002-3229

BEFORE FEDERAL TRADE COMMISSION

COMMISSIONERS: Timothy J. Muris, Chairman

Sheila F. Anthony

Mozelle W. Thompson

Orson Swindle

Thomas B. Leary

)

In the Matter of )

) DOCKET NO. C-4018

PANDA HERBAL INTERNATIONAL, )

INC., a corporation, )

also doing business as ) DECISION

Viable Herbal Solutions, and ) AND ORDER

)

EVERETT L. FARR III, )

individually and as an officer of )

the corporation. )

)

The Federal Trade Commission ("Commission"), having initiated an investigation of certain acts and practices of the respondents named in the caption hereof, and the respondents having been furnished thereafter with a copy of a draft of complaint which the Commission's Northeast Region proposed to present to the Commission for its consideration and which, if issued by the Commission, would charge respondents with violation of the Federal Trade Commission Act; and

The respondents 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 aforesaid draft of complaint, a statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by respondents that the law has been violated as alleged in such complaint, or that the facts as alleged in such complaint, other than jurisdictional facts, are true and waivers and other provisions as required by the Commission's Rules; and

The Commission, having thereafter considered the matter and having determined that it had reason to believe that the respondents have violated the said Act, and that a complaint should issue stating its charges in that respect, and having thereupon accepted the executed consent agreement and placed such agreement on the public record for a period of thirty (30) days, now in further conformity with the procedure prescribed in Section 2.34 of its Rules, the Commission hereby issues its complaint, makes the following jurisdictional findings and enters the following order:

1a. Proposed respondent Panda Herbal International, Inc. d/b/a Viable Herbal Solutions ("Panda") is a Pennsylvania corporation with its principal office or place of business at 744 Walnut Avenue, Building 2, Bensalem, Pennsylvania 19020.

1b. Proposed respondent Everett L. Farr III is an officer of the corporate respondent. Individually or in concert with others, he formulates, directs, or controls the policies, acts, or practices of the corporation. His business address is 744 Walnut Avenue, Building 2, Bensalem, Pennsylvania 19020.

2. 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.

For purposes of this order, the following definitions shall apply:

A. Unless otherwise specified, "respondents" shall mean Panda Herbal International, Inc. doing business as Viable Herbal Solutions, a corporation, its successors and assigns and its officers; Everett L. Farr III, individually and as an officer of the corporation; and each of the above's agents, representatives, and employees.

B. "Commerce" shall mean as defined in Section 4 of the Federal Trade Commission Act,

15 U.S.C. § 44.

C. "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 have 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.

D. "Product label" shall mean any label or other written, printed, or graphic matter upon any product or accompanying any product, including package labels, bottle labels, and package inserts.

E. "Clear(ly) and prominent(ly)" shall mean as follows:

1. In an advertisement communicated through an electronic medium (such as television, video, radio, and interactive media such as the Internet, online services and software), the disclosure shall be presented simultaneously in both the audio and visual portions of the advertisement. Provided, however, that in any advertisement presented solely through visual or audio means, the disclosure may be made through the same means in which the ad is presented. Provided, further, that in any advertisement communicated through interactive media which is presented predominantly through visual or audio means, the disclosure may be made through the same means in which the ad is predominantly presented. The audio disclosure shall be delivered in a volume and cadence sufficient for an ordinary consumer to hear and comprehend it. The visual disclosure shall be of a size and shade, with a degree of contrast to the background against which it appears, and shall appear on the screen for a duration and in a location, sufficiently noticeable for an ordinary consumer to read and comprehend it.

2. In a print advertisement, promotional material, or instructional manual,

the disclosure shall be in a type size and location sufficiently noticeable for an ordinary consumer to read and comprehend it, in print that contrasts with the background against which it appears. In multi-page documents, the disclosure shall appear on the cover or, alternatively, on the first page.

3. On a product label, the disclosure shall be in a type size and location sufficiently noticeable for an ordinary consumer to read and comprehend it and in print that contrasts with the background against which it appears. Provided, however, if a disclosure on a bottle label or package label is made in a location other than the principal display panel, the bottle label or package label shall include the statement, "See important safety warning(s) on [insert disclosure location]," as follows: (i) in a type size and location on the principal display panel sufficiently noticeable for an ordinary consumer to read and comprehend it; (ii) in print that contrasts with the background against which it appears; and (iii) within a border that is a color or shade that contrasts with the background against which it appears. Provided further, that in a multi-page insert, the disclosure shall appear on the cover page or first page.

Nothing contrary to, inconsistent with, or in mitigation of the disclosure shall be used in any advertisement or on any label.

F. In the case of advertisements disseminated by means of an interactive electronic medium, such as software, the Internet, or online services, "in close proximity" shall mean on the same Web page, online service page, or other electronic page, and proximate to the triggering representation, and shall not include disclosures accessed or displayed through hyperlinks, pop-ups, interstitials or other means.

G. "Food," "drug," and "device" shall mean as "food," "drug," and "device" are defined in Section 15 of the Federal Trade Commission Act, 15 U.S.C. § 55.

H. "Covered product or service" shall mean any service, program, dietary supplement, food, drug, or device.

I. "Herbal Outlook product" shall mean Panda's Herbal Outlook or any other covered product or service for which the term "Hypericum Perforatum" or "St. John's Wort" appears on the covered product or service label or in any advertising or promotion, and any covered product or service containing "Hypericum Perforatum" or "St. John's Wort."

J. "HerbVeil 8 product" shall mean Panda's HerbVeil 8 or any covered product or service for which the term "HerbVeil 8" appears on the product label or in any advertising or promotion, any covered product or service containing "HerbVeil 8," and any covered product or service promoted for the topical treatment of any cancer.

K. "Purchaser for resale" shall mean any purchaser of any of respondents' Herbal Outlook product or HerbVeil 8 product, who: (a) is a distributor of, or operates a wholesale or retail business that sells, any such product(s); or (b) orders twenty (20) or more units of any such products(s) in any three (3) month period.

L. A requirement that respondents "notify the Commission," "file with the Commission" or "deliver to the Commission" shall mean that the respondents shall send the necessary information via first-class mail, costs prepaid, to the Associate Director for Division of Enforcement, Federal Trade Commission, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. Attention: In the Matter of Panda Herbal International, Inc.

M. "Person" shall mean a natural person, organization or other legal entity, including a partnership, corporation, proprietorship, association, cooperative, or any other group acting together as an entity.

IT IS ORDERED that respondents, directly or through any corporation, subsidiary, division, trade name, or other device, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of any Herbal Outlook product, or any covered product or service in or affecting commerce, shall not make any representation, in any manner, expressly or by implication, that ingestion of such product is effective in the treatment of HIV/AIDS, herpes simplex, tuberculosis, influenza, or hepatitis B infections unless, at the time the representation 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, trade name, or other device, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of any HerbVeil 8 product, or any covered product or service in or affecting commerce, shall not make any representation, in any manner, that application of such product is effective in the treatment of any cancer unless, at the time the representation is made, respondents possess and rely upon competent and reliable scientific evidence that substantiates the representation.

IT IS FURTHER ORDERED that respondents, directly or through any corporation, subsidiary, division, trade name, or other device, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of any Herbal Outlook product in or affecting commerce, shall not make any representation, in any manner, expressly or by implication, that ingestion of any Herbal Outlook product has no known contraindications or drug interactions.

IT IS FURTHER ORDERED that in any advertisement, promotional material, or product label for any Herbal Outlook product, that contains any representation about the efficacy, performance, or safety of such product, and in any discussion, communicated via electronic mail or any telephone line, that contains any representation about the efficacy, performance, or safety of any Herbal Outlook product, respondents, directly or through any corporation, subsidiary, division, trade name, or other device, shall make clearly and prominently, the following disclosure:

WARNING: St. John's Wort can have potentially dangerous interactions with some prescription drugs. Consult your physician before taking St. John's Wort if you are currently taking anticoagulants, oral contraceptives, anti-depressants, anti-seizure medications, drugs to treat HIV or prevent transplant rejection, or any other prescription drug. This product is not recommended for use if you are or could be pregnant unless a qualified health care provider tells you to use it. The product may not be safe for your developing baby.

unless respondents possess competent and reliable scientific evidence that such product produces no adverse drug interactions or side effects.

Provided, however, that the product label requirements of this Part shall not apply to products that are shipped to consumers or purchasers for resale less than thirty (30) days after the date of service of this order; and, provided further, that with regard to products shipped after thirty (30) days of the date of service of this order, respondents may affix the disclosure clearly and prominently by sticker or other device on the labels of products manufactured prior to thirty (30) days after the service of this order.

Provided further, that in the event that the Food and Drug Administration issues a final rule requiring a warning on the labeling of products containing St. John's Wort, respondents may substitute that warning for the disclosure required under this Part.

IT IS FURTHER ORDERED that respondents, directly or through any corporation, subsidiary, division, trade name, or other device, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of any Herbal Outlook product, HerbVeil 8 product, or any covered product or service in or affecting commerce, shall not make any representation, in any manner, expressly or by implication:

A That such covered product or service is effective in the mitigation, treatment, prevention, or cure of any disease or illness; or

B. About the health benefits, performance, safety, or efficacy of any such covered product or service;

unless, at the time the representation is made, respondents possess and rely upon competent and reliable scientific evidence that substantiates the representation.

IT IS FURTHER ORDERED that respondents shall:

A. Within seven (7) days after service of this order upon respondents, deliver to the

Commission a list, in the form of a sworn affidavit, of all purchasers for resale who purchased on or after January 1, 1999 an Herbal Outlook product, directly from respondents or indirectly through one of respondents' other purchasers for resale. Such list shall include each purchaser for resale's name and address, and, if available, the telephone number and email address of each purchaser for resale.

B. Within seven (7) days after service of this order upon respondents, deliver to the

Commission a list, in the form of a sworn affidavit, of all consumers who purchased on or after January 1, 1999 an Herbal Outlook product, directly from respondents or indirectly through one of respondents' purchasers for resale. Such list shall include each consumer's name and address, and, if available, the telephone number and email address of each consumer.

C. Within seven (7) days after service of this order upon respondents, deliver to the

Commission a list, in the form of a sworn affidavit, of all purchasers for resale who purchased on or after January 1, 1999 an HerbVeil 8 product, directly from respondents or indirectly through one of respondents' other purchasers for resale. Such list shall include each purchaser for resale's name and address, and, if available, the telephone number and email address of each purchaser for resale.

D. Within seven (7) days after service of this order upon respondents, deliver to the

Commission a list, in the form of a sworn affidavit, of all consumers who purchased on or after January 1, 1999 an HerbVeil 8 product, directly from respondents or indirectly through one of respondents' other purchasers for resale. Such list shall include each consumer's name and address, and, if available, the telephone number and email address of each consumer and the full purchase price, including shipping, handling, and taxes, of any HerbVeil 8 product purchased from respondent.

E. Within thirty (30) days after service of this order upon respondents, send by first

class mail, with postage prepaid, an exact copy of the notice attached hereto as Attachment A, showing the date of mailing, to each purchaser for resale who purchased respondents' Herbal Outlook and/or HerbVeil 8 products between January 1, 1999 and the date of service of this order. This mailing shall not include any other document.

F. Within thirty (30) days after service of this order upon respondents, send by first

class mail, with postage prepaid, an exact copy of the notice attached hereto as Attachment B, showing the date of mailing, to each consumer who purchased respondents' Herbal Outlook and/or HerbVeil 8 products between January 1, 1999 and the date of service of this order. This mailing shall not include any other document.

VII.

IT IS FURTHER ORDERED that respondents shall refund the full purchase price of HerbVeil 8 products purchased from respondents between January 1, 1999 and the date of service of this order, including shipping and handling and applicable taxes, to each consumer whose request for a refund is received by Panda within ninety (90) days after the date of mailing shown on Attachment B. To receive a refund the consumer must substantially complete a Refund Request in the form of the Refund Request appended to Attachment B and return it to Panda at the address indicated thereon. The refund shall be paid within fifteen (15) business days of respondents' receipt of the consumer's substantially completed declaration.

VIII.

IT IS FURTHER ORDERED that respondents shall, no later than one hundred and eighty (180) days after the date of service of this order, deliver to the Commission a report, in the form of a sworn affidavit executed on behalf of respondents. This report shall specify the steps respondents have taken to comply with the terms of Parts VI and VII of this order and shall state, without limitation:

A. The name and address of each purchaser to whom respondents sent the notice attached hereto as Attachment A as required under Part VI E;

B. The name and address of each consumer to whom respondents sent the notice attached hereto as Attachment B as required under Part VI F;

• C. The name and address of each consumer from whom respondents received a refund request;

D. The date on which each request was received and the amount of the refund requested;

E. The amount of the refund provided by respondents to each such consumer;

F. The status of any disputed refund request and the identification of each consumer whose refund request is disputed, by name, address, and amount of the claim; and

G. The total amount of refunds paid by respondents.

IT IS FURTHER ORDERED that respondents, directly or through any corporation, subsidiary, division, trade name, or other device, shall:

A. Take reasonable steps sufficient to monitor and ensure that all employees and

agents engaged in sales, order verification, or other customer service functions comply with Parts I through V of this order. Such steps shall include adequate monitoring of all advertisements, promotions, sales presentations, and other oral and written communication with customers regarding such products. Respondents, at a minimum, shall:

1. Conduct periodic monitoring of representations concerning any Herbal Outlook and HerbVeil 8 products, and any other covered product or service, made by persons engaged in sales or other customer service functions, including representations made orally or through electronic communications;

2. Conduct periodic monitoring of representations made about any Herbal Outlook and HerbVeil 8 products, and any other covered product or service, on all Internet websites operated and maintained by respondents; and

3. Establish a procedure for receiving, maintaining, and responding to consumer complaints.

B. Terminate any employee or agent who knowingly engages in any conduct prohibited by Parts I through V of this order once respondents know or should know that such person is or has been engaged in such conduct.

IT IS FURTHER ORDERED that respondents, directly or through any corporation, subsidiary, division, trade name, or other device, shall:

A. For a period of five (5) years following the entry of this order, send a copy of the

notice attached hereto as Attachment A by first class certified mail, return receipt requested, to any purchaser for resale of any Herbal Outlook or HerbVeil 8 product, provided, however, that the requirements of this Part X A shall not apply to any purchasers for resale who received a copy of the notice attached hereto as Attachment A pursuant to the requirements of Part VI E of this order.

B. Institute a reasonable program of surveillance adequate to reveal whether any of

respondents' purchasers for resale are:

1. Disseminating advertisements or promotional materials that contain any

representation about any Herbal Outlook or HerbVeil 8 product or any other covered product or service manufactured by or purchased from any respondent, that is prohibited by Parts I , II, III, and V of this order; or

2. Disseminating advertisements or promotional materials or distributing

respondents' Herbal Outlook product without the advertising and labeling disclosure required pursuant to Part IV of this order.

C. Terminate all sales of Herbal Outlook and HerbVeil8 products and any other covered product or service to any purchaser for resale who is engaged in:

1. Disseminating advertisements or promotional materials that contain any representation about any Herbal Outlook or HerbVeil 8 product or any other covered product or service manufactured by or purchased from any respondent, that is prohibited by Parts I, II, III, and V of this order; or

2. Disseminating advertisements or promotional materials or distributing

respondents' Herbal Outlook product without the advertising and labeling disclosure required pursuant to Part IV of this order;

once respondents know or should know that the purchaser for resale is or has been engaged in such conduct.

XI.

Nothing in this order shall prohibit respondents from making any representation for any drug that is permitted in labeling for such drug under any tentative final or final standard promulgated by the Food and Drug Administration, or under any drug application approved by the Food and Drug Administration. Nor shall it prohibit respondent 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.

IT IS FURTHER ORDERED that respondent Panda, and its successors and assigns, and respondent Everett L. Farr III 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:

A. All advertisements and promotional materials containing the representation;

B. All materials that were relied upon in disseminating the representation; and

C. All tests, reports, studies, surveys, demonstrations, or other evidence in their possession or control that contradict, qualify, or call into question the representation, or the basis relied upon for the representation, including complaints and other communications with consumers or with governmental or consumer protection organizations.