P. Leiner Nutritional Products Corp

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IN THE MATTER OF P. LEINER NUTRITIONAL PRODUCTS CORP., ET AL. CONSENT ORDER, ETC. , IN REGARD TO ALLEGED VIOLATIONS OF SECS. 5 AND 12 OF THE FEDERAL TRADE COMMISSION ACT Docket 9173. Complaint, Jan. 27, 1984-Decision, May, 1985 This consent order requires two CaJifbrnia firms engaged in the advertising, lahclJing, packaging, sale and distribution of nutritional supplements, among other things to cease representing falsely or without proper substantiation, that DeLaeaI 4 or any similar product can improve human vigor, endurance or other aspects of physical performance or fitness; or that the Octacosano, Triacontanol, Hex- Bcosaool or tetracLJsanol contained in their products are related to athletic endurance or physical fitness. The firms are also barred from making claims regarding physical benefits to be derived from using such products unless they are properly substantiated; and from misrepresenting the purpose, reliability, results or conclusions of any test, research, article or scientific opinion. Additionally, the companies arc required to maintain for a period of three years all materials that substantiate or contradict representations covered by the order. Appearances For the Commission: Cheryl B. A nderson, Teresa A. Hennessy and Brinley H. Williams.

For respondents: Henry P. Sailer and Jonathan L. Wiener, Covington Burling, Washington, D.

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 PLNP Holdings, Inc., a corporation, and P. Leiner Nutritional Products, Inc. , a 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:

PARAGRAPH 1. Respondent PLNP Holdings, Inc., is a corporation organized, existing and doing business under and by virtue ofthe laws of the State of California. Respondent P. Leiner Nutritional Products Inc., is a corporation organized, existing and doing business under and by virtue of the laws of the State of Delaware. Respondent PLNP _.. ; ::_.

Complaint 105 F.

Holdings, Inc. dominates or controls, knew of and approved, or benefits from the acts and practices of its only and wholly-owned subsidiary, P. Leiner Nutritional Products, Inc., including the acts and practices hereinafter set forth. Both corporate respondents have their offces and principal places of business at 1805 West 205th Street Torrance, California.

PAR. 2. Respondents are now and for some time last past have been engaged in the manufacture, offering for sale, and sale of nutritional supplements, including Octacol 4, and other products for personal or household use by members of the general public (hereinafter "consumer products PAR. 3. Respondents have caused to be prepared and placed for publication and have caused the dissemination of advertising and promotional material, including, but not limited to, the advertising and labeling referred to herein, to promote the sale of Octacol 4. As advertised, Octacol 4 is a "food" within the meaning of Section 12 of the Federal Trade Commission Act.

PAR. 4. PLNP Holdings, Inc., and P. Leiner Nutritional Products Inc., operate in various States ofthe United States and in the District of Columbia. Respondents' manufacture, offering for sale, sale, and distribution of nutritional supplements, including Octacol 4, mentioned herein constitutes maintenance of a substantial course of trade in or affecting commerce, as "commerce" is defined in the Federal Trade Commission Act.

PAR. 5. In the course and conduct of their businesses, respondents have disseminated and caused the dissemination of advertisements for nutritional supplements, including Octacol 4, by various means in or affecting commerce, including national magazines, product labels point of sale brochures, distributed by the mail across state lines for the purpose of inducing and which were likely to induce, directlyand or indirectly, the purchase of said products. PAR. 6. Typical statements in said advertisements, and promotional materials, disseminated as previously described, but not necessarily inclusive thereof, are found in advertisements and promotional materials attached hereto as Exhibits A through D. Specifically, the aforesaid advertisements contain the following statements: (a) Octacol 4 Helps Increase Endurance, Stamina and Vigor. (b).. . Octaco\-1 contains all jou.r sports stamina factors reported in U.S. Patent No 031 376-including high content octacosanol (Emphasis in Originals. (c) To help you play stronger, play longer. (d) Gctacol 4 contains all jour sports stamina factors reported in U.S. Patent No. 031,376. Triacontanol. TetracosanoL Hexacosanol. And high-content octacosanol. Result? Octaco14 can help you get the most from your favorite sport-jogging, swimming, . . .

L.tll\jr,.n u-,.Lu.L.L__._- 291 Complaint (e) (lid long-term university studies and related research, published results indicate that the four performance factors now available in Octaco) 4-including high content OctacosanoJ-have shown significant effects on several types of human endurance. Result? Athletes participating in these research studies were able to play and perform stronger, longer.

(f In particular, Gctacol 4 may benefit athlctes and active people participating in these extra effort sports:

Aerobics Racquet Sports Basketball Running Dance Soccer Football Swimming Hockey Skiing Jogging Weight Training PAR. 7. Through the use inter alia, of the statements referred to in Paragraphs Six (a) through Six (f), and other representations contained in advertisements or promotional materials not specifically set forth herein, respondents have represented, and now represent, directly or by implication, that the use of Octacol 4 wil improve consumers' endurance, stamina, vigor, overall athletic performance, or overall physical fitness.

PAR. 8. Through the use, inter alia, ofthe statements referred to in Paragraph Six (b) and Six (dJ, respondents have represented, and now represent, directly or by implication, that Octacol 4 contains four sports stamina and performance factors--ctacosanol, triacontanol tetracosanol, and hexacosanol-that render Octacol 4 effective in improving consumers' athletic endurance or performance or physical fitness.

PAR. 9. Through the use inter alia of the statements referred to in Paragraph Six (a) through Six (f) respondents have represented, and now represent, directly or by implication, that they possessed and relied upon a reasonable basis consisting of competent and reliable evidence that substantiated the representations referred to in Paragraphs Seven through Eight, at the time they first disseminated those representations and at each subsequent dissemination. Through the use inter alia of the statements referred to in Paragraph Six (e), respondents further represented:

(a) that, at the time they made the representations referred to in Paragraphs Seven and Eight, they possessed and relied upon scientif ic studies, conducted and evaluated in an objective manner by persons qualified to do so, using procedures generally accepted in the profession or science to yield accurate and reliable results; and (b) that the scientific studies referred to in Paragraph Nine (a) provided a reasonable basis consisting of competent and reliable 294 EDERAL TRADE COMMISSION DECISIONS Complaint 105 F.

scientific evidence that substantiated the representations in Paragraphs Seven and Eight.

PAR. 10. The representation contained in Paragraph Seven is false for the reason that the use of Octacol 4 wil not improve consumers athletic endurance, stamina, vigor, overall athletic performance or overall physical fitness.

PAR. 11. The representation contained in Paragraph Eight is false for the reason that none of the four factors referred to in Paragraph Eight renders Octacol 4 effective in improving consumers' athletic endurance or performance or physical fitness. PAR. 12. The representations contained in Paragraph Nine are false, for the reasons that respondents did not possess and rely upon a reasonable basis that substantiated the representations referred to in Paragraphs Seven and Eight at the time they made those representations. The representations referred to in Paragraph Nine (a) and (b) are false, for the reasons that the studies referred to: (a) were not conducted and evaluated in an objective manner by persons qualified to do so, using procedures generally accepted in the profession or science to yield accurate and reliable results; and (b) did not provide a reasonable basis consisting of competent and reliable scientiflc evidence that substantiated the representations referred to in Paragraphs Seven and Eight.

PAR. 13. The use by respondent ofthe aforesaid acts and practices directly or by implication, and the placement in the hands of others ofthe means and instrumentalities by and through which others may have used the aforesaid statements, representations, acts, and practices, have had and now have the capacity and tendency to mislead consumers and to induce such persons to purchase Octacol 4. PAR. 14. The aforesaid acts and practices of respondents were and are to the prejudice and injury ofthe public, and constituted and now constitute unfair or deceptive acts or practices in or affecting commerce and false advertisements in violation of Sections 5 and 12 ofthe Federal Trade Commission Act.

; : ,,_ ___ _:__. : 291 Complaint EXHIBIT A ;;";7;

- i c / Ot1=1 4 I athleles . Ami ,:re. ":DOrtm n"" ror LJr1 dally 5uppi (j P' ed ':1 "'m ",I !har w !w:!h t OcoI4i,ap"rsur.11 '"P Incr", ' ""mtr\and 'anc- yo P!Jys!r! Rcr DayIGnH'I 'fta .:'''d f3r're 0J4COnl.e;lnUsp'''JIIIOU''D0 03U II1IUaing nlen! O - R"-wt? you I the m lram "'var;1t5 :mmir.g, tef jnn&- '"o :;ffid;;i VE $1- SIZE Bonl BUT mrN'- N'NO\l '' 1 MARKWRnE"OHTHEW,U B!'T All PRICE' Mer! !AYE 11 C:N CC;:'CCL4 MT.iESEC;UA BI-MART nn MfYER kma'"

PAY '10 SAVE 1 clOer 'r,e ' 'cres ,. ! . , .. . . . Complaint 105 F.

EXHIBIT B YO Llf!" OCTACOL 4.

AS EEN IN SPORTS , LLUSTRATFD PEOPLE.

RUN;'.JER' S WORLD 1 J' :J" - l' , C" "

OCT:'COLA. Thll edl"i" 'POrll. Th",..dq i"lile. t", .: . ...:; , ;;\ , ,,,.:; , # . .: ,;,,, ;:, :,, : ? :.... , . , , . (;! . ,. ; . , ET AL. Lc,ml"K NUTRITIONAL PRODUCTS CORP. 291 Complaint EXHIBIT C YOUR LIFE' OCTACOL 4.

ASS::::\) iN SPOR: S ILLUSTRATED PEOPLE RUNNER' S world \GwFNc "t.C 'Jl 'c' T" :'f " I' 1;;. J!'( woo ";1: 'i\i'; 14 can heIPY frurn m ' wlmm",&dancl WCh1 mHf1lngOf!ef1fHS:: -0.,1i"!.", \t\ .' W E.I'!R." .' sport.J()g8'nR. :N..Octacoi4!rome04rlile! . ; c psuLI- l:IOfrtlnthcvltJmt!seQnofleatTgS!or iiiii:;:' ;if Jilji o, f"ia Jj .

. VIGOR. OC:!Qccl , HELPS "EHDURANCE, 4 AND canl,der COL Irl(: Ihou.d 1 (! OCTmC:lEASEST:'MINA ., . ' life. --v 4'I'orls.:L ._ in,.\ in - ,:., . . edge/() CCledge r ) ./ OC7Thethe ,..

,. ;::r: ), :! lie. c. ilATURAl IN .1 .: ::" '- (. r PRODUCT. EDGE ;:, :r:T,, ?,;;, , THE L,: OCTACOl4.FOOD ;, PORTS. ,;

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IN \-J EDGE Co- EDGE. THE S OCTACOl4. ..r:ILH,' OCr:COSANOl.mE 291 Decision and Order SEP ARA TE S'l' A 1'EMENT OF COMMISSIONER MICHAEL PERTSCHUK * ON COMPLAINT IN P. LEINER NUTRITIONAL PRODUC' , INC. I fully support the Commission s decision to issue a complaint in this matter. At the same time, I am disturbed that the Commission has scrapped its traditional practice of pleading a failure to have a reasonable basis for an advertising claim as both an unfair as well as a deceptive practice. The complaint issued today charges only that the respondent's claims (both express and implied) that it had substantiation for its advertising claims were false. One concern is that this unwarranted change in the Commission standard pleading will cause confusion and uncertainty. Among others, the administrative law judges will naturally wonder whether the Commission intended in some way to change the standard traditionally used to judge unsubstantiated ads. Further, while the staff have stated that the changes only reflect what staff in fact intend to prove in this particular case, given Chairman Miller s repeated concerns about the advertising substantiation doctrine, this change may also be a step toward abandonment of unfairness as a basis for the advertising substantiation doctrine. If that is the case, it marks a radical departure for the Commission which has recently plainly stated in its unfairness policy statement sent to Congress that unfairness is a cornerstone of the advertising substantiation doctrine.

No adequate justification has been given for such a change in our legal theory for requiring advertising substantiation. No analysis has been presented on whether such a change will make it more diffcult for the Commission to win its cases. And certainly no rationale has been given for making this decision now, rather than waiting for the Commission s review of the comprehensive comments recently filed concerning the Commission s advertising substantiation program. DECISION AND ORDER The Commission having heretofore issued its complaint charging the respondents named in the caption hereof with violations of Sections 5 and 12 ofthe Federal Trade Commission Act, as amended, and the respondents having been served with a copy of that complaint together with a notice of contemplated relief; and The respondents, their attorney, and counsel for the Commission having thereafter executed an agreement containing a consent order an admission by the respondents of all the jurisdictional facts set forth in the complaint, a statement that the signing of said agreement is for . Michael Pl'rt.Hchuk, Commissioner 1977- 1981 Decision and Order 105 F. settlement purposes only and does not constitute an admission by respondents that the law has been violated as alleged in such complaint, and waivers and other provisions as required by the Commission s Rules; and The Secretary ofthe Commission having thereafter withdrawn this matter from adjudication in accordance with Section 3.25(c) of its Rules; and The Commission having considered the matter and having thereupon accepted the executed consent agreement and placed such agreement on the public record for a period of sixty (60) days, now in further conformity with the procedure prescribed in Section 3.25(1) of its Rules, the Commission hereby makes the following jurisdictional findings and enters the following order:

1. Respondent P. Leiner Nutritional Products Corp., is a corporation organized, existing and doing business under and by virtue ofthe laws of the State of California, with its offce and principal place of business located at 1805 West 205th Street, Torrance, California. 2. Respondent P. Leiner Nutritional Products, Inc., of Delaware, is a corporation existing and doing business under and by virtue of the laws of the State of Delaware with its offce and principal place of business located at 1805 West 205th Street, Torrance, California. 3. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondents, and the proceeding is in the public interest.

ORDER It is ordered That respondents P. Leiner Nutritional Products Corp., a corporation, and P. Leiner Nutritional Products, Inc. , of Del aware, a corporation, their successors and assigns, and their offcers agents, representatives, and employees, directly or through any corporation, subsidiary, division or other device, in connection with the manufacture, advertising, labeling, packaging, offering for sale, sale or distribution of Octacol 4, or any other product of substantially similar composition, in or affecting commerce, as Hcommerce " is defined in the Federal Trade Commission Act, do forthwith cease and desist from:

A. Representing, directly or by implication, that the product can help consumers improve vigor, stamina, endurance, any aspect of athletic performance, or any aspect of physical fitness. B. Representing, directly or by implication, that the following in- P. LEINER NU'1lU'1JUNAL PKUlJUt.lti LLJKP. T 1\1.. "Vi 291 Decision and Order gredients contained in the product are related in any way to athletic endurance or performance or physical fitness--ctacosanol, triacontanol, hexacosonal, tetracosanol.

It is further ordered, That respondents, their successors and assigns and their offcers, agents, representatives and employees, directly or through any corporation, subsidiary, division or other device, in connection with the manufacture, advertising, labeling, packaging, offering for sale, sale, or distribution of any product for personal or household use in or affecting commerce, as ncommerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from misrepresenting in any manner, directly or by implication, the purpose, content, sample, reliability, results or conclusions of any scientific test, research, or article, or any other scientific opinion or data.

A. It is further ordered That respondents, their successors and assigns, and their offcers, agents, representatives and employees directly or through any corporation, subsidiary, division, or other device, in connection with the manufacture, advertising, labeling, packaging, offering for sale, sale, or distribution of any product for personal or household use in or affecting commerce, as tocommerce is defined in the Federal Trade Commission Act, do forthwith cease and desist from making any representation, directly or by implication, concerning any benefit to be derived from using any such product with respect to athletic performance or endurance or any improvement in physical capability to be derived from using such product or from comparing any such products to any product or products of one or more competitors concerning the benefits from using any such products with respect to athletic performance or endurance or any improvement in physical capability to be derived from using such product unless, at the time of such representation, respondents possess and rely upon reliable and competent evidence that substantiates each such representation of the type and quantum appropriate for the representation.

B. For the purposes of Part III (A) to the extent evidence consists of scientific or professional tests, analyses, research, studies or any other evidence based on expertise of professionals in the relevant area, such evidence shall be "reliable and competent" only if those tests, analyses, research, studies, or other evidence are conducted and Decision and Order 105 F. evaluated in an objective manner by persons qualified to do so, using procedures generally accepted in the profession or science to yield accurate and reliable results.

It is further ordered That respondents, their successors and assigns and their offcers, agents, representatives and employees, directly or through any corporation, subsidiary, division or other device, in connection with the manufacture, advertising, labeling, offering for sale sale, or distribution of any product for personal or household use in or affecting commerce, as !!commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from failing to maintain accurate records:

1. Of all materials that were relied upon by respondents in disseminating any representation covered by this order. 2. Of all test reports, studies, surveys, or demonstrations in their contradictpossession or control or of which they have knowledge that any representation made by respondents that is covered by this order. Such records shall be retained by respondents for three years from the date that the representations to which they pertain are last disseminated. It is further ordered that any such records shall be retained by respondents and that respondents shall make such documents available to the Commission for inspection and copying upon request.

It is further ordered, That respondents notify the Commission at least thirty (30) days prior to any proposed changes in respondents 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 corporations which may affect compliance obligations arising out of the Order.

It is further ordered That respondents shall forthwith distribute a copy of this Order to each of their operating divisions and to all distributors ofOctacol4 or any other product of substantially similar composition.

291 Decision and Order VII It is further ordered That respondents shall, within sixty (60) days inafter service of this Order, fie with the Commission a report, writing, setting forth in detail the manner and form in which they have complied with this Order.

VII It is further ordered That no provision of this Order shall be interpreted as precluding respondents from making statements or disclosures on their labels or labeling where those statements or disclosures are required by regulations promulgated by the Food and Drug Administration (FDA) or by statutes the FDA enforces. Complaint 105 FTC.