The Federal Trade Commission has agreed to a final stipulated judgment and permanent injunction that brings to a close its pending lawsuit against Pantron I Corporation and its owner, Hal Z. Lederman. According to the FTC, Pantron and Lederman were pioneers of the program-length commercial or "infomercial." Between 1985 and 1990, they sold $100 million worth of a purported baldness cure, the "Helsinki Formula," through the widely disseminated "Discover with Robert Vaughan" infomercial. The proposed settlement prohibits the defendants from representing that the "Helsinki Formula" products will cure or prevent baldness.
The FTC filed suit against Pantron and Lederman in November 1988, alleging that the advertising claims the defendants created and disseminated falsely represented that the "Helsinki Formula" was effective in stopping hair loss and promoting hair regrowth in persons suffering from baldness. The complaint also alleged that the defendants falsely represented that the effectiveness of the "Helsinki Formula" was scientifically proven.
The case was tried in a five-day bench trial in late 1989 before the late Judge Richard A. Gadbois of the U.S. District Court for the Central District of California. In 1992, the court entered an injunction barring the defendants from representing that scientific evidence established that the "Helsinki Formula" was effective. The court allowed the defendants to represent that the Helsinki Formula was the subject of medical investigative work by responsible European physicians, and that the product was effective to some extent for some people. The court denied the FTC's request for consumer redress. The Commission appealed the district court's decision. In 1994, the Ninth Circuit Court of Appeals remanded the case to the district court with instructions to modify the injunction consistent with its holding that the efficacy claims for the "Helsinki Formula" were false, and to order the defendants to pay monetary relief.
The settlement announced today resolves the matter of monetary equitable relief by providing that the FTC on behalf of injured consumers will receive a pro-rata share of the proceeds of Lederman’s Chapter 7 bankruptcy. (Lederman filed bankruptcy in 1994.) Pursuant to a separate agreement, the Bankruptcy Court for the Central District of California entered an order on January 27, 1997, allowing the FTC’s claim for $27,000,000 against Lederman. As a result the Commission will receive approximately 80 percent of the distributions from the Lederman bankruptcy liquidation. (The Commission is unable to determine exactly how much will be available for redress from the bankruptcy proceeding.) Pantron I went out of business in October 1995.
The settlement agreement is consistent with the Court of Appeals' opinion that the advertising claims for the "Helsinki Formula" products were false. Under the terms of the agreement, the defendants are prohibited from claiming that the "Helsinki Formula" or any other baldness product is effective in curtailing hair loss, promoting regrowth of lost hair, or treating baldness, unless such claims would be permitted in labeling for such products by the Food and Drug Administration. In addition, the defendants are prohibited from representing that competent and reliable tests or studies establish the effectiveness of the "Helsinki Formula" or any other baldness product.
Moreover, the settlement agreement prohibits the defendants from making any representation regarding the performance, benefits, safety or efficacy of any food, drug, device or cosmetic unless they possess and rely upon competent and reliable scientific evidence to substantiate the representation.
Further, the settlement addresses two advertising techniques commonly employed by infomercial producers, the endorsement and the demonstration. First, the defendants are prohibited from representing that an endorsement reflects the typical or ordinary experience of persons using the advertised product, unless the claimed results have been established by competent and reliable scientific evidence. Second, the defendants are prohibited from using demonstrations that involve the undisclosed alteration of the product, or models or props used in the demonstration, or the undisclosed use or substitution of another product or device to demonstrate the results claimed for the advertised product.
The case was handled by the FTC's Seattle Regional Office. The Commission vote to authorize filing of the stipulated final judgment and permanent injunction was 5-0. The proposed agreement was filed in the U.S. District Court for the Central District of California, on February 11, 1997. It is subject to court approval.
NOTE: This stipulated final judgment and permanent injunction is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Such judgments have the force of law when signed by the judge.
Copies of the stipulated final judgment and permanent injunction, the bankruptcy settlement order, as well as other documents associated with this case, are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest FTC news as it is announced, call the FTC's NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC's World Wide Web Site at: http://www.ftc.gov
(FTC Matter No. X890012)
(Civil Action No. 88-6686(MRP))
(Bankruptcy Case No. SV 94-22688-AG)
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