J.B. Williams Company, Inc

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IN THE MATTER OF THE J.B. WILLIAMS COMPANY, INC., ET AL.

MODIFYING ORDER IN REGARD TO ALLEGED VIOLATION OF THE FEDERAL 'I'TRADE COMMISSION ACT Docket C-2037. Consent Order, Sept. 1971 Modifying Order, Aug. 20, 1986 The Federal Trade Commission has modified a 1971 order with respondents (791". 410) by terminating a perpetual obligation that the company submit advertising and labeling to the FTC at six month intervals to demonstrate compliance with the order. The FTC concluded that it was in the public intercst to relieve respondents of the costs of compliance with this provision. ORDER REOPENING AND MODIFYING CEASE AND DESIST ORDER ISSUED ON. SEPTEMBER 9, 1971 On February 19, 1986, Beecham, Inc., on behalf of itself and its wholly-owned subsidiary, J.B. Willams Company, Inc., petitioned the Commission to reopen the proceeding in Docket No. C-2037 and modify the order against J.B. Willams issued by the Commission on September 9, 1971. Pursuant to Section 2.51 of the Commission s Rules of Practice, Beecham s petition was placed on the public record for comment. No comments were received.

Summary of Order The order prohibits certain product effectiveness representations in advertising the product Proslim, or Hany other purported weight reducing or weight control product"

In addition, the order prohibits the dissemination of any advertising which, in s.ny manner, makes reference to scientific or medical tests or studies as substantiating any representation or claim as to the effectiveness or performance of any consumer product, unless such scientific tests or studies do, in fact, substantiate such representation or claim. The order further imposes the continuing obligation on the respondent to submit to the Commission samples of all advertising and labeling every six months to show continued compliance. Request That Provision Requiring Substantiation For Product Claims Be Set Aside Beecham first requests that Part II of the order, which requires substantiation for product claims, be deleted from the order on the basis of changed conditions of fact and public interest considerations. Beecham bases its request that Part II be deleted from the order Modifying Order primarily on changed conditions offact. First, it states that the weight control products that were the subject ofthe order are no longer being manufactured, advertiscd or sold. Secondly, it states that J.B. Williams, the "bad actor" involved in the conduct leading to the order no longer effectively exists. Therefore, Beecham argues that, since the products that were the subject of thc order and the transgressor whose conduct led to the order no longer effectively exist, it is in the public interest to eliminaie such a fencing-in provision. In support of its argument that these changed conditions of fact require that Part II be deleted from the order, Beecham cites cases involving appellate review of orders with fencing-in provisions and competition cases where the Commission removed fencing-in provisions from orders because changing market conditions rendered the fencing-in provisions unnecessary. Beecham, however, fails to cite authority for the relief that it is requesting. The Commission rejects Beecham s argument that the discontinuance of the products that were the subject of the complaint or that corporate personnel changes are changed conditions of fact requiring that the order be modified by deleting Part II from the order. The sale and advertising of weight control products may be resumed. More importantly, Part II is applicable to "any consumer product", not just to weight control preparations. In its April 11, 1984 letter to Beecham denying its prior petition to vacate this order in its entirety, along with others, the Commission rejected Beecham s argument that corporatc personnel changes is a suflcient changed condition of fact to justify the relief requested in that petition. No new arguments have been advanced that would 2stablish that this changed condition of fact warrants the modification requested herein. Furthermore Bcccham has cited no authority for its argument that the two asserted factual changes taken together, rather than considered separately, warrant the deletion of a fencing-in provision of an order. Part II ofthe order is a limited and reasonable substantiation provision that should not impose unnecessary burdens on Beecham, and Beecham has not shown that it does impose such burdens. Simply stated, Part II merely requires that medical tests or studies do, in fact substantiate effectiveness or performance claims if Beecham makes reference in advertising to such medical tests or studies. If Beecham does not have medical tests or studies to substantiate such claims, it may not make reference to such medical tests or studies. See Pfizer Inc. 81 F. C. 23 (1972).

, Modifying Order 108 F' Request That, If Part II Is Not Deleted From Order It Be Qualified By The Addition Of A Second Paragraph. If the Commission declines to delete Part II from the order Beecham asks that the following paragraph be inserted in the order as the second paragraph in Part II of the order: Provided, however That such scientific or medical tests or studies shall be deemed to substantiate any such representation or claim where competent scientific or medical persons retained or employed by respondent have a reasonable good faith belief that such substantiation in fact exists regardless of whether some other scientific or medical person or persons mayor do have a belief to the contrary. The request that the order be modified to place the above paragraph in the order is based on changed conditions oflaw and public interest considerations. Beecham says that Commission law was changed with Pfizer, Inc., supra in 1972. It argues that Part II of the order may be interpreted by staff acting unreasonably as an "absolute basis" standard, rather than a " reasonable basis" standard. An c'absolute basis standard, according to Beecham, may require that its substantiation be "free from all uncertainties or good faith differences among competent scientists, medical personnel and other experts. Beecham further argues that the substantiation standard in Part II is ambiguous and that it is "fundamentally unfair" not to provide Beecham with clear guidance on the applicable standard which must be met under Part II.

Arguing that the public interest requires that the order be reopened and modified by the addition of its proposed paragraph, Beecham cites General Motors Corporation 104 F. C. 511 (1984), as an order which was modified "to avoid any unintended restriction on the dissemination to the public of information material to purchasing decisions. The General Motors approach is equally appropriate here, Beecham argues (to) eliminate the ambiguities in the advertising substantiation standards applicable under the Proslim order and to permit Beecham to make representations for which it has a reasonable basis and which consumers may wish to hear.

The Commission does not view Part II ofthe order as imposing on Beecham an "absolute basis" standard requiring unanimity of a11 scientists and medical personnel. If Beecham refers to medical tests or studies in its advertising, such tests or studies must substantiate such claim. The ultimate determination of whether Beecham s substantiation does, in fact, substantiate its claim is not made by staff but it is made by the district court in an enforcement action. On the other hand, the paragraph that Beecham wishes to be placed in the order would, in the Commission s opinion, create an absolute stan- Modifying Order dard. It would establish that the "reasonable good faith belief that such substantiation exists" possessed by ('competent scientific or medical persons retained or employed" by Beecham is absolute "regardless of whether some other scientific or medical person or persons mayor do have a beliefto the contrary." There is no justification for the substantiation standard proposed by Beecham. As to the public interest argument, the Commission has found that Beecham has failed to demonstrate that the public interest requires modification. The current situation is not comparable to the factual situation in General Motors. In General Motors the modification was considered to be in the public interest because it permitted the flow of information to consumers concerning normal and ordinary handling characteristics of General Motors' vehicles which would have been impossible under the order.

Request That Product Coverage Be Limited If the Commission declines to delete Part II from the order Beecham requests that product coverage in Part II be limited to: Products intended for consumer use which are (a) sold under a trademark in use by. Williams at the time thatJ.B. Wiliarns was acquired by l3eecham, (b) sold for the same uses as .J.B. Williams sold such preparations at such time and (c) composed of subs tantially the same constituents as were in such products at such time. The petition notes that the Commission s letter to Beecham of April , 1984, denying its request that this order and three other orders be set aside, also advised Beecham that it is bound by this order and the other J.B. Willams orders with respect to its advertising of the , Williams consumer products. Changes in the products make it imperative, according to Beecham, that the Commission provide a more specific definition of which products are J.B. Wiliams consumer products and which are Beecham consumer products. The reformulation of Beecham products is said to be a changed condition of fact requiring the product coverage modifications. With reformulations, Beecham asserts that it becomes increasingly difficult to determine whether any such product is stil a "preparation of substantially similar composition" or possesses "substantially similar properties" to the old product.

Next, the integration ofthe J.B. Wiliams manufacturing facilities with those of Beecham is stated to be a changed condition of fact. Since a J.B. Wiliams product may be manufactured at a Beecham facility, and a Beecham product may be manufactured at a J.B. Williams facility, Beecham says that the products may be confused. A final changed condition of fact, according to Beecham, is the g., Modifying Order 108 F. dismissal of almost all J.B. Williams management personnel after Beecham s acquisition of that company. None of those responsible for the illegal conduct prohibited by the Proslim order are currently employed by Beecham.

Beecham also argues that adoption of the product coverage modifications is in the public interest "as giving Beecham guidance on precisely which products are and are not" J.B. Williams consumer products "covered by the order.

The changed conditions of fact and public interest considerations recited in the petition do not justify the relief requested. Product reformulations, the integration ofJ.B. Williams manufacturing facilities with those of Beecham, management turnover, and the development of new products do not, in the opinion of the Commission, render B. Wiliams consumer products less ident.ifiable. The Commission has previously determined that the order in Docket No. C-2037 only governs the advertising of J.B. Williams' consumer products. J. Williams' products and Beecham products are clearly distinguishable. J.B. Williams products would include any products manufactured by J.B. Williams at the time of the acquisition . and modifications thereto, sold and promot.ed under the same or substantially similar brand names, and any derivative products Sominex II, Geritol Complete, etc. However, to the extent t"at identification of J.B. Williams products is an issue, a determination may be made on a case-bycase basis.

Request That Perpetual Reporting Requirement Be Eliminated The last modification requested by Beecham would delete from Part IV of the order a requirement that samples of all advertising, labels and labeling for weight control products and all advertisements for any consumer product that refer to scientific or medical tests or studies must be submitted every six months to demonstrate compliance with the order.

Upon consideration of Beecham petition and other relevant information, the Commission now finds that the public interest warrants reopening the proceeding and modifying Part IV of the order. The record demonstrates that termination of fhe perpetual periodic obligation to submit advertising and labeling to the Commission to relieve respondent of compliance costs is in the public interest. It is therefore ordered That this matter be, and hereby is reopened and that the last paragraph of Part IV of the Commission s order be and hereby is modified to read as follows: It is further ordered That respondents submit to the Commission Modifying Order labels and labeling, for "Proslim " or "Proslim 7 Day Reducing" wafers, diet drink mix, or any other purported weight reducing or weight control product, and all advertisements for any consumer product which in any manner make reference to scientific or medical tests or studies as allegedly substantiating any representation or claim as to the effectiveness or performance of any such product, to show the manner of compliance with this order.

FEDERAL TRADE COMMISSION ImCISIONS Complaint 108 F.