E6-7533. Basic Research LLC, et al.

AGENCY:

Federal Trade Commission.

ACTION:

Proposed consent agreement.

SUMMARY:

The consent agreement in this matter settles alleged violations of Federal law prohibiting unfair or deceptive acts or practices or unfair methods of competition. The attached Analysis to Aid Public Comment describes both the allegations in the complaint and the terms of the consent order—embodied in the consent agreement—that would settle these allegations.

DATES:

Comments must be received on or before June 12, 2006.

ADDRESSES:

Interested parties are invited to submit written comments. Comments should refer to “Basic Research LLC, Docket No. 9318,” to facilitate the organization of comments. A comment filed in paper form should include this reference both in the text and on the envelope, and should be mailed or delivered to the following address: Federal Trade Commission/Office of the Secretary, Room 135-H, 600 Pennsylvania Avenue, NW., Washington, DC 20580. Comments containing confidential material must be filed in paper form, must be clearly labeled “Confidential,” and must comply with Commission Rule 4.9(c). 16 CFR 4.9(c) (2005).^[1] The FTC is requesting that any comment filed in paper form be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions. Comments that do not contain any nonpublic information may instead be filed in electronic form as part of or as an attachment to e-mail messages directed to the following e-mail box: [e-mail].

The FTC Act and other laws the Commission administers permit the collection of public comments to consider and use in this proceeding as appropriate. All timely and responsive public comments, whether filed in paper or electronic form, will be considered by the Commission, and will be available to the public on the FTC Web site, to the extent practicable, at http://www.ftc.gov. As a matter of discretion, the FTC makes every effort to remove home contact information for individuals from the public comments it receives before placing those comments on the FTC Web site. More information, including routine uses permitted by the Privacy Act, may be found in the FTC's privacy policy, at http://www.ftc.gov/​ftc/​privacy.htm.

FOR FURTHER INFORMATION CONTACT:

Laureen Kapin (202-326-3237), Bureau of Consumer Protection, 600 Pennsylvania Avenue, NW., Washington, DC 20580.

SUPPLEMENTARY INFORMATION:

Pursuant to section 6(f) of the Federal Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46(f), and § 3.25(f) of the Commission Rules of Practice, 16 CFR 3.25(f), notice is hereby given that the above-captioned consent agreement containing a consent order to cease and desist, having been filed with and accepted, subject to final approval, by the Commission, has been placed on the public record for a period of thirty (30) days. The following Analysis to Aid Public Comment describes the terms of the consent agreement, and the allegations in the complaint. An electronic copy of the full text of the consent agreement package can be obtained from the FTC Home Page (for May 11, 2006), on the World Wide Web, at http://www.ftc.gov/​os/​2006/​05/​index.htm. A paper copy can be obtained from the FTC Public Reference Room, Room 130-H, 600 Pennsylvania Avenue, NW., Washington, DC 20580, either in person or by calling [phone].

Public comments are invited, and may be filed with the Commission in either paper or electronic form. All comments should be filed as prescribed in the ADDRESSES section above, and must be received on or before the date specified in the DATES section.

Analysis of Agreement Containing Consent Order To Aid Public Comment

The Federal Trade Commission (“Commission “) has accepted an agreement containing a consent order, subject to final approval, with Basic Research L.L.C. (“Basic Research”) and five other limited liability companies (“Corporate Respondents”), as well as with Dennis Gay, Daniel Mowrey, and Mitchell Friedlander (“Individual Respondents”), all of whom were named as Respondents in the Complaint issued by the Commission on June 15, 2004.

The agreement and consent order settle charges that the Corporate Respondents and the Individual Respondents (together “Respondents”) violated sections 5 and 12 of the Federal Trade Commission Act, 15 U.S.C. 45 and 52, by advertising and selling dietary supplements and drugs with unsubstantiated claims for fat loss and/or weight loss, falsely representing that some of these products were clinically proven to be effective, and falsely representing that Respondent Mowrey was a medical doctor. On February 27, 2006, the case was withdrawn from adjudication, so that the Commission could consider the proposed consent order.

The proposed consent order has been placed on the public record for thirty (30) days to receive comments from interested persons. Comments received during this period will become part of the public record. After thirty (30) days, the Commission will review the agreement and any comments received, and decide whether to withdraw from the agreement or to make final the proposed order.

The purpose of this analysis is to facilitate comment on the proposed consent order. This analysis does not constitute an official interpretation of the agreement and proposed order and does not modify their terms in any way.

The Complaint Allegations

According to the Commission's Complaint, Individual Respondents Dennis Gay, Daniel Mowrey (also doing business as American Phytotheraphy Research Laboratory), and Mitchell K. Friedlander all worked from the same Salt Lake City, Utah facility as Corporate Respondents Basic Research, L.L.C., A.G. Waterhouse, L.L.C., Klein-Becker usa, L.L.C., Nutrasport, L.L.C., Sovage Dermalogic Laboratories, L.L.C., and BAN, L.L.C., who have operated as a common enterprise to advertise and sell a broad line of topical gels and dietary supplements.

The Commission's Complaint alleges that these Respondents engaged in deceptive practices in advertising and selling topical fat-loss gels (Dermalin-APg, Cutting Gel, and Tummy Flattening Gel), weight-loss and fat-loss dietary supplements for “significantly overweight” adults containing ephedrine, caffeine and aspirin (Anorex and Leptoprin), and a weight-loss dietary supplement for children containing glucomannan (PediaLean). Specifically, the Commission's Complaint challenges the following claims as unsubstantiated:

• That Dermalin-APg, Cutting Gel, and Tummy Flattening Gel cause rapid and visibly obvious fat loss in areas of the body to which they are applied;
• That Leptoprin and Anorex cause weight loss of more than 20 pounds in significantly overweight users and that those products cause loss of substantial, excess fat in significantly overweight users; and
• That PediaLean causes substantial weight loss in overweight or obese children. Additionally, the Complaint challenges the following claims as false:
• That published, clinical testing proves that Cutting Gel and Tummy Flattening Gel cause rapid and visibly obvious fat loss in areas of the body to which they are applied;
• That clinical testing proves that Leptoprin causes weight loss of more than 20 pounds, including as much as 50, 60, or 147 pounds, in significantly overweight users; and that clinical testing proves that Leptoprin causes loss of substantial, excess fat in significantly overweight users;
• That clinical testing proves that PediaLean causes substantial weight loss in overweight or obese children; and
• That Respondent Mowrey is a medical doctor.

The Proposed Consent Order

The proposed consent order contains provisions designed to prevent Respondents from continuing the illegal conduct alleged in the Complaint, and from engaging in future practices similar to those previously alleged. The proposed order's specific provisions are as follows:

The core prohibitions appear in Paragraphs I through IV. Paragraph I prohibits Respondents from making any unsubstantiated representations that Dermalin-APg, Cutting Gel, Tummy Flattening Gel, Anorex, Leptoprin, PediaLean, or any substantially similar product, cause weight loss or fat loss. At the time that any Respondents make weight loss or fat loss claims for any of those products, Respondents must possess and rely upon a reasonable basis for such claims, which shall consist of competent and reliable scientific evidence.

Paragraph II of the proposed order prohibits Respondents from making any unsubstantiated representations that any food, drug, or dietary supplement has an effect on any disease, on the structure or function of the human body, or other health benefits or weight loss benefits. At the time that any Respondents make any such claims, Respondents must possess and rely upon a reasonable basis for those claims, which shall consist of competent and reliable scientific evidence.

The proposed consent order also prohibits the Respondents from making misrepresentations concerning any test, study, or research (Paragraph III of the proposed order), or concerning the profession, expertise, training, education, experience or qualifications of Respondent Mowrey or any other endorser (Paragraph IV of the proposed order).

As defined in the proposed order, “competent and reliable scientific evidence” means tests, analyses, research, studies, or other evidence, based on the expertise of professionals in the relevant area, that has been conducted and evaluated in an objective manner by persons qualified to do so, using procedures generally accepted in the profession to yield accurate and reliable results. A “substantially similar product” means any product that is substantially similar in ingredients, composition, and properties to any of the six products challenged in the Complaint.

Paragraph V provides that Basic Research will pay the sum of three million dollars ($3,000,000), on behalf of all Respondents, to the Commission. In the discretion of the Commission, these funds may be used to provide redress to purchasers of any of the products challenged in the Complaint and to pay the attendant administrative costs. If the Commission determines, in its sole discretion, that redress to product purchasers is wholly or partially impracticable or is otherwise unwarranted, any funds not used will be paid to the U.S. Treasury.

The proposed order allows Respondents to engage in various forms of legitimate conduct. The order does not prohibit Respondents from making any claim for any drug that is permitted in labeling for that drug under any tentative final or final standard established by the Food and Drug Administration (“FDA”), or under any new drug application approved by the FDA (Paragraph VI of the proposed order). The order also does not prohibit Respondents from making any claim for any product that is specifically permitted in labeling for that product under FDA regulations made under the Nutrition Labeling and Education Act of 1990 (Paragraph VII of the proposed order).

Additionally, Paragraphs VIII, IX, X, and XI provide for various compliance reports and notifications by the Respondents. Paragraph XII obligates the Respondents to cooperate in certain ways with any Commission inquiry into their compliance with the order. The proposed order will expire in 20 years.

By direction of the Commission.

Donald S. Clark,

Secretary.

Footnotes

1.  The comment must be accompanied by an explicit request for confidential treatment, including the factual and legal basis for the request, and must identify the specific portions of the comment to be withheld from the public record. The request will be granted or denied by the Commission's General Counsel, consistent with applicable law and the public interest. See Commission Rule 4.9(c), 16 CFR 4.9(c).