VX-6.4 1 7 1 4 0 713 1863 1320 45 -1 5 1 7 1 4 1 713 1863 223 33 93.300201 “eliminates5 1 7 1 4 2 952 1866 290 40 92.175270 undercharging5 1 7 1 4 3 1258 1868 34 31 95.856430 in5 1 7 1 4 4 1310 1869 135 31 96.017982 normal5 1 7 1 4 5 1462 1869 143 39 93.289108 battery5 1 7 1 4 6 1622 1871 174 32 24.766159 use”’—as5 1 7 1 4 7 1812 1872 77 31 96.286499 wells 1 7 1 4 8 1907 1881 39 22 96.382591 as5 1 7 1 4 9 1962 1874 71 29 96.973137 two4 1 7 1 5 0 710 1911 924 47 -1 5 1 7 1 5 1 710 1911 101 34 96.869125 others 1 7 1 5 2 825 1914 123 32 96.575989 claims5 1 7 1 5 3 961 1915 80 32 96.514923 that5 1 7 1 5 4 1054 1926 61 22 96.977570 ares 1 7 1 5 5 1128 1917 36 31 96.785049 in5 1 7 1 5 6 1177 1917 61 32 96.690849 thes 1 7 1 5 7 1252 1918 127 32 96.435074 nature5 1 7 1 5 8 1393 1919 38 31 96.724945 of5 1 7 1 5 9 1445 1920 189 38 94.797211 “puffing.”3 1 7 2 0 0 709 1972 1324 286 -1 4 1 7 2 1 0 758 1972 1275 47 -1 5 1 7 2 1 1 758 1972 207 40 96.338875 Regarding5 1 7 2 1 2 984 1974 59 32 96.826218 thes 1 7 2 1 3 1063 1975 102 32 96.477760 claims 1 7 2 1 4 1186 1976 40 32 96.921021 of5 1 7 2 1 5 1244 1977 225 40 93.288048 eliminating5 1 7 2 1 6 1489 1978 301 41 91.734695 undercharging,5 1 7 2 1 7 1814 1980 61 31 96.978951 Dr.5 1 7 2 1 8 1899 1980 134 32 96.349579 Hamer4 1 7 2 2 0 711 2021 1320 46 -1 5 1 7 2 2 1 711 2021 76 32 96.532501 said5 1 7 2 2 2 805 2022 98 32 96.147766 after5 1 7 2 2 3 921 2023 144 33 96.622261 furthers 1 7 2 2 4 1082 2026 238 39 96.764030 questioning,5 1 7 2 2 5 1340 2027 78 32 96.907120 that5 1 7 2 2 6 1436 2028 188 39 96.335236 accepting5 1 7 2 2 7 1642 2030 45 31 96.335236 all5 1 7 2 2 8 1708 2030 59 32 96.825371 thes 1 7 2 2 9 1786 2031 90 31 96.741402 tests5 1 7 2 2 10 1896 2032 37 30 96.583542 at5 1 7 2 2 11 1952 2031 79 32 96.934029 face4 1 7 2 3 0 710 2070 1322 48 -1 5 1 7 2 3 1 710 2070 113 38 96.516388 value,5 1 7 2 3 2 855 2073 233 37 96.516388 respondents5 1 7 2 3 3 1119 2076 115 31 96.237999 would5 1 7 2 3 4 1265 2076 42 31 96.777504 be5 1 7 2 3 5 1336 2076 157 38 96.346748 justified5 1 7 2 3 6 1526 2078 35 31 96.325294 in5 1 7 2 3 7 1593 2078 170 40 96.222412 claiming5 1 7 2 3 8 1793 2079 81 32 92.369644 that5 1 7 2 3 9 1906 2081 126 32 92.149681 under-4 1 7 2 4 0 710 2119 1320 49 -1 5 1 7 2 4 1 710 2119 176 41 96.522209 charging5 1 7 2 4 2 905 2122 36 32 96.771713 in5 1 7 2 4 3 961 2124 136 31 96.180923 normal5 1 7 2 4 4 1119 2134 61 22 96.794991 uses 1 7 2 4 5 1201 2125 30 31 96.739662 is5 1 7 2 4 6 1251 2125 135 39 93.297180 helped.5 1 7 2 4 7 1408 2127 368 34 91.421959 Cross-examinations 1 7 2 4 8 1798 2130 75 31 96.266983 also5 1 7 2 4 9 1894 2130 136 38 96.003265 yielded4 1 7 2 5 0 709 2172 1320 45 -1 5 1 7 2 5 1 709 2172 224 33 96.198784 concessions5 1 7 2 5 2 961 2183 38 22 96.109810 as5 1 7 2 5 3 1026 2175 36 30 96.152649 to5 1 7 2 5 4 1088 2174 60 32 96.255386 thes 1 7 2 5 5 1175 2175 72 31 96.255386 tests 1 7 2 5 6 1273 2178 151 36 89.844421 supports 1 7 2 5 7 1450 2177 183 33 17.653107 for.some5 1 7 2 5 8 1661 2178 103 32 96.747360 others 1 7 2 5 9 1792 2179 124 32 95.962448 claims5 1 7 2 5 10 1953 2181 76 36 95.990929 (Tr.4 1 7 2 6 0 709 2221 195 37 -1 5 1 7 2 6 1 709 2221 195 37 39.850777 4103-48)5 1 7 2 6 2 889 2216 16 48 86.094696 .3 1 7 3 0 0 707 2278 1323 184 -1 4 1 7 3 1 0 754 2278 1273 43 -1 5 1 7 3 1 1 754 2278 53 32 95.569855 On5 1 7 3 1 2 828 2279 60 32 0.000000 thes 1 7 3 1 3 901 2280 105 32 0.000000 ‘basis5 1 7 3 1 4 1028 2282 39 31 96.092003 of5 1 7 3 1 5 1086 2282 72 32 96.903137 this5 1 7 3 1 6 1181 2283 203 38 96.145081 testimony,5 1 7 3 1 7 1407 2294 38 22 96.554459 as5 1 7 3 1 8 1468 2285 75 31 96.051468 wells 1 7 3 1 9 1567 2295 40 22 96.671570 as5 1 7 3 1 10 1630 2286 61 32 93.301216 thes 1 7 3 1 11 1714 2286 213 33 91.888138 examiner’s5 1 7 3 1 12 1950 2298 77 21 96.164406 own4 1 7 3 2 0 707 2329 1323 46 -1 5 1 7 3 2 1 707 2329 263 33 96.584770 considerations 1 7 3 2 2 997 2331 40 31 96.310448 of5 1 7 3 2 3 1060 2332 59 32 96.310448 thes 1 7 3 2 4 1147 2332 213 33 91.499435 “duration”5 1 7 3 2 5 1386 2334 122 32 96.344398 claims5 1 7 3 2 6 1536 2335 35 31 96.402855 in5 1 7 3 2 7 1599 2335 60 33 95.956047 thes 1 7 3 2 8 1687 2336 92 39 96.601639 lights 1 7 3 2 9 1806 2337 40 31 96.416534 of5 1 7 3 2 10 1872 2337 59 33 96.424713 thes 1 7 3 2 11 1958 2338 72 31 96.361259 test4 1 7 3 3 0 707 2380 1319 41 -1 5 1 7 3 3 1 707 2380 151 37 96.640587 reports,5 1 7 3 3 2 889 2380 61 32 96.712105 thes 1 7 3 3 3 972 2381 143 40 96.209801 findings 1 7 3 3 4 1145 2385 96 29 96.526695 must5 1 7 3 3 5 1270 2383 43 31 94.663239 be5 1 7 3 3 6 1343 2384 79 31 96.769676 that5 1 7 3 3 7 1453 2385 85 31 96.321968 such5 1 7 3 3 8 1570 2385 124 33 96.364342 claims5 1 7 3 3 9 1726 2386 90 33 96.511292 have5 1 7 3 3 10 1848 2388 62 31 96.495911 not5 1 7 3 3 11 1941 2388 85 31 96.495911 been4 1 7 3 4 0 708 2428 303 34 -1 5 1 7 3 4 1 708 2428 303 34 42.682938 substantiated.2 *6 But see the conclusions, infra.

vena Van saas ae UUave ey aed cease wae 488 : Initial Decision As to other advertising claims,?’ particularly those specifically listed in the complaint, the examiner cannot find as a fact that all such claims have been substantiated by competent scientific tests or by valid user tests. However, in view of the laboratory “test. reports on VX-6, the scores of letters from users attesting to the satisfactory performance of the product, and the purchases and repurchases of the product by industrial, commercial, and governmental customers in the circumstances described, the examiner finds that respondents had a reasonable basis for their performance claims. It cannot be found that they made advertising representations in reckless disregard of their truth or falsity. This finding will be further discussed in the conclusions that follow.

SUMMARY AND ANALYSIS Before stating the legal conclusions based on the foregoing findings, some commentary is appropriate on the major issue presented by this record—the question of whether respondents’ performance claims for VX-6 are substantiated by competent scientific tests or valid user tests or both. The examiner has essentially found that although all the test reports in evidence, with all their deficiencies, tend to substantiate respondents’ principal performance claims for VX-6, the record does not permit a finding that they, in fact, do so. Neverthéless, in the examiner’s opinion, respondents’ data provided a reasonable and substantial foundation in fact for the performance claims (Universe Co., supra, 68 F.T.C., at 1295).

The examiner recognizes that ordinarily the intent or the good faith of the advertiser is not a controlling factor in determining whether an order should issue against advertising representations — that have been proved to be false.?* In this case, however, the claims of testing are literally true. The product was tested, and the results tended to show its efficacy. Even without the expert testimony, it is apparent that, standing alone, some of the tests are properly subject to scientific criticism. As noted, however, there is no evidence that the laboratories were other than reputable. There has been no showing that the tests 7 In their reply brief, complaint counsel make a belated and wholly-undocumented assertion that other representations—including some listed in the complaint but not questioned either by Dr. Hamer or by Dr. White--‘‘are not supported by any of respondents’ tests’ (CRB 17-18). This contention is rejected.

*S But see Parents Magazine Enterprises, Inc., Docket No. C-1133 (Consent Order, Oct. 25, 1966 [70 F.T.C. 1116]).

Initial Decision: 82 F.T.C.

-were “phony” or that respondents contracted for and accepted them other than in good. faith..Having paid to have the product tested by such laboratories and having accepted the laboratory tests in good faith, respondents had a reasonable basis for advertising that VX-6 had been subjected to tests. This would be a different case if, in fact, the performance representations had been proved to be false. In that circumstance, the existence of test reports tending to uphold the performance representations would not bar an order against claims proved to be false.

Ironically, Dr. Hamer testified that a valid scientific test of the efficacy of VX—6 might be made within 6 months or a year, using no more than six batteries (Tr. 2298-2302, 2801-09, 4031-82). The conflicting claims of counsel as to the cost of such a test do not appear to be grounded in any evidence of record. Finally, regarding the so-called “duration” claims—clearly not substantiated—the examiner is of the opinion that this record does not warrant an order forbidding claims of testing because of such failure of substantiation. Those claims—although dubious on their face—are hardly of such a nature that the public would believe they had been substantiated by laboratory tests. They are in the nature of “puffing” but might nevertheless be subject to a prohibitory order had their validity been attacked directly. , The examiner cannot wholly accept respondents’ argument that such representations are outside the scope of the complaint, but their argument does raise a question whether they constitute representations ‘similar’ enough to the technical performance claims specifically listed in the complaint (top of page 4) to warrant an order singling them out for indirect prohibition. CONCLUSIONS 1. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondents. 2. The complaint herein states a cause of action, and this proceeding is in the public interest.

3. The record establishes the allegations of Paragraph One of the complaint to the effect that respondent Elliott Meyer is and had been the president of the corporate respondent and that, both as an officer and as an individual, he has formulated, directed, and controlled the acts and practices of the corporate respondent. The fact that his personal participation in the acts challenged by the INALLIUINAL VIINAMILUS UURY., Ml Alu 040 488 Initial Decision complaint may have been minimal is not controlling; such participation was sufficient to hold him individually liable. In any event, the history of the corporate respondent and the role he has played therein, together with his control of another corporation engaged ~insthe same line of business -(supra, pp. 4-5), compels the conclusion that it is necessary that he be named in the order, both as a corporate officer and as an individual, so as to make the order fully effective and to prevent its evasion. 4. The record fails to support the allegations of Paragraph Six (1)—(4) of the complaint.

5. The record supports the allegations of Paragraph Six (5) to the effect that respondents misrepresented the earnings of VX-6 distributors. (The order proposed on this subject has been revised.) , .

6. The record supports the allegations of Paragraph Seven of the complaint.

7. The record establishes that VX-6 had been tested by laboratories but that it had not been approved by laboratories. The - representation that laboratories had approved VX-6 was false, misleading, and deceptive.

8. The record fails to establish that none of ‘the laboratory tests relied on by respondents were competent scientific tests. 9. Respondents did not represent that their performance claims for VX-—6 -were substantiated by “‘authenticated, controlled and duly recorded user tests.”

10. Although the evidence does not permit a finding that respondents’ performance claims for VX-6 are substantiated by competent scientific tests or by valid user tests, the examiner finds that respondents had a reasonable and substantial foundation in fact for making such performance claims. They. did not make such advertising claims with reckless disregard of their truth or falsity. In the examiner’s opinion, no order is warranted in respect to respondents’ representations of testing. 11. The use by respondents of the statements, representations, and practices herein found to be false, misleading, and deceptive has had, and now has, the capacity and tendency to mislead members of the purchasing public into the erroneous and mistaken belief that such representations were and are true and into the purchase of substantial quantities of respondents’ product by reason of such erroneous and mistaken belief. | : 12. The acts and practices of respondents, as herein found, were, and are, all to the prejudice and injury of the public and of Initial Decision 82 F.T.C.

respondents’ competitors, and constituted, and now constitute, unfair methods of competition in commerce and unfair and deceptive acts and practices in commerce ‘in violation of Section 5 of the Federal Trade Commission Act.

ORDER It is ordered, That respondents National Dynamics Corporation, a corporation, and its officers, and Elliott Meyer, individually and as an officer of such corporation, and respondents’ agents, representatives, and employees, directly or through any corporate or other device, in connection with the advertising, offering for sale, sale, or distribution of the battery additive; VX—6, or of any other products, in commerce, as “commerce” is defined in the Federal Trade Commission Act, do forthwith cease and desist from:

1. Representing, directly or by implication, that persons purchasing respondents’ products for resale will derive any stated amount of gross or net profits or other earnings through representations as to the past earnings of purchasers of respondents’ product unless, in fact, the past earnings represented are those of a substantial number of purchasers ‘and accurately reflect the average earnings of such purchasers under circumstances similar to those of the’ purchaser to whom the representation is made; or misrepresenting in any manner the past, present, or future profits or earnings derived, or to be derived, from the resale of re- . spondents’ products.

2. Representing, directly or by implication, contrary to fact, that any product has been approved by any laboratory or by any other organization or person.

8. Using, publishing, or referring to any testimonial or endorsement unless (1) such use, publication, or reference is expressly authorized in writing and unless (2) respondents have good reason to believe that at the time of such use, publication, or reference, the.person or organization named subscribes to the facts and opinions therein contained. 4. Eailing to deliver a copy of this order to cease and desist to all present and future salesmen or other persons engaged in the sale of respondents’ products, and failing to secure from each such salesman or other person a signed statement acknowledging receipt of such order. ee ee eee eee Seer ey —- 488 Initial Decision It is further ordered, That the respondent corporation shall forthwith distribute a copy of this order to each of its operating divisions.

It is further ordered, That respondents shall notify the Com- ““ynission atleast 30 days prior-to' any -proposed 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 which may affect compliance obligations arising out of the order.

It is further ordered, That other allegations of the complaint as to practices not covered by this order be, and they hereby are, dismissed.

DISSENTING STATEMENT By JONES, Commissioner:

I dissent from that part of the Commission’s decision which holds that respondents need only have a reasonable basis for making the battery performance claims challenged by this complaint and that on this test complaint counsel failed his burden to show that respondents did not have a reasonable basis to make the challenged claims.

If the rule of law is sound that itis unfair to make certain types of claims without adequate substantiation, then it seems to me that irrespective of whether or not the proper test is generalized to be a reasonable basis, the real issue in each case will be as to what constitutes the reasonable basis for the particular type of claim in issue. In the instant case, specific performance claims about batteries were made. Respondent itself _ recognized that the validity of these claims could only be established by laboratory tests. Complaint counsel offered evidence to show that respondents did not have competent scientific tests to substantiate their claims. The evidence consisted of expert opinion directed to showing deficiencies in the laboratory reports of the tests run by respondents. I can find no basis in reason or logic for this Commission to hold in the face of this evidence that respondents were entitled to rely in support of their claims on something less, to wit the laboratory reports. In the first placé, I believe complaint counsel put in sufficient evidence to cast substantial doubt on the adequacy of the laboratory tests which respondent did run. I believe it was respondent’s Opinion 82 F.T.C.

burden to go forward to show the contrary. In the second place, however the substantiation standard is expressed by the Com- * mission, I believe that for thése— types of specific performance claims only laboratory tests could constitute a reasonable basis for making them—a fact which respondent in effect recognized itself. Thirdly, despite the fact that respondent did run laboratory tests, the opinion concludes that respondent could rely simply on reports of these tests because it didn’t have in-house expertise to evaluate. This to me flies in the face of all reason and logic. Respondent makes the batteries, they made the claims about their performance. To say that they lacked in-house expertise to evaluate the reports of the tests which they caused to be run provides a wholly unwarranted an unfair loophole to the Commission’s standards of adequate substantiation. The Commission’s opinion is a regrettable and unnecessary retreat from this standard. OPINION OF THE COMMISSION By KIRKPATRICK, Commissioner:

I. THE ADMINISTRATIVE PROCEEDINGS The complaint in this proceeding charged respondents, National Dynamics Corporation and Elliott Meyer, individually and as an officer of said corporation, with deceptive advertising through claims which falsely implied to consumers that there had been competent scientific testing and laboratory approval of VX-6 battery additive. Respondents were also charged with deception through the use of misleading (1) testimonial. letters and. (2) claims relating to the (a) earnings and franchise protection of VX-6 distributors, (b) extent of national advertising, and (c) professional qualifications of National Dynamics’ personnel, all in violation of Section 5 of the Federal Trade Commission Act.' On January 19, 1970, respondents filed their answer denying all substantive allegations of the complaint. After a full adjudicative hearing, the administrative law judge issued an initial decision finding against complaint counsel on all complaint alle- “1 The following abbreviations are used for citations: 1.D.-- Initial decision of administrative law judge: Tr.---Transcript of testimony :

CX-—Commission exhibit :

RX-—Respondent exhibit ;

App. Br.-~Brief on Appeal of respondent (Res.) or complaint counsel (C.C.) : Ans. Br.— Answering brief ;

Rep. Br.—Reply brief.

NATIONAL DYNAMIUS UUnY., BL AL. ute 488 Opinion gations, except those concerning deception in the claims relating to the earnings of VX-6 distributors, the use of testimonials, and the representation that independent laboratories had approved _ _VX-6. He also found the individual respondent had formulated, direéted, ard controlled the acts and. practices of the corporate respondent and that-such participation was sufficient to hold him individually liable.

This matter is now before the Commission on appeals by counsel supporting the complaint and respondents. Complaint counsel contend that the judge erred in dismissing those complaint charges relating to respondents’ (1) failure to substantiate their performance claims; (2) representations that their product had been user tested; and (3) representation that it had been “fully tested.” ? Complaint counsel also appeal the judge’s order on the ground that it does not adequately protect the public against the continued use by respondents of deceptive earnings claims and testimonials. Respondents challenge the judge’s proposed order on the grounds that (1) it would preclude them from truthfully advertising the earnings of individual VX-6 distributors, and (2) it imposes an unnecessary and unreasonable burden by requiring respondents to distribute a copy of the order to all present and future VX-6 distributors.’ II. ISSUES OF LIABILITY Respondents have made numerous claims concerning the performance characteristics of VX-6 as a battery additive. In this proceeding, such claims are challenged as unsubstantiated. Typical of the claims which were alleged in the complaint as unsubstantiated are those which relate to (1) the specific. effects of the product which improve the performance of lead-acid storage batteries, and (2) the period of time over which such effects may ? Complaint counsel do not appeal the judge’s dismissal of complaint charges relating to respondents’ nationwide sales force, extent of national advertising, and franchise arrangements. ‘We have carefully reviewed the pertinent sections of the record, and we find the evidence fully Supports the judge’s finding that the record failed to support these charees. The judge's conclusion that no liability was shown is, therefore, aflirmed. 3 Respondents do not appeal the judge's determination of corporate and individual liability with respect to complaint charges relating to earnings claims, use of testimonial letters, and claims representiny that VX-6 had been approved by independent testing laboratories. We have reviewed the record evidence relating to these charges and the judge’s findings; and to the extent they are not inconsistent with this opinion, they are supported by the record and accordingly are adopted by the Commission. Opinion 82 F.T.C.

be expected to last. These latter claims. have been designated “duration-of-effect” claims. « ~ Specifically, the complaint alleges that respondents’ performance claims for VX-—6 were not substantiated by “competent scientific tests or by authenticated, controlled and duly recorded user tests.” In dismissing the complaint allegations relating to substantiation, the administrative law judge noted that complaint counsel failed to introduce any consumer testimony to support the inference that respondents’ performance claims embrace an implied representation of testing. Thus, he found the record “wholly devoid of evidence that any member of the public so interprets” respondents’ performance claims.’ In his opinion, the allegation in the complaint that the challenged claims imply that they are substantiated by prior. testing represents a novel interpretation of advertising claims and, therefore, it ‘““would be unreasonable and its adoption would be arbitrary and unwarranted” in the absence of supporting consumer testimony. In effect, then, the judge held that, in the absence of consumer testimony, the implied representation of substantiation cannot reasonably be found in the challenged advertisements. Complaint counsel take exception to this finding. A. Commission Expertise It is well established that the Commission’s expertise is sufficient to interpret an advertisement without consumer testimony as to how an advertisement is perceived by the public.® In applying its expertise in determining the meaning of an advertisement, the test is not the novelty of the implication the Commission is asked to draw or whether the interpretation is supported by consumer testimony. The test applied by the Commission is whether the interpretation is reasonable in light of the claims made in the advertisement.

*Claims allegédly unsubstantiated include such representations as VX-6: allows batteries to perform satisfactorily at 30 degrees below zero as well as under extreme heat conditions of 168 degrees F.; gives recuperative self-recharging ability; makes separators last longer; increases the brightness of lights; restores active life to dead batteries; will make batteries last five years: and will make batteries last a lifetime (CX-1, 2, 6, 9, 24, 25, 31-39, 49, 50, 51, 57-70, 78, 103-4, 109, 113-14, 221).

* LD. 37, 41 [pp. 523, 527 herein].

FTC5 1 5 3 1 2 813 2538 20 12 90.789566 v.5 1 5 3 1 3 853 2530 237 24 65.812630 Colaate-Palmolive5 1 5 3 1 4 1106 2532 48 22 89.964371 Co.,5 1 5 3 1 5 1173 2533 40 19 92.719032 3805 1 5 3 1 6 1231 2533 54 19 95.677841 U.S.5 1 5 3 1 7 1303 2534 48 21 95.148842 374,5 1 5 3 1 8 1369 2534 85 18 95.423447 391-925 1 5 3 1 9 1476 2533 75 22 92.388947 (1965)5 1 5 3 1 10 1573 2533 88 19 91.023117 Niresk5 1 5 3 1 11 1680 2532 141 21 0.000000 Industries,5 1 5 3 1 12 1840 2533 49 18 87.980324 Inc.5 1 5 3 1 13 1907 2539 21 12 89.083603 v.5 1 5 3 1 14 1949 2531 65 21 95.234154 FTC,4 1 5 3 2 0 691 2565 826 23 -1 5 1 5 3 2 1 691 2566 40 18 96.075172 2785 1 5 3 2 2 747 2565 54 19 82.629082 F.2d5 1 5 3 2 3 814 2566 49 21 96.029839 337,5 1 5 3 2 4 877 2566 40 19 96.639763 3425 1 5 3 2 5 935 2566 51 21 86.189217 (7th5 1 5 3 2 6 1000 2566 58 21 67.273331 Cir.)5 1 5 3 2 7 1076 2568 57 17 74.150864 eert.5 1 5 3 2 8 1147 2566 88 21 96.314728 denied,5 1 5 3 2 9 1250 2567 39 19 92.749298 3645 1 5 3 2 10 1304 2566 52 20 95.880150 U.S.5 1 5 3 2 11 1371 2568 41 19 94.940269 8835 1 5 3 2 12 1430 2567 87 21 94.940269 (1960). NATIONAL DYNAMICS CORP., HT AL. D470 488 Opinion B. Implied Representation of Substantiation Complaint counsel cite claims such as “quick starts in —40 degrees” and VX-6 “increases brightness of lights by 25%,” and ~conclude.that the very nature of the language of such claims, and indeed all performance claims, implies that they are supported by competent scientific tests or authenticated, controlled and duly recorded user tests or both.’ Thus, we are urged to find respondents in violation of Section 5 of the Federal Trade Commission Act, unless we conclude the performance claims for VX-6 are based upon tests meeting the precise standards set forth in the complaint. The Commission has previously considered and evaluated the capacity of performance claims to represent by implication that the advertiser had substantiation to support the advertised claims. In Firestone Tire and Rubber Co.,* we held it unfair and deceptive to consumers for a tire manufacturer to make a specific advertising claim relating to tire performance characteristics without substantial scientific test data to support it.’ The Commission found respondent’s claim led consumers to believe the tires had been adequately tested when in fact they had not. This finding led the Commission to conclude, “Clearly, respondent’s advertisement thus had the capacity and tendency to deceive members of the public into an erroneous and mistaken belief as to respondent’s product.” In essence, respondent’s stopping claim impliedly represented that respondent had a reasonable basis to support the claim; and in the circumstances of that case, particularly since it involved a matter of human safety, adequate scientific tests provided the only basis which could reasonably support the claim. The record before us demonstrates that respondents employed the performance claim in advertising to inform consumers of the specific attributes of their product. In so doing, wé “find they represented to consumers that they had a reasonable basis for believing their claims were true. This is the impression respondents conveyed to the public. A performance claim is not a technique which can be used with impunity for ascribing specific attributes to a product based on nothing more than a guess that it will perform as represented. We find that the absence of_a reasonable basis to support such claims s would ‘not only be a material fact, the knowledge of w which might significantly affect consumer purchase *CC App. Br. 12.

‘ Docket No. 8818 (Sept. 22, 1972 [81 F.T.C. 3981). ® Accord, Universe Co., 63 FTC 1282 (1963), aff'd sub. nom. Nirchner v. FTC, 337 F.2d 751 (9th Cir. 1964).

Opinion 82 F.T.C.

decisions, but it would also mislead in light of the implied representation of substantiation. Thus, performance claims lacking a reasonable basis in fact may be found deceptive within the meaning of Section 5 of the Federal Trade Commission Act."° 1. Nature of Respondents’ Substantiation It is not disputed on appeal that respondents’ battery additive had been tested by several independent laboratories. Under the standard set forth in Pfizer, these tests would provide a reasonable basis for respondents’ claims, assuming they are valid, only if they existed prior to and supported the challenged claims. In this proceeding, however, complaint counsel challenge all of these tests, contending that they are invalid or incompetent scientific tests and, therefore, can not substantiate any of respondents’ claims regardless of when such tests were actually performed. The evidence on the validity of respondents’ substantiation is found in the test reports issued by six independent commercial laboratories, the testimony of representatives of the laboratories, and two expert witnesses who evaluated the laboratory test reports. A. Original Tests Prior to purchasing the formula for VX—6 in 1957, respondent Meyer had field tests submitted to him which had been prepared by a battery consultant.’ Later, in 1958, the same battery consultant provided respondent Meyer with an additional written report on VX-6 which supported the conclusions found_in the field report previously submitted to Meyer.”

In addition to the battery consultant’s reports, Mr. Meyer engaged the Public Service Testing Laboratories (PSTL) to test the product and to verify certain performance characteristics of VX-6." The report issued by PSTL concluded that the product This application of the ‘‘reasonable basis’’ test, based on deception, is to be distinguished from the Commission’s review of. the question of advertising substantiation in the context of our recent decision in /’pfizer, Inc., Docket No. 8819 (July 11, 1972 [81 F.T.C. 23, 56]). There we considered the impact of unsubstantiated, affirmative product claims as a matter of marketplace fairness; and our decision was grounded exclusively on the unfairness jurisdiction conferred upon the Commission by Section 5 of the FTC Act. Whether an advertisement is analyzed from the standpoint of unfairness or deception, however, the standard for evaluatinye the substantiating material and test which is applied is the same—does the substantiation provide a reasonable basis to support the claim. Essentially, this is a factual issue to be formulated .in the context of circumstances present in each case. Pfizer, Inc. Tr.5 1 8 2 1 2 781 2493 91 19 93.629204 409-12.3 1 8 3 0 0 699 2526 248 22 -1 4 1 8 3 1 0 699 2526 248 22 -1 5 1 8 3 1 1 699 2526 65 20 65.056442 Tr, 410; CX 220.

BwTy, 412.

ANSE A RUANASE PANERA YUAVE oy 44d Sade vee 488 Opinion broke down sulphation corrosion, restored active life to the battery and enabled the battery to retain a charge; demonstrated recuperation and self-charging ability; enabled the battery to operate _ efficiently at 40 degrees F. below zero and at 160 degrees F.; increased- brightness of lights by-25 percent after restoring active life to the battery; and enabled the battery to maintain full voltage after being subject to the above tests." Mr. Michael DiMartino, president and technical director, PSTL, testified that the purpose of this test was to determine whether the product had any merit; and in his opinion it represented a reasonably accurate scientific study to determine the performance characteristics of the product.

B. Subsequent Tests In addition to the PSTL test, and on the advice of certain employees, Mr. Meyer contacted Botco Laboratories for further tests to determine the merits of VX-6."* On June 30, 1960, Botco Laboratories submitted its report to National Dynamics.’? Two groups of batteries were tested. The experiment described in the report used 60 new batteries and 20 used and sulphated, but mechanically sound, batteries. The test was conducted-over a six-month period; and based on data collected ‘and interpreted by the laboratory, 12 specific conclusions were formulated which substantially confirmed the conclusions reached by PSTL.'§ Mr. Meyer thereafter retained Industrial Testing Laboratory to CX 221; Tr. 1600-03.

Tr, 1605-06 ; 1646-47.

6 Tr. 1811. :

17 Complaint counsel contend that the Botco test was never performed and that. the report was “a plagiarism” of two tests reported in ‘Hearings before the Select Committee on Small Business, United States Senate, Eighty Third Congress, First Session, in Investipation of Battery Additive Ad~X2—March 31, June 22, 23, 24, 25 and 26, 1953.” (Proffered CX 310 A-Z 33). The Judge excluded this exhibit on several grounds, the principal of which was his finding that “it does not have sufficient rational probative force to support the inference claimed for it by the government * * *" (Tr. 4254-63). Complaint counsel have appealed this ruling. The fact that the conclusions of the reports are similar or even identical does not conclusively support the inference that the Botco report was playiarized. Assuming jdentical test procedures were employed to test products with similar ingredients, it would be possible to observe substantially similar results leading to the conclusions found in the test reports. The record is devoid of any evidence indicating that the Botco test was not performed. On the other hand, the record does establish that. respondents paid at least $3000 for the test (Tr. 4825-30; RX 32-34), and the report was reviewed and approved by two other laboratories (Tr. 1858-70, 1919, 1921, 19830; RX 2422; Tr. 1533-35). In these circumstances, we ayree with the judge’s conclusion and we affirm his decision excludine proffered CX 310 A-Z-33 from the record.

CX5 1 5 7 1 2 642 2414 40 18 91.230057 2265 1 5 7 1 3 697 2413 62 19 48.080139 L-U. Opinion 82 F.T.C.

evaluate and provide a scientific opinion concerning the validity of the,Botco report.’® Mr. Wilson J. H. Rogers,'a partner in Industrial and a consulting chemist, testified that in 1964 Mr. Meyer requested their opinion as to whether the Botco report was valid and whether it demonstrated the efficacy of the product.?° After checking the mathematics for accuracy, evaluating the consistency of observations and conclusions and the test procedures employed,?! it was the opinion of Industrial that the Botco report was sound in these respects.”

Many of the results reported by Botco were observed by at least four other independent laboratories, and each of. these laboraties confirmed properties of VX-6 reported by Botco. Thus, the record shows that respondents, over a ten-year period, sought and obtained scientific evaluations of their product from six independent commercial laboratories.?* C. Reasonable Basis Test The administrative law judge found that respondents had relied in good faith on the test reports furnished by the laboratories, and that such test reports provided a reasonable basis for their effectiveness claims, even though the record would not support a finding that such claims were substantiated by competent scientific tests or valid user tests.2* On appeal, complaint counsel contend that it was erroneous for the judge to find reasonableness to. be a defense to a charge of misleading advertising. In upholding the judge’s decision in respect of the performance claims in issue we appreciate that we are, in-effect, amending: the complaint in this matter. The complaint is based in these respects on the allegation that the performance claims were not supported by competent scientific or valid user tests, and the record before us does not show otherwise. However, this matter is now before us upon the full record; and it is our view that the standard set forth in the complaint is not the standard that should be here applied. We believe that, in light of Pfizer and Firestone, the complaint in this matter sets forth a standard which is too narrow for the purposes of evaluating the substantiation in this case. In these circumstances, however, we do not believe that the Com- ® Tr. 1866.

20 Tr. 1866.

1 Tr. 1868+70.

= Tr. 1868.

°3 CX 231 A-B, Tr. 2002-03, 2015.

“TD. 60 [p. 541 herein}.

488 Opinion mission should be straight-jacketed by the standard set forth in the complaint. The test in this case, as in each case that comes before us on these issues, should be whether on the full record the substantiation constitutes a reasonable basis for the challenged ' ~elaims. To the extent that the complaint in this matter sets forth a narrower standard, the complaint has too narrow a focus. However, it is our view that amendment of the complaint (so as to set forth the standard herein applied) and remand would not be appropriate here because, as outlined herein, the substantiation shown to underlie the challenged performance claims has satisfied us that a reasonable basis for them existed. We believe the cases cited by counsel are inapposite. The complaint in this matter did not challenge respondents’ performance claims directly on the grounds that they were false. If the truth or falsity of respondents’ claims had been an issue in this proceeding and the claims proved to be false, we agree, good faith or lack of intent to deceive would be irrelevant. In this matter, however, we are concerned solely with the charge that respondents did not have adequate substantiation for their claims. We have held that the test applied to determine the adequacy of substantiation is whether or not it provides respondents with a reasonable basis for believing their claims are true. The issues thus raised under this test appropriately involved a consideration of the reasonableness of the advertiser’s action and his good faith. Pfizer, Inc. Dkt. No. 8819 (July 11, 1972 [81 F.T.C. 23]). Complaint counsel argue further, however, that respondents have not acted in good faith on the basis of these test reports. Insupport of this contention, counsel refer to the testimony of representatives of National Testing, Public Service, and Stillwell & Gladding laboratories, indicating that respondents were informed that these laboratories did not consider their tests, Standing © alone, were sufficiently detailed to substantiate cliams for advertising.2* As further evidence of the lack of good faith, complaint counsel state that it was not until the Botco test was conducted, three years after the product was put on the market, that respondents had what purported to be a comprehensive test of the product. In reviewing respondents’ evidence, complaint counsel apparently relied on the theory that regardless of when the perform- 2 The laboratory representatives who testified thought their tests were not “extensive enough” or were “preliminary in nature,” and suggested, for these reasons, the reports were insufficient for advertising purposes. However, each witness considered his test to be scientifically valid and supportive of conclusions reached concerning the merits of the product (Tr. 2042 ; Tr. 1646-47; Tr. 2004, 2007, 2013). Opinion 82 F.T.C.

ance claims were made, they were unsubstantiated as alleged in the complaint because respondents’ tests were not competent scientific tests or authenticated, controlled or duly recorded user tests. At trial, complaint counsel relied on that standard and did not establish the period of time during which specific advertising claims were made in relation to the substantiation which then existed to support such claims. Thus, the record fails to show whether adequate substantiation existed prior to the time particular performance claims were made.** For purposes of our review, therefore, it must be assumed that the substantiation was relied upon hy respondents before the claims were made; and we have considered all of respondents’ tests to determine whether individually or in the aggregate such substantiation otherwise provides a reasonable basis for the claims.

1. Expert Evaluation of Respondents’ Tests Respondents’ test reports were reviewed by two experts on the subject of lead-acid storage batteries. Dr. Walter J. Hamer, a consultant in the Electricity Division of the National Bureau of Standards, and Dr. Joseph C. White,** director of the Electric Chemistry Branch, Chemistry Division, Naval Research Laboratory, were called upon by complaint counsel to determine the validity of the foregoing tests. Both experts detected numerous defects and deficiencies apparent on the face of each of respondents’ test reports.

With respect to the Botco report, Dr. Hamer noted an absence of essential data to support a number of conclusions in the report; he commented on the imprecise expression of measurements such as temperature ranges; he took issue with certain test procedures and pointed out that certain statements in the report were contrary to known scientific observations.2* Dr. Hamer also found inconclusive the observation by National Testing that VX-6 “permits the batteries to perform satisfactory at below freezing temperatures as well as under extreme heat conditions.” In his opinion, a mechanically sound battery without VX-6 will operate under the es Respondents’ tests were performed during the period 1957-1967. The record shows that the challenged advertising claims were disseminated during the period between 1965-1969 (Tr. 323-342). It is not clear from the record whether these claims were made prior to 1965 and, if so, whether a particular claim was supported by tests previously conducted. *" The testimony of Dr. White was stipulated by counsel (Tr. 4191). 28 Observation number 4 of the Botco report states: ‘# * * the light red-brown of the peroxide was very clearly defined in the grids and was quite brittle’ (CX 226-S). Dr. Hamer explained that peroxide is an oxide and is by nature a “soft, nice spongy substance,” and that in 40 years as a scientist he has not seen brittle peroxide (Tr. 2489-90). aero nee. aS ee ee eee eee Le ee ey 488 Opinion same conditions described in the report. Dr. Hamer had similar criticism of each test report, emphasizing the insufficiency of data and the failure to define controls or describe the test procedures adequately.”° ;

~"Insaview. 6f these deficiencies, beth experts concluded that re-_ spondents’ reports, either singly or in the aggregate, were not descriptive of competent scientific tests.*° These conclusions, however, do not establish the invalidity of each underlying test. As Dr. Hamer pointed out, a test could be a scientific test although the report of a test which, for example, failed to define the controls clearly could not properly be described as a scientific report due to a failure to set forth completely all relevant test conditions.*! It is also of some importance that complaint counsel did not introduce in evidence nor did Drs. Hamer and White have access to the original test data or laboratory notebooks. They were, therefore, somewhat limited in their ability to evaluate the underlying tests.*? The record reveals that the test reports were prepared by well-established independent testing laboratories.** Dr. Hamer testified that as far as he could tell from the reports, the people who prepared the reports were objective in reaching their con- 20 Dr. Hamer testified that the report issued by Electrical Testing Laboratories appeared to be descriptive of a scientific test, but the test had no relevance to the effect of VX-6 on the lead-acid storage battery, because silver nitrate was presérit im the test solution. Dr. Hamer pointed out that silver nitrate is “very detrimental” to a battery (Tr. 4023-24). 1D, 49 |p. 533 herein|.

31 Specifically, Dr. Hamer’s testimony concerning the distinction between a scientific test and the report on that test was offered in response to questioning by respondents’ counsel: Q. If a report is not scientific because its content is not all it should he, does that automatically ipso facto mean that the test itself is not scientific just because the results were not put into the report, doctor ? A. It could be either way.

Q. It could be. It could be scientific and it could not? A. A person could do a very good scientific test and do a very horrible job, sir, in reporting Q. Would that mean the test is not scientific, doctor *? A. I couldn’t tell.

Q. 1t could mean the test would still be scientific, doctor? A. There is no way to answer that. (Tr. 2767-68, 2756-57, 2761, 2769.) = Tr, 290-07, 3780.

23 Stillwell & Gladding has been in existence for more than 100 years (Tr. 2039); Public Service Testing Laboratories has been in business for 25 years (Tr. 1601); and Electrical Testing Laboratories was specifically recognized by one of the Government's expert witnesses as a reputable laboratory that mixht have done some work on behalf of the National Bureau of Standards (Tr. 2833-34, 4037-38). Industrial Testing Laboratories has been in business since 1876, although it acquired new management in 1958 (Tr. 1846, 1858). National Testing Laboratories was organized in 1956 (Tr. 1989). The record is silent as to American Laboratories and Botco Laboratories which went out of business in 1962 upon the death of its owner (1.D. 48 |p. 531 herein]).

Opinion 82 F.T.C.

clusions.** Moreover, on cross-examination Dr. Hamer agreed with some of the reported conclusions-and disagreed with others,** but he acknowledged that the instances of his disagreement, for the most part, represent honest differences of opinion between competent scientists.** Although the deficiencies in respondents’ test reports forewarned complaint counsels’ expert witnesses to question the validity of the underlying tests, the record does not disclose respondents possessed the capacity or the scientific expertise in-house to undertake such technical evaluations. As laymen in the field of scientific evaluation, respondents not only relied upon conclusions in the test reports as scientific statements based upon competent scientific tests but actively sought the advice and assistance of independent commercial laboratories in determining the validity of these reports. On several occasions, respondents engaged independent laboratories to evaluate prior test reports. In each case the laboratory approved the prior report or reported, on basis of its own independent tests, results confirming conclusions previously reported. We find evidence that Industrial Testing Laboratories reviewed the report issued by Botco Laboratories and advised respondent Meyer that it was a valid report.** The evidence.shows that National Testing Laboratories was requested to update the findings of PSTL and, based on the results of its independent tests, confirmed the findings of Public Service.** In addition, the Commission finds the test reports in evidence issued by six different laboratories, in the aggregate, tend to corroborate and support the conclusions reached by any single laboratory. wee os The judge found that there was insufficient evidence in the record to establish that the laboratory tests were competent scientific tests. Nevertheless, on the facts of this case, we believe the question is whether individual laboratory test reports, which were reviewed by independent laboratories and corroborated by several independent tests, could, in themselves, provide a reasonable basis for respondents’ claims. On this point, we find with respect to respondents’ reliance on the test reports, as distinguished from the underlying'‘tests, the evidence supports the judge’s conclusion that ‘respondents, by relying upon the advice and test reports of six “Ty, 3776-77 : 8798-99.

* Ty, 3780-84.

“ Tr, 3798-3800, 3810-11.

Tr, 1868-70.

Tr, 1955, 2015.

rr er eR eee oy ae treat wee 488 Opinion independent laboratories, in the circumstances of this case,®° acted upon information which would satisfy a reasonably prudent businessman that claims covered by the test reports are supported. 3.2.5 1 4 1 1 2 707 545 192 45 94.289711 Adequacy5 1 4 1 1 3 913 550 40 31 96.441475 of5 1 4 1 1 4 967 530 593 51 64.445862 Substantiation—-Effectiveness5 1 4 1 1 5 1576 549 132 33 96.677406 Claims2 1 5 0 0 0 514 615 1318 491 -1 3 1 5 1 0 0 514 615 1317 189 -1 4 1 5 1 1 0 562 615 1269 40 -1 5 1 5 1 1 1 562 615 143 38 96.016304 Having5 1 5 1 1 2 717 615 112 32 96.016304 found5 1 5 1 1 3 843 617 81 30 96.312683 that5 1 5 1 1 4 935 617 233 37 95.917747 respondents5 1 5 1 1 5 1182 626 93 22 95.771500 were5 1 5 1 1 6 1288 616 158 39 95.771500 justified5 1 5 1 1 7 1460 616 35 31 96.475906 in5 1 5 1 1 8 1510 616 141 38 95.936508 relying5 1 5 1 1 9 1664 626 93 27 95.936508 upon5 1 5 1 1 10 1771 615 60 32 96.938080 thea 1 5 1 2 0 516 665 1314 40 -1 5 1 5 1 2 1 516 665 89 31 96.639359 tests5 1 5 1 2 2 624 665 114 32 95.974937 which5 1 5 1 2 3 759 676 93 21 96.546043 were5 1 5 1 2 4 873 676 77 27 96.751320 run,5 1 5 1 2 5 972 677 69 27 96.635040 any5 1 5 1 2 6 1063 666 223 39 96.182205 advertising5 1 5 1 2 7 1306 666 122 32 96.803047 claims5 1 5 1 2 8 1451 665 211 39 96.473373 reasonably5 1 5 1 2 9 1683 665 147 32 96.834816 covered4 1 5 1 3 0 514 714 1314 40 -1 5 1 5 1 3 1 514 714 47 38 96.886864 by5 1 5 1 3 2 574 714 59 32 96.637138 thes 1 5 1 3 3 646 716 71 31 96.519432 tests 1 5 1 3 4 731 718 140 36 96.000900 reports5 1 5 1 3 5 885 716 124 32 96.450729 should5 1 5 1 3 6 1023 716 43 32 96.793938 be5 1 5 1 3 7 1080 716 142 32 95.883560 deemed5 1 5 1 3 8 1236 718 37 30 96.370010 to5 1 5 1 3 9 1287 716 41 32 96.878433 be5 1 5 1 3 10 1343 716 208 38 96.616371 adequately5 1 5 1 3 11 1567 715 261 32 96.421669 substantiated4 1 5 1 4 0 517 764 359 40 -1 5 1 5 1 4 1 517 764 36 31 96.881943 in5 1 5 1 4 2 568 764 72 33 96.532227 this5 1 5 1 4 3 654 767 222 37 96.499466 proceeding.3 1 5 2 0 0 515 815 1315 188 -1 4 1 5 2 1 0 562 815 1268 39 -1 5 1 5 2 1 1 562 815 39 30 96.360222 In5 1 5 2 1 2 625 815 71 31 96.836456 this5 1 5 2 1 3 720 816 140 38 95.946747 regard,5 1 5 2 1 4 883 816 84 32 96.581200 both5 1 5 2 1 5 992 817 62 31 95.403511 Dr.5 1 5 2 1 6 1080 817 134 30 96.036606 Hamer5 1 5 2 1 7 1237 817 70 31 96.765877 ands 1 5 2 1 8 1332 816 61 32 96.235359 Dr.5 1 5 2 1 9 1418 815 117 33 96.064041 Whites 1 5 2 1 10 1560 815 185 32 96.625824 evaluated5 1 5 2 1 11 1770 815 60 31 96.825218 thea 1 5 2 2 0 516 864 1314 40 -1 5 1 5 2 2 1 516 864 178 39 96.451782 adequacy5 1 5 2 2 2 708 866 39 31 96.755020 of5 1 5 2 2 3 761 866 244 38 95.806053 respondents’5 1 5 2 2 4 1020 867 89 30 96.236244 tests5 1 5 2 2 5 1126 866 35 31 96.665459 in5 1 5 2 2 6 1178 866 150 31 96.516541 relations 1 5 2 2 7 1343 867 37 30 96.745178 to5 1 5 2 2 8 1394 866 60 31 96.278320 thes 1 5 2 2 9 1469 865 224 38 96.278320 advertising5 1 5 2 2 10 1708 864 122 33 96.395767 claims4 1 5 2 3 0 515 914 1315 40 -1 5 1 5 2 3 1 515 914 102 31 95.850037 made5 1 5 2 3 2 635 914 59 32 93.218552 for5 1 5 2 3 3 711 916 122 31 76.691765 VX-6.5 1 5 2 3 4 853 916 108 31 96.389931 Theirs 1 5 2 3 5 978 916 203 38 96.355042 testimony,5 1 5 2 3 6 1200 926 40 22 96.628204 as5 1 5 2 3 7 1259 916 235 32 95.919968 summarized5 1 5 2 3 8 1513 916 47 38 96.394424 by5 1 5 2 3 9 1579 916 60 31 96.338631 thes 1 5 2 3 10 1658 915 121 38 96.552307 judge,5 1 5 2 3 11 1800 914 30 31 96.552307 is4 1 5 2 4 0 516 965 309 38 -1 5 1 5 2 4 1 516 965 204 38 95.512436 essentially5 1 5 2 4 2 733 965 92 32 95.844902 that:3 1 5 3 0 0 514 1031 1318 75 -1 4 1 5 3 1 0 517 1031 1315 34 -1 5 1 5 3 1 1 517 1031 13 15 89.835678 *5 1 5 3 1 2 554 1032 12 14 86.586258 *5 1 5 3 1 3 591 1033 13 14 92.472733 *5 1 5 3 1 4 626 1032 155 32 96.228745 assuming5 1 5 3 1 5 801 1033 50 25 96.919228 thes 1 5 3 1 6 870 1033 127 32 96.402351 validity5 1 5 3 1 7 1018 1034 33 25 96.562889 of5 1 5 3 1 8 1072 1033 37 26 95.458603 all5 1 5 3 1 9 1132 1033 50 25 95.570572 thes 1 5 3 1 10 1204 1035 61 24 96.588036 tests 1 5 3 1 11 1285 1035 118 30 96.517784 reports5 1 5 3 1 12 1425 1032 57 26 96.112984 ands 1 5 3 1 13 1504 1033 50 26 93.298653 thes 1 5 3 1 14 1576 1031 203 27 92.785515 corrrectness5 1 5 3 1 15 1801 1031 31 25 97.014412 of4 1 5 3 2 0 514 1073 1318 33 -1 5 1 5 3 2 1 514 1073 79 26 96.126183 theirs 1 5 3 2 2 613 1074 193 31 96.454163 conclusions,5 1 5 3 2 3 828 1074 49 26 96.481804 thes 1 5 3 2 4 898 1077 75 24 96.481804 tests5 1 5 3 2 5 994 1075 222 26 96.420998 substantiated5 1 5 3 2 6 1239 1075 39 26 96.257751 all5 1 5 3 2 7 1300 1076 33 25 96.225792 of5 1 5 3 2 8 1354 1075 49 26 96.795334 thes 1 5 3 2 9 1425 1076 49 24 96.042152 tens 1 5 3 2 10 1498 1074 208 32 96.042152 performances 1 5 3 2 11 1728 1073 104 26 96.037003 claims2 1 6 0 0 0 514 1115 1311 76 -1 3 1 6 1 0 0 514 1115 1311 76 -1 4 1 6 1 1 0 514 1115 1311 34 -1 5 1 6 1 1 1 514 1116 178 31 84.839867 specifically5 1 6 1 1 2 718 1117 172 31 96.301155 challenged5 1 6 1 1 3 916 1118 38 31 96.839241 by5 1 6 1 1 4 979 1118 49 26 96.384125 thes 1 6 1 1 5 1055 1118 162 31 92.872772 complaints 1 6 1 1 6 1244 1118 12 14 91.966446 *5 1 6 1 1 7 1288 1119 12 13 91.966446 *5 1 6 1 1 8 1328 1118 13 13 92.336823 *5 1 6 1 1 9 1375 1117 73 30 85.669380 (I.D.5 1 6 1 1 10 1476 1118 33 25 92.609009 595 1 6 1 1 11 1541 1118 41 30 92.609009 [p.5 1 6 1 1 12 1609 1118 53 24 92.304344 5405 1 6 1 1 13 1690 1115 135 31 91.749496 herein])4 1 6 1 2 0 520 1158 749 33 -1 5 1 6 1 2 1 520 1158 127 30 95.864304 (Hamer5 1 6 1 2 2 665 1160 180 29 90.124374 4112-4148)5 1 6 1 2 3 874 1159 122 32 93.281212 (White,5 1 6 1 2 4 1018 1159 73 32 88.775841 Stip.5 1 6 1 2 5 1112 1160 157 30 92.287613 4191-92).2 1 7 0 0 0 515 1223 1317 337 -1 3 1 7 1 0 0 515 1223 1317 337 -1 4 1 7 1 1 0 562 1223 1270 40 -1 5 1 7 1 1 1 562 1223 52 32 96.228844 On5 1 7 1 1 2 635 1225 136 38 96.383919 appeal,5 1 7 1 1 3 792 1225 192 38 96.413628 complaints 1 7 1 1 4 1003 1226 141 31 96.684814 counsels 1 7 1 1 5 1166 1226 43 31 95.681572 do5 1 7 1 1 6 1231 1227 61 30 95.681572 not5 1 7 1 1 7 1312 1225 173 38 96.052902 seriously5 1 7 1 1 8 1506 1224 151 32 96.296463 contends 1 7 1 1 9 1678 1224 80 31 93.279060 that5 1 7 1 1 10 1779 1234 53 21 92.530586 re-4 1 7 1 2 0 515 1274 1315 38 -1 5 1 7 1 2 1 515 1274 203 37 91.293640 spondents’5 1 7 1 2 2 733 1276 90 31 96.408401 tests5 1 7 1 2 3 838 1275 64 32 96.638840 fails 1 7 1 2 4 918 1277 37 30 96.750870 to5 1 7 1 2 5 969 1286 104 22 96.705276 covers 1 7 1 2 6 1087 1276 100 32 96.828911 those5 1 7 1 2 7 1203 1276 122 32 96.615021 claims5 1 7 1 2 8 1341 1275 115 32 96.770226 which5 1 7 1 2 9 1473 1276 110 31 96.264305 relates 1 7 1 2 10 1598 1277 36 29 96.264305 to5 1 7 1 2 11 1650 1274 60 32 93.303207 thes 1 7 1 2 12 1726 1284 104 28 91.550247 prop-4 1 7 1 3 0 515 1325 1316 40 -1 5 1 7 1 3 1 515 1325 107 31 96.375130 erties5 1 7 1 3 2 646 1335 40 21 96.209190 or5 1 7 1 3 3 710 1325 244 32 95.986923 effectiveness5 1 7 1 3 4 979 1327 39 31 96.660660 of5 1 7 1 3 5 1041 1326 60 32 93.300705 thes 1 7 1 3 6 1125 1327 189 38 55.754047 product.*®5 1 7 1 3 7 1338 1327 62 31 96.298637 We5 1 7 1 3 8 1424 1326 132 32 96.247238 believes 1 7 1 3 9 1582 1325 59 32 96.247238 thes 1 7 1 3 10 1666 1325 165 31 96.452354 evidence4 1 7 1 4 0 515 1375 1316 40 -1 5 1 7 1 4 1 515 1375 129 38 96.852264 simply5 1 7 1 4 2 661 1376 85 31 96.230293 fails5 1 7 1 4 3 764 1378 37 29 96.469269 to5 1 7 1 4 4 819 1379 149 36 96.518173 supports 1 7 1 4 5 986 1387 21 21 95.259628 a5 1 7 1 4 6 1025 1377 137 38 95.259628 findings 1 7 1 4 7 1180 1377 79 31 96.700081 that5 1 7 1 4 8 1278 1377 59 31 96.472931 thes 1 7 1 4 9 1357 1378 70 30 96.819901 tests 1 7 1 4 10 1447 1378 139 36 96.440651 reports5 1 7 1 4 11 1606 1376 36 31 93.298920 in5 1 7 1 4 12 1664 1376 167 37 92.473328 respond-4 1 7 1 5 0 515 1426 1317 39 -1 5 1 7 1 5 1 515 1426 89 31 96.727287 ents’5 1 7 1 5 2 625 1427 201 37 96.611725 possessions 1 7 1 5 3 848 1437 60 21 96.764587 ares 1 7 1 5 4 929 1428 210 37 96.437347 inadequate5 1 7 1 5 5 1161 1428 35 30 96.171928 in5 1 7 1 5 6 1218 1437 103 28 96.716034 scope5 1 7 1 5 7 1342 1437 40 21 96.631767 or5 1 7 1 5 8 1403 1428 188 30 96.631767 substances 1 7 1 5 9 1612 1428 70 30 96.117630 ands 1 7 1 5 10 1705 1427 43 31 95.353493 do5 1 7 1 5 11 1771 1428 61 30 95.353493 nota 1 7 1 6 0 515 1476 1317 45 -1 5 1 7 1 6 1 515 1476 239 33 96.385666 substantiates 1 7 1 6 2 775 1478 100 43 96.307899 those5 1 7 1 6 3 892 1478 255 37 60.109135 performances 1 7 1 6 4 1170 1478 123 35 90.383316 claims5 1 7 1 6 5 1315 1478 115 43 90.383316 which5 1 7 1 6 6 1455 1478 109 31 95.791321 relates 1 7 1 6 7 1587 1479 36 30 95.637161 to5 1 7 1 6 8 1646 1478 60 30 93.263794 thes 1 7 1 6 9 1730 1476 102 32 92.441696 effec-4 1 7 1 7 0 515 1525 896 35 -1 5 1 7 1 7 1 515 1527 155 32 96.233238 tiveness5 1 7 1 7 2 683 1529 39 30 92.853638 of5 1 7 1 7 3 734 1529 122 31 86.302444 VX-6.5 1 7 1 7 4 1396 1525 15 5 0.000000 .2 1 8 0 0 0 883 1605 581 47 -1 3 1 8 1 0 0 883 1605 581 47 -1 4 1 8 1 1 0 883 1605 581 47 -1 5 1 8 1 1 1 883 1614 29 30 91.826187 3.5 1 8 1 1 2 952 1612 366 40 91.826187 Duration-of-Effects 1 8 1 1 3 1333 1605 131 39 96.720886 Claims2 1 9 0 0 0 514 1685 1318 682 -1 3 1 9 1 0 0 514 1685 1317 188 -1 4 1 9 1 1 0 561 1685 1270 40 -1 5 1 9 1 1 1 561 1685 73 31 95.553093 Thes 1 9 1 1 2 651 1686 109 38 95.553093 judges 1 9 1 1 3 779 1687 111 31 96.000809 found5 1 9 1 1 4 910 1687 79 31 96.252342 that5 1 9 1 1 5 1007 1687 249 38 96.056122 performances 1 9 1 1 6 1276 1687 122 31 95.626862 claims5 1 9 1 1 7 1420 1686 153 38 96.193100 relating5 1 9 1 1 8 1591 1688 37 30 93.297028 to5 1 9 1 1 9 1649 1686 182 31 92.807426 duration-4 1 9 1 2 0 514 1735 1316 40 -1 5 1 9 1 2 1 514 1735 169 38 91.980865 of-effect,5 1 9 1 2 2 706 1737 171 38 96.460487 although5 1 9 1 2 3 900 1737 131 38 96.815392 clearly5 1 9 1 2 4 1054 1737 313 32 96.169357 unsubstantiated5 1 9 1 2 5 1390 1737 46 38 96.701912 by5 1 9 1 2 6 1461 1737 243 38 96.528938 respondents’5 1 9 1 2 7 1729 1737 101 36 96.320732 tests,4 1 9 1 3 0 514 1787 1317 44 -1 5 1 9 1 3 1 514 1787 115 31 95.716873 would5 1 9 1 3 2 658 1789 61 29 96.099289 not5 1 9 1 3 3 746 1789 161 30 96.045456 warrants 1 9 1 3 4 935 1788 59 31 96.396713 thes 1 9 1 3 5 1024 1788 161 32 96.240112 issuance5 1 9 1 3 6 1215 1788 39 32 96.325874 of5 1 9 1 3 7 1282 1798 44 22 92.347389 an5 1 9 1 3 8 1357 1788 213 32 75.024246 order.‘!.In5 1 9 1 3 9 1593 1787 68 44 93.021416 thes 1 9 1 3 10 1691 1787 140 37 91.573196 judge’s4 1 9 1 4 0 517 1831 1199 42 -1 5 1 9 1 4 1 517 1836 154 37 96.510010 opinion,5 1 9 1 4 2 687 1837 122 32 96.433510 claims5 1 9 1 4 3 824 1839 84 30 96.311806 such5 1 9 1 4 4 924 1848 51 21 96.439407 as:5 1 9 1 4 5 1582 1831 134 11 32.114914 a3 1 9 2 0 0 610 1887 655 39 -1 4 1 9 2 1 0 610 1887 655 39 -1 5 1 9 2 1 1 610 1887 35 37 93.981384 1)5 1 9 2 1 2 691 1887 97 32 93.981384 Ends5 1 9 2 1 3 803 1887 142 39 95.209213 battery5 1 9 2 1 4 959 1888 138 31 96.146957 troubles 1 9 2 1 5 1111 1888 154 38 96.191460 forever.3 1 9 3 0 0 607 1936 1223 39 -1 4 1 9 3 1 0 607 1936 1223 39 -1 5 1 9 3 1 1 607 1937 37 35 92.974075 2)5 1 9 3 1 2 690 1938 152 31 91.015480 Assures5 1 9 3 1 3 860 1938 163 31 96.378159 like-news 1 9 3 1 4 1039 1938 183 37 96.663330 operations 1 9 3 1 5 1241 1938 39 31 95.539566 of5 1 9 3 1 6 1296 1938 170 31 96.264641 batteries5 1 9 3 1 7 1483 1938 60 37 96.095161 for5 1 9 3 1 8 1560 1938 58 30 96.601135 thes 1 9 3 1 9 1636 1936 63 38 96.224869 life5 1 9 3 1 10 1717 1936 38 38 96.224869 of5 1 9 3 1 11 1773 1937 57 29 96.726151 thee 1 9 4 0 0 688 1997 69 21 -1 4 1 9 4 1 0 688 1997 69 21 -1 5 1 9 4 1 1 688 1997 69 21 96.314697 car.3 1 9 5 0 0 609 2037 1177 37 -1 4 1 9 5 1 0 609 2037 1177 37 -1 5 1 9 5 1 1 609 2037 37 37 94.784950 3)5 1 9 5 1 2 691 2037 124 31 95.362976 Makes5 1 9 5 1 3 829 2047 78 21 95.550423 news 1 9 5 1 4 920 2037 171 31 96.498512 batteries5 1 9 5 1 5 1106 2037 138 31 96.104721 troubles 1 9 5 1 6 1259 2037 78 31 96.104721 free5 1 9 5 1 7 1349 2037 61 37 96.607506 for5 1 9 5 1 8 1423 2037 67 37 96.548988 five5 1 9 5 1 9 1504 2046 104 28 96.760452 years5 1 9 5 1 10 1624 2046 41 22 95.928619 or5 1 9 5 1 11 1678 2045 108 22 95.928619 more.3 1 9 6 0 0 514 2086 1318 189 -1 4 1 9 6 1 0 609 2086 576 39 -1 5 1 9 6 1 1 609 2086 37 37 95.530701 4)5 1 9 6 1 2 691 2086 154 32 95.530701 Reserves 1 9 6 1 3 859 2097 118 28 96.717804 powers 1 9 6 1 4 992 2087 30 31 96.265533 is5 1 9 6 1 5 1039 2087 146 32 96.602119 endless.4 1 9 6 2 0 514 2135 1318 39 -1 5 1 9 6 2 1 514 2145 61 22 96.786392 ares 1 9 6 2 2 590 2136 35 31 96.572220 in5 1 9 6 2 3 640 2136 60 31 96.822647 thes 1 9 6 2 4 715 2136 150 32 95.497910 “nature5 1 9 6 2 5 880 2136 39 32 96.070366 of5 1 9 6 2 6 925 2136 175 38 95.718109 puffing,”5 1 9 6 2 7 1115 2136 63 32 96.506943 but5 1 9 6 2 8 1193 2136 117 38 96.663376 might5 1 9 6 2 9 1325 2136 240 31 96.609177 nevertheless5 1 9 6 2 10 1580 2136 42 31 96.658806 be5 1 9 6 2 11 1639 2135 141 38 96.318855 subjects 1 9 6 2 12 1795 2136 37 30 96.318855 to4 1 9 6 3 0 516 2183 1315 42 -1 5 1 9 6 3 1 516 2196 45 20 95.667076 an5 1 9 6 3 2 575 2186 105 32 96.219368 orders 1 9 6 3 3 694 2187 68 31 96.210144 had5 1 9 6 3 4 777 2187 29 31 96.658081 it5 1 9 6 3 5 820 2187 84 31 96.463524 been5 1 9 6 3 6 921 2183 215 36 96.425568 established5 1 9 6 3 7 1151 2187 150 38 96.313728 directly5 1 9 6 3 8 1315 2187 79 31 96.789490 that5 1 9 6 3 9 1408 2187 60 31 96.789490 thes 1 9 6 3 10 1483 2187 123 31 96.259277 claims5 1 9 6 3 11 1621 2196 94 21 96.559387 were5 1 9 6 3 12 1729 2185 102 32 96.924164 false.4 1 9 6 4 0 517 2236 1315 39 -1 5 1 9 6 4 1 517 2236 72 31 95.626122 Thes 1 9 6 4 2 604 2237 109 38 96.525955 judges 1 9 6 4 3 731 2237 145 31 96.694481 furthers 1 9 6 4 4 893 2238 206 37 96.464890 questioned5 1 9 6 4 5 1120 2237 159 32 96.544067 whether5 1 9 6 4 6 1297 2237 99 32 96.675140 these5 1 9 6 4 7 1416 2236 304 39 95.944267 representations5 1 9 6 4 8 1739 2245 93 21 96.961136 were3 1 9 7 0 0 546 2295 1286 40 -1 4 1 9 7 1 0 546 2295 1286 40 -1 5 1 9 7 1 1 546 2310 17 13 37.377693 3°5 1 9 7 1 2 573 2310 42 20 51.668758 Sees 1 9 7 1 3 637 2312 129 20 92.143333 discussions 1 9 7 1 4 790 2313 103 21 68.602882 relating5 1 9 7 1 5 913 2295 25 37 96.846100 to5 1 9 7 1 6 961 2313 39 19 95.897179 thes 1 9 7 1 7 1023 2313 62 19 96.396294 issues 1 9 7 1 8 1107 2313 25 19 96.423431 of5 1 9 7 1 9 1155 2313 65 22 96.349319 prior5 1 9 7 1 10 1243 2313 186 19 95.617912 substantiation5 1 9 7 1 11 1453 2318 29 13 96.012444 on5 1 9 7 1 12 1507 2318 61 17 95.508270 pages 1 9 7 1 13 1591 2312 55 19 92.963974 9-105 1 9 7 1 14 1675 2311 49 22 90.540451 [pp.5 1 9 7 1 15 1750 2311 82 18 75.383270 553-543 1 9 8 0 0 516 2345 99 22 -1 4 1 9 8 1 0 516 2345 99 22 -1 5 1 9 8 1 1 516 2345 99 22 91.693863 herein].2 1 10 0 0 0 545 2379 330 58 -1 3 1 10 1 0 0 545 2379 330 58 -1 4 1 10 1 1 0 545 2379 234 24 -1 5 1 10 1 1 1 545 2379 14 12 33.513428 “5 1 10 1 1 2 569 2379 37 20 95.925964 CC5 1 10 1 1 3 618 2381 62 22 95.925964 App.5 1 10 1 1 4 695 2381 37 20 95.075851 Br.5 1 10 1 1 5 747 2382 32 18 80.944977 61.4 1 10 1 2 0 545 2413 330 24 -1 5 1 10 1 2 1 545 2413 69 20 68.197533 T.D. 61 [p. 542 herein].

Opinion 82 F.T.C.

close enough to the “technical claims” listed in the complaint to warrant an order singling them out for prohibition. A. Notice of Claims in Issue We find no basis in the record for reading out of the complaint all performance claims except those couched in ‘technical’ language or those which used “battery terminology.” The complaint in this matter specifically placed in issue the question of substantiation for all of respondents’ performance claims, including those listed in the complaint and claims similar thereto. At pretrial, complaint counsel listed duration claims among those which they intended to prove contain implied representations of testing; and both counsel questioned witnesses concerning the “duration” claims.'? We, therefore, find respondents were accorded fair notice of all performance claims in issue, including those relating to the duration-of-effect of the product.

B. Claims in the Nature of Puffing We also agree with complaint counsel that the judge erroneously considered all of respondents’ “duration” claims to be in the nature of “puffing.” Duration claims such as “Makes new batteries trouble-free for five years or more” and “VX-6 prevents sulphation from forming for the life of the car” appear credible, are capable of objective measurement, and certainly have a tendency or capacity to lead a significant number of viewers to expect trouble-free battery operation for a specific duration. Similarly, the duration claim “Ends battery trouble forever,” while certainly an exaggeration, nevertheless implies that one may expect trouble-free’ performance from his battery for some significant period of time; and we believe a significant number of consumers would interpret this time period as being the life of the car. This representation, and respondents’ other duration-of-effect performance representations, we find, impliedly represent that the respondents had a reasonable basis for believing the product would work effectively over the period of time expressly claimed or reasonably implied. C. Adequacy of Substantiation Dr. White reviewed the laboratory tests relied upon by respondents and, in his opinion, the duration-of-effect claims were unsubstantiated by these tests."* A fair reading of Dr. Hamer’s testi- * Tyr. 811-18, 832-33.

Ty,5 1 9 1 2 2 772 2545 106 18 93.547112 4191-92. 488 . Opinion mony in its entirety indicates he also believed the duration claims to be unsubstantiated, although he did express the view that assuming the additive could do all of the things which the test reports indicate, it would have an effect on battery life.’ ' ~-Dr.,Hamer, was of the opinion, however, that an appropriate _ scientific test to determine whether a battery additive added to or subtracted from the useful life of a battery would be to run an extended, controlled “life cycle test” (a cycle consists of charging a battery to a state of full charge and discharging it). He further pointed out that none of respondents’ test reports described a specifically controlled test for the effect of VX-—6 on the life of a battery.

Complaint counsel contend that respondents’ duration claims impliedly represent that respondents have competent scientific tests or authenticated, controlled and duly recorded user tests to substantiate such claims. Since a “‘life cycle test” was not performed on the product, complaint counsel argue that respondents’ duration claims are unsubstantiated.

The Commission does not believe that such an implied representation can reasonably be found in respondents’ advertising. On the record before us, we believe these duration claims implied that respondents had a reasonable basis for such claims; and complaint counsel have not shown that these claims can be reasonably supported only through such a precise type of substantiation as scientific tests. Certainly, a controlled “life cycle test” as described by Dr. Hamer would provide adequate substantiation for respondents’ duration claims. It may not however, be the only support which would provide a reasonable basis for such claims. In Dr. Hamer’s opinion, for example, sufficient evidence is found in the laboratory reports to conclude VX-6 has some lasting effects. Although we do not believe this extrapolated conclusion would provide a reasonable basis to support the specific duration claims made by respondents, it does raise a question as to whether scientific studies relating to products with ingredients similar to VX-6 or scientific literature generally would support a conclusion that the effects produced by the introduction of an additive into a battery electrolyte would continue for so long as the additive is present in the solution."

Ty, 4121-25 ; 4137-38.

'S There is evidence that respondents’ employees consulted numerous sources of information on battery additives: however, the record does not develop the extent to which such sources were relied upon, if indeed they were used at all, by respondents to substantiate their claims (Tr. 719-20).

560 FEDERAL TRADE COMMISSION DECISIONS — Opinion 82 F.T.C.

Although complaint counsel have established, as alleged in the complaint, that respondents failed to substantiate the duration-ofefféct claims with competent scientific tests, we believé, on the basis of this record, that the complaint did not set forth the correct standard for evaluating the substantiation for these claims. As a result, the record evidence is inconclusive as to whether the absence of competent scientific tests is equivalent to finding that respondents lacked a reasonable basis for their claims. D. Respondents’ Implied “Fully Tested” Claim Complaint counsel also appeal the judge’s dismissal of Paragraph 6(6) of the complaint alleging as false and deceptive respondents’ representation of laboratories and certain users as having “fully tested” VX-—6. Complaint counsel refer to advertisements which represent the product as tested by laboratories and then list in the same advertisement the performance attributes claimed for the product. These ads, complaint counsel argue, impliedly represent that the laboratories have “fully tested” the product at least with respect to the performance claims made in the advertisements.*® The Commission is of the view that advertisements which expressly or. impliedly represent the product as laboratory tested, without. qualification,** and then proceed to describe the performance characteristics of the product, have a tendency and capacity to lead the public to believe that the laboratories have fully tested the product for each of the performance attributes claimed in the advertisement. The administrative law judge, essentially, reached the same conclusion; ‘* and respondents’ counsel virtually conceded such advertisements represent that the performance claims’ are based on the laboratory tests.** Advertising for VX-6 represents that the test performed by National Testing Laboratories ‘proves and certifies that VX-6 battery additive * * “ extends the life of a battery !’’ Respondents have also represented by implication, through the unqualified use of laboratory seals,*° that independent testing laboratories have CC5 1 5 3 6 2 783 2179 62 52 96.352539 App.5 1 5 3 6 3 861 2179 40 52 96.122955 Br.5 1 5 3 6 4 915 2201 19 18 95.297760 2.3 1 5 4 0 0 682 2230 1323 94 -1 4 1 5 4 1 0 712 2230 1293 37 -1 5 1 5 4 1 1 712 2233 16 12 37.367317 “5 1 5 4 1 2 740 2230 175 37 63.369843 Respondents’.5 1 5 4 1 3 934 2235 101 22 96.489586 products 1 5 4 1 4 1057 2241 47 13 96.814178 was5 1 5 4 1 5 1126 2235 75 19 95.511932 tested5 1 5 4 1 6 1223 2234 29 22 95.511932 by5 1 5 4 1 7 1274 2234 184 20 95.758293 Underwriters’5 1 5 4 1 8 1483 2233 172 20 93.797333 Laboratories.5 1 5 4 1 9 1679 2233 48 19 96.773033 Thes 1 5 4 1 10 1751 2232 184 20 95.584335 Underwriters’5 1 5 4 1 11 1958 2232 47 19 95.584335 seal4 1 5 4 2 0 684 2264 1321 42 -1 5 1 5 4 2 1 684 2268 55 19 96.485832 used5 1 5 4 2 2 753 2268 28 21 95.852943 by5 1 5 4 2 3 796 2264 155 42 96.467583 respondents5 1 5 4 2 4 965 2268 24 19 96.359932 in5 1 5 4 2 5 1004 2268 156 22 56.560707 advertising,5 1 5 4 2 6 1175 2268 114 22 96.168907 however,5 1 5 4 2 7 1304 2274 48 13 96.168907 was5 1 5 4 2 8 1366 2268 110 22 96.036896 qualified5 1 5 4 2 9 1490 2268 39 19 96.568924 for5 1 5 4 2 10 1543 2268 43 19 96.424332 fires 1 5 4 2 11 1600 2267 87 20 96.441902 hazards 1 5 4 2 12 1702 2267 61 23 94.984421 only.5 1 5 4 2 13 1780 2266 76 20 95.898331 Others 1 5 4 2 14 1870 2266 135 21 0.000000 laboratory4 1 5 4 3 0 682 2301 1234 23 -1 5 1 5 4 3 1 682 2302 89 21 94.858139 testing5 1 5 4 3 2 790 2301 81 20 96.559021 claims5 1 5 4 3 3 891 2308 61 13 96.181931 were5 1 5 4 3 4 971 2304 43 18 96.916328 not5 1 5 4 3 5 1033 2302 108 22 96.125961 qualified5 1 5 4 3 6 1161 2309 26 13 96.074066 as5 1 5 4 3 7 1206 2304 24 18 96.193413 to5 1 5 4 3 8 1248 2302 41 19 96.285210 thes 1 5 4 3 9 1307 2301 101 23 96.602989 products 1 5 4 3 10 1426 2301 192 20 96.398712 characteristics5 1 5 4 3 11 1637 2308 27 13 96.398712 or5 1 5 4 3 12 1684 2301 130 20 91.344604 attributes5 1 5 4 3 13 1834 2301 82 19 92.962372 tested.3 1 5 5 0 0 710 2335 334 24 -1 4 1 5 5 1 0 710 2335 334 24 -1 5 1 5 5 1 1 710 2335 15 12 67.798401 *5 1 5 5 1 2 736 2336 46 20 49.059845 TLD.5 1 5 5 1 3 796 2337 25 18 87.507042 355 1 5 5 1 4 839 2337 33 22 88.830841 [p.5 1 5 5 1 5 886 2337 39 19 95.642967 5215 1 5 5 1 6 941 2336 103 21 91.911667 herein].3 1 5 6 0 0 709 2370 298 22 -1 4 1 5 6 1 0 709 2370 298 22 -1 5 1 5 6 1 1 709 2370 16 11 27.453178 ”5 1 5 6 1 2 736 2370 37 19 76.805603 Ty,5 1 5 6 1 3 787 2371 84 19 91.704758 254-555 1 5 6 1 4 882 2377 4 15 88.168045 ;5 1 5 6 1 5 899 2371 108 20 94.492538 4408-09.3 1 5 7 0 0 682 2403 1321 93 -1 4 1 5 7 1 0 710 2403 1293 25 -1 5 1 5 7 1 1 710 2404 74 19 27.506729 *°Thes 1 5 7 1 2 808 2404 140 24 96.317085 impressions 1 5 7 1 3 973 2406 94 19 96.548538 created5 1 5 7 1 4 1093 2406 29 22 96.548538 by5 1 5 7 1 5 1146 2405 39 20 96.825546 thes 1 5 7 1 6 1209 2412 39 13 96.470474 uses 1 5 7 1 7 1272 2406 25 19 96.508423 of5 1 5 7 1 8 1321 2405 136 22 93.236061 laboratory5 1 5 7 1 9 1481 2406 60 19 96.772148 seals5 1 5 7 1 10 1567 2406 22 19 95.759155 in5 1 5 7 1 11 1615 2405 147 20 90.563980 advertising5 1 5 7 1 12 1786 2405 20 19 95.916740 is5 1 5 7 1 13 1831 2403 118 20 95.916740 described5 1 5 7 1 14 1975 2403 28 22 96.459541 by4 1 5 7 2 0 682 2438 1321 24 -1 5 1 5 7 2 1 682 2439 155 22 96.336044 respondents5 1 5 7 2 2 854 2439 23 19 96.522415 in5 1 5 7 2 3 895 2439 125 19 96.097572 literature5 1 5 7 2 4 1037 2440 111 22 96.083626 provided5 1 5 7 2 5 1164 2441 24 18 93.279282 to5 1 5 7 2 6 1205 2439 72 20 83.577271 VX-65 1 5 7 2 7 1294 2439 161 19 92.888565 distributors:5 1 5 7 2 8 1474 2439 90 19 90.603065 ‘‘These5 1 5 7 2 9 1580 2439 61 19 95.560562 seals5 1 5 7 2 10 1657 2440 64 18 95.560562 must5 1 5 7 2 11 1738 2439 27 19 96.828720 be5 1 5 7 2 12 1781 2439 95 22 96.751152 earned,5 1 5 7 2 13 1894 2438 109 20 96.532959 deserved4 1 5 7 3 0 683 2472 1320 24 -1 5 1 5 7 3 1 683 2472 45 20 96.534843 ands 1 5 7 3 2 745 2473 112 23 96.207321 justified,5 1 5 7 3 3 876 2473 46 20 96.484062 ands 1 5 7 3 4 940 2480 117 15 96.278923 everyone5 1 5 7 3 5 1075 2474 51 20 96.874237 who5 1 5 7 3 6 1144 2480 49 13 96.509285 sees5 1 5 7 3 7 1212 2473 62 20 96.311760 them5 1 5 7 3 8 1292 2473 160 21 96.311760 understands5 1 5 7 3 9 1471 2473 46 21 96.424416 this5 1 5 7 3 10 1537 2474 57 20 96.794258 fact.5 1 5 7 3 11 1614 2473 74 20 96.417343 These5 1 5 7 3 12 1705 2473 61 20 96.291893 seals5 1 5 7 3 13 1786 2473 59 19 96.373878 backs 1 5 7 3 14 1865 2479 43 16 96.340759 you5 1 5 7 3 15 1928 2478 31 16 96.225067 up5 1 5 7 3 16 1980 2472 23 19 96.172081 in2 1 6 0 0 0 683 2506 1320 58 -1 3 1 6 1 0 0 683 2506 1320 58 -1 4 1 6 1 1 0 683 2506 1320 24 -1 5 1 6 1 1 1 683 2514 58 15 96.789375 yours 1 6 1 1 2 754 2508 82 19 96.551277 claims5 1 6 1 1 3 851 2508 46 19 96.585876 ands 1 6 1 1 4 912 2508 176 22 95.824890 explanations,5 1 6 1 1 5 1105 2509 97 21 96.304497 provides 1 6 1 1 6 1216 2508 40 19 95.966049 thes 1 6 1 1 7 1270 2509 79 21 95.966049 stamps 1 6 1 1 8 1364 2508 27 19 96.251938 of5 1 6 1 1 9 1405 2507 123 23 96.251938 authority5 1 6 1 1 10 1542 2508 39 19 96.920929 for5 1 6 1 1 11 1597 2507 39 20 95.819397 thes 1 6 1 1 12 1650 2507 75 20 92.889053 whole5 1 6 1 1 13 1741 2507 73 20 68.912155 VX-65 1 6 1 1 14 1831 2507 63 20 96.762138 Sales5 1 6 1 1 15 1912 2506 91 22 96.725861 Story.”4 1 6 1 2 0 685 2541 277 23 -1 5 1 6 1 2 1 685 2541 151 22 83.904495 (CX-31(E),5 1 6 1 2 2 851 2542 111 22 90.963081 112(C)). 488 Opinion substantiated such claims as VX-6 provides “27 battery starts a day for the life of the car” and other similar duration claims.” Mr. Felix ‘Konstandt, president and technical director of National Testing, testified that there were no procedures in any of his ~..tests which would determine how long the -effects of VX-6 last.*? Similarly, both Dr. Hamer and Dr. White were of the opinion, assuming the validity of respondents’ tests and the correctness of the conclusions, the laboratory test reports in respondents’ possession do not support respondents’ specific duration-of-effect claims. We believe this evidence demonstrates that the independent laboratories engaged by respondents to test VX-6 did not determine the duration-of-effect of the product. Accordingly, we find that respondents’ use of laboratory seals or claims of laboratory testing in advertisements which also represent the duration-ofeffect of VX-6 is a misleading and deceptive practice in violation of Section 5 of the Federal Trade Commission Act. E. Respondents’ “User Tested” Claim Complaint counsel argue on appeal that respondents, by expressly claiming VX-6 had been subjected to user tests, thereby impliedly represented such tests were “authenticated, controlled, and duly recorded.” In support of this argument, complaint counsel called Dr. Charles S. Goodman, an expert in marketing, to testify concerning the validity of respondents’ user tests. On voir dire examination, Dr. Goodman testified that he was not familiar with any accepted industry or business definition for the term “authenticated, controlled and duly recorded.’ Nor was he aware of any industry association, professional association, or governmental authority which has promulgated standards for authenticated, controlled and duly recorded user tests.°? In Dr. - Goodman’s opinion, a valid user test should conform to standards recognized by the scientific community as applicable to any kind of scientific study or investigation, but he was unable to state that the scientific community recognizes as valid only those user tests which are “authenticated, controlled and duly recorded user test” as alleged in the complaint.

On the basis of this testimony, the judge ruled that there are no established standards for “authenticated, controlled and duly recorded user test;” and, therefore, except testimony was not proper CX 39 A; CK 49 A-D; CX 114.

* Pr. 1969, 5 'Ty, 8387-88.

562 FEDERAL TRADE COMMISSION DECISIONS ~ Opinion 82 F.T.C.

or necessary to a determination of the validity of respondents’ user tests.** In his initial decision, however, the judge did not decide “whether respondents’ tests were authenticated, controlled, and duly recorded, finding instead that respondents had not represented that their advertising claims were substantiated by authenticated, controlled and duly recorded user tests. Two grounds led him to this conclusion: first, he found no evidence of any public understanding that user tests meet the specifications contained in the complaint, and, second, he thought it significant that. no such standard was applied either by the judge or the Commission for the user testimony in Pioneers, Inc.® 1. User Testimony Relating to Product Efficacy - In Pioneers, the Commission relied on the testimony of numerous consumers to resolve a conflict in the scientific evidence relating to a question of whether or not a battery additive performed as represented. Such testimony was found to be relevant and probative even though the witnesses had not conducted authenticated, controlled and duly recorded user tests.

We believe the judge’s reliance on the Pioneers case was misplaced. The issue in Pioneers for-which consumers were called to testify was whether a battery additive worked as represented. Such testimony, of course, may be relevant to the issue of product efficacy; and although it is far from conclusive, it may be entitled to some weight.

The user in Pioneers, however, did not testify as to whether advertisements for the product made representations of testing and, if so, what these representations were. Since the testimony of the consumer witnesses in Pioneers did not concern the meaning of the advertisements, that decision is not applicable to the issue in this proceeding.

2. Validity of User Tests In claiming that their product has been user tested, we believe respondents impliedly represent that their tests are valid scientific tests, but our consideration of the facts reveals no evidence to support complaint counsels’ contention that a user test is scientifically ‘4 The administrative law judge also expressed the view that to allow expert testimony with respect to each of respondents’ so-called user tests would unduly extend the hearing and the record (Tr. 3408).

“552 FTC 1315 (1956).

488 Opinion valid only when it is authenticated, controlled and duly recorded. Thus, we find the record fails to provide a nexus between the representation that a product has been user tested and the implied representation that such tests meet the standard complaint counsel - urge us to adopt. Accordingly, we affirm the judge’s conclusion that no liability was established.

III. Issues of Relief A. Earnings Claims Both counsel.supporting the complaint and counsel for respondents appeal from the judge’s order provision which prohibits respondents from making representations of sales agent’s past profits or earnings unless the earnings represented are those of a substantial number of purchasers and accurately reflect the average earnings of such purchasers. Respondents contend this provision is unduly restrictive and beyond the Commission’s authority to the extent truthful but qualified representations would be prohibited. Respondents believe their representations of past earnings of VX-6 distributors should be permitted, even if exceptional, so long as the representations are true and disclosure is made as to whether the earnings represented are those of a substantial number of purchasers and accurately reflect the average earnings of such purchasers under circumstances similar to those of the purchaser to whom the representation is made. 7 Complaint counsel, on the other hand, believe the judge’s order, while adequately covering claims relating to past earnings of VX-6 distributors, fails to deal adequately with instances where respondents’ earnings claims are not related to specific distributors. It is argued, for example, that claims which represent: “You can earn $12,000 a year” selling VX-—6 when in fact $12;000-a year is © earned by very few of respondents’ distributors, would not be covered. Complaint counsel would also require respondents to keep records which substantiate the accuracy and representativeness of any claims relating to sales or profits earned by their distributors. The parties stipulated that of 12,000 distributors who purchased VX-—6 from respondents during the calendar year 1969, not more than 60 distributors, or one-half of one percent of the total number of distributors, “made profits in excess of $10,000 through the resale of * * * VX-6;” that of these 60, not more than 20 made profits in excess of $15,000; that not more than 5 made profits in excess of $25,000; and that no distributor made profits in excess Opinion 82 F.T.C.

of $75,000.** Respondents’ advertising on the other hand attributed earnings to named VX-6 distributors of:

“ 5 1 2 1 3 3 797 572 304 39 47.426876 $15540neweek5 1 2 1 3 4 1173 568 9 4 71.026718 ~5 1 2 1 3 5 1288 569 5 5 42.416309 |3 1 2 2 0 0 797 623 253 38 -1 4 1 2 2 1 0 797 623 253 38 -1 5 1 2 2 1 1 797 623 90 38 96.840958 $1485 1 2 2 1 2 901 632 66 22 96.484497 ones 1 2 2 1 3 982 623 68 38 96.759468 day3 1 2 3 0 0 797 672 360 39 -1 4 1 2 3 1 0 797 672 360 39 -1 5 1 2 3 1 1 797 674 170 37 96.435249 $2316.965 1 2 3 1 2 982 683 66 21 95.663887 ones 1 2 3 1 3 1061 672 96 32 96.443199 week3 1 2 4 0 0 799 723 381 38 -1 4 1 2 4 1 0 799 723 381 38 -1 5 1 2 4 1 1 799 723 112 38 96.588326 $10285 1 2 4 1 2 932 733 65 21 96.658813 ones 1 2 4 1 3 1018 723 123 32 91.596725 months 1 2 4 1 4 1156 726 24 15 15.162079 *’3 1 2 5 0 0 703 770 1324 392 -1 4 1 2 5 1 0 751 770 1276 41 -1 5 1 2 5 1 1 751 773 73 32 96.555290 Thes 1 2 5 1 2 846 773 230 32 96.615150 uncontested5 1 2 5 1 3 1099 773 136 38 96.174004 findings 1 2 5 1 4 1257 773 38 31 96.384697 of5 1 2 5 1 5 1316 772 60 31 96.783684 thes 1 2 5 1 6 1398 772 110 37 96.460663 judges 1 2 5 1 7 1530 781 74 22 96.855965 was5 1 2 5 1 8 1626 771 81 31 96.218727 that5 1 2 5 1 9 1730 770 124 32 96.348618 claims5 1 2 5 1 10 1878 770 86 31 95.303177 such5 1 2 5 1 11 1987 779 40 22 95.303177 as4 1 2 5 2 0 703 819 1323 42 -1 5 1 2 5 2 1 703 823 100 32 96.377274 these5 1 2 5 2 2 817 824 90 31 96.709900 have5 1 2 5 2 3 921 824 60 31 96.663696 thes 1 2 5 2 4 995 823 162 38 96.028969 capacity5 1 2 5 2 5 1171 823 68 32 96.569687 ands 1 2 5 2 6 1255 822 174 38 96.757790 tendency5 1 2 5 2 7 1443 823 37 30 96.823654 to5 1 2 5 2 8 1495 821 77 32 96.422134 leads 1 2 5 2 9 1587 821 178 31 96.422134 members5 1 2 5 2 10 1780 820 40 32 96.506432 of5 1 2 5 2 11 1834 819 61 32 96.932983 thes 1 2 5 2 12 1909 819 117 39 95.996910 publica 1 2 5 3 0 705 869 1320 37 -1 5 1 2 5 3 1 705 875 36 30 96.898315 to5 1 2 5 3 2 758 873 135 33 96.241959 believes 1 2 5 3 3 910 873 79 32 96.241959 that5 1 2 5 3 4 1008 884 20 21 96.695816 a5 1 2 5 3 5 1047 873 214 32 96.678284 substantial5 1 2 5 3 6 1282 872 150 32 95.705956 numbers 1 2 5 3 7 1451 872 39 31 95.705956 of5 1 2 5 3 8 1509 871 234 32 96.289825 distributors5 1 2 5 3 9 1765 870 40 32 93.039810 of5 1 2 5 3 10 1822 870 113 32 65.688141 VX-65 1 2 5 3 11 1954 869 71 31 95.998161 will4 1 2 5 4 0 704 920 1322 43 -1 5 1 2 5 4 1 704 924 181 39 96.328194 regularly5 1 2 5 4 2 913 934 85 22 96.069908 earns 1 2 5 4 3 1027 924 85 32 96.069908 such5 1 2 5 4 4 1139 924 178 36 96.763557 amounts;5 1 2 5 4 5 1346 923 70 31 96.492386 ands 1 2 5 4 6 1444 922 73 32 95.939102 this5 1 2 5 4 7 1546 920 289 40 96.136574 representations 1 2 5 4 8 1864 920 31 32 96.825325 is5 1 2 5 4 9 1924 920 102 37 95.989281 false,4 1 2 5 5 0 704 971 1323 42 -1 5 1 2 5 5 1 704 974 214 39 96.310699 misleading5 1 2 5 5 2 936 974 69 32 96.372963 ands 1 2 5 5 3 1026 974 190 38 92.866768 deceptive.5 1 2 5 5 4 1237 973 183 38 96.481918 Although5 1 2 5 5 5 1441 972 235 39 96.233940 respondents5 1 2 5 5 6 1698 971 44 32 96.888176 do5 1 2 5 5 7 1763 971 63 31 96.215317 not5 1 2 5 5 8 1846 971 181 37 95.975891 challenge4 1 2 5 6 0 705 1015 1322 48 -1 5 1 2 5 6 1 705 1024 72 32 97.014259 this5 1 2 5 6 2 795 1024 147 39 96.516098 finding,5 1 2 5 6 3 961 1025 84 37 96.516098 they5 1 2 5 6 4 1063 1034 110 28 96.927277 argues 1 2 5 6 5 1191 1023 79 33 96.475990 that5 1 2 5 6 6 1289 1022 305 40 96.587341 representations5 1 2 5 6 7 1614 1015 158 45 96.782822 relating5 1 2 5 6 8 1789 1022 37 31 96.319748 to5 1 2 5 6 9 1845 1021 61 32 93.288727 thes 1 2 5 6 10 1926 1030 101 22 91.384872 earn-4 1 2 5 7 0 705 1070 1321 43 -1 5 1 2 5 7 1 705 1074 80 39 96.135406 ings5 1 2 5 7 2 800 1074 40 32 96.822197 of5 1 2 5 7 3 853 1074 141 39 96.386940 specifics 1 2 5 7 4 1009 1074 231 32 96.487396 distributors5 1 2 5 7 5 1256 1083 61 22 96.287766 ares 1 2 5 7 6 1332 1073 155 37 96.628014 literally5 1 2 5 7 7 1501 1073 81 31 96.384178 true5 1 2 5 7 8 1598 1072 69 31 96.393250 ands 1 2 5 7 9 1684 1071 32 31 96.769455 if5 1 2 5 7 10 1730 1070 165 40 96.342056 qualified5 1 2 5 7 11 1911 1070 115 31 96.552475 would4 1 2 5 8 0 705 1124 695 38 -1 5 1 2 5 8 1 705 1125 62 30 96.129364 not5 1 2 5 8 2 780 1124 43 31 96.129364 be5 1 2 5 8 3 837 1124 223 38 95.311859 misleading.5 1 2 5 8 4 1075 1124 61 31 96.506310 We5 1 2 5 8 5 1151 1124 44 31 96.376976 do5 1 2 5 8 6 1209 1124 62 31 96.352905 not5 1 2 5 8 7 1285 1133 115 28 96.352905 agree.3 1 2 6 0 0 704 1171 1351 440 -1 4 1 2 6 1 0 753 1171 1274 41 -1 5 1 2 6 1 1 753 1175 98 31 96.478157 Even5 1 2 6 1 2 869 1174 32 31 96.478157 if5 1 2 6 1 3 916 1174 175 38 96.376579 qualified,5 1 2 6 1 4 1109 1173 245 39 95.989151 respondents’5 1 2 6 1 5 1372 1172 166 39 96.241280 repeated5 1 2 6 1 6 1556 1172 204 31 96.756660 references5 1 2 6 1 7 1777 1172 38 31 96.814079 to5 1 2 6 1 8 1832 1171 60 31 93.300774 thes 1 2 6 1 9 1910 1171 117 31 92.264297 extra-4 1 2 6 2 0 706 1219 1320 44 -1 5 1 2 6 2 1 706 1224 171 38 96.260452 ordinary5 1 2 6 2 2 895 1223 168 40 96.514694 earnings5 1 2 6 2 3 1081 1224 38 32 96.487694 of5 1 2 6 2 4 1135 1234 20 21 96.657455 a5 1 2 6 2 5 1172 1223 72 32 95.848587 few5 1 2 6 2 6 1260 1223 217 32 96.316551 individuals5 1 2 6 2 7 1494 1221 116 33 96.681038 would5 1 2 6 2 8 1628 1221 92 32 95.909256 have5 1 2 6 2 9 1738 1231 20 21 95.760658 a5 1 2 6 2 10 1777 1220 162 38 96.677147 capacity5 1 2 6 2 11 1957 1219 69 32 96.884804 anda 1 2 6 3 0 704 1268 1324 44 -1 5 1 2 6 3 1 704 1274 175 38 96.464020 tendency5 1 2 6 3 2 900 1275 37 30 96.144485 to5 1 2 6 3 3 956 1274 149 31 96.300659 misleads 1 2 6 3 4 1127 1273 223 38 96.225548 prospective5 1 2 6 3 5 1372 1271 233 34 96.519844 distributors5 1 2 6 3 6 1628 1271 76 31 93.299400 into5 1 2 6 3 7 1727 1270 204 38 90.499397 believeing5 1 2 6 3 8 1948 1268 80 33 96.862610 that4 1 2 6 4 0 706 1320 1349 42 -1 5 1 2 6 4 1 706 1325 86 31 96.949959 such5 1 2 6 4 2 814 1324 169 37 96.491486 earnings5 1 2 6 4 3 1004 1324 198 38 96.324776 ordinarily5 1 2 6 4 4 1222 1333 82 29 96.723244 may5 1 2 6 4 5 1325 1323 42 32 96.417229 be5 1 2 6 4 6 1389 1322 167 39 96.072945 expected5 1 2 6 4 7 1579 1322 46 37 93.223091 by5 1 2 6 4 8 1646 1322 113 31 65.027145 VX-65 1 2 6 4 9 1783 1320 241 32 93.224213 distributors.5 1 2 6 4 10 2053 1338 2 3 67.181580 -4 1 2 6 5 0 705 1369 1322 43 -1 5 1 2 6 5 1 705 1373 62 33 96.614182 We5 1 2 6 5 2 789 1374 134 32 96.655273 believes 1 2 6 5 3 945 1373 59 32 96.827446 thes 1 2 6 5 4 1028 1373 219 39 96.083527 implications 1 2 6 5 5 1271 1372 176 38 96.536644 conveyed5 1 2 6 5 6 1471 1373 37 30 96.697708 to5 1 2 6 5 7 1531 1372 61 31 96.903267 thes 1 2 6 5 8 1615 1370 121 40 96.222710 public5 1 2 6 5 9 1759 1370 47 38 96.222710 by5 1 2 6 5 10 1829 1370 61 31 96.616936 thes 1 2 6 5 11 1914 1369 113 38 96.873367 heavy4 1 2 6 6 0 706 1419 1321 42 -1 5 1 2 6 6 1 706 1423 181 38 96.614624 emphasis5 1 2 6 6 2 923 1424 243 37 96.614624 respondents’5 1 2 6 6 3 1202 1423 298 32 95.419678 advertisements5 1 2 6 6 4 1535 1422 99 38 95.419678 places 1 2 6 6 5 1669 1431 45 21 95.721039 on5 1 2 6 6 6 1750 1419 277 38 95.721039 extraordinary4 1 2 6 7 0 704 1470 1323 45 -1 5 1 2 6 7 1 704 1473 171 39 96.753334 earnings5 1 2 6 7 2 892 1473 118 36 96.627274 would5 1 2 6 7 3 1032 1473 251 37 95.911972 substantially5 1 2 6 7 4 1305 1471 200 44 95.617424 contradicts 1 2 6 7 5 1525 1471 60 32 95.617424 thes 1 2 6 7 6 1607 1470 204 39 96.296402 qualifying5 1 2 6 7 7 1833 1470 194 31 96.449020 disclosure4 1 2 6 8 0 705 1515 1321 46 -1 5 1 2 6 8 1 705 1533 38 21 96.982613 as5 1 2 6 8 2 757 1524 37 30 96.982658 to5 1 2 6 8 3 808 1523 60 31 96.415611 thes 1 2 6 8 4 882 1533 152 28 96.047638 averages 1 2 6 8 5 1048 1523 169 38 96.047638 earnings5 1 2 6 8 6 1231 1522 40 32 93.293976 of5 1 2 6 8 7 1301 1515 93 39 0.000000 VX—65 1 2 6 8 8 1406 1521 238 32 0.000000 distributors5 1 2 6 8 9 1659 1520 117 31 96.391418 which5 1 2 6 8 10 1792 1519 234 38 96.278358 respondents4 1 2 6 9 0 705 1572 610 39 -1 5 1 2 6 9 1 705 1583 88 28 95.370743 urges 1 2 6 9 2 806 1573 61 31 95.370743 thes 1 2 6 9 3 883 1572 235 33 96.081512 Commissions 1 2 6 9 4 1132 1573 37 31 95.681587 to5 1 2 6 9 5 1183 1572 132 38 96.890930 accept.3 1 2 7 0 0 703 1616 1325 388 -1 4 1 2 7 1 0 751 1616 1275 45 -1 5 1 2 7 1 1 751 1623 74 31 96.635437 Thes 1 2 7 1 2 841 1623 143 38 96.461281 general5 1 2 7 1 3 1001 1622 117 31 95.427055 themes 1 2 7 1 4 1135 1622 40 31 96.958115 of5 1 2 7 1 5 1189 1622 61 31 96.317566 thes 1 2 7 1 6 1267 1621 205 38 96.574242 challenged5 1 2 7 1 7 1490 1620 63 33 96.595169 ads5 1 2 7 1 8 1572 1629 152 28 96.110664 conveys5 1 2 7 1 9 1742 1629 21 22 96.993019 a5 1 2 7 1 10 1780 1620 61 30 93.263596 nets 1 2 7 1 11 1859 1616 167 40 92.354042 impress-4 1 2 7 2 0 704 1665 1322 45 -1 5 1 2 7 2 1 704 1673 59 31 96.321121 ions 1 2 7 2 2 786 1673 80 31 96.555908 that5 1 2 7 2 3 887 1665 236 45 92.993454 distributing5 1 2 7 2 4 1144 1672 112 31 79.978561 VX-65 1 2 7 2 5 1280 1671 30 32 96.837692 is5 1 2 7 2 6 1333 1671 61 31 96.874802 thes 1 2 7 2 7 1418 1671 86 31 96.125938 roads 1 2 7 2 8 1527 1671 37 30 96.125938 to5 1 2 7 2 9 1587 1669 149 38 96.295616 making5 1 2 7 2 10 1761 1668 82 32 96.659485 “thes 1 2 7 2 11 1866 1668 160 38 96.419456 Biggest,4 1 2 7 3 0 703 1717 1324 44 -1 5 1 2 7 3 1 703 1723 145 32 96.199387 Easiest5 1 2 7 3 2 860 1723 129 38 96.406631 Moneys 1 2 7 3 3 1003 1722 40 38 96.705055 of5 1 2 7 3 4 1054 1733 89 27 96.552299 yours 1 2 7 3 5 1156 1722 112 37 92.803619 Life,”5 1 2 7 3 6 1283 1725 25 15 88.546524 **5 1 2 7 3 7 1322 1722 61 30 96.391640 far5 1 2 7 3 8 1396 1721 36 31 95.805206 in5 1 2 7 3 9 1446 1730 120 22 96.500259 excess5 1 2 7 3 10 1580 1720 39 32 96.500259 of5 1 2 7 3 11 1631 1720 60 31 96.051506 thes 1 2 7 3 12 1706 1719 147 31 93.299576 amounts 1 2 7 3 13 1866 1717 161 32 92.933624 ordinar-4 1 2 7 4 0 707 1767 1320 43 -1 5 1 2 7 4 1 707 1772 48 37 95.504395 ily5 1 2 7 4 2 773 1772 131 31 96.089302 earned5 1 2 7 4 3 923 1772 45 38 91.479645 by5 1 2 7 4 4 986 1773 112 31 75.822296 VX-65 1 2 7 4 5 1116 1772 243 32 96.325195 distributors.5 1 2 7 4 6 1381 1770 236 38 96.282646 Considering5 1 2 7 4 7 1636 1769 247 38 93.297958 respondents’5 1 2 7 4 8 1904 1767 123 32 93.026917 adver-4 1 2 7 5 0 706 1818 1320 42 -1 5 1 2 7 5 1 706 1823 187 31 92.183281 tisements5 1 2 7 5 2 908 1823 36 31 95.789879 in5 1 2 7 5 3 959 1822 95 32 95.789879 theirs 1 2 7 5 4 1069 1822 154 38 96.797394 entirety5 1 2 7 5 5 1238 1832 39 21 96.728653 as5 1 2 7 5 6 1291 1822 85 37 96.665001 they5 1 2 7 5 7 1391 1818 173 34 96.501740 would5 1 2 7 5 8 1518 1814 43 51 93.297379 be5 1 2 7 5 9 1580 1820 147 37 74.642502 read-by5 1 2 7 5 10 1742 1819 102 31 96.004852 those5 1 2 7 5 11 1862 1820 42 30 76.608719 to.5 1 2 7 5 12 1926 1818 100 31 89.117943 whom4 1 2 7 6 0 704 1866 1324 44 -1 5 1 2 7 6 1 704 1872 84 38 96.616798 they5 1 2 7 6 2 812 1882 61 21 96.748672 ares 1 2 7 6 3 897 1872 167 37 96.275818 directed,5 1 2 7 6 4 1088 1881 52 22 96.986732 we5 1 2 7 6 5 1164 1872 44 31 96.019363 do5 1 2 7 6 6 1232 1872 61 30 96.019363 not5 1 2 7 6 7 1316 1870 133 32 96.448494 believes 1 2 7 6 8 1473 1870 60 31 96.787697 thes 1 2 7 6 9 1558 1868 262 40 96.302116 qualifications5 1 2 7 6 10 1845 1867 111 38 95.895676 urged5 1 2 7 6 11 1981 1866 47 38 95.895676 by4 1 2 7 7 0 706 1916 1321 44 -1 5 1 2 7 7 1 706 1922 235 38 96.242126 respondents5 1 2 7 7 2 954 1922 115 32 96.111328 would5 1 2 7 7 3 1084 1921 135 39 96.304840 changes 1 2 7 7 4 1233 1921 60 31 96.312233 thes 1 2 7 7 5 1307 1922 60 30 96.784279 nets 1 2 7 7 6 1382 1920 213 38 96.592667 impressions 1 2 7 7 7 1612 1919 40 32 95.944519 of5 1 2 7 7 8 1665 1917 225 39 96.726669 advertising5 1 2 7 7 9 1905 1916 122 32 96.793678 claims4 1 2 7 8 0 705 1971 341 33 -1 5 1 2 7 8 1 705 1971 113 33 93.132660 found5 1 2 7 8 2 834 1971 212 33 0.000000 unlawful.*°3 1 2 8 0 0 703 2016 1324 143 -1 4 1 2 8 1 0 751 2016 1276 43 -1 5 1 2 8 1 1 751 2022 64 31 96.753784 We5 1 2 8 1 2 830 2022 75 31 96.478111 also5 1 2 8 1 3 921 2022 133 31 96.485268 believes 1 2 8 1 4 1070 2022 80 31 96.557648 that5 1 2 8 1 5 1166 2021 169 38 95.831543 earnings5 1 2 8 1 6 1354 2019 123 33 96.700180 claims5 1 2 8 1 7 1495 2019 116 31 96.500458 which5 1 2 8 1 8 1629 2028 61 22 96.500458 ares 1 2 8 1 9 1710 2016 185 34 96.516792 unrelated5 1 2 8 1 10 1913 2018 36 30 96.927124 to5 1 2 8 1 11 1967 2016 60 31 96.821159 thea 1 2 8 2 0 703 2065 1324 47 -1 5 1 2 8 2 1 703 2073 82 37 96.482986 past5 1 2 8 2 2 805 2081 41 22 96.992676 or5 1 2 8 2 3 865 2073 145 37 95.967468 presents 1 2 8 2 4 1030 2071 169 38 96.019722 earnings5 1 2 8 2 5 1219 2070 40 32 93.285149 of5 1 2 8 2 6 1277 2070 114 32 76.021118 VX-65 1 2 8 2 7 1412 2070 234 31 96.534142 distributors5 1 2 8 2 8 1668 2067 126 45 96.572678 should5 1 2 8 2 9 1816 2067 42 31 96.674843 be5 1 2 8 2 10 1879 2065 148 33 96.674843 covered4 1 2 8 3 0 705 2117 1130 42 -1 5 1 2 8 3 1 705 2121 214 38 96.500359 specifically5 1 2 8 3 2 937 2121 47 38 96.500359 by5 1 2 8 3 3 1003 2121 61 31 96.488792 thes 1 2 8 3 4 1084 2121 115 31 96.542946 order.5 1 2 8 3 5 1221 2120 247 38 96.325333 Respondents5 1 2 8 3 6 1491 2118 230 39 96.321480 represented5 1 2 8 3 7 1743 2117 92 32 96.402863 that:2 1 3 0 0 0 705 2192 1323 78 -1 3 1 3 1 0 0 705 2192 1323 78 -1 4 1 3 1 1 0 742 2192 1285 35 -1 5 1 3 1 1 1 742 2197 72 26 88.031395 IT’S5 1 3 1 1 2 847 2197 79 27 95.926483 NOT5 1 3 1 1 3 957 2197 77 27 95.568192 TOO5 1 3 1 1 4 1066 2196 119 26 96.390526 LATE!5 1 3 1 1 5 1219 2196 91 26 95.802994 What5 1 3 1 1 6 1341 2196 35 25 95.802994 do5 1 3 1 1 7 1407 2204 58 23 96.698547 you5 1 3 1 1 8 1495 2197 82 24 96.696892 wants 1 3 1 1 9 1607 2196 30 25 96.947197 to5 1 3 1 1 10 1669 2193 85 26 95.947876 makes 1 3 1 1 11 1787 2193 32 25 95.947876 of5 1 3 1 1 12 1849 2201 76 24 96.560760 yours 1 3 1 1 13 1955 2192 72 26 96.829399 life?4 1 3 1 2 0 705 2235 1323 35 -1 5 1 3 1 2 1 705 2240 12 14 90.715332 *5 1 3 1 2 2 742 2240 13 14 90.554504 *5 1 3 1 2 3 781 2240 13 14 90.554504 *5 1 3 1 2 4 815 2241 45 25 96.295761 An5 1 3 1 2 5 881 2239 198 31 95.920586 independents 1 3 1 2 6 1096 2238 137 27 96.471451 business5 1 3 1 2 7 1252 2238 32 26 96.691399 of5 1 3 1 2 8 1301 2246 76 23 96.578812 yours 1 3 1 2 9 1395 2238 83 25 92.755310 own?5 1 3 1 2 10 1499 2237 13 14 90.090683 *5 1 3 1 2 11 1537 2238 13 14 89.619919 *5 1 3 1 2 12 1575 2237 13 14 92.281586 *5 1 3 1 2 13 1609 2237 48 25 95.951149 An5 1 3 1 2 14 1677 2236 113 25 96.348518 incomes 1 3 1 2 15 1809 2236 32 25 96.903099 of5 1 3 1 2 16 1860 2235 119 29 96.535934 $15,0005 1 3 1 2 17 1999 2235 29 24 96.669563 to2 1 4 0 0 0 703 2328 1324 229 -1 3 1 4 1 0 0 730 2328 612 25 -1 4 1 4 1 1 0 730 2328 612 25 -1 5 1 4 1 1 1 730 2330 19 11 66.011826 565 1 4 1 1 2 760 2330 46 20 5.763359 TD.5 1 4 1 1 3 820 2331 34 21 93.714432 24,5 1 4 1 1 4 868 2331 27 19 88.838867 255 1 4 1 1 5 913 2331 49 22 81.363297 [pp.5 1 4 1 1 6 977 2331 84 19 94.842934 512-135 1 4 1 1 7 1075 2328 91 22 75.582138 herein]5 1 4 1 1 8 1180 2335 4 13 55.257915 :5 1 4 1 1 9 1198 2329 39 19 95.333397 Tr.5 1 4 1 1 10 1252 2330 90 18 95.079895 172-73.3 1 4 2 0 0 732 2364 170 19 -1 4 1 4 2 1 0 732 2364 170 19 -1 5 1 4 2 1 1 732 2364 17 12 58.602787 575 1 4 2 1 2 760 2364 40 19 86.455940 CX5 1 4 2 1 3 812 2365 12 18 86.080704 25 1 4 2 1 4 837 2364 65 19 86.080704 A-D.3 1 4 3 0 0 732 2398 167 22 -1 4 1 4 3 1 0 732 2398 167 22 -1 5 1 4 3 1 1 732 2398 17 11 61.375488 *®5 1 4 3 1 2 760 2398 39 20 84.338684 CX5 1 4 3 1 3 815 2399 84 21 84.338684 18(A).3 1 4 4 0 0 703 2429 1324 128 -1 4 1 4 4 1 0 734 2429 1292 26 -1 5 1 4 4 1 1 734 2432 67 20 0.000000 *9CX5 1 4 4 1 2 820 2434 8 18 89.529816 15 1 4 4 1 3 850 2433 30 21 89.529816 (A5 1 4 4 1 4 897 2433 46 19 93.251785 ands 1 4 4 1 5 961 2433 45 22 89.056961 B);5 1 4 4 1 6 1023 2433 38 19 95.972916 CX5 1 4 4 1 7 1078 2433 12 19 88.374481 25 1 4 4 1 8 1109 2432 96 22 88.374481 (A-D);5 1 4 4 1 9 1221 2432 39 20 95.360641 CX5 1 4 4 1 10 1274 2433 12 18 94.901451 45 1 4 4 1 11 1307 2432 31 22 94.672195 (A5 1 4 4 1 12 1354 2431 46 20 93.279366 ands 1 4 4 1 13 1419 2431 45 22 90.654900 B);5 1 4 4 1 14 1481 2431 39 19 95.854927 CX5 1 4 4 1 15 1537 2432 11 18 93.062141 65 1 4 4 1 16 1569 2430 96 22 90.886307 (A-D);5 1 4 4 1 17 1683 2430 38 19 96.297195 CX5 1 4 4 1 18 1739 2430 12 19 89.710617 65 1 4 4 1 19 1772 2430 57 22 89.710617 (C);5 1 4 4 1 20 1846 2430 40 19 96.194283 CX5 1 4 4 1 21 1903 2430 12 19 92.584717 85 1 4 4 1 22 1936 2429 28 22 92.450401 (B5 1 4 4 1 23 1981 2430 45 18 92.922173 anda 1 4 4 2 0 705 2463 1322 25 -1 5 1 4 4 2 1 705 2467 46 21 89.240433 C);5 1 4 4 2 2 766 2466 39 20 94.230705 CX5 1 4 4 2 3 821 2468 24 18 94.946938 115 1 4 4 2 4 864 2467 31 21 92.311989 (A5 1 4 4 2 5 910 2466 46 20 92.371780 ands 1 4 4 2 6 971 2467 45 21 56.571522 B);5 1 4 4 2 7 1031 2466 40 20 95.776047 CX5 1 4 4 2 8 1087 2467 22 19 92.940399 145 1 4 4 2 9 1129 2466 76 22 54.053268 (A-B)5 1 4 4 2 10 1219 2472 4 15 54.053268 ;5 1 4 4 2 11 1238 2466 39 19 96.073418 CX5 1 4 4 2 12 1294 2467 25 19 93.211273 185 1 4 4 2 13 1339 2465 76 23 85.130852 (A-B)5 1 4 4 2 14 1429 2472 4 15 85.130852 ;5 1 4 4 2 15 1449 2465 38 19 96.067429 CX5 1 4 4 2 16 1502 2466 41 21 96.173103 30;5 1 4 4 2 17 1558 2465 40 20 95.464348 CX5 1 4 4 2 18 1613 2466 26 19 93.057373 315 1 4 4 2 19 1660 2464 96 22 54.461441 (A-D);5 1 4 4 2 20 1771 2464 39 20 95.849815 CX5 1 4 4 2 21 1828 2465 25 19 92.741211 365 1 4 4 2 22 1873 2464 29 22 96.009140 (A5 1 4 4 2 23 1918 2463 45 20 92.617142 ands 1 4 4 2 24 1982 2463 45 22 32.132896 B);4 1 4 4 3 0 703 2498 1323 25 -1 5 1 4 4 3 1 703 2500 37 19 87.065521 CX5 1 4 4 3 2 765 2502 41 19 92.234818 1095 1 4 4 3 3 832 2501 96 22 56.158047 (A-B);5 1 4 4 3 4 949 2501 39 19 95.657799 CX5 1 4 4 3 5 1014 2502 38 18 96.302200 1105 1 4 4 3 6 1078 2501 59 22 95.753273 (A);5 1 4 4 3 7 1160 2500 39 20 94.670929 CX5 1 4 4 3 8 1223 2501 39 19 87.663605 1135 1 4 4 3 9 1289 2500 53 22 95.300568 (A).5 1 4 4 3 10 1367 2500 64 18 92.845192 Koch5 1 4 4 3 11 1453 2506 20 12 92.039917 v.5 1 4 4 3 12 1496 2499 66 22 95.710579 FTC,5 1 4 4 3 13 1585 2500 41 18 96.214500 2065 1 4 4 3 14 1652 2499 54 19 96.214500 F.2d5 1 4 4 3 15 1730 2500 39 18 93.530800 3115 1 4 4 3 16 1798 2499 49 21 93.530800 (6th5 1 4 4 3 17 1872 2498 47 20 83.017830 Cir.5 1 4 4 3 18 1944 2499 82 20 69.136864 19538);4 1 4 4 4 0 703 2533 1009 24 -1 5 1 4 4 4 1 703 2535 133 22 91.444595 Kalwajtys5 1 4 4 4 2 850 2542 20 12 82.662697 v.5 1 4 4 4 3 885 2534 62 23 94.329170 FTC,5 1 4 4 4 4 962 2536 40 18 93.299606 2875 1 4 4 4 5 1018 2535 55 19 93.540443 F.2d5 1 4 4 4 6 1086 2536 40 18 93.785400 6545 1 4 4 4 7 1143 2534 50 22 82.808167 (7th5 1 4 4 4 8 1207 2534 46 20 91.696213 Cir.5 1 4 4 4 9 1267 2535 66 21 96.540497 1956)5 1 4 4 4 10 1351 2535 56 18 94.972382 cert.5 1 4 4 4 11 1421 2533 89 22 83.711304 denied,5 1 4 4 4 12 1525 2534 40 19 94.870461 3525 1 4 4 4 13 1580 2533 54 19 94.872238 U.S.5 1 4 4 4 14 1650 2534 62 18 93.952988 1025. 488 Opinion $50,000 per year? * * * Part-time earnings of $10, $15, $20 per hour? Money for a bigger or better home, a second car, college for your children, retirement for yourself and your wife? * * * These dreams can be a reality once you get on the job as an authorized VX-—6 Distributor! ® . _.The judge found such representations misleading and deceptive, and'we agree. These representations, like those relating to earnings of specific distributors, constitute a significant part of respondents’ advertising and far exceed the earnings normally received by dealers in VX-6. We have, therefore, modified the judge’s order so that it will specifically cover such claims. Complaint counsel also recommend an additional order provision which would require respondents to keep records which substantiate the accuracy and representativeness of any advertised earnings claims. Respondents vigorously oppose this requirement. First, they believe it improper for complaint counsel to propose on ‘appeal a relief provision which did not appear in the notice order and which was not recommended for consideration by the judge. In addition, respondents view this provision as an unlawful attempt to shift the burden of substantiating earnings claims in future advertising. We find neither of respondents’ arguments persuasive.

The record herein reflects that respondents extensively represented the earnings of no more than one-half of one percent of the distributors as the earnings which one could normally expect as a VX-6 distributor. Having found these “representations to be misleading and deceptive, it is incumbent upon us to insure that such deception does not continue.

Respondents view any record-keeping provision as an unlawful shifting of the burden of substantiating their earnings claims. This contention is without merit. The Commission may require respondents to maintain records to support their earnings claims in order to protect the public against a continuation of their unlawful practices. The record-keeping requirement is reasonably related to the violation and is necessary to prevent repetition of the wrong. It is, therefore, a lawful provision and will be included in our order.* B. Testimonials Complaint counsel further object to the judge’s order relating to the use of testimonials. The judge’s order would require re- CX 36 B.

5 1 6 1 2 2 589 2384 87 23 85.648552 Tashof5 1 6 1 2 3 689 2392 21 13 87.541687 v.5 1 6 1 2 4 724 2385 64 22 92.981262 FTC,5 1 6 1 2 5 801 2387 41 19 92.286003 4375 1 6 1 2 6 856 2386 55 20 84.706490 F.2d5 1 6 1 2 7 925 2388 40 19 89.969208 7075 1 6 1 2 8 983 2388 65 21 82.008102 (D.C.5 1 6 1 2 9 1062 2388 46 19 95.187592 Cir.5 1 6 1 2 10 1124 2390 75 21 96.337097 1970). 566 FEDERAL TRADE COMMISSION DECISIONS — ;

Qpinion . 82 F.T.C.

spondents to obtain express authorization in writing before using or referring to a testimonial; and, in addition, respondents must -have good reason to believe that-at the time of such use, publication or reference, the person or organization named subscribes to the facts or opinions therein contained. Complaint counsel contend this provision does not adequately protect the public interest because respondents would not be required to date the testimonials appearing in advertising or to ascertain that they are genuine “in all respects.”

Respondents were charged in the complaint with using testimonials which appeared to contain the statements of persons who were using respondents’ product at the time the testimonials were published and that respondents had not been given permission to publish such statements. The evidence demonstrated that respondents published testimonial letters without the author- . ization of the writers and continued to publish such testimonials for several years after the writers had discontinued using the product and no longer endorsed it.

The Commission is of the view that statements of fact in testimonials should not be used in advertising where such facts are untrue or misleading with respect to the performance characteristics of the product. In this proceeding, however, the complaint did not challenge the truth of factual statements in the testimonials. Thus, on the record before us, the judge’s order appropriately requires respondents to obtain from the author of a testimonial written authorization to use his testimonial in advertising. Once such authorization is obtained, the testimonial may be published so long as respondent has good reason to. believe, at the time it is being used, the author subscribes to the views therein contained. In these respects, the judge’s order provision is reasonable and it is affirmed.

C. Distribution of the Order Finally, respondents challenge the provision of the judge’s order requiring them to deliver a copy of the order to all present and future salesmen and to obtain a statement acknowledging receipt of the order. This provision appeared in the notice order, but respondents did not contest it before the judge. Nevertheless, the question was fully briefed by the parties and we think it appropriate to consider on appeal.

® 1.D. 25-30 [pp. 513-17 herein].

we we en oy mee whe vee 488 Opinion Respondents object to this provision on the grounds that it is unnecessary and compliance would be unduly burdensome. Respondents claim all of their 12,000 distributors are independent contractors, mostly ‘“‘part-time-opportunity seekers,” and they ~~-anticipate.a turnover rate of 100-percent annually in distributors. Based on this estimated turnover rate, respondents calculate the total cost of compliance with this requirement, including printing and mailing, would run to $24,000 per year. Respondents also point out that they produce and provide the distributors with all sales material; and they conclude, since their distributors produce absolutely no advertising material, there is no danger that unlawful advertising will reach the consumer from anyone other than respondents.

Respondents’ objections to this provision are premised on the wholly-unsupported contention that each year there is a complete turnover of VX-—6 distributors. We find this contention lacking any record support, and we believe it unwarranted to assume such a total and rapid turnover given the fact that respondents have approximately 12,000 distributors. Respondents concede they have placed in their distributors’ possession all of the sales literature used to sell the product. Thus, it is reasonable to assume many of respondents’ current distributors have relied and will continue to rely upon representations found unlawful in this proceeding unless they are informed of the Commission’s order. In our judgement, it is necessary to inform these distributors of the Commission’s order to provide adequate protection against the continuation of the deception made possible through respondents’ dissemination of deceptive advertising literature.

Complaint counsel have not, however, persuaded us that it is necessary to require respondents to provide a copy of the order to. all future distributors. We believe any further distribution by respondents of advertising material found unlawful in this proceeding is adequately covered by our order and would certainly include advertising material furnished to all new distributors. For the reasons herein stated, the Commission has determined that the order entered by the administrative law judge should be modified in accordance with this opinion; and as modified, it is affirmed.

FINAL ORDER Respondents and counsel supporting the complaint having filed cross-appeals from the initial decision of the administrative law Final Order 82 F.T.C.

judge, and the matter having been heard upon briefs and oral argument; and .

~ “The Commission having rendered its decision determining that the initial decision issued by the judge should be modified in accordance with the views and for the reasons expressed in the accompanying opinion, and, as so modified, adopted as the decision of the Commission:

It is ordered, That the initial decision be modified by striking the order to cease and desist issued by the judge and substituting therefor the following:

ORDER It is ordered, That respondents National Dynamics Corporation, a corporation, and its officers, and Elliott Meyer, individually and as an officer of such corporation, and respondents’ agents, representatives, and employees, directly or through any corporate or other device, in connection with the advertising, offering for sale, sale, or distribution of the battery additive, VX—6, or of any other products, in commerce, as “commerce” is defined in the Federal Trade Commission Act, do forthwith cease and desist from: 1. Representing, directly or by implication, that persons purchasing respondents’ products can or will derive any stated amount of sales, profits or earnings; or representing, directly or by implication, the past or present sales, profits or earnings of purchasers of respondents’ products unless in fact the past sales, or the profits and earnings represented, are those of a substantial number of purchasers and ac¢trately reflect the average sales, profits or earnings of such purchasers under circumstances similar to those of the purchaser or prospective purchaser to whom the representation is made; or misrepresenting, in any manner, the past, present or future sales, profits or earnings from the resale of respondents’ products. 2. Failing to maintain accurate records which substantiate that the past or present sales, profits or earnings represented are accurate and are those of a substantial number of purchasers and accurately reflect the average sales, profits or earnings of such purchasers under circumstances similar to those of the purchaser or prospective purchaser to whom the representation is being made.

3. Representing, directly or by implication, contrary to eR ee AW UE oy Lud thhse Vvtv 488 Final Order fact, that any product has been approved by any laboratory or by any other organization or person.

4. Representing, directly or by implication, in any adver- -.,, prodyct or that any laboratory test. ‘substantiates or supports performance claims in said advertisement, unless each per- | formance claim in said advertisement has been substantiated | by a competent scientific test conducted by said laboratory or laboratories and unless such laboratory or laboratories have! supplied respondents with a written report which describes,’ in detail, the entire test performed, including, but not limited, the product tested, instruments used, test procedures, data, and results of such test.

5. Using, publishing, or referring to any testimonial or endorsement unless (1) such use, publication, or reference is expressly authorized in writing and unless (2) respondents have good reason to believe that at the time of such use, publication, or reference, the person or organization named subscribes to the facts and opinions therein contained. 6. Failing to deliver a copy of this order to cease and desist to all present salesmen or other persons engaged in the sale of respondents’ products, and failing to secure from each such salesman or other person a signed s statement acknowledging receipt of such order. =.

It is further ordered, That the respondent corporation shall forthwith distribute a copy of this order to each of its operating divisions.

It is further ordered, That respondents shall notify the Commission at least 30 days prior to any proposed 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 which may affect compliance obligations arising out of the order.

It is further ordered, That respondent herein shall within sixty (60) days after service upon it of this order, file with the Commission a report, in writing, setting forth in detail the manner and form in which it has complied with this order. It is further ordered, That other allegations of the complaint as to practices not covered by this order be, and they hereby are, dismissed.

Complaint 82 F.T.C.

Commissioner MacIntyre concurred in the result but not in the opinion. Commissioner Jones dissented for the reasons 3 set forth in - her accompanying dissenting statement.