| DEBRA VALENTINE General Counsel CHARLES A. HARWOOD ELEANOR DURHAM LISA B. KOPCHIK UNITED STATES DISTRICT COURT FEDERAL TRADE COMMISSION, Plaintiff, v. ROSE CREEK HEALTH PRODUCTS, INC., THE STAFF OF LIFE, INC., and DONALD L. SMYTH, Defendants. Civil Number COMPLAINT FOR PERMANENT INJUNCTION AND OTHER EQUITABLE RELIEF Plaintiff, the Federal Trade Commission ("FTC" or "Commission") for its Complaint alleges: 1. The Commission brings this action pursuant to Section 13(b) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. § 53(b), to obtain preliminary and permanent injunctive relief, an accounting, restitution, rescission, disgorgement and other equitable relief for defendants' deceptive acts or practices in connection with the advertising, marketing and sale of an alleged nutritional supplement, "Vitamin O," in violation of Sections 5(a) and 12 of the FTC Act, 15 U.S.C. §§ 45(a) and 52. JURISDICTION AND VENUE 2. This Court has jurisdiction of this matter pursuant to 28 U.S.C. §§ 1331, 1337(a), and 1345, and 15 U.S.C. § 53(b). 3. Venue in the Eastern District of Washington is proper under 28 U.S.C. § 1391 and 15 U.S.C. § 53(b). PLAINTIFF 4. Plaintiff, the Federal Trade Commission, is an independent agency of the United States Government created by statute. 15 U.S.C. §§ 41 et seq. The Commission is charged, inter alia, with enforcement of Sections 5(a) and 12 of the FTC Act, 15 U.S.C. §§ 45(a) and 52, which respectively prohibit unfair or deceptive acts or practices in or affecting commerce, and false advertisements for food, drugs, devices, or cosmetics in or affecting commerce. The Commission is authorized to initiate federal district court proceedings to enjoin violations of the FTC Act and to secure such equitable relief, including consumer redress, as may be appropriate in each case. 15 U.S.C. § 53(b). DEFENDANTS 5. Rose Creek Health Products, Inc. ("Rose Creek"), is a Washington corporation with its principal place of business at 3881 Enzyme Lane, Kettle Falls, Washington 98141. Since 1998, Rose Creek has been engaged in the wholesale and retail sale of nutritional products via mail order. Rose Creek transacts business in the Eastern District of Washington. 6. The Staff of Life, Inc. ("SOL"), is a Washington corporation with its principal place of business at 3881 Enzyme Lane, Kettle Falls, Washington 98141. Since 1990, SOL has been engaged in the wholesale and retail sale of nutritional products via mail order. SOL does business as R-Garden or R-Garden Internationale. SOL transacts business in the Eastern District of Washington. 7. Defendant Donald L. Smyth owns 100% of the capital stock of the corporate defendants Rose Creek and SOL. At all times relevant to this complaint, acting alone or in concert with others, he has formulated, directed, controlled, or participated in the acts and practices of defendants Rose Creek and SOL, including the acts and practices set forth in this complaint. He resides and transacts business in this District. COMMERCE 8. At all times relevant to this complaint, defendants' course of business, including the acts and practices alleged herein, is and has been in or affecting commerce, as "commerce" is defined in Section 4 of the FTC Act, 15 U.S.C. § 44. DEFENDANTS' BUSINESS PRACTICES 9. Defendants have advertised, promoted, offered for sale, and sold a purported nutritional supplement called "Vitamin O" to consumers via Internet and newspaper advertising. Consumers can order the product by calling a toll free telephone number or by mail. According to defendants' advertisements, "Vitamin O" consists of "intact oxygen molecules in a liquid solution of distilled water, sodium chloride and trace minerals." The product label claims that "Vitamin O" contains 3% dissolved, stabilized oxygen; close to 30,000 parts per million ("ppm") total oxygen concentration. The "Vitamin O" product label is attached as Exhibit A. In contrast, defendants assert that tap water in most cities contains only 5 to 7 ppm of dissolved oxygen. 10. Defendants claim that many people suffer diminished health and disease as a result of oxygen deprivation caused by pollution, deforestation, stress or other causes, and that "Vitamin O" will provide the oxygen needed for optimum health. Further, defendants claim that consumers can effectively treat life-threatening diseases including cancer, cardiovascular disease, and pulmonary disease with "Vitamin O." 11. Exhibit B is an advertisement placed by defendants in USA Today. Exhibit B makes the following statements:
12. Exhibit C is an advertisement placed by defendants in USA Today. Exhibit C makes the following statement:
13. Exhibit D is an Internet advertisement placed by defendants on their website at www.rgarden.com. This advertisement contains the following statements:
14. Defendants have placed a publication on their Internet website that they claim is "a report from Bio/Tech News, a newsletter that focuses on inside information on important innovations in Bioscience and Technology." This publication, as it appears on defendants' website, is attached as Exhibit E. This "report" contains quotes from numerous doctors and researchers advising consumers that decreasing levels of oxygen in the air are in large part responsible for cancer, arthritis, heart disease, Alzheimer's disease, chronic fatigue, premature aging and many other serious ill-health conditions. According to the experts cited in the "report," scientific and medical research has resulted in one of the most important new health-giving, disease-preventing, and life-extending breakthroughs of the 20th century. This breakthrough is "Vitamin O." "Vitamin O" is described as a "dramatic and beneficial new breakthrough in orthomolecular medicine," a "breakthrough regarding oxygenation of the human body [that] has effectively solved some of the most perplexing problems that have been faced by modern medicine in its attempts to energize and vitalize the human body and its immune system, and give the body the power it needs to overcome illness and chronic degenerative disease." This "report" also contains the following statement: Stabilized oxygen is a new generation of super oxygenation technology developed by Dr. Williams F. Koch M.D., Ph.D. and then later utilized by NASA for the space research program. According to Dr. David Holden, Dip. Bio. Chem., 'Stabilized oxygen was designed to destroy any known and unknown microorganisms with a minimum dose, yet maintain its safety to the host. The obvious use -- to help the astronauts avoid bringing back any germs or foreign organisms in their body fluids.' 15. Defendants charge $40 plus $5 for shipping for two 2-oz. bottles of "Vitamin O;" $70 plus $5 for shipping for four 2-oz. bottles of "Vitamin O;" and $100 plus $5 for shipping for six 2-oz. bottles of "Vitamin O." DEFENDANTS' VIOLATIONS OF THE FTC ACT 16. Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), prohibits unfair or deceptive acts or practices in or affecting commerce. Section 12(a) of the FTC Act, 15 U.S.C. § 52(a), prohibits the dissemination of any false advertisement in or affecting commerce for the purpose of inducing, or which is likely to induce, the purchase of food, drugs, devices, or cosmetics. As set forth below, the defendants have engaged and are continuing to engage in such unlawful practices in connection with the marketing and sale of "Vitamin O." 17. For the purposes of Section 12 of the FTC Act, 15 U.S.C. § 52, "Vitamin O" is either a "food" or a "drug" pursuant to Section 15(b) and (c) of the FTC Act, 15 U.S.C. § 55(b) and (c). COUNT ONE 18. Through the use of representations, testimonials, and statements contained in the advertisements, attached as Exhibits A through E, defendants have represented, expressly or by implication, that:
19. In truth and in fact:
20. Therefore, the representations set forth in Paragraph 18 are false and misleading and constitute deceptive acts or practices and false advertisements of a food, drug, device or cosmetic in or affecting commerce, in violation of Sections 5(a) and 12 of the FTC Act, 15 U.S.C. §§ 45(a) and 52. COUNT TWO 21. Defendants did not possess and rely upon a reasonable basis that substantiated the representations set forth in Paragraph 18, at the time the representations were made. 22. Therefore, the making of the representations set forth in Paragraph 18 was, and is, a deceptive act or practice in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a). CONSUMER INJURY 23. Consumers have suffered or are likely to suffer substantial monetary loss as a result of defendants' unlawful acts or practices. Absent injunctive relief by this Court, defendants are likely to continue to injure consumers and harm the public interest. THIS COURT'S POWER TO GRANT RELIEF 24. Section 13(b) of the FTC Act, 15 U.S.C. § 53(b), empowers this Court to issue preliminary and permanent injunctions against defendants' violations of the FTC Act and, in the exercise of its equitable jurisdiction, to order such ancillary relief as preliminary monetary relief, rescission, restitution, and disgorgement of profits resulting from defendants' unlawful acts or practices, and other remedial measures. PRAYER FOR RELIEF WHEREFORE, plaintiff requests that this Court, as authorized by Section 13(b) of the FTC Act, 15 U.S.C. § 53(b), and pursuant to its own equitable powers:
Dated:_____________, 1999 Respectfully Submitted, DEBRA A. VALENTINE _______________________________ LISA B. KOPCHIK |