UNITED STATES OF AMERICA In the Matter of TrendMark Inc., also doing business as TrendMark International, a corporation, William McCormack, individually and as an officer of the corporation, and E. Robert Gates, individually and as an officer of the corporation. FILE NO. 972 3255 AGREEMENT CONTAINING The Federal Trade Commission has conducted an investigation of certain acts and practices of TrendMark Inc. (“TrendMark”), also doing business as TrendMark International, a corporation, and William McCormack and E. Robert Gates, individually and as officers of the corporation (“proposed respondents”). Proposed respondents are willing to enter into an agreement containing a consent order resolving the allegations contained in the attached draft complaint. Therefore, IT IS HEREBY AGREED by and between TrendMark Inc., a corporation, and William McCormack and E. Robert Gates, individually and as an officers of the corporation, by their duly authorized officers, and counsel for the Federal Trade Commission that: 1.a. Proposed respondent TrendMark is a Tennessee corporation with its principal office or place of business at 3665 South Perkins, Suite 8, Memphis, TN 33183. 1.b.Proposed respondent William McCormack is an owner and officer of proposed respondent TrendMark. Individually or in concert with others, he formulates, directs, or controls the policies, acts, or practices of TrendMark. His principal office or place of business is the same as that of TrendMark. 1. c. Proposed respondent E. Robert Gates is an owner and officer of proposed respondent TrendMark. Individually or in concert with others, he formulates, directs, or controls the policies, acts, or practices of TrendMark. His principal office or place of business is the same as that of TrendMark. 2. Proposed respondents admit all the jurisdictional facts set forth in the draft complaint. 3. Proposed respondents waive:
4. This agreement shall not become part of the public record of the proceeding unless and until it is accepted by the Commission. If this agreement is accepted by the Commission, it, together with the draft complaint, will be placed on the public record for a period of sixty (60) days and information about it publicly released. The Commission thereafter may either withdraw its acceptance of this agreement and so notify proposed respondents, in which event it will take such action as it may consider appropriate, or issue and serve its complaint (in such form as the circumstances may require) and decision in disposition of the proceeding. 5. This agreement is for settlement purposes only and does not constitute an admission by proposed respondents that the law has been violated as alleged in the draft complaint, or that the facts as alleged in the draft complaint, other than the jurisdictional facts, are true. 6. This agreement contemplates that, if it is accepted by the Commission, and if such acceptance is not subsequently withdrawn by the Commission pursuant to the provisions of Section 2.34 of the Commission's Rules, the Commission may, without further notice to proposed respondents, (1) issue its complaint corresponding in form and substance with the attached draft complaint and its decision containing the following order in disposition of the proceeding, and (2) make information about it public. When so entered, the order shall have the same force and effect and may be altered, modified, or set aside in the same manner and within the same time provided by statute for other orders. The order shall become final upon service. Delivery of the complaint and the decision and order to proposed respondents by any means specified in Section 4.4 of the Commission's Rules shall constitute service. Proposed respondents waive any right they may have to any other manner of service. The complaint may be used in construing the terms of the order. No agreement, understanding, representation, or interpretation not contained in the order or in the agreement may be used to vary or contradict the terms of the order. 7. Proposed respondents have read the draft complaint and consent order. They understand that they may be liable for civil penalties in the amount provided by law and other appropriate relief for each violation of the order after it becomes final. ORDER DEFINITIONS For purposes of this order, the following definitions shall apply: 1. “Competent and reliable scientific evidence” shall mean 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. 2. “Clearly and prominently” shall mean as follows:
The disclosure shall be in all of the languages that are present in the advertisement. Nothing contrary to, inconsistent with, or in mitigation of the disclosure shall be used in any advertisement or on any label. 3. Unless otherwise specified, “respondents” shall mean TrendMark Inc., its successors and assigns, and its officers William McCormack and E. Robert Gates, individually and as an officers of TrendMark Corp., and each of the above’s agents, representatives, and employees. 4. “Commerce” shall mean as defined in Section 4 of the Federal Trade Commission Act, 15 U.S.C. § 44. 5. “Drug” shall mean as defined in Section 15 of the Federal Trade Commission Act, 15 U.S.C. § 55. 6. “Food” shall mean as defined in Section 15 of the Federal Trade Commission Act, 15 U.S.C. § 55. I. IT IS ORDERED that respondents, directly or through any corporation, subsidiary, division, or other device, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of Neuro-Thin™ and Lipo-Thin™, or any other product or program in or affecting commerce, shall not make any representation, in any manner, expressly or by implication, that:
unless at the time it is made, respondents possess and rely upon competent and reliable scientific evidence that substantiates the representation. II. IT IS FURTHER ORDERED that respondents, directly or through any corporation, subsidiary, division, or other device, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of any product or program in or affecting commerce, shall not represent, in any manner, expressly or by implication, that the experience represented by any user testimonial or endorsement of the product represents the typical or ordinary experience of members of the public who use the product, unless:
For purposes of this Part, “endorsement” shall mean as defined in 16 C.F.R. § 255.0(b). III. IT IS FURTHER ORDERED that respondents, directly or through any corporation, partnership, subsidiary, division, or other device, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of Neuro-Thin™ or Lipo-Thin™, or any other food, dietary supplement, drug, or device, as “food,” “drug,” and “device” are defined in Section 15 of the Federal Trade Commission Act, in or affecting commerce, shall not make any representation, in any manner, expressly or by implication, about the health benefits, performance, or efficacy of such product, unless, at the time the representation is made, respondents possess and rely upon competent and reliable scientific evidence that substantiates the representation. IV. IT IS FURTHER ORDERED that respondents, directly or through any corporation, subsidiary, division, or other device, in connection with the labeling, advertising, promotion, offering for sale, sale, or distribution of any product or program, in or affecting commerce, shall not misrepresent, in any manner, expressly or by implication, the existence, contents, validity, results, conclusions or interpretations of any test, study, or research. V. IT IS FURTHER ORDERED that respondents, directly or through any corporation, subsidiary, division, or other device, in connection with the labeling, advertising, promotion, offering for sale, sale, or distribution of any product or program, in or affecting commerce, shall disclose, clearly and prominently, a material connection, when one exists, between a person providing an endorsement for any product or program, as “endorsement” is defined in 16 C.F.R. § 255.0(b), and any respondent, or any individual or entity labeling, advertising, promoting, offering for sale, selling, or distributing such product or program. For purposes of this Part, “material connection” shall mean any relationship that might materially affect the weight or credibility of the endorsement and would not reasonably be expected by consumers. VI. Nothing in this order shall prohibit respondents from making any representation for any drug that is permitted in the labeling for such drug under any tentative final or final standard promulgated by the Food and Drug Administration, or under any new drug application approved by the Food and Drug Administration. VII. Nothing in this order shall prohibit respondents from making any representation for any product that is specifically permitted in labeling for such product by regulations promulgated by the Food and Drug Administration pursuant to the Nutrition Labeling and Education Act of 1990. VIII. IT IS FURTHER ORDERED that respondent TrendMark, and its successors and assigns, and respondents William McCormack and E. Robert Gates shall, for five (5) years after the last date of dissemination of any representation covered by this order, maintain and upon request make available to the Federal Trade Commission for inspection and copying:
IX. IT IS FURTHER ORDERED that, for a period of ten (10) years after the date of issuance of this order, respondent TrendMark, and its successors and assigns, and respondents William McCormack and E. Robert Gates shall deliver a copy of this order to all current and future principals, officers, directors, and managers, and to all current and future employees, agents, and representatives having responsibilities with respect to the subject matter of this order, and shall secure from each such person a signed and dated statement acknowledging receipt of the order. Respondents shall deliver this order to current personnel within thirty (30) days after the date of service of this order, and to future personnel within thirty (30) days after the person assumes such position or responsibilities. X. IT IS FURTHER ORDERED that respondent TrendMark, and its successors and assigns shall notify the Commission at least thirty (30) days prior to any change in the corporation(s) that may affect compliance obligations arising under this order, including but not limited to a dissolution, assignment, sale, merger, or other action that would result in the emergence of a successor corporation; the creation or dissolution of a subsidiary, parent, or affiliate that engages in any acts or practices subject to this order; the proposed filing of a bankruptcy petition; or a change in the corporate name or address. Provided, however, that, with respect to any proposed change in the corporation about which respondents learn less than thirty (30) days prior to the date such action is to take place, respondents shall notify the Commission as soon as is practicable after obtaining such knowledge. All notices required by this Part shall be sent by certified mail to the Associate Director, Division of Enforcement, Bureau of Consumer Protection, Federal Trade Commission, Washington, D.C. 20580. XI. IT IS FURTHER ORDERED that each of respondents William McCormack and E. Robert Gates, for a period of five (5) years after the date of issuance of this order, shall notify the Commission of the discontinuance of his current business or employment, or of his affiliation with any new business or employment. The notice shall include respondent's new business address and telephone number and a description of the nature of the business or employment and his duties and responsibilities. All notices required by this Part shall be sent by certified mail to the Associate Director, Division of Enforcement, Bureau of Consumer Protection, Federal Trade Commission, Washington, D.C. 20580. XII. IT IS FURTHER ORDERED that respondent TrendMark, and its successors and assigns, and respondents William McCormack and E. Robert Gates shall, within sixty (60) days after the date of service of this order, and at such other times as the Federal Trade Commission may require, file with the Commission a report, in writing, setting forth in detail the manner and form in which they have complied with this order. XIII. This order will terminate twenty (20) years from the date of its issuance, or twenty (20) years from the most recent date that the United States or the Federal Trade Commission files a complaint (with or without an accompanying consent decree) in federal court alleging any violation of the order, whichever comes later; provided, however, that the filing of such a complaint will not affect the duration of:
Provided, further, that if such complaint is dismissed or a federal court rules that the respondents did not violate any provision of the order, and the dismissal or ruling is either not appealed or upheld on appeal, then the order will terminate according to this Part as though the complaint had never been filed, except that the order will not terminate between the date such complaint is filed and the later of the deadline for appealing such dismissal or ruling and the date such dismissal or ruling is upheld on appeal. Signed this day of , 1998 TrendMark Corp. By: William McCormack William McCormack, E. Robert Gates, Ronald L. Waldman APPROVED: Michael Joel Bloom UNITED STATES OF AMERICA In the Matter of TrendMark Inc., also doing business as TrendMark International, a corporation, William McCormack, individually and as an officer of the corporation, and E. Robert Gates, individually and as an officer of the corporation. DOCKET NO. COMPLAINT The Federal Trade Commission, having reason to believe that TrendMark Inc., a corporation, William McCormack, and E. Robert Gates, individually and as officers of the corporation (“respondents”), have violated the provisions of the Federal Trade Commission Act, and it appearing to the Commission that this proceeding is in the public interest, alleges: 1. Respondent TrendMark Inc. (“TrendMark”) is a Tennessee corporation with its principal office or place of business at 3665 South Perkins, Suite 8, Memphis, TN 33183. 2. Respondent William McCormack is an owner and officer of respondent TrendMark. Individually or in concert with others, he formulates, directs, or controls the policies, acts, or practices of TrendMark, including the acts or practices alleged in this complaint. His principal office or place of business is the same as that of TrendMark. 3. Respondent E. Robert Gates is an owner and officer of respondent TrendMark. Individually or in concert with others, he formulates, directs, or controls the policies, acts, or practices of TrendMark, including the acts or practices alleged in this complaint. His principal office or place of business is the same as that of TrendMark. 4. Respondents have manufactured, advertised, labeled, offered for sale, sold, and distributed over-the-counter weight-loss products to the public called “Neuro-Thin™” and “Lipo-Thin™.” Neuro-Thin™ and Lipo-Thin™ are “foods” or “drugs,” within the meaning of Sections 12 and 15 of the Federal Trade Commission Act. 5. The acts and practices of respondents alleged in this complaint have been in or affecting commerce, as “commerce” is defined in Section 4 of the Federal Trade Commission Act.
(Exhibit B) 7. Through the means described in Paragraph 6, respondents have represented, expressly or by implication, that:
8. Through the means described in Paragraph 6, respondents have represented, expressly or by implication, that they possessed and relied upon a reasonable basis that substantiated the representations set forth in Paragraph 7, at the time the representations were made. 9. In truth and in fact, respondents did not possess and rely upon a reasonable basis that substantiated the representations set forth in Paragraph 7, at the time the representations were made. Among other reasons, the purported support which proposed respondents did rely upon for the above claims--studies on individual components of Neuro-Thin™ or Lipo-Thin™-- did not relate adequately to their advertising claims. For example, most of the studies that were submitted by the proposed respondents as support were test tube studies and studies of rats. These studies cannot be used as adequate support for the therapeutic effects of Neuro-Thin™ and Lipo-Thin™ in human beings. Therefore, the representation set forth in Paragraph 8 was, and is, false or misleading. 10. Through the means described in Paragraph 6, respondents have represented, expressly or by implication, that scientific studies prove that Neuro-Thin™ and Lipo-Thin™ cause significant weight loss. 11. In truth and in fact, scientific studies do not prove that Neuro-Thin™ and Lipo-Thin™ cause significant weight loss. Therefore, the representation set forth in Paragraph 10 was, and is, false or misleading. 12. Through the means described in Paragraph 6, respondents have represented that the statements of Toni Holcomb, John Vaught, and Kay Morton appearing in website advertisements are endorsements of Neuro-Thin™ and Lipo-Thin™. Respondents have failed to disclose adequately that these endorsers have a material connection with individuals and entities marketing and profiting from the sales of Neuro-Thin™ and Lipo-Thin™. At the time of providing their endorsements, Toni Holcomb and John Vaught were the spouses of independent distributors of Neuro-Thin™ and Lipo-Thin™. At the time of providing her endorsement, Kay Morton was an independent distributor of Neuro-Thin™ and Lipo-Thin™. These facts would be material to consumers in their purchase or use decisions regarding Neuro-Thin™ and Lipo- Thin™. The failure to disclose adequately this fact, in light of the representation made, was, and is, a deceptive practice. 13. The acts and practices of respondents as alleged in this complaint constitute unfair or deceptive acts or practices, and the making of false advertisements, in or affecting commerce in violation of Sections 5(a) and 12 of the Federal Trade Commission Act. THEREFORE, the Federal Trade Commission this day of , has issued this complaint against respondents. By the Commission. Donald S. Clark SEAL: ANALYSIS OF PROPOSED CONSENT ORDER The Federal Trade Commission has accepted, subject to final approval, an agreement to a proposed consent order ("proposed order") from TrendMark Inc., also doing business as TrendMark International (“TrendMark”), and its principals, William McCormack and E. Robert Gates. The proposed order has been placed on the public record for sixty (60) days for receipt of comments by interested persons. Comments received during this period will become part of the public record. After sixty (60) days, the Commission will again review the agreement and comments received and will decide whether it should withdraw from the agreement or make final the agreement's proposed order. This matter concerns weight loss products which were marketed by the proposed respondents via unsolicited commercial e-mail sent to users of America Online. The e-mail directed recipients to click on a hyperlink that would then take them to TrendMark’s website on the Internet. Both the e-mail and Internet website made various weight loss and health-related claims about respondents’ Thin-Thin Diet™ which consisted of two products--Neuro-Thin™ and Lipo-Thin™. The Commission’s complaint alleges that proposed respondents engaged in deceptive advertising in violation of Sections 5 and 12 of the FTC Act by making unsubstantiated claims that: (1) Neuro-Thin™ controls appetite; (2) taking Neuro-Thin™ and Lipo-Thin™ in combination causes significant weight loss without a change in diet; (3) taking Neuro-Thin™ and Lipo-Thin™ in combination causes long-term or permanent weight loss; (4) Lipo-Thin™ helps prevent the absorption of ingested fat; (5) Lipo-Thin™ lowers LDL cholesterol and boosts HDL cholesterol; (6) Lipo-Thin™ promotes healing of ulcers and lesions; (7) Lipo-Thin™ helps prevent irritable bowel syndrome; (8) Lipo-Thin™ reduces levels of uric acid in the blood; (9) Lipo-Thin™ helps improve cardiovascular health; and (10) testimonials from consumers appearing in advertisements for the Thin-Thin Diet™ reflect the typical or ordinary experience of members of the public who use Neuro-Thin™ and Lipo-Thin™. The complaint alleges that the proposed respondents did not have a reasonable basis for these weight loss and health-related claims. In addition, the complaint alleges that testimonials given by individuals on respondents’ website failed to disclose adequately that these individuals had material connections with individuals marketing and profiting from the sales off Neuro-Thin™ and Lipo-Thin™. The proposed respondents indicated that they neither possessed nor were aware of any studies relating specifically to the Neuro-Thin™ or Lipo-Thin™ products. Moreover, the purported support which proposed respondents did rely upon for the above claims--studies on individual components of Neuro-Thin™ or Lipo-Thin™-- did not relate adequately to their advertising claims. For example, most of the studies that were submitted by the proposed respondents as support were test tube studies and studies of rats. These studies cannot be used as adequate support for the therapeutic effects of Neuro-Thin™ and Lipo-Thin™ in human beings. The complaint further alleges that proposed respondents made a false claim that clinical evidence proves that Neuro-Thin™ and Lipo-Thin™ cause users to lose significant weight. The proposed order contains provisions designed to remedy the violations charged and to prevent proposed respondents from engaging in similar acts in the future. Paragraph I of the proposed order prohibits proposed respondents from claiming that Neuro-Thin™ and Lipo-Thin™ or any other product or program: (1) controls appetite; (2) causes significant weight loss without a change in diet; (3) causes long-term or permanent weight loss; (4) prevents or helps prevent the absorption of ingested fat; (5) lowers LDL cholesterol or boosts HDL cholesterol; (6) promotes healing of ulcers or lesions; (7) helps prevent irritable bowel syndrome; (8) reduces levels of uric acid in the blood; and (9) helps improve cardiovascular health, unless, at the time the representation is made, proposed respondents possess and rely upon competent and reliable scientific evidence that substantiates the representation. Paragraph II of the proposed order states that the proposed respondents shall not represent, in any manner, expressly or by implication, that the experience represented by any user who gives a testimonial or endorsement of the product represents the typical or ordinary experience of members of the public who use the product, unless: (a) at the time it is made, the proposed respondents possess and rely upon competent and reliable scientific evidence that substantiates the representation; or (b) the proposed respondents disclose, clearly and prominently, and in close proximity to the testimonial or endorsement, either: (1) what the generally expected results would be for users of the product, or (2) the limited applicability of the endorser’s experience to what consumers may generally expect to achieve, that is, that consumers should not expect to experience similar results. Paragraph III of the proposed order prohibits proposed respondents from making any representation for Neuro-Thin™ and Lipo-Thin™ or any other food, drug, dietary supplement, drug, or device, about the health benefits, performance, or efficacy of such product unless, at the time the representation is made, proposed respondents possess and rely upon competent and reliable scientific evidence that substantiates the representation. Paragraph IV of the proposed order prohibits proposed respondents from misrepresenting the existence, contents, validity, results, conclusions, or interpretations of any test, study, or study. Paragraph V of the proposed order requires the proposed respondents to disclose, clearly and prominently, a material connection, when one exists, between a person providing an endorsement for any product or program and any respondent, or any individual or entity labeling, advertising, promoting, offering for sale, selling, or distributing such product or program. Paragraph VI of the proposed order provides that nothing in this order shall prohibit proposed respondents from making any representation about any drug permitted by the Food and Drug Administration. Paragraph VII of the proposed order provides that nothing in this order shall prohibit proposed respondents from making any representation for any product that is specifically permitted in labeling for such product by regulations promulgated by the Food and Drug Administration pursuant to the Nutrition Labeling and Education Act of 1990. Paragraph VIII of the proposed order contains record keeping requirements for materials that substantiate, qualify, or contradict covered claims and requires the proposed respondents to keep and maintain all advertisements and promotional materials containing any representation covered by the proposed order. In addition, paragraph IX requires distribution of a copy of the consent order to current and future officers and agents having responsibility with respect to the subject matter of the order. Further, Paragraph X provides for Commission notification upon a change in the corporate respondent. Paragraph XI requires proposed respondents William McCormack and E. Robert Gates to notify the Commission when either of them discontinues his current business or employment and of an affiliation by either of them with any new businesses or employment. Paragraph XII of the proposed order requires the proposed respondents to file a compliance report. Finally, paragraph XIII of the proposed order provides for the termination of the order after twenty years under specified conditions. The purpose of this analysis is to facilitate public comment on the proposed order. It is not intended to constitute an official interpretation of the agreement and proposed order or to modify in any way their terms. |