UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION

In the Matter of

NATURAL ORGANICS, INC., a corporation, and GERALD A. KESSLER, individually and as an officer of the corporation.

DOCKET NO. 9294

AGREEMENT CONTAINING
CONSENT ORDER

The agreement herein, by and between Natural Organics, Inc., a corporation, by its duly authorized officer, and Gerald A. Kessler, individually and as an officer of said corporation, hereafter sometimes referred to as respondents, and their attorney, and counsel for the Federal Trade Commission, is entered into in accordance with the Commission's Rule governing consent order procedures. In accordance therewith the parties hereby agree that:

1.a. Respondent Natural Organics is a New York corporation with its principal office or place of business at 548 Broadhollow Road, Melville, New York 11747-3708. Natural Organics also does business as Nature's Plus.

1.b. Respondent Gerald A. Kessler 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.

2. Respondents have been served with a copy of the complaint issued by the Federal Trade Commission charging them with violation of Sections 5(a) and 12 of the Federal Trade Commission Act, and have filed an answer to said complaint denying all charges.

3. Respondents admit all the jurisdictional facts set forth in the Commission's complaint in this proceeding.

4. Respondents waive:

a. Any further procedural steps;
 
b. The requirement that the Commission's decision contain a statement of findings of fact and conclusions of law;
 
c. All rights to seek judicial review or otherwise to challenge or contest the validity of the order entered pursuant to this agreement; and
 
d. Any claim under the Equal Access to Justice Act.

5. This agreement shall not become a 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 will be placed on the public record for a period of thirty (30) days and information about it publicly released. The Commission thereafter may either withdraw its acceptance of this agreement and so notify Respondents, in which event it will take such action as it may consider appropriate, or issue and serve its decision, in disposition of the proceeding.

6. This agreement is for settlement purposes only and does not constitute an admission by Respondents that the law has been violated as alleged in the Commission's complaint, or that the facts as alleged in the Commission's complaint, other than the jurisdictional facts, are true.

7. 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 3.25(f) of the Commission's Rules, the Commission may, without further notice to

Respondents, (1) issue its decision containing the following order to cease and desist in disposition of the proceeding, and (2) make information about it public. When so entered, the order to cease and desist 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 decision containing the agreed-to order to Respondents' address as stated in this agreement by any means specified in Section 4.4(a) of the Commission's Rules shall constitute service. Respondents waive any right they might have to any other manner of service. The complaint may be used in construing the terms of the order, and no agreement, understanding, representation, or interpretation not contained in the order or in the agreement may be used to vary or to contradict the terms of the order.

8. Respondents have read the complaint and the order contemplated hereby. They understand that once the order has been issued, they will be required to file one or more compliance reports showing that they have fully complied with the order. Respondents further understand that they may be liable for civil penalties in the amount provided by law 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. "Substantially similar product" shall mean any product that is substantially similar in ingredients, composition, and properties.

3. "ADHD" shall mean Attention Deficit/Hyperactivity Disorder, a widely-recognized developmental disorder of childhood characterized by a persistent pattern of inattention and/or hyperactivity-impulsiveness that is more frequent and severe than is typically observed in individuals at a comparable level of development, as identified in American Psychiatric Association, Diagnostic and Statistical Manual of Mental Disorders, (4th ed. 1994).

4. "Children" shall mean individuals under the age of 13.

5. "Mental disorder" shall mean any disorder that meets the criteria for a specific disorder identified in American Psychiatric Association, Diagnostic and Statistical Manual of Mental Disorders, (4th ed. 1994).

6. Unless otherwise specified, "respondents" shall mean Natural Organics, Inc., a corporation, its successors and assigns and its officers; Gerald A. Kessler, individually and as an officer of the corporation; and each of the above's agents, representatives, and employees.

7. "Commerce" shall mean as defined in Section 4 of the Federal Trade Commission Act, 15 U.S.C. 44.

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 Pedi-Active A.D.D. or any other food, drug, or dietary supplement, as "food" and "drug" 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, that such product:

A. will improve the attention span of children who have difficulty focusing on school work;
 
B. will improve the scholastic performance of children who have difficulty focusing on school work;
 
C. will improve the attention span of children who suffer from ADHD;
 
D. will improve the scholastic performance of children who suffer from ADHD; or
 
E. can treat or mitigate ADHD in children;

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, or other device, in connection with the manufacturing, labeling, advertising, promotion, offering for sale, sale, or distribution of Pedi-Active A.D.D. or any substantially similar product marketed for children in or affecting commerce, shall not use the name "A.D.D." or any other name that represents expressly or by implication, that the product can treat or mitigate ADHD unless, at the time the representation is made, respondents possess and rely upon competent and reliable scientific evidence that substantiates the representation.

III.

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 food, drug or dietary supplement marketed for children, as "food" and "drug" 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, regarding the ability of such product to treat or cure any disease or mental disorder unless, at the time the representation is made, respondents possess and rely upon competent and reliable scientific evidence that substantiates the representation.

IV.

Nothing in this order shall prohibit respondents from making any representation for any product that is specifically permitted in labeling for such product either by regulations promulgated by the Food and Drug Administration pursuant to the Nutrition Labeling and Education Act of 1990, or pursuant to Sections 303-304 of the Food and Drug Administration Modernization Act of 1997.

V.

Nothing in this order shall be constituted as a waiver of respondents' right to engage in speech protected by the First Amendment to the Constitution of the United States.

VI.

IT IS FURTHER ORDERED that this order shall not apply to any product sold or distributed to consumers by third parties under private labeling agreements with respondents, their successors or assigns, provided respondents, their successors or assigns, do not participate in any manner, directly or indirectly, in the funding, preparation or dissemination of any advertising of said products to consumers.

VII.

IT IS FURTHER ORDERED that respondent Natural Organics, Inc., and its successors and assigns, and respondent Gerald A. Kessler 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:

1. All advertisements and promotional materials containing the representation;
 
2. All materials that were relied upon in disseminating the representation; and
 
3. 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.

VIII.

IT IS FURTHER ORDERED that respondent Natural Organics, Inc., and its successors and assigns, and respondent Gerald A. Kessler 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. Respondents shall maintain and upon request make available to the Federal Trade Commission for inspection and copying a copy of each signed statement acknowledging receipt of the order.

IX.

IT IS FURTHER ORDERED that respondent Natural Organics, Inc. and its successors and assigns shall notify the Commission at least thirty (30) days prior to any change in the corporation 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 respondent learns less than thirty (30) days prior to the date such action is to take place, respondent 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.

X.

IT IS FURTHER ORDERED that respondent Gerald A. Kessler, for a period of ten (10) 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.

XI.

IT IS FURTHER ORDERED that respondent Natural Organics, Inc., and its successors and assigns, and respondent Gerald A. Kessler 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.

XII.

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:

1. Any Part in this order that terminates in less than twenty (20) years;
 
2. This order's application to any respondent that is not named as a defendant in such complaint; and
 
3. This order if such complaint is filed after the order has terminated pursuant to this Part.

Provided, further, that if such complaint is dismissed or a federal court rules that the respondent 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 , 2001

NATURAL ORGANICS, INC.

By:

GERALD A. KESSLER
Chief Executive Officer

GERALD A. KESSLER, individually and as an officer of the corporation

JOHN R. FLEDER
STEPHEN H. MCNAMARA
A. WES SIEGNER
PAUL L. FERRARI
Hyman, Phelps & McNamara, P.C.
700 Thirteenth Street, N.W.
Washington, D.C. 20005-5929

Attorneys for Respondents

MATTHEW D. GOLD
KERRY O'BRIEN
DEAN C. GRAYBILL

Counsel for the Federal Trade Commission

APPROVED:

JEFFREY KLURFELD
Regional Director
Western Region

JOAN Z. BERNSTEIN
Director
Bureau of Consumer Protection