OneSource Worldwide Network, Inc., operating in Dallas, Texas, and its president, James Fobair, have settled Federal Trade Commission charges that they made false and unsubstantiated advertising claims for a laundry detergent substitute they sold. According to the FTC's complaint, OneSource and Fobair falsely touted their product, "The EarthSmart Laundry CD," as an effective substitute for laundry detergents that not only cleans laundry but does so without polluting the earth's waterways. The proposed settlement would prohibit OneSource and Fobair from claiming that the Laundry CD or any similar product cleans as well as conventional laundry detergent and would require them to pay $50,000 in disgorgement. These funds are to be divided equally among the FTC and six states that participated in this action: Arkansas, Illinois, Michigan, Missouri, Nevada and Texas.
According to the FTC's complaint detailing the charges, the defendants manufactured, marketed, and distributed The EarthSmart Laundry CD -- a plastic disc filled with allegedly "structured water"-- that could be used in washing machines instead of conventional laundry detergents. The product sold for approximately $80. The defendants advertised on the Internet, in promotional materials, and in face-to-face solicitations. Fobair also develop a multilevel marketing structure that sold the products through a network of distributors.
The FTC alleged that the defendants falsely claimed that The Laundry CD cleans laundry as well as conventional laundry detergent; that The Laundry CD cleans clothes by changing the molecular structure of water; that The Laundry CD is recyclable; and that scientific evidence proves that the product works. The complaint also alleged that the defendants did not have adequate substantiation for the claims they made about the product's environmental attributes or the product's ability to replace fabric softeners. In addition, according to the complaint, testimonials that appeared to reflect the typical or ordinary experience of users of the product were misleading because the testimonialists' experience was not typical.
The proposed settlement, which requires the court's approval to become binding, in addition to prohibiting the defendants from making the efficacy claims alleged in the complaint about The Laundry CD or any substantially similar product, would require the defendants to have substantiation for claims about any product's comparative or absolute efficacy, benefits, mechanism of action, or performance; its ability to soften fabrics; or its recyclability. The settlement also would prohibit the defendants from misrepresenting the results of any tests, studies or research and would prohibit them from assisting others in performing the activities prohibited by the order.
Moreover, the proposed settlement would bar the misleading use of testimonials and would require any atypical testimonial to be accompanied by a disclosure that the result is not typical or a statement as to what the generally expected result is for the product at issue. The proposed settlement also would prohibit the defendants from distributing their consumer information to others.
Defendants OneSource and Fobair have agreed to jointly pay $50,000, with an avalanche clause in the amount of $7.5 million, if the financial information disclosure given to the FTC is found to be false.
Finally, the proposed settlement contains various recordkeeping provisions to assist the FTC in monitoring the defendants' compliance.
The FTC has published a Consumer Alert, "Wash Daze: Laundry Gadgets Won't Lighten the Load," that cautions consumers to get the facts before throwing away their regular laundry detergent. In addition, the FTC, along with the Environmental Protection Agency, has published a brochure for consumers, "Sorting Out 'Green' Advertising Claims," to help them understand various environmental marketing claims.
The Commission vote to authorize staff to file the complaint and proposed settlement was 4-0. The complaint and stipulated final judgment were filed in the U.S. District Court for the Northern District of Texas, Dallas Division, today.
NOTE: This consent judgment is for settlement purposes only and does not constitute an admission by the defendants of a law violation. Consent judgments have the force of law when signed by the judge.
Copies of the news release and the consumer brochures are available from the FTC's web site at http://www.ftc.gov and copies of the consent judgment will be available shortly from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 1-877-FTC-HELP (1-877-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.
(FTC File No. 982 3017)
(Civil Action No. 3-99 CV1494-L)
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