B234118 UNITED STATES OF AMERICA In the Matter of JENNY CRAIG, INC., a corporation, and JENNY CRAIG INTERNATIONAL, INC., a corporation. DOCKET NO. 9260 AMENDED COMPLAINT The Federal Trade Commission, having reason to believe that Jenny Craig, Inc., a corporation, and Jenny Craig International, Inc., a corporation ("Jenny Craig" or "respondents"), have violated the provisions of the Federal Trade Commission Act, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, alleges: PARAGRAPH ONE: Respondent Jenny Craig International, Inc., a California Corporation, is a wholly-owned subsidiary of respondent Jenny Craig, Inc., a Delaware Corporation. Jenny Craig, Inc. dominates and controls the acts and practices of Jenny Craig International, Inc. Both corporations maintain their offices and principal places of business at 445 Marine View Avenue, #300, Del Mar, California 92014. PARAGRAPH TWO: Respondents have advertised, offered for sale, and sold weight loss and weight maintenance services and products, including 1000 to 1500 calorie-a-day weight loss programs which they make available to consumers at numerous company-owned and franchised "Jenny Craig Weight Loss Centres" nationwide. These products also include "food" within the meaning of Sections 12 and 15 of the Federal Trade Commission Act. PARAGRAPH THREE: 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. PARAGRAPH FOUR: Respondents have disseminated or have caused to be disseminated advertisements for the Jenny Craig Weight Loss Program, including but not necessarily limited to the attached Exhibits A through V. SUCCESS CLAIMS PARAGRAPH FIVE: The advertisements referred to in PARAGRAPH FOUR, including but not necessarily limited to the attached Exhibits A through I and Exhibit N, contain the following statements:
PARAGRAPH SIX: Through the use of the statements contained in the advertisements referred to in PARAGRAPH FIVE, including but not necessarily limited to the statements in the advertisements attached as Exhibits A-I and N, respondents have represented, directly or by implication, that Jenny Craig customers typically are successful in reaching their weight loss goals. PARAGRAPH SEVEN: Through the use of the statements contained in the advertisements referred to in PARAGRAPH FIVE, including but not necessarily limited to the statements in the advertisements attached as Exhibits A-I and N, respondents have represented, directly or by implication, that at the time they made the representation set forth in PARAGRAPH SIX, respondents possessed and relied upon a reasonable basis that substantiated the representation. PARAGRAPH EIGHT: In truth and in fact, at the time they made the representation set forth in PARAGRAPH SIX, respondents did not possess and rely upon a reasonable basis that substantiated such representation. Therefore, the representation set forth in PARAGRAPH SEVEN was, and is, false and misleading. PARAGRAPH NINE: The advertisements referred to in PARAGRAPH FOUR, including but not necessarily limited to the attached Exhibit B and Exhibits D through M, contain the following statements:
PARAGRAPH TEN: Through the use of the statements contained in the advertisements referred to in PARAGRAPH NINE, including but not necessarily limited to the statements in the advertisements attached as Exhibits B and D-M, respondents have represented, directly or by implication, that:
PARAGRAPH ELEVEN: Through the use of the statements contained in the advertisements referred to in PARAGRAPH NINE, including but not necessarily limited to the statements in the advertisements attached as Exhibits B and D-M, respondents have represented, directly or by implication, that at the time they made the representations set forth in PARAGRAPH TEN, respondents possessed and relied upon a reasonable basis that substantiated such representations. PARAGRAPH TWELVE: In truth and in fact, at the time respondents made the representations set forth in PARAGRAPH TEN, they did not possess and rely upon a reasonable basis that substantiated such representations. Therefore, the representation as set forth in PARAGRAPH ELEVEN was, and is, false and misleading. PROJECTION OF WEIGHT LOSS CLAIM PARAGRAPH THIRTEEN: In the routine course and conduct of their business, respondents state, during the initial sales presentation, that consumers typically will reach their desired weight loss goal within the time frame set by respondents' "PD Presentation" computer program. PARAGRAPH FOURTEEN: In truth and in fact, consumers typically will not reach their desired weight loss goal within the time frame set by respondents' "PD Presentation" computer program. Therefore, the representation set forth in PARAGRAPH THIRTEEN was, and is, false and misleading. PARAGRAPH FIFTEEN: Through the use of the statements described in PARAGRAPH THIRTEEN, respondents have represented, directly or by implication, that at the time they made the representation set forth in PARAGRAPH THIRTEEN, respondents possessed and relied upon a reasonable basis for the representation. PARAGRAPH SIXTEEN: In truth and in fact, at the time respondents made the representation set forth in PARAGRAPH THIRTEEN, they did not possess and rely upon a reasonable basis that substantiated such representation. Therefore, the representation set forth in PARAGRAPH FIFTEEN was, and is, false and misleading. PRICE CLAIMS PARAGRAPH SEVENTEEN: The advertisements referred to in PARAGRAPH FOUR, including but not necessarily limited to the attached Exhibit L and Exhibits N through R, contain the following statements:
PARAGRAPH EIGHTEEN: Through the use of the statements contained in the advertisements referred to in PARAGRAPH SEVENTEEN, including but not necessarily limited to the statements in the advertisements attached as Exhibits L and N-R, respondents have represented, directly or by implication, that the advertised price is the only cost associated with losing weight on the Jenny Craig Weight Loss Program. PARAGRAPH NINETEEN: In truth and in fact, the advertised price is not the only cost associated with losing weight on the Jenny Craig Weight Loss Program. There are substantial additional mandatory expenses associated with participation in the Jenny Craig program that far exceed the advertised price. Therefore, the representation set forth in PARAGRAPH EIGHTEEN was, and is, false and misleading. PARAGRAPH TWENTY: In their advertising and sale of the Jenny Craig Weight Loss Program, respondents have represented, directly or by implication, that the advertised price is the only cost associated with losing weight on the Jenny Craig Weight Loss Program. Respondents have failed to disclose adequately to consumers the existence and amount of all mandatory expenses associated with participation in the Jenny Craig program. This fact would be material to consumers in their purchase decisions regarding the program. The failure to disclose this fact, in light of the representation made, was, and is, a deceptive practice. HEALTH RISKS CLAIMS PARAGRAPH TWENTY-ONE: In the routine course and conduct of their business, respondents state:
PARAGRAPH TWENTY-TWO: In the routine course and conduct of their business, respondents provide their customers with diet protocols that require said customers, inter alia, to come in to a Jenny Craig Weight Loss Centre at least once a week for monitoring of their progress, including weighing in. PARAGRAPH TWENTY-THREE: Through the use of the statements set forth in PARAGRAPH TWENTY-ONE, and through the conduct of the monitoring described in PARAGRAPH TWENTY-TWO, respondents have represented, directly or by implication, on an ongoing basis to each customer, that customers on respondents' weight loss program lose weight safely and do not experience an increased risk of developing health complications. PARAGRAPH TWENTY-FOUR: In the course of regularly monitoring their customers' weight loss progress, respondents, in some instances, are presented with weight loss results indicating that a customer is losing weight significantly in excess of what would be expected, considering the daily caloric intake prescribed for that customer, which is an indication that the customer may not be consuming all of the calories prescribed by his or her diet protocol. Such conduct could, if prolonged, result in health complications associated with rapid weight loss. PARAGRAPH TWENTY-FIVE: Respondents have failed to disclose, either in their advertising, at point of sale, or to individual customers losing weight too rapidly, that such weight loss, if prolonged, could result in health complications, including the development of gallbladder disease. This fact would be material to consumers in their purchase and use decisions regarding respondents' program. PARAGRAPH TWENTY-SIX: In light of the representations set forth in PARAGRAPH TWENTY-THREE, respondents' failure to disclose that not consuming all of the calories prescribed by the diet protocol, if prolonged, could result in health complications, including the development of gallbladder disease, is a deceptive practice. PARAGRAPH TWENTY-SEVEN: In providing the advertisements referred to in PARAGRAPH FOUR and the materials referred to in PARAGRAPH THIRTEEN and PARAGRAPH TWENTY-ONE to their individual franchised stores for the purpose of inducing consumers to purchase their weight loss services and products, respondents have furnished the means and instrumentalities to those stores to engage in the acts and practices alleged in PARAGRAPHS FIVE through TWENTY-SIX. CUSTOMER SATISFACTION CLAIMS PARAGRAPH TWENTY-EIGHT: The advertisements referred to in PARAGRAPH FOUR, including but not necessarily limited to the attached Exhibits S through V and Exhibit L, contain the following statements:
PARAGRAPH TWENTY-NINE: Through the use of the statements contained in the advertisements referred to in PARAGRAPH TWENTY-EIGHT, including but not necessarily limited to the statements in the advertisements attached as Exhibits S-V and L, respondents have represented, directly or by implication, that competent and reliable studies or surveys show that ninety percent or more of Jenny Craig customers would recommend the Jenny Craig Weight Loss Program. PARAGRAPH THIRTY: In truth and in fact, competent and reliable studies or surveys do not show that ninety percent or more of Jenny Craig customers would recommend the Jenny Craig Weight Loss Program. Therefore, the representation set forth in PARAGRAPH TWENTY-NINE was, and is, false and misleading. PARAGRAPH THIRTY-ONE: Through the use of the statements contained in the advertisements referred to in PARAGRAPH TWENTY-EIGHT, including but not necessarily limited to the statements in the advertisements attached as Exhibits S-V and L, respondents have represented, directly or by implication, that ninety percent or more of Jenny Craig customers would recommend the Jenny Craig Weight Loss Program. PARAGRAPH THIRTY-TWO: Through the use of the statements contained in the advertisements referred to in PARAGRAPH FOUR, including but not necessarily limited to the statements in the advertisements attached as Exhibits S-V and L, respondents have represented, directly or by implication, that at the time they made the representations set forth in PARAGRAPHS TWENTY-NINE and THIRTY-ONE, respondents possessed and relied upon a reasonable basis that substantiated such representations. PARAGRAPH THIRTY-THREE: In truth and in fact, at the time they made the representations set forth in PARAGRAPHS TWENTY-NINE and THIRTY-ONE, respondents did not possess and rely upon a reasonable basis that substantiated such representations. Therefore, the representation set forth in PARAGRAPH THIRTY-TWO was, and is, false and misleading. PARAGRAPH THIRTY-FOUR: 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. IN WITNESS WHEREOF, the Federal Trade Commission has caused this amended complaint to be signed by its Secretary and its official seal to be hereto affixed at Washington, D.C. this nineteenth day of February, 1998. By the Commission, Chairman Pitofsky recused and Commissioner Azcuenaga not participating. Donald S. Clark |