ANALYSIS OF PROPOSED CONSENT
ORDER TO AID PUBLIC COMMENT

The Federal Trade Commission has accepted, subject to final approval, an agreement to a proposed Consent Order ("proposed order") from Magnetic Therapeutic Technologies, Inc. ("MTT") and Jim B. Richardson, the President of the corporation.

The proposed consent order has been placed on the public record for sixty (60) days for the reception 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 will decide whether it should withdraw from the agreement or make final the agreement's proposed order.

This matter concerns Internet, print, and catalogue advertisements disseminated directly to consumers, and print advertisements provided to distributors and retail stores, including health food stores and pharmacies, for dissemination directly to consumers, for proposed respondents' magnetic therapy products. These products contain magnets that purportedly treat and alleviate a variety of medical problems, including cancer, high blood pressure, HIV, diabetic neuropathy, and Multiple Sclerosis. Proposed respondents' magnetic products include an assortment of devices, such as Magnetic Knee Supports and Magnetic Sleep Pads.

The Commission's complaint charges that the proposed respondents engaged in deceptive advertising in violation of Sections 5 and 12 of the FTC Act by making unsubstantiated claims that its magnetic therapy products: (1) are effective in treating cancer, including lung and breast cancers, diabetic ulcers, arthritis, and degenerative joint conditions; (2) lower high blood pressure; (3) stabilize or increase the T-cell count of HIV patients; (4) reduce muscle spasms in persons with Multiple Sclerosis; (5) reduce nerve spasms associated with diabetic neuropathy; (6) increase bone density, immunity, and circulation; and (7) are as effective as prescription pain medicine in alleviating severe pain caused by conditions such as arthritis, carpal tunnel syndrome, and back pain.

The complaint further alleges that proposed respondents represented that testimonials from consumers appearing in the advertisements or promotional materials for proposed respondents' products reflect the typical or ordinary experience of members of the public who use the products. The proposed complaint alleges that respondents lack substantiation for this claim.

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 representing that their magnetic therapy products (defined as any product that contains a magnet of any kind purporting to relieve the symptoms of, treat, mitigate, cure, relieve, heal or alleviate any disease or health condition): (1) are effective in treating cancer, including lung and breast cancers, diabetic ulcers, arthritis, or degenerative joint conditions; (2) lower high blood pressure; (3) stabilize or increase the T-cell count of HIV patients; (4) reduce muscle spasms in persons with Multiple Sclerosis; (5) reduce nerve spasms associated with diabetic neuropathy; (6) increase bone density, immunity, or circulation; or (7) are comparable or superior to prescription pain medicine, unless, at the time the representation is made, respondents possess and rely upon competent and reliable scientific evidence that substantiates the representation.

Paragraph II of the proposed order prohibits proposed respondents from representing that the experience represented by any user testimonial or endorsement of any product or program represents the typical or ordinary experience of members of the public who use the product or program, unless the representation is true, and competent and reliable scientific evidence substantiates that claim, or respondents clearly and prominently disclose either: (1) what the generally expected results would be for product or program participants; 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 achieve similar results.

Paragraph III of the proposed order prohibits proposed respondents from making any representation about the health benefits, performance, or efficacy of any product or program, unless, at the time the representation is made, respondents possess and rely upon competent and reliable scientific evidence that substantiates the representation.

Paragraph IV of the proposed order prohibits proposed respondents from:

(1) disseminating to any distributor any material containing any claims prohibited by the order; and (2) authorizing any distributor to make any representations prohibited by the order. In addition, Paragraph IV requires proposed respondents to (1) send a short notice to distributors with whom they have done business since January 1, 1994, announcing their settlement with the FTC and the state of Texas, and requiring distributors to submit all proposed promotional and marketing materials to proposed respondents for approval prior to their dissemination; (2) send, for a period of three years, the same notice to future distributors with whom proposed respondents do business; (3) monitor distributors' promotional activities; (4) terminate, as appropriate, the right of any distributor to market MTT products or programs who continues to use promotional materials or make oral representations that violate the order; (5) provide the FTC all relevant information about the distributors who continue to engage in activities that violate the order; and (6) approve all marketing materials before distributors disseminate them to the public.

Paragraph V contains record keeping requirements for the notification letters sent to distributors, communications between respondents and distributors referring or relating to the requirements of Paragraph IV of the order, and any other materials created pursuant to Paragraph IV.

Paragraph VI 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 VII requires distribution of a copy of the consent decree to current and future officers and agents. Further, Paragraph VIII provides for Commission notification upon a change in the corporate respondents. Paragraph IX requires proposed respondent Jim B. Richardson to notify the Commission when he discontinues his current business or employment and of his affiliation with any new business or employment. The proposed order, in Paragraph X, also requires the filing of a compliance report.

Finally, Paragraph XI of the proposed order provides for the termination of the order after twenty years under certain circumstances.

The purpose of this analysis is to facilitate public comment on the proposed order, and it is not intended to constitute an official interpretation of the agreement and proposed order, or to modify in any way their terms.