UNITED STATES OF AMERICA In the Matter of Herbal Worldwide Holdings Corp., a corporation, FILE NO. 972-3157 AGREEMENT CONTAINING CONSENT ORDER The Federal Trade Commission has conducted an investigation of certain acts and practices of Herbal Worldwide Holdings Corp., a corporation, José Diaz, individually and as an officer of the corporation, and Eduardo N. Naranjo, individually and as an officer of the corporation ("proposed respondents"). Proposed respondents, having been represented by counsel, 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 Herbal Worldwide Holdings Corp., a corporation, José Diaz, individually and as an officer of the corporation, and Eduardo N. Naranjo, individually and as an officer of the corporation, by their duly authorized officers, and counsel for the Federal Trade Commission that: 1.a. Proposed respondent Herbal Worldwide Holdings Corp. ("Herbal") is a Florida corporation with its principal office or place of business at 3326 Mary Street, Miami, Florida, 33133. 1.b. Proposed respondent José Diaz is an owner and officer of proposed respondent Herbal. Individually or in concert with others, he formulates, directs, or controls the policies, acts, or practices of Herbal, including the acts or practices alleged in this complaint. His principal office or place of business is the same as that of Herbal. 1.c. Proposed respondent Eduardo N. Naranjo is an owner and officer of proposed respondent Herbal. Individually or in concert with others, he formulates, directs, or controls the policies, acts, or practices of Herbal, including the acts or practices alleged in this complaint. His principal office or place of business is the same as that of Herbal. 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 Herbal Worldwide Holdings Corp., a corporation, its successors and assigns and their officers; José Diaz, individually and as an officer of Herbal, Eduardo Naranjo, individually and as an officer of Herbal, 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 Fattaché®, or any food, drug or dietary supplement, in or affecting commerce, shall not make any representation, in any manner, expressly or by implication, that: A. Such product causes weight loss without a change in diet; B. Such product prevents the absorption of ingested fat; C. Such product helps eliminate ingested fat before it is absorbed; or D. Such product has any beneficial effect, unless at the time it is made, respondents possess and rely upon competent and reliable scientific evidence that substantiates the representation. II. IT FURTHER 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 any product 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. 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. IV. 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. V. IT IS FURTHER ORDERED that respondents, and their successors and assigns 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:
VI. IT IS FURTHER ORDERED that respondent Herbal, and its successors and assigns, and respondents José Diaz and Eduardo N. Naranjo 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. VII. IT IS FURTHER ORDERED that respondent Herbal, 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. VIII. IT IS FURTHER ORDERED that respondent Herbal, and its successors and assigns, and respondents José Diaz and Eduardo N. Naranjo 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. IX. IT IS FURTHER ORDERED that respondents José Diaz and Eduardo N. Naranjo, for a period of five (5) years after the date of issuance of this order, shall notify the Commission of the discontinuance of their current business or employment, or of their affiliation with any new business or employment. The notice shall include the 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. X. 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 never had 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 _______________, 1997. HERBAL WORLDWIDE HOLDINGS CORP. By: ____________________________________ ____________________________________ ____________________________________ ____________________________________ APPROVED: UNITED STATES OF AMERICA In the Matter of Herbal Worldwide Holdings Corp., a corporation, COMPLAINT The Federal Trade Commission, having reason to believe that Herbal Worldwide Holdings Corp., a corporation, José Diaz, individually and as an officer of the corporation, and Eduardo Naranjo, individually and as an officer 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 Herbal Worldwide Holdings Corp. ("Herbal") is a Florida corporation with its principal office or place of business at 3326 Mary Street, Miami, Florida, 33133. 2. Respondent José Diaz is an owner and officer of respondent Herbal. Individually or in concert with others, he formulates, directs, or controls the policies, acts, or practices of Herbal, including the acts or practices alleged in this complaint. His principal office or place of business is the same as that of Herbal. 3. Respondent Eduardo N. Naranjo is an owner and officer of respondent Herbal. Individually or in concert with others, he formulates, directs, or controls the policies, acts, or practices of Herbal, including the acts or practices alleged in this complaint. His principal office or place of business is the same as that of Herbal. 4. Respondents have manufactured, advertised, labeled, offered for sale, sold, and distributed an over-the-counter weight-loss product to the public called "Fattaché." The ingredients of Fattaché include psyllium, chitosan (from deacetylated shellfish shells), glucomannan, and apple pectin. Fattaché is a "food" and/or "drug," 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. 6. Respondents have disseminated or have caused to be disseminated Spanish-language advertisements for Fattaché, including but not necessarily limited to the attached Exhibit A, which is the transcription of a television advertisement with an English-language translation. The advertisement contains the following statements:
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, much of the research relied on by respondents did not address the weight loss and fat absorption effects discussed in the advertisement, and/or the results of the research could not be extrapolated to the population as a whole because of methodological weaknesses. Therefore, the representation set forth in Paragraph 8 was, and is, false or misleading. 10. 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. ANALYSIS OF PROPOSED CONSENT The Federal Trade Commission has accepted an agreement, subject to final approval, to a proposed consent order from Herbal Worldwide Holdings Corp, José Diaz, and Eduardo N. Naranjo (hereinafter "respondents"). Respondents are marketers of an over-the-counter weight loss product called "Fattaché." 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 any comments received and will decide whether it should withdraw from the agreement and take other appropriate action or make final the agreement's proposed order. This matter has focused on respondents' Spanish-language television advertisement for Fattaché. The ingredients in Fattaché include psyllium, chitosan, glucomannan, and apple pectin. The proposed complaint alleges that respondents made unsubstantiated claims that: (1) Fattaché causes weight loss without a change in diet; (2) Fattaché prevents the absorption of ingested fat; (3) Fattaché helps eliminate ingested fat before it is absorbed, and (4) testimonials from consumers appearing in advertisements for Fattaché reflect the typical or ordinary experience of members of the public who use Fattaché. Parts I and II of the proposed order prohibit the respondents from making the challenged claims, unless at the time of the representation, the respondents possess and rely on competent and reliable scientific evidence that substantiates the representation. Part II of the order also requires that if the respondents do not have substantiation for claims made through the use of consumer testimonials, that the advertisement disclose the results that users can generally expect to achieve, or the limited applicability of the endorser's experience to what users can generally expect to achieve. Because this matter involves substances that could be regulated by the FDA as a food or drug, Part III of the order includes a "safe harbor" allowing the respondents to make any claims approved in any new drug application, or in any tentative final or final standard promulgated by that agency. In addition, Part IV of the proposed order includes a safe harbor for representations specifically permitted by regulations promulgated by the FDA pursuant to the Nutrition Labeling and Education Act of 1990. The proposed order also requires the respondents to maintain materials relied on to substantiate clams covered by the order; to provide a copy of the consent agreement to all employees or representatives with duties affecting compliance with the terms of the order; and to file one or more compliance reports detailing compliance with the order. 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. |