Stauffer Laboratories, Inc.

Text (OCR of the scan at left; may contain errors)

I" THE MATTER OF STAUFFER LABORATORIES, IKC., ET AL.

armER, OPIKION , ETC., I REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE COM:MISSION ACT Docket 7841. Complaint, Mar. fl, 1960-Decision, Feb. 7, 1964 Order requiring Los Angeles sellers of a device operated by electric current and designated as a "Posture Rest" and "Magic Couch", to cease reprerenting falsely in advertisements in magazines and periodicals and in advertising matter and brochures distributed to dealers that the device was of value in reducing the body in particular areas such as hips, thighs, legs and stomach, as well as the over-all bod.y weight, and that it would tone and firm sagging muscles.

COMPLAINT * Pursuant to the provisions of the Federal Trade Commission Act and by virtue of the authority vested in it by said Act, the Federal Trade Commission having reason to believe that Stauffer Labora. .. Reported as amended by order of hearing examiner dated Oct. 20, 1960. 630 FEDERAL TRADE CO:'\L\fISSION DECISIONS Complaint 64 F.

tories, Inc. , a corporation, and Bernard H. Stauffer, individually and as an offcer of said corporation, hereinafter referred to as respondents, have violated t.he provisions of said Act, and it appearing to the Comlnission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint stating its charges in that respect as follows:

PARAGRAPH 1. Respondent Stauffer Laboratories, Inc. , is a corporation organized, existing and doing business under' and by yinue of the laws of the State of New Mexico, with its principal olfice and place of business located at 1910 Vineburn Avenue, in the eit\" of Los RespondentAngeles, BernardCalifornia.H. Stauffer is the president of the corporate respondent and formulates, directs and controls the acts and practices of the corporate respondent, including the acts and practices hereinafter set forth. 1-lis address is the same as that of t.he corporate respondent.

PAR. 2. Respondents are now, and for some time lnst past lli,,been, engaged in the advertising, offering for sale, sale m1Cl distribution, directly to the public and also to distributors and clear1el's. of a device as "device" is defined in the Federal Trade Commission Act used in connection with the "Sta.uffer Home Plan . Such del-ice operates by electrical CUlTent and is and has been designated 8.S a Posture Rest" and ":l\magic Couch:' PAR. 3. Respondents cause the said device, when sold, to be llall::ported from their place of business in the State of Ca1iforniCl to purchasers thereof located in various other states of the United t:states and in the District of Columbia both for renta.l and sale. Hesponclents maintain, and at an t.times ment.ioned herein have mailstained, fi course of trade in said device in commerce as " COmlTlerce is defined in the Federal Trade Commission Act. The volume of business in such commerce has been and is substantial PAR. 4. In the course and conduct of their aforesaid busines2 respondents have disseminated, and have caused the dissemination oL certain advertisements concerning the said device by the United t:states mail and by various Ineans in commerce, as "comme.rce :: is defined in the Federal Trade Conllnission Act, including but not limited to magazines and periodical1s of general circula,tion and in advertising matter and brochures supplied to dealers and distributors, for the purpose of inducing and wlyieh were likely to induce directly or indirectly, the purchase of 2aicl device; and respondents have disseminated, and ca.,used the dissemination of, ac1n rtjsemcllts STAUFFER I.JABORATORIES INC. ET AL. 631 628 Complaint concerning said device by various means, including but not limited to the aforesaid media, for the purpose of inducing and which \\er8 likely to induce, directly or indirectly, the purchase of said cleyice in commerce, as "commerce" is defined in the Federal Trade Commission Act.

1) AR. 5. Among and typical of the statements and representatiolls contained in said advertisements disseminated a,s hereinaboye set. forth are the following:

Greet summer with a lovelier figure.

How you ll look in a swimsuit depends on how you reduce. No longer need heavy hips, thighs, legs and waistlne "rolls embarrass you. Beautify your posture, reproportion your figure into more youthful looking, lovelier lines by trimming a way umvanted inches with the famous Stauffer home reducing plan of effortless exercise and calorie reduction. And the wonderful thing is that you can do this in your own home.

Reduce-while you relax * * * with the Stauffer home reducing plan.

This plan of effortless exercise and calorie reduction lets you lose poundsand inches-while you relax on the l\magic Couch", the famous Posture-Rest.

The Magic Couch (Posture-Rest) is the heart of the Stauffer plan of effortless exercise and calorie reduction. oJ '" * You lose unwanted pounds.

You lose inches where you need to-from hips, tummy, thighs. Yon acbiew a graceful lifted posture.

Your skin fits smoothly-sagging tissue is firmed and toned. * * * There is more to the Stauffer home plan than just reducing. Rather, it is a complete program of scientific figure control. It not only takes off excess weight, but also removes hard-to-Iose inches from ankles thighs, hips and tummy. * * * For a woman, it tones Rnd firms sagging muscles, beautifies posture for a lovelier carriage, and gives her a more youthfu-looking figure.

PAR. 6. Through the use of the statements contained in the afore. said advertisements, a,nd others similar thereto not specifically set out herein, respondents have represented and are now representing: cli- , FEDERAL TRADE COj\lMISSIO DECISIONS632 Initial Decision 64 ji' rectly and by implication, that said device used in connection with a Plan" which provides for a low calorie diet: 1. Is of value in reducing the, body in particular areas such as hips thighs, legs, and the stomach, as well as the over.all body weight. * 2. Will tone and firm sagging muscles.

PAR. 7. The said representations were and are misleading in material respects and constituted, and now constitute false advertisements" as that term is defined in the Federal Trade Commission Act. In truth and in fact, the use of said devices: 1. Is of no value either in reducing the body in any particular area or the over.all body weight. Any reduction of weight that might re suit from the use of respondents Plan" wil be brought about by the reduction in the caloric intake and not by use of the device. 2. 'Will neither ione nor firm sagging muscles. PAR. 8. The dissemination by the respondents of the false adver. tisements, as aforesaid, constituted, and now constitutes, unfair and deceptive acts and practices in commerce, within the intent and meaning of the Federal Trade Commission Act.

Mr. Harold A. Kennedy supporting the complaint. Rhyne Rhyne Washington, D. , by Mr. Oharles S. Rhyne for respondents.

INITIAL DECISIO BY EDWARD CREEL, HEARING EXA:'finer MARCH 21 , 1963 Thc Federal Trade Commission issued its complaint against the respondents on March 21, 1960, charging them with disseminating advertisements which falsely represented the effects to be obtained from a device designated as Posture. Rest and as Magic Couch in connection with their Stauffer Home Reducing Plan. The complaint charged that these practices constituted unfair and deceptive acts and practices in violation of Section 5 of the Federal Trade Commis. sion Act. Respondents' answer denied generally the allegations of the complaint, although some allegations were admitted. Following the trial of the case, the hearing examiner fied an initial decision on June 26, 1962. On February 21, 1963 (62 F. C. 1511J, the Commis. sion vacated and set aside this initial decision and remanded the matter to the hearing examiner for his further consideration and for the prepa.ration and filing of a new initial deeisioll. . Reported as amended by order of hearing examiner dated Oct. .20 , 1060 STAUFFER LARORATORIES, INC. , ET AL. 633 629 initial Decision This proceeding is again before the hearing examiner for final consideration upon the complaint, answer, testimony and other evi. dence, and proposed findings of fact and conclusions filed by counsel for respondents and by counsel supporting the complaint and oral arguent thereon. Consideration has been given to the proposed find ings of fact and conclusions submitted by both parties, and all pro. posed findings of fact and conclusions not hereinafter specifically found or concluded are rejected, and the hearing examiner, having considered the entire record herein, makes the following findings of fact, conclusions drawn therefrom, and issu.es the following order: FINDINGS OF FACT Respondent Stauffer Laboratories, Inc., is a corporation organized existing and doing business under and by virtue of the laws of the State of New :Mexico, with its principal offce and place of business located at 1919 Vineburn Avenue, Los Angeles, California. Respondent Bernard H. Stauffer is president of the corporate respondent and formulates, directs and controls the acts and prac. tices of the corporate respondent. His address is the same as that of the corporate respondent.

Respondents for some time last past have been engaged in the advertising, offering for sale, saJe and distribution, directly to the public and also to distributors and dealers, of a clevicB, as "device" is defined in the Federal Trade Commission Act, used in connection with a body.reducing plan called the "Stauffer Home Plan." Such device operates by electrical current and is, and has been designated as L "Postllre-Rest and ")fagic Couch"

Respondents cause the said device, when sold, to be transported from their place of business in thc State of California to purchasers t.hereof located in various other States of the United States and in the District of Columbia both for rental and sale Respondents main. tain, and at all times mentioned herein have maintained, a course of trade in said device in commerce, as "commerce" is defined in the Federal Trade Commission Act. The volume of business in such commerce has been, and is, substantial.

In the course and conduct of their aforcsaid business, respondents have disseminated, and have caused the dissemination of, certain advertisements concerning the said device by the United States mail and by various means in commerce, as "commerce" is defined in the Federal Trade Commission Act, including but not limited to maga. zines and periodicals of general circulation and in advertising matter 224 OG9-'i0--1 / . .

Initial Decision 6f F. and brochu.es supplied to dealers and distributors, for the purpose of inducing and which were likely to induce, directly or indirectly, the purchase of said device; and respondents have disseminated, and caused the dissemination of, advertisements concerning said device by various means, including but not limited to the aforesaid media for the purpose of inducing and which were likely to induce, directly or indirectly, the purchase of said device in commerce, as "commerce is defined in the Federal Trade Commission Act. Among and typical of the statements and representations contained in said advertisements disseminated as hereinabove found are the following:

Greet summer with a lovelier figure.

How you ll look in a s\vimsuit depends all how you reduce. o longer need heavy hips, tbighs, legs fiDd waistlne "rolls embarras you. Beautify your posture, reproportioD your figure into more youthful looking, lovelier lines by trimming away unwanted inches with the famous Sta ll:fer home reducing plan of effortless exercise and calorie reduction. And the wonderful thing is that you Can do this in your own borne.

Reduce-while you relax .. with the Stauffer home reducing plan.

This plan of effortless exercise and calorie reduction lets you lose poundsand inches-whHe you relax on the :Magic Couch", the famous Posture-Rest.

. . . You lose unwanted pounds.

You lose inches where you Deed to-from hips, tummy, thighs. You achieve a graceful, lifted posture. Your skin fits smoothly-sagging tissue is firmed and toned. . . .

There is more to the Stauffer home plan than just reducing. Rather, it is a complete program of scientific figure control. It not only takes off excess weight, but also removes hard-to-Iose inches from ankles thighs, hips and tummy. . .

For a woman, it tones and firms sagging muscles, beautifes posture for a lovelier carriage, and gives her a more youthful-looking figure.

" " . The Magic Couch (Posture-Rest) is the heart of the Stauffer Plan of effortless exercise and calorie reduction.

STAUFFER LABORATORIES ET AL. 635 629 Initial Decision Through the use of the statements contained in the aforesaid advertisements respondents have represented, directly and by impli. cation, that said device used in connection with a plan which provides for a low calorie diet:

1. vVill reduce the body in particular areas such as hips, thighs, legs, and stomach, as well as the over.all body weight. 2. vVill tone and firm sagging muscles.

The foregoing findings of fact are in substance those which wem proposed by counsel supporting the complaint and were conceded by respondents to be accurate, except that respondents did not concede that the advertisements referred to above were typical of respondents advertising or that the description of respondents' plan was complete. I'r. 1461- 62.

The complaint alleges that respondents' device, which they desig. nate as "Posture-Rese' and "Magic Couch", is of no value either in reducing the body in any particular area or the over.all body weight and will neither tone nor firm sagging muscles, and that as a result the dissemination of the above advertisements, and others of like import, were false and constituted unfair and deceptive acts and practices in commerce within the intent and meaning of the Federal Trade Commission Act.

The basic device is composed of a motorized unit with a platform on top which has been described by respondents as an oscilating platform; a leg and foot rest; and an upper body and head rest. Thus, the basic device is composed of three parts. Respondents can. tend that they are selling not only this device, but a home reducing plan which includes a "Calorie Guide" and consultations with the counselor or salesman who ma,kes the original sale to the user. EVIDENCE SUPPQRTIXG THE COMPLAINT In support of the allegations that respondents' device is ineffective in reducing weight and toning and firming muscles, counsel support. ing the complaint adduced testimony from several physicians, two of whom had conducted certain tests of respondents' device. The first of t,Jwse, Dr. Charles S. 'Vise l was professor of physical medicine and rehabilitation at Gcorge 'Washington University School of 1\fedi. cme and director of the Department of Physical Medicine and Rehabilitation at George vVashington University Hospital. His cdu. cation, experience, and a list of his writings are set forth in detail in Commission Exhibits 18, 19 and 20.

1 'Testimony begins at Tr. 31.

636 FEDERAL TRADE COMMISSION DECISIOXS Initial Decision 64 F. T. At the request of someone at the Federal Trade Commission Dr. 1Vise conducted tests of the Magic Couch by hav;ng a number of obese employees of the George 1Vashington University Hospital use ;t at the hospital for a period of ten weeks. He concluded- . '. '" on my experience and knowledge of the effectiveness of massage, pbYSiological effects, the physiological effects of mechanical massage, my knowledge and experience in the management of patients with obesity, my knowledge and -experience dealing with muscle physiology, muscle tone, muscle weakness and strength, the Bum of my clinical experience, plus, together with my observations of the use of this device, as well as other mecbanical devices. (Tr. 48. that the Magic Couch had no effect on weight or dimensions, and would not tone or Jirm muscles. He further stated that the device would not accomplish these things either alone or in any plan which he could conceive.

Dr. Frederick J. Kottke ' professor and head of the Department of Physical :\Iedicine and Rehabilitation of University of .Minnesota :!Iedical School, whose education, experience, and publications are set forth in Commission Exhibits 21 and 22, testified to the same effect. He also made tests of respondents' device at respondents' behest in 1958, and the results of these tests, which recorded increases in oxygen consumption of individuals using the device, a.re sho,,-n by Commission Exhibits 23 and 24.

The maclUne which he used was caJJed "Metabolaid", which was one of respondents' machines. This machine could be operated at one.half the speed of the Magic Couch and it is not clear which speed was used. Dr. Kottke testimony, which.h was given several years after these tests were performed, was- My opinion is that the machine of this type using vibration or oscilation in the manner recommended in the treatment brochure has no little eflect on producing or requiring an increase in energy consumption of muscles or of the body as a whole that it is less than the normal energy consumption and consequently would not be effective in increasing either the rate of energy or the reduction of tat in the body, (Tr. 117. He further said:

The couch wil be ineffective in influencing change in weight regardless of what other aspects are used in the treatment and The couch would be ineffective in increasing strength or tone of muscle. (Tr. 119.

Dr. Arthur S. Abramson ' professor and chairman of the Depart. ment of RehabUitation and Medicine at Albert Einste;n College of 2 Testimony begins at Tr. 80.

Testimony begins at Tr. 138.

STAUFFER LABORATORIES, INC. , ET AL. 637 629 Initial Decision .Medicine of Yeshiva University, and director and visiting physician, physical medicine and rehabilitation, Bronx Municipal Hospital Center, whose training and experience, associations, and list of publications are shown by Commission Exhibit 26, testified that he had examined respondents' device briefly and respondents ' instructions for its use; that it was his opinion that the Magic Couch was of no value in rcducing the body, either over. all or in any particular area; and that it would not tone or firm muscles. He further testified in substance that in his opinion neither diet nor anything else in c.ombination with the fagic Couch would make the Magic Couch more effective.

These three eminently qualified physicians, two of whom had made tests of respondents' device as hereinbefore described, all testified that the device was of no value in reducing weight or toning or firming muscles either alone or in conjunction with a diet or anything else.

RESPONDENTS ' EVIDEXCE Dr. Irving Rehman ' a Doctor of Philosophy but not a Doctor of )ledicine, associate professor of Anatomy at the University of outhern California School of Medicine, testified that respondents device caused an expenditure of energy, and that in 1955 or 1956 he participated in the taking of X.ray motion pictures, in the record as Respondents Exhibits 2 and 3, which were shown at the hearing. These pictures were taken of polio patients at the Sister Kenny Memorial Hospital, EI Monte, California. He said that the X.ray motion pictures were made of areas not involved which presumably means the pictures were made of muscles which were not paralyzed by polio. Dr. Rehman stated that he was an expert in X.ray motion pictures but was not an expert in the interpretation of them. It is concluded that these motion pictures demonstrated that the unit caused a movement of the muscles shown in the pictures but that the amount or degree of such movement or the effect of this movement on weight reduction or nluscle tone cannot be determined from this evidence.

Respondents adduced evidence of Dr. Horace Alfred Anderson a practicing physician in private practice in Tacoma, \Vashington who was a specialist in intc.rnal medicjne. A substantial part of his practice consisted of treating over. weight people. He testified that about 125 of his patients had used respondents' device and that about 'Testimony begins at Tr. 171.

o Testimony begins at Tr. 660.

, .

638 FEDERAL TRADE CO L'vIISSIO)l DECISIONS Initial Decision 64 ,' 50 percent of them lost weight without changing their dietary habits. He also testified that in his opinion the device would tonc and firm sagging muscles.

Dr. Anderson further testified in substance that the medical pro. fession generally would be convinced that the device was not etreetiw. Although Dr. Anderson had at one time been financially interested in the sale of respondents' device in Canada, it is believed that Dr. Anderson believed that respondents' device. was efi'cdlv8 in reducing weight in certain cases even though he apparently had no explanation which was acceptable to him as to how the dfect ',fis accomplished.

Dr. George Gilbert Rowland Kunz 6 a general practitioner, in Tacoma Vashington, testified that he believed respondents' device would reduce certain areas of the body, 'would reduce total body weight, and would tone and firm musculature. Hespondents also adduced evidence of Dr. John E. Potts ' a private practitioner in Walla Valla, 'Va,shington ho 'was connected w' ith a test of eleven individuals for a five. week period in 1961. The results of these tests are in the record as Respondents Exhibits 54 , 55, and 56. The records which show the weight loss of these individuals were kept by a " Stauffer technician :: in the Stauffer office, and there, is considerable doubt as to Dr. Potts' knowledge of the correctness of these results or the manner in which they were obtained. S a medical doctor who was Chief of Stall Dr. Mervin H. Ellestad , testifiedat the Harbor General Hospital, Torrance, CRlifornia regarding a study which he conducted in a hospital at Long Beach California. The purpose of this test was to determine thc increased consumption of oxygen through the use of respondent.s' device. This test showed an increase in oxygen consumption of the individuals tested, and a description of the results of the test is in the record as Respondents Exhibit 57. These tests included rcsistiyc positions of individuals on the device as well as passive positions. Dr. Philip J. Charley,' a Ph. D. in biochemistry and nutrition with S. and I.S. degrees in engineering, who was a yice president of Truesdai1 Laboratories of Los Ange1cs. testified regarding tC2ts which he performed to determine oxygen consumption through the use of respondents' device which were similar to the tests performed by Dr. Ellestad. A description of these tests and the results, which show the. flmount of oxygen consumption increase, are shm,n in Respondents Exhibit 6.

! Testimony begins at Tr. 812.

1 Testimony begins at Tr. 882.

S Testimony begins at Tr. 966.

g Testimony begins at Tr. 223 STAUFFER LABORATORIES, INC., ET AL. 639 629 Initial Decision Dr. Harry H. Wilson " a medical doctor of Los Angeles, who was employed by respondents as a full.time consultant since 1958, follow. ing his retirement from active practice of medicine, testified that when he first came with the organization he was very much of the opinion that any potential effect of respondents' device was largely psychological, but that he had sinco changed his opinion and that he gradually came to the conclusion that if the device did affect the body it would do so only because it initiated normal reflex aetions that were inherent within the body and that it was suffcient to stim. ulate muscular lengthening and contraction or neuromuscular reflex actions. It was his further view that the device without caloric reduction could cause weight loss, providing various factors were completely favorable to that end result, and he said those factors werer- The nutritional intake would have to be so nearly equilbrium, as far 8S weight and gain of the user was concerned, that a small increase, a very sligbt increase in calorie consumption might tend toward the loss of weight. (Tr. 1076.

In answer to an inquiry as to the principal effect of the device when used by an obese person, he stated:

I think-this is purely an opinion and it would vary according to the individual, because they all could not possibly have the same principal effect. My impression has been that its value to the plan, from a psychological standpoint, would be the sense of self.esteem that embarking upon an improvement prognnn caused in the l1S('l' , plus the addiction to this more or less pleasant feeling, at fixed times per day, would be more likely to cause them to stick to their overall (sick program than if it were, not a part of the plan. Physiologically I think that the postural improving factors such as the stretching of non-elastic tissues, which tend to immobilze joinfs, and probably the stretching of spastic muscles, "bich may be helping immobilze joints in a bad posstore, gives, may give to the average person a sense of relaxation and freedom of movement, and increased sense of well.being, which encourages them to keep on tbe improvement program. (Tr. 1076-77. In explaining that he believed the unit produces definite muscular activity, he stated:

There are three or four neuromuscular mechanisms within the body that I referred to, that are inherent. The simplest would be the direct stretch of a muscle. From my own observation, that isn t operative too many times by the placement of the body on this moving platform. In other words, I am inclined to believe, for those individuals whom I tested, the stretch was insuffcient to affect the direct stretch reflex too often. It may be my studies were too limited, and the subjects too limited. (Tr. 1077.

Respondents produced evidence of electromyograph tests and pic. tures of such tests as proof that the device will contract muscles. 10 Testimony begins at Tr. 1057.

640 FEDERAL TRADE COl\ISSION DECISIONS Initial Dedsion 64 F.

In their oral argument on the proposed findings they stated that they did not place any great reliance on this evidence, that no specific findings regarding the electromyograph evidence were requested (Tr. 1496), and that they requested that this evidence be considered only insofar as it would support the evidence that muscle movement was caused by the device. Since it is found that the X.ray motion pictures do show muscle movement, no finding is being made regarding the electromyograph evidence.

Respondents also called twelve users of the device who testified that while they were on respondents' reducing plan they lost varying amounts of weight and inches. One of these witnesses testified that although she lost a total of 130 pounds, her eating habits remained unchanged.

Respondents conducted a contest which closed in April 1959 called the "10 Happiest 'Women . This contest was initiated by an employee of respondents, who became employed by the advertising agency which completed the contest. The purpose of the contest was to obtain information to form the basis for a national advertising program which would feature the ten winners of the contest. Entry forms were sent to customers of respondents, presumably by way of the sales. women or counselers, and the contestants were to sho\" certain body measurements and body weight prior to using the Stauffer Home Reducing Plan and the same information after having used it. The contestants were also instructed to furnish before and after photo. graphs and to write a statement of their reasons why they were happier after using the plan. Each of the ten winners received a dream trip for two to Paris and London . (CX 6-:") Respondents did prepare and nse national advertising based on these photo. graphs and descriptions of weight Joss of many of these contestants. The entry forms containing the information described for about 230 women are in the record as Respondents Exhibits 26 thru 35. While this evidence shows weight loss of these individuals over a period of time, it is not competent to prove the reasons for such weight loss or the effectiveness of respondents' device. REnVTTAI EVIDENCE IN S-CPl'ORT OF Tire fPLAI An additional reason for not making specific findings with respect to the electromyograph evidence is the fact that Dr. .Joseph Goodgold l1 associate clinical professor, New York University Coj1ege of Medicine, Department of PhysicalJledicine and Rehabilitation, who had had considerable experience in the field of electromyography, 11 Testimony begins at Tr. HOT.

STAuJ'J'ER LABORATORIES , INC. , ET AL. 641 629 Initial Decision testitied that electromyography cannot be used to determine the amount of muscle movement. Also, Dr. Alberto A. Marinacci " an associate professor in the Department of K eurology at the University of Southern California School of Medicine, who teaches the "elec. tromyogram and brain waves, testified that * * * An electromyograph only Is good for one thing and that is to record the activity generated by the nerve of the muscle to see whether there 18whether it is a normal or an abnormal state, that is it, Dot to the variation of' their anomaly, How mucn work that can do, how much that can not do, that wil not do that. (Tr. 862) Dr. G. Donald 'Whedon " Chief, Metabolic Disease Branch National Institute of Arthritis and Metabolic Diseases, National Institutes of Health, Bethesda, Maryland, whose education, experi. ence, and publications are set forth in Commission Exhibit 80 studied the evidence given by Drs. Ellestad and Charley and the results of the tests they performed, and in commenting upon his interpretation of the results of Dr. Ellestad's work stated: I intend to comIJttl'e the energy expcnctiture in the lying-do\vn position lying on the unit, with the unit in operation, and with the unit Dot turned on, as the best controlled situation in which to determine the action of this unit to increase the expenditure of energy, which in my understanding is its intention.

Now comparing in this one position with the unit on and the unit ofr, there is only a four per cent difference, and by statistical analysis this is not statistically significant.

Now in addition to that, there was made the same comparison with the ma. chine on and off-this is in Dr. Ellestad's data I am talking about-looking at his figures for tbe difference with the machine on and off in all three passive positioll, tbe positions in which Dr. Ellestad at the bottom of page 3 of bis report says that he obtained only 10. 5 per cent difference. By statistical analysis this difference is not significance (sic). by my statistical analysis. I started to say that I would like to comment in relation to this matter, if we were to accept the difference in energy expenditure between the machine on and off in all three passive positions, if we were to accept this difference of 17 ccs per meter square per minute as significant, then I would like to indicate whnt significance' e this really has in biological terms. By that I mean, in order to accomplish the purpose for which the machine appears to be intended, the reduction of weight, the expenditure of energy, no,y 17 ees of oxygen per meter square per minute calculates out to be 8. calories of energy per hour, if tbe machine is run for an entire hour. Now the point that I think-the concept that I think is very important for everyone to understand, is this concept of basal metabolism. That is the energy u Testimony begins at Tr. 839.

11 Testimony begins at Tr. 1330.

Initial Decision 64 F.

expenditure in the resting situation which is used by Dr. Ellestad as the base line from which all of his comparisons of the machine were made. This is a situation in which the patient or subject is resting quietly in bed, not having consumed any food or drink for the preceding 10 to 14 hours. Now the point is this: The moment that a subject shifts his position, sits up, dresses, or eats or even begins to talk, his energy expenditure becomes higher than the basal metabolic level. So that as I am sitting here talking, I am expending more energy by a significant amount than I would if I were in the basal situation, so that I think we need to have that concept in mind in examining the magnitude of the energy expenditure change which Dr. Ellestad obtained, if we were to concede that it was statistically significant. This energy expenditure with a machine running for ODe hour amounts to not more than one half of one per cent of the total calories that an individual would consnme 1111(1 ('xpCJHl in a day. One hour of passiye oscilation is 8. calories. This expenditure can be accomplished in about six to 8 minutes of just sitting and talking. It could be accomplished in four minutes of housework; it could be accomplished in two minutes of walking- In terms of this expenditure of energy of 8.5 calories per hour with the ma chine running for one hour, as calculated from Dr. Ellestad's figures, in terms of tissue of the body this would be 5tb of an ounce of body weigbt. If this action of the unit alone were to be relied upon for the loss in body weight, I calculated that it would take 400 days to lose one pound of weight: that is, it would take more than one year to lose one pound of weight. (Tr. 1348-52) With regard to Dr. Charley s tests, which arc also referred to as the "Truesdail Study, Dr. 'Whedon commented- That the Truesdale (Big) study was set up in such a way that a comparison at the action of the unit could only be made with a subject in the back-lying position. In this situation the metabolic rate compared to basal, looking at Dr. Charley s report, was given as 107 in comparison with the basal metabolism rate of 100.

He states further, I believe, that this means that there was a seven per cent increase in energy expenditure caused by the unit in this position. I would merely submit without stating, without having checked the statistical significance of this difference, that as far as biological significance, from the point of view of achieving a real degree of weight loss, that this is a lesser difference than was obtained by the Ellestad st.udy. (Tr. 135455. He also said that there was nothing in the reports of the tests of Dr. E11estad and Dr. Charley that indicated to him that the device was effective for causing weight loss.

DISCUS8IO:r AND ADDIT10XAL FIX DINGS It is beJicved that the questions to be decided here must be dec.ided on the basis of the evidence of the best qualified witnesses in the absence of careful11v c.ontro11ed experimental evidence showinl' that the opinions of hil'hly quaJificd experts are erroneous. It is believed ,, STAUFFER LABORATORIES L."'C, I ET AL. 643 629 Initial Decision that the evidence offered in support of the charges of the complaint is not successfully overcome by respondents' evidence which consisted of observations and opinions of practicing physicians, oxygen consumption tests, muscle movement tests, and evidence of the effect of respondents' reducing plan on particular people. Respondents contend that thc issue is whether the device has any value whatsoever, and that they have shown that the device has some value, thereby resolving the issue raised by the pleadings in their favor. In absolute terms respondents are correct, in the sense that the use of thc device increases the expenditure of energy above what ould be expended in a resting state, but it is found that the device does not increase the expenditurc of energy to a significant degree and it is found that the device is not effective, or of value, as a device for reducing the weight or size of parts of the body or the entire body; and it is furt.her found that the device is not effective in firm. ing or toning muscles of the body.

It is true that any object. can be used to exercise the body and even bodily movements without the use or any object can afford effective exercise, but the principle espoused by respondents is passive effortless exercise and it is believcd that the evidence shows such so. called exercise through the use of this device to be ineffective. In 1958 and in 1960, respondents added certain attachments to their devjce which could be purchased separately or with the device, or could be earned by referring prospective customers to respondents mleswomen. These att.achments added a rcsistive principle to the effortless principle and were similar to those which respondents had previously used in their salons. To thc extent that the resistance of hands and feet involves the use or energy, the effectiveness of the device with the attachments would be increased but the tests of the use. of the device with the rcsistive attachments. although inc.reasing energy expenditure considerably, still did not cause suffcient expenditure of energy to est.ablish that the device was effective for its claimed purposes.

It is further round that the sa.id representations were and are misleading in material respects and constituted "false advertisements as that term is defined in the Federal Trade Commission Act. In truth and in fact the use of said device:

1. 1Vil1 not reduce the booy in an)' partien1ar area or the over.all body weight. Any reduction of weight that might result from the use of respondents' plan wil be brought about by the reduction in the caloric intake and not by use of the device. 2. 'ViJ1 neither tone nor firm sagging muscles. Opinion 64 F.

CONCLUSION The dissemination by the respondents of the false advertisements as aforesaid, constituted unfair and deceptive acts and practices in commerce, within the intent and meaning of the Federal Trade Commission Act.

OImER It is ordend That respondent Stauffer Laboratories, Inc. : a corporation, and its offces, and respondent Bernard H. Stanifer, individually and as an offcer of said corporation, and respondents: agents re.presentatives and employees, directly or through any corporate or other device: in connection with the altering for sale: sale, distribution :Magic Couch" and Post.llre- qr rental of the deyi..e,signntecl " Rest':, or any other device of substantially the same constrnction, design or operation, do forthwith cease and deeist from: 1. Disseminating or causing to be disseminated by means of the United States mails or by any means in commerce, as ': com merce" is defined in the Federal Trade Commission Act, any ad. vertisement which represents, directly or by implication: (a) That said device will cause a reduction in size or weight of the human body or any particular area thereof; or that the use of said device in conjunction with a cliet will auction in size or ,,:e1i-otto1chllmari cjc!" i:te(tha i-;u ' areUthereol,unle.s it ny such reduction would be soJelv bv reason of a diet: (b) sajd device secl ;'-"t y or"spartof,, jring a restriete diett ol'_ i an ot11ef'plan tD. - include ..scale.--. 2. Disseminatingousih'if to' DedissemimLted by any means any advertisement for the purpose of inducing, or which is likely to induce, directly or indirectly, the purchase of said device in commerce, as "commerce" is defined in the Federal Trade Commission Act, which advertisement contains any representations prohibited in Paragraphs l(a) or l(b) hereof. OPINIOK UP THE COMl\IISSIOX FERRCAny 7 , 1864 By ..\NDERSOK 0 ornissioner:

This matter is before the Commission upon the exceptions of the respondents to the hearing examiner s initial decision filed "larch 21 STAUFFER LABORATORIES, INC. , ET AL. 645 \;29 Opinion 1963 , the second initial decision filed herein.' The complaint charges respondents with the dissemination of false and misleading adver. tisements in connection with promoting the sale of 11 device designated as "Posture. Rest" and "1\'Iagic Couch" used with the "Stanffer Home Plan." It is alleged that eontrary to advertising representa. tions the device is of no value either in reducing the body in any particular area or the over.a11 body weight and that it will neither tone nor firm sagging muscle.s. The examiner, in the decision now before us, found that the allegations in the complaint were sustained by the. evidence, and he entered an order to cease and desist against respondents.

The general contention of the respondents is to the effect that the evidence is insuffcient to sustain the findings and coneJusions of illegality. Respondents specifically challenge a number of findings of the examiner, and they also object to the asserted failure of the examiner to make rulings as to the credibility of the witnesses and the probative va.1ue of expert testimony. Among the specific points raised are these: (1) that the examiner erred in allegedly placing the burden of proof on respondents, (2) that he erred in allegerlly aJtpring the complaint from a "no value" charge to a " docs not increase the expenditure of energy to a significant degree " charge, and (3) that he erred in allegedly denying respondents a fair hearing because of the events respecting one of respondents' witnesses. The respondents are Stauffer Laboratories, Inc. , a K ew l\Iexico corporation with principal offces located at 191D Vineburn A n'n ne Los Angeles, California, and its president Bernard H. St LUffer. They seJ1 a device n ferred to as the "Posture-ResC' and " fagic Couch" in conjunction with a plan for weight reduction and music1e, firming and toning. The basic device, resembling a conch, is composed of a motorized unit with an osciJ1ating platform and two removable couch extensions.

1 The examiner filed a first initial declsJon all .Tune 2i, 1962. TlJereln the respondents were held to be In .iolatlon of law as ebarged find ordered by tbe examiner to cease and desist the practices he found unlawful. Upon exceptions by the respondents to that decision, the Commission ordered It vacated and set aside because of Insuffcient findings and remanded the proceeding to the examiner for preparation of a new Initial deciston containing adequate findings.

2 In granting the petition for review as to the second Initial dec1slon advised the parties that in such review It would consider not only the,brIefsthe Commiss1oJ1and argu. ment as to such decision but also the prior briefs and argument. Respondents also have a device called the "Metabol-aid " whtcb admittedly Is identical to the "Posture-Rest (Magic Couch)", except that it operates at two speeds: one identical to the POEiture-Rest and the other, one-half that speed. The MetaboI-ald 'Wll8 a device offered to the medical profession. . . , .

646 FEDERAL TRADE CO fMISSIO:\ DECISIONS Opinion 64 F.

Respondents, in their advertisements, promise to bene.fit pe.rsons afficted with obesity and " sagging muscles," The foJ1owing are typical ad \ ertising statements:

Get slim-stay sum lnsist OD Stauffer the only home plan backed by 20 years of reducing success The Stauffer principle has helped more than 5 milion women remake their figures.

It' s a complete figure.beautifying plan of effortless exercise and calorie reduction. Staufer s "Magic Couch" Tbe Posture-Rest unit-provides controlled rhythroic motion. Helps take off excess weight, remove unwanted inches.

No starvation diets. o strenuous exercise. Exercise comes first with Stauffer. But it' effortless exercise-without work or strain-on Stauffer s Magic Couch. This exercise does away with inches" .. .. tones and firms hard-to-reach . .. .. even problem areas " .. .. improves posture reproportioDs. When you want to lose both inches and pOUDds, exercise on the ::fagic Couch is combined with sensible calorie reduction. This brings about results you just can t get from diet alone. And every woman who reduces with StautTer does it with the help and encouragement at another woman" . .. a trained Staufer cOUDseior.

Greet Summer with a lo.elier figure.

How you ll look in a swimsuit depends on how you reduce. No longer need heavy hips, thighs, legs and waistline "rolls embarrass you. Beautify your posture, reproportion your figure into more youthful looking, lovelier lines by trimming away unwanted inches with the famous Stauffer home reducing plan of effortless exercise and calorie reduction. . . . Tbe Magic Couch (Posture Rest) is the heart of the Staufer home reducing plan of effortless exercise and calorie reduction * ". * .

You lose unwanted pounds.

You lose inches where you need to-from hips, tummy, thighs. You achieve a gracefu lid posture. Your skin fits smoothy-sagging tissue is firmed and toned.

There is more to the Stautrer home plan than just STAUFFER LABOllATORIES IKC. ET AL. 647 629 Opiron reducing. Rather, it is a complete program scientific figure control. It not only takes off excess weight, but also removes hard-to-Iose inches from ankles thighs, hips and tummy.

For a woman, it tones and firms sagging muscles, beautifies posture tor a lovelier carriage, and gives her a more youthful-looking figure. The complaint as amended alleges that through the use of state. ments such as those set out above respondents have represented directly and by implication, that its device used in connection with a "plan" which provides for a low calorie diet: 1. Is of value in reducing the body in particular areas such as hips thighs, Jegs, and the stomach, as well as the over. all body weight. 2. Will tone and firm sagging muscles.

One of respondents' contentions is that the elements of the tauffel' IIome Plan" were ignored. It is claimed that evidence ,vas presented against the device alone, whereas respondents assertedly advertise and sell their couch for use only as an "inextricable integral component'" of their plan. ' While it is true that respondents mention the "plan" in their advertising, the emphasis is mainly on the device. The advertisements state or imply that the device itself win provide or contribute to the claimed benefits. For instance, one representation reads: " This exercise does away with inches tones and firms hard to reach problem areas The "This exercise" is the exercise which the user is supposed to get from the couch; hence, according to the representation, it is the couch itself which does the reducing and toning.

While the advertisements briefly refer to caloric reduction, the general impression is that the conch provides most or al1 of the bene. fits. Certain of the advertisements state that thc conch adds some. thing which the user can t get by the diet alone, thus clearly plugging the merits of the couch. An example is as follows: "when you want to lose both inches and pouncls, exercise on the Magic Couch is com. bined with sensible calorie reduction. This brings about results you just can t get ftom diet alone " (Emphasis supplied. ) The significance of the device is stressed in other ways, such as by referrina to it the "heart of the famous Stauffer Home Hedueing Plan" and by prominent illustrations. In addition, respondents advertisements mention "effortless exercise," which plainly phces the emphasis on the device, and they make claims for reductions in specific areas (e. "hard to lose inches from ankles, thighs, hips and 'Respondents claim the essential elements ot their plan are exercise, diet and motivation.

648 FEDERAL 1'TRADE COMMISSION DECISIONS Opinion 64 F.

tummy ), which suggest the exercising of these areas by the de"ice. When all these factors are considered, there is no doubt that respond. ents, though sellng a device in conjunction with a plan, are also making claims for the effectiveness of the device independent of the plan. See Damar Products, Inc. Docket No. 7769, 59 F. C. 1263 December 6 , 1961 affrmed, Damar Products v. United States, 309 F. 2d 323 (3d Cir. 1962).

The complaint is directed to the device alone, and so the evidence principally concerns the device. The complaint states that respond. ents represented that the de1Jice used in connection with a "plan pro"iding for a Jow calorie diet would have the claimed benefits, and tlmt. the device will not provide such benefits as represented either in conjunction with the "plan" or without. That it is the device alone which is cha.llenged is unmistakably clear from the sentence "Any reduction of weight that might result from the use of the respond. ents Plan' win be brought about by the reduction in the. caloric intake and not by use of the device.

::ome comment is in order as to the nature of respondents plan offered in its advertisements. The representations themselves state that it is a "pla.n of effortless exercise and calorie reduction " suggestinq" two elements: exercise and diet. In respondents' manual entitled C Lifetime Program for a Lifetime Problem " it is explained that the. plan em bodies four pha es; proper posture, muscle relaxation weight reduction, and increased circulation. In all phases respondents recommend use of the: Posture. These' except for weight reduction, and as to that the literature states: "* * * It is 81tggested that ealorie intake be reduced below your usual consumption. " (Emphasis supplied. ) Certain other advertisements mention a "counselor': service. Respondents insist that the plan includes "motivation " but motivation for what? To lose weight and tone muscles? An incentive t.o achieve these objectives oulc1 be of little help unless the means ate effective. Here the complaint raises no question about the effecthT ness of diet; it is the effectiveness of the device alone which is dis. puted. On the latter, motivation would be important only to the extent that the device wiJj perform as claimed, and this is the issue we are to decide.

Ve fail to see merit in respondents' urging that a "plan" is involved. As stated above, the device was represented as being effective of itself, and the challenge is made to that claim. Moreover, the plan" is in reality nothing more than the device served with a litte garnish of advice and handholding.

Respondents object to certain findings of the examiner on the ground that tests or studies presented by witnesses supporting the STAUFFER LABORATORIES ET AL. 649 629 Opinion complaint were made with the device without the attachments.' They claim that not one shred of evidence was introduced by complain"t counsel against the attachments and that since the complaint was directed against respondents' plan, which includes use of the attach. ments, it should have been dismissed for failure to establish a prima facie case. In all of the advertisements above referred to, the pictures of the Posture-R.est device in no instance show any attachments nor are attachments otherwise mentioned. Respondents' manual entitled "A Lifetime Program for a Lifetime Problem" explains the use of the device, using elaborate pictures and ilustrations, but Jike. wise makes no mention of any attachments. K ot only that, but the advertisements state that the exercise is "effortless." The representations plainly were made for the device as it was pictured and described in the advertising, not as to a device with attachments for resistive" exercising. It is well settled that the law is violated if the first contact is secured by deception. Exposition Press, Inc. Federal Tmde Oommission 285 F. 2d 869 , 873 (2d Cir. 1961), and cases cited therein. Moreover, the study conducted by Dr. El1estad for respondents (to be discussed in detail later) in which resistive positions (e. pulling on stretch bar) \were used fails to show the claimed effectiveness of the device even with attachments. ,Yo therefore reject responrlents' contention for dismissal of the complaint on I he ground herb considered.

EVIDENCE surpORTIXG THE COMPLAINT Counsel in support of the complaint in their case.in.chief placed in evidence the testimony of three medical witnesses, all experts in their field. These were Dr. Charles S. 1Vise, professor of physical medicine and rehabilitation at George Washington School of Medicine, and direetor of the Department of Physical Medicine and Rehabilitation at the George Washington University Hospital; Dr. Frederick J. Kottke, professor and head of Department of Phvsical Medicine and Rehabiltation of Universitv of Minnesota dical school; Dr. Arthur S. Abramson, professo and chairman of the Department of Rehabilitation and Medicine at Albert Einstein College of Medicine of Yeshiva University, and director and visiting physician, physical medicine and rehabilitation, Bronx Municipal Hospital Center, New York. All three are diplomates of and certi. fied by the American Board of Physical :\fedicine and Rehabilitat.ion and Drs. Kottke and Abramson are members of the board itself. The The attachments referred to include the "stretch bar" and other extra parts which apparently will provide a certain amount of resistance, thereby Increasing the physical e1rort of224-0e9--70--2the user.

Opinion 64 F.

board consists of eleven members. It is the examining and qualifying board for doctors of medicine who wish to specialize in physical medicine and rehabilitation.

The examiner summarized the testimony of these witnesses as follows:

These three eminently qualified physicians, two 01 whom had made tests of respondents' device as hereinbefore described, all testified that the device was of no value in reducing weight or toning or :frming muscles either alone or in conjunction with a diet or anything else.

The opinions of these authorities were based not only upon their general knowledge and experience but upon their familiarity with the device through observation.

Dr. Wise testified that in his opinion the use of the Magic Couch would have no effect on the reduction of weight or change in dimen. sions of the individual, used alone or as part of any plan that he could conceive of, and that it would not have any effect on the toning or firming of normal muse-Ies. fie said that he based his conclusion on his experience and knowledge of the effectiveness of massage the physiological effects of mechanical massage, his knowledge and experience in the management of patients with obesity, his knowl. edge and experience dealing with muscle phy;Jiology, muscle tone muscle weakness and strength, the sum of his clinical experience together with his observations of the use of the device in question as well as other mechanical devices.

On cross-examination, Dr. 'Vise was asked about the circumstances under which he had observed the device in operation, and it was then that he described his study of the use of the device by a number of obese George 'Washington University Hospital employees oyer a ten-week period.

Respondents refer to these observations as a "test" of their devices and then proceed to challenge the opinion as based on such test which they assert was improperly conducted. Their premise is faulty, however, because Dr. 'Vise s observation did not constitute a test in the strict sense of the word but simply a means by which he could see the device in operation. lie testified that he wanted to "* least observe this specific couch in operation before I would commit observe the devicemyself delinitely * * * " The fact that he did in actual use if anything, strcngthens his testimony concerning the lack of ellicacy of the couch. Moreover, his opinion was based upon his whole kn wJedge and experience, not simply his observations of the device.

Dr. Abramson, a specialist in the field of physical medicine and rehabilitation, testified that the people seen by physicians in his field STAUFFER LABORATORIES . IXC, ! ET AL. 651 '6:!8 Opinion have suffered "loss of energy reserves due to paralysis, loss of limb and so on " and that the weight carried by these people is of interest beca,use it takes up the energy reserves. He testified in part: These are examples of the kind of concern we have with overweight as far as our patients are concerned, and the things I am mostly concerned with is to make my patients very lean, if I possi bly can, even underweight." Accordingly, it is clear that Dr. Abramson is directly concerned with and treats obesity in his patients.

As to the Magic Couch, Dr. Abramson testified that it is wholly inejj'active either to reduce weight or to firm or tone sagging muscles. He further testified that diet or exercise or anything else that he could think of would not add anything to the effectiveness of the cOlleb.

The third expert witness complaint counsel put on the stand as part of their case.in.chief was Dr. Kottke. This witness, a specialist m physical medicine and rehabilitation, stated that in his field doctors ate concerned with developing muscles which are weak and Wlth maintaining optimal body metabolism and body size. The field he ,testified, is definitely concerned with overweight persons. Dr KO'Tke conducted a clinical study of the Mctabol.aid, a device iden. tic&l to the Posture. Rest except for an additional speed. He testified thi\t in his opinion the device is ineffective in influencing change in weight regardless of what plan it is combined with and that it is ineij'active in increasing strength or tone of muscle. The study which Dr' . Kottke conducted involved the use of a metabolism machine to determine oxygen consumption. His opinion as to the ineffecth-eness of re.spondents' device was based not only upon his study with this device but upon other studies he made in this same field. Respondents challenge the qualifications of these three witnesses referring to them somewhat slightingly as "article-writing professors who teach rehabilitation of crippled people, not about overweight penons." In making their point, they describe their own witnesses as " experienced practicing physicians who treat ordinary overweight pe()ple." These complaint witnesses all have had extensive education training and experience in the field of physical medicine, which includes the problems of overweight and muscular dcvelopment. The suggestion that they arc somehow less qualified because they mH not treat the so.called ordinary overweight people is poorly ;ie. They are ranking specialists in their field and highly qualified to Epcak authoritatively on medical questions here raised. Excessive body weight, it is clear, may be an even greater hazard and harder 652 FEDERAL TRADE CO::nfISSION DECISIONS Opinion 64 F.

to remove from a crippled person than from one of the so-called ordinary overweight people.

Uespondents challenge the competency of the testimony of Dr. Abramson on the ground that he only briefly, iewed the device in operation. There is no merit in this contention. A medical witness is qualified to give an opinion as to the effectiveness of a product even though he has had no clinical experience with it. The objection. if valid, goes to the weight but not to the competence of the testimony. Koch v. Federal Tmde Oommission 206 F. 2d 311, 315 (6th Cir. 1953), and cases cited therein. Moreover, it has been hc1d that opinion evidence based on general medical and pharmacological knowledge constitutes substantial evidence. Erickson Hair and Scalp Specialid8 v. Federal Trade Oommission 272 F. 2d 318 , 321 (7th Cir. 1959), cert. denied 362 U.S. 940. Here Dr. Abramson s opinion testimony was based not only upon genera.l knowledge but upon actual.l, although limited, experience in observing the use of the device. Dr. Kottke is described by respondents as "acting on bitter ,'engeance ' against respondents because they refused to pay him $12 000 fee he allegedly demanded for testing their device. This assertion is completely unsupported by evidence. Ioreover, the record shows that Dr. ICottke WfiS approaclwd by Commission personllel on the matter of testifying in this proceeding, not the other way around. Thus, there is not the slightest suggestion that Dr. Kottke was acting out of spite ill this matter. '\Ye reject as baseless this contfmtion made against Dr. ICottke.

Respondents' Evidence Respondent.s introduced the testimony of a number of medical "witnesses and other "itne,sses in their defense. The most important of these were the fol101\"ing: Dr. I-Iorace A. .Anderson, practicing physician in private practice in Tacoma, \Vashington, and a specialist in internal medicine; Dr. George G. R.. Kunz, general practitioner in Tacoma, ,Vashington; Dr. T ohn E. Potts, general practitioner in IValla '\Valla, Washington; Dr. Harry H. '\Vilson, a doctor of medi. cine and associated since retirement from private practice in 1958 with Stauffer Laboratories as a consultant; Dr. 1Iarvin H. Ellestad chief of staff of Harvard General Hospital in Torrance, California; Philip 1. Charley, a Ph. D. in biochemistry and nutrition, and vice president of Truesdail Laboratories, Inc. , a testing laboratory jn Los Angeles, California; and Dr. Irving Rehman, a Ph. D. nnd associate professor of anatomy, University of Southern California ::chool of )Iedicine.

STAUFFER LABORATORIES , IKC. , ET AL. 653 629 Opinion :)1' Anderson testified that the Sta ufIer unit reduces both inches and total body weight and that it will improve the tone of sagging ml1 cles. I-Ie appeared to be basing his opinion largely upon his stated suctess in reducing his o n patients weight with the clevice. He claimed that among his patients there were some "horn he had tried to get to diet and they did not lose weight. Thereafter, he freed these patients from their diet and, according to his testimony, using the Stauffer unit they then lost weight. At one point he testified: A.. So then \vhen I freed them from it (tbe diet), they began to lose weight. and they were using the unit. That is the conclusion-the only conclusion that you eouid draw from it. When you take a person off a thousand calorie diet, he starts using the machine as his adjunct to treatment and loses weight. He cenainly isn t going to eat a thousand calories if he ,yasll t doing it before. Bet€- Dr. Anderson -was talking about patients who had been pre\'i. ously put on a onc thousand caloric diet, but who, he -was convinced, did not follow such a diet. J-Tjs testimony indicates that he was satisiied that after being put on the machine the. patients did not diet but t.his does not necessarily follow in the cireuInstances. After all these patients had invested a. great deal of capital in the unit, and with that in mind, it is possible that the user might very well follow a (1iel t.o justify the investment 01 approxinutely $300. Dr. Anderson wa3 only guessing .when he testified that the unit alone tS responsible for the reduction in weight, since he did not know for a fact that his patients were not dieting. A thorough rending of Dr. Anderson s testimony shows that he was most inexacting about his record1keeping as to his study of the patients using the device. He made no real attempt at a clinical study. He admitted in his test.imony that prior to such observations he had had little hith in the device. Thus he must have become convinced of its claimed merits as a result his observations which plainly were highly unseientific. In the circurn tanees, Dr. Anderson s opinion is not persnasiye. Dr. Runz is a general pract.itioner respondents introdueed to tes. tify as to the merits of their device. He stated that the Stau.ffer Home Plan unit would be effective in reducing weight. and in muscle toning and firming. He belie.ved the unit to be a form of passive exercise which would reduce specific areas, as ",e11 as total body weight. His opinion was based on his experience, training, and upon his observations of patients using t.he device,. The patients for whom Dr. Kunz prescribed the use of the machine were apparently also put on a diet; hence, it is not clear what grounds he had for his opinion that the device alone and separate from the diet would be efiective. Dr. Runz had made no elinical studies of any kind with respect to respondents device. He had no special training in the field of physical medicine. (!_ 654 FEDERAL TRADE COMMISSION DECISIO:\S Opinion 64 F.

He had had no teaching appointments and had done no writing. Weighing his opinion in the light of thc whole record, we conclude that it is of little probative value.

Dr. Potts, another general practitioner, testified as to a stud\' he had made of the efi'ecti\ eness of the Stallfter device in i1pio' inch loss. Eleven of his patients were studied over a five. week pefiod and records \were kept as to the effects of the unifs use. The patierlts following a diet prescribed by Dr. Potts, were sent to the Stauffer offee to use the device. The lueasurements as to weight and inches lost were made at the Stauffer offce and the records were also kept there. In view of such shoi1ing, the hearing examiner concluded that there was doubt as to Dr. Potts s knowledge of the correctness of the results of his study, and we, agree. )1moreover, there is little if any thing to indicate that the unit alone was responsible for the weight and inch losses claimed, since the patients were an iollowing a diet. Another witness presented by respondents was Dr. Irving Reh.'l;an. He had prepared X.ray pictures which the examiner concluded demo onstrated a movement of muscle in connection -with the use of respondents' device. It was not shown, however, whether this moycment effected weight reduction or muscle tone. Expert wit.nesses caJJed by the respondents included Drs. EJJestad and Charley, who conducted oxyge.n consumption tests. Respondents place great store on the results of these tests, particularly that conducted by Dr. Ellestad. The latter, in testing the respondents' device and using six positions, both active and passive, arrived at an a-verage of 11.9 percent increa e in oxygen consumption over a basal c.ondit-ion. I-Ie testified that he considered such a percentage "just barely significant': . He also testified that he considered the increase he found in caloric consumption to be significant, but he did not te3tify that any significant weight loss would result. Dr. G. Donald Whedon, Chief, Metabolic Disease Branch, National Institute of Arthritis and Metabolic Diseases, National Institutes of Hca1th, Bethesda, Maryland, was called as a rebuttal witness by counsel supporting the complaint to express his views as to the evidence given by Drs. EJJestad and Charley. Dr. Whedon, in response to a question as to whether figures given by respondents' witnesses \yol1ld mean that the Stnuffer unit causes a loss of weight. testified as follows:

If one were to accept these changes as statistically sig-nificant, which I do Dot, but if one were to accept them, the increase in energy expenditure would amount to such a small amount in the realm of-for example, requiring more than a year to lose one pound in weight-assuming the dietary intake was 8 Basal Is a situation In wblch the !'1!bject Is resting quletIy In bed . not ba.vInl! consumed any food or drink for the preceding 10 to 14 hours. . .

STAUFFER LABORATORIES, INC. , ET AL. 655 629 Opinion kept constant, as to be of no real significance for the furtherance of weight loss in an obese person.

Another witness presented by respondents was Dr. Harry H. Wil. son, a medical doctor and a full. time consultant for respondents since 1958. Dr. ,\Vilson s testimony is so equivocal as to be of little use in attempting to evaluate the effectiveness of respondents' device. Wilen asked about his opinion as to whether the Posture. Rest alone, with. out caloric reduction, would cause weight loss, he answered that it could, providing various factors are completely favorable to the end result. Asked to state the factors, he answered: A. The nutritional intake would have to be so nearly equilbrium, as far as weight and gain of the user was concerned, that a small increase. a very slight increase in caloric consumption might tend toward the loss of weight. (Emphasis supplied.

Dr. '\Vilson further testified as to the effect of the Posture.Rest unit when used by an obese person and he emphasized thc psychological effect more than the physiological. In fact, his statement as to the physiological effect seemed to includc the psychological. He stated at one point as follows:

Physiologically I think that the postural improving factors such as the stretching of Don.elastic tissues, which tend to immobilze joints, and probably the stretching of spastic muscles, which may be helping immobilze joints in a bad posture, gives, may give to the average person a sense of relaxation and freedom of movement, and increased sense of well being, which encourages them to keep on the improvement program.

Now here that Dr. '\Vilson has used terms such as "which tend to im. mobilize may be helping, may give to the average person. His over.all testimony appears to be that, while the device might result in some muscle stretching, the primary effect was in the motivation given to the user.

Respondents produced evidence of electromyograph tests for the purpose of proving that their device wil contract muscles. The ex. aminer, on the basis of other evidence (i. ray pictures intra. duced through Dr. Rehman) found that respondents' device would contract muscles, and he concluded that it would be unnecessary in the circumstances for him to make a finding as to respondents' electro. myograph evidence. The examiner also mentioned the testimony of complaint counsel's rebuttal witnesses, Dr. Joseph Goodgold and Dr. Alberta A. Marinacci, who testified to the effect that the electromyo. graph cannot be used to determine the amount or extent of muscle movement. 'Ve concur in the examiner s decision not to give any weight to the electromyograph evidence.

Finally, in presenting their case, respondents introduced user-type evidence, including the testimony of twelve satisfied users of the 656 FEDERAL TRADE CmIMISSIOK DECISIONS Opinion 64 F.

device.. These witnesses claimed to have lost varying amounts in weight and inches. Satisfied-user testimony is of limited value because, of the Jack of scientific controls to determine the accuracy or truth of the claims. 'Ve do not believe the user cvidcnce suffcicntJy persuasive to show that the device has any effectiveness especially in the face of the contrary testimony of qualified medical experts. Further user-type evidence introduced by respondents relates to a. national contest which they conducted called the " 10 Happiest Women." In this contest the women participating submitted to respondents data showing their body measurements and weights before and after using the Stauffer Home Reducing Plan as well as pictures and a statement on why they ,,'cre happier using the plan. The winners, those showing the greatest losses, were .a warded a trip to Paris and London. There is a sho-wing that these conte,stants lost weight, but, as with other user evidence this is no proof that the device was responsible for the results. 'Ve concur in the e.::aminer ruling that this evidence is not competent to prove the eiIecth-eness of respondents' unit.

Conr1usion as to Evidence.

The examiner ultimately found that respondents' device does not increase the expenditure of energy to a significant degree, that it is not e.ffecti\ e or of value for reducing the weight or size of parts of the body or the whole body, and that it is not effective in firming or toning useless mnscles of the body. 'Ve concur fully in this finding. 1VhiJe there is some disagreement among the expert witnesses alled to testify in this proceeding as to the effcacy of respondents device, this is not a case of stark conflict among cqmllly well qualified experts. The examiner ha.s dec.iclcd the matter, as we understand iL essentiallv on the basis of the witnesses he determined to be the best quaJitied. Complaint counsers witnesses are very highly qualified 7 It has been held that the trier 01' the fact may in cases of conflict of expert testimony rely on the greater experience of one expert over another. Northern Feather Work"" Inc. v. Federal Trade Commission 234 F. 2d 335 (3d Cir. 1956). Moreover, Ii contact of medical opinion concernln the effectiveness of a product presents a Question of fact to be decided by the Commission. Erickson Hair and Scalp Specialists v. Federal trade Commission 272 F. 2d 318, 321 (7th Clr. 1959) ; Carter Products, Inc. v. Federal 'trade Commission 208 F. 2d 461, 492 (9th Cir. 1959), cert. denied 361 'C. S. 884. In Wa,.d Laboratories, , Inc. v. Federal Trade Commission 276 F. 2d 952 , 954 (2d Clr. 1960), eert. denied, 364 U. S. 827, the court, in reference to an argument that the findings were arbitrary and capricious and based on a conglomeration of disputed theory and medical disagreement. remarked:

... . . It Is indeed a rare case where medical experts are called which does not involve disagreement. Here, however, the examiner is supported by clear and convincing testlmony from well Qualified witnesses. HIs decision and findings are the antithesis of arbitrary and capricious.''' STAUFFER LABORATORIES IX-C. ET AL. 657 629 Opinion and each has expressed the opinion that respondents' device lacks the claimed effcacy. This is a strong showing, indeed, in support of the charges. Looking at the evidence adduced by respondents wc note that it includes the testimony of physicians who expressed the opin. ion that respondents' device would give the benefits represented. This testimony, however, as we have indicated above, is lacking in persuasiveness since the witnesses generally had no sound basis for their views. Moreover, we do not believe that they arc as well quali. fied by reason of tra.ining and experience in the field involved as are complaint counsel's witnesses. In considering the whole record, therefore, we are convinced and we hold that the charges in the complaint are supportcd by reliable, probative and substantial evidence. Additional Contentions The respondents claim that the examiner, in stating that the evi. dence offered in support of the charges of the complaint is not successful1Jy overcome by respondents' evidence, impropcrly places on them the burden of proof in the proceeding, but that is not true. As we construe it, the examiner here means only that in evaluating all of the evidence, including that contrary to the allegations of the complaint, he believes the charges to be sustained. To put it another way, he concluded that the prima facie case had been made out and that it was not rebutted or explained away by the evidence intro. duced by respondents in their defense. This is not a shifting of the burden of proof. Complaint counsel had the full burden to prove the charges of the complaint and they sustained that burden. Cf. Each Federal Trade Commission 206 F. 2d 311, 319 (6th Cir. 1953); Carter Products, Inc. v. Federal Trade Commission 268 F. 2d 461 487 (9th Cir. 1959), cert. denied 361 "C. S. 884. He.pondents further assert that thc examiner has made no findings as to the credibility or probative value of the testimony of the vari. ous witnesses. This likewise is not true. In spite of the fact that the examiner might have articulated his appra.isal of the witnesses in more detail, we believe his findings are suffcient. 'When he uses the expression " best qualified witnesses " he means, it seems to us, that he made an evaluation which included a judgment of the credibility of the witnesses as well as other probative factors. This is shown by the fact that in mentioning the witnesses individually in the initial decision, the examiner points out those circumstances which bear on the probative value of their testimony. For example, he emphasizes that Dr. Rehman wa,s an expert in X-ray pictures but not in the interpretation of them, and so he made his finding on that evidence 658 FEDERAL TRADE CmOlISSION DECISIONS Opinion 64 P.

accordingly. To give another example, the examiner considered the circumstance that Dr. Anderson had had financial interest in respond. ents' device as a result of a distributorship connection in Canada but concludes, as we understand it, that this factor did not influence his testimony. As a further instance, the exa liner considered Dr. Potts ' testimony in the light of the circumstances in which his tests were made the kecping of the records by the Stauffer people, and determined that this put doubt on the evidence. Respondents charge that they were denied a fair hearing because complaint counsel and the examiner conducted what thev term a three-ring circus " in destroying a defense witness. Two respondents' witnesses, Mr. Robert W. Kay and Mr. John IV. Gregory, who testified as to the so. called electromyograph evidence, represented that they had educational dcgrees which they did not in fact have. This was developed on the record by complaint counsel subsequent to the testimony of sHeh witnesses for the respondents. Respondents seem to be charging in part that complaint counsel introduced more evidence than was necessary to show that these witnesses, and in particular Mr. Gregory had lied. They further claim that the whole case is tainted by the attention given to that issue. Their brief states: While it is conceded that Staff Counsel and the Bearing Examiner enjoyed this prodigious piloring of a helpless and hopeless and mistaken man, it is submitted that this tactic so diverted the attention of the Hearing Examiner from the real issues in the case and so perverted the purpose of the hearing as to deny Respondent a fair hearing on the issues-the real issues in this case.

We have reviewed the record to discover any possible levity of the type which respondents suggest but none is revealed by the written words. As to the amount of evidence put in on the subject, there is no showing that complaint counsel exceeded reasonahle bounds. Re. spondents continued to rest their defense in part upon the electro. myograph evidence, and complaint counsel could justifiably have de. eided that effective rebuttal required the effort they made. There is nothing at all in the record which could possibly be con. strued as showing that the examiner was unduly influenced in his de. cision by the revelations bearing on the trustworthiness ancl reliabil. ity of witnesses Kay and Gregory. ' While he made no finding on the lectromyograph evidence received through these witnesses, significantly, he gave as his reasons therefor factors other than the Jack of reliability of the witnesses. The Commission, in any event, has the ultimate responsibility of making the findings of fact and the decision in this matter. Cf. Uni1'ersal Camera Corp. v. National Labo/' Relations Board 340 U.S. 474 (1951). As stated above, we STAlJFFER LABORATORIES, IKC" ET AL. 659 62H Opinion hold that the charges of the complaint are sustained by reliable, pro. blltlye and substantial evidence. Extensive hearings have been held and respondents have been given full opportunity to defend against the charges. Their apparent assertion of bias on the part of the hear. ing examiner changing the course of the heating has no record sub stantiation. vVe conclude that respondents have not been denied a fail' hearing.

A further contention of the respondents is that the examiner erred in allegedly alt.ering the complaint from the "no value:: cha.rge to a. charge that the device "does not increase the expenditure of energy to 11 significant degree.:' 'Ve do not agree that the examiner has changed the charge. The allegations of the complaint have to do ",ith the effectiveness of respondents' device in reducing weight and in iirming sagging muscles. A sho\ving of the mere expenditure of energy is not crucial because energy co.n- be expended, such as is the case in every physical activity, ",without necessarily reducing ",eight or firming sagging muscles. The charge of no value has to do with the question of weight reduction and of firming muscles and since the record shows that the device has no value in this connection, the allegations have been sustained in spite of the fact that there may be some e.xpenditure of energy. :Moreover, the examiner found, even as to t.he slight expenditure of energy, that it was not significant. Accordingly, we deny respondents' exception to this part of the initial dec.ision.

R.respondents' additional exception, the final one in our consideration, is the assertion that the hearing examiner did not apply the statutory standard ",which assertedly requires the measurement of re suits under customary conditions of ordinary record1encled use. R.eference is made to 15 C. 55 (a). This section provides that in determining whether an advertisement is misleading in a material I'e,pect, and therefore a false advertisement, there shall be taken into account, among other things, the extent to which the advertisement fails to reveal facts material in the Jight of such representations or i.terial with respect to consequences which may result from the use of the commodity to which the adve.rtisement relates under the conditions prescribed in said advertisement, or under such conditions as 8re customary or usual. It is obvious that the reference to conditiODE: as are customary or usual is a consideration in determining whether the advertisement is fa.lse for failing to reveal material facts. This does not provide a standard for evaluating advertising other. wise, and it has nothing to do ",ith the instant case, which charges amnnatiye misre,presentation. Additionally, the Section cited does not provide a criterion for the eVrlll1ation of testimony, as respond- , 660 FEDERAL TRADE COMIHISSIOK DECISIONS S.syllabus 64 F.

ents 80m to suggest. Aside from that, however, it is clear that the expert tetifying for the complaint were familiar with respondents instructions for use of the device and that their testimony was based upon results to be obtained under conditions of normal recommended use. This exception is therefore rejected. Manifestly for respondents, this is no couch of roses. Their appeal is denied, and the initial decision will be adopted as the decision of the Commission. An appropriate order will be entered. Commissioner Reilly did not participate for the reason that he did not hear oral argument.

FINAL ORDER This matter having come on to be heard upon the exceptions of the respondents to the hearing examiner s initial decision fied March , 1963, and upon briefs and oral argument in support thereof and in opposition thereto; and The Commission, for the reasons stated in the accompanying opinion, having denied respondents' exceptions and appeal and hav. ing directed that the said initial decision be adopted as the decision of the Commission:

It is ordered That the hearing examiner s initial decision filed March 21, 1963, as supplemented and explained by the Commisslon opinion, be, and it hereby is, adopted as the decision of the Com. mission.

I t is JUTther ordered That the respondents shall, within sixty (SO) days after service upon them of this order, file with the Commission a report, in writing, setting forth in detail the manner and ford in which they have complied with the order to cease and desist. Commissioner Reilly not participating for the reason that he did not hear oral argument.

IN THE )1:A TTER OF STATE PAI T ilia UFACTCRI G CmIPA Y ET AL. ORDER ETC. , IN REGARD TO THE ALLEGED VIOLATlOX OF TILE FEDERAL TRo\DE nnSSION ACT Docket sarJ/. COlJp/ant, A.pr. 20. JD61-JJeci8ioll, Feb. 19G' Order requiring Tampa, Fla., paint manufacturers to cease representing falsely in newspaper advertising that a stated price was the usual retail Qr fac. STATE PAINT fANUFACTFRING CO. ET AL. 661 .660 Complaint tory price for paint and that a purchaser would receive a "FREE GALLON WITH EVERY GALLON PURCHASE" when the advertised price was t.he regular sellng price for two cans; and to cease printing the words Factory Guarantee" on labels attached to their paint products when the guarantee was limited by undisclosed conditions. CO:JIPLAINT Pursuant to the provisions of the Federal Trade Commission Act and by virtue of the authority vested in it by said Act, the Federal Trade. Commission, having reason to believe that State Paint Manu. facturing Company, a corporation, and Nick G. Palermo, Nick O. Pale.rmo, and l\iario P. Charbonier, individuaily and as offcers of said corporation, hereinafter re,ferred to as respondents, have violated the provisions of said Act, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public intfTfst, hereby issues its complaint, stating its charges as follows: P P" 'GRAPH 1. Respondent State Paint Manufacturing Company is a, corporation organized, existing and doing business under and by yi,tue of the laws of the StlLte of Florida, ,,'ith its principal place of b1i3iness located at 4610 ,Vest Buffalo Street, Tampa, Florida. Individual respondents Nick G. Palermo, Kick O. Palermo and ..\1&1':0 Char bonier are offcers of said corporation. They fornmlate direc, and control the policies of the corporate respondent including the acts and practices set forth hereinafter. Their address is the same as n,at of the corporate respondent.

PAR. 2. Respondents are now, and for some time last past have been, engaged in the business of manufacturing: selling and distributlng paint and related products to the public, under the 1a1el or trade, name of " State Paints.'j throuah various retail outlets and fl' El('hise dealers located in the various States of the United States. P.:,,1-:. 3. In the course and conduct of the business, respondents cause flnd have caused, their paint products to be transported from their pract of business in Florida to State Paint Stores and franchise dealers located in various ot.her st.at.es of the -United States, where sa,id products are sold at retail. Said respondents, thereby maintain, and at all times mentioned herein have maintained a substantial course of trade in said paint products in conunerce, as " cOITunerce" is de.fincd in the Federal Trade Comlnission Act.

R. 4. Respondents advertise, and have caused to be advertised thejr paints in vR.rious newspapers of general circulation. Among 662 FEDERAL TRADE COi\L\HSSION DECISIONS Complaint 64 F.

and typical, but not all inc.usive, of the statements contained in such advertisements are the following:

'Yhatevel' paint needs you llWY ha Ie, visit one ofyaur nearby State Paint Stores, and be assured that you wil be using the finest quality paint m.anufactrned at the lowest price. Sold at direct factory prices.

Share in State Paint' s milion dollar bonus. Every 2nd gallon free! Gallon with every gallon purchased Buy l Get 2 Buy 2-Get 4 Buy 5-Get 10 o limit-Any paint Free! 'With every gallon prncbaseda gallon free Black Label Super Wall Latex Outside White $6.98 gal. $2.25 qt. $5. Every 2nd can free Every 2nd can free Interior Latex Alyd Flt $5.98 gal. $2.00 qt. $5.98 gal. $2.00 qt. Every 2nd can free Every 2nd can free The facts ftre there 60 milion Scotchmen can t 'be wrong:

50,00 gallons of fine paint free Every 2nd can free Save up to $9.00 on every 2 gallons of fine quality paint. Participate in the world's most famous paint offer. Free gallon with every gallon purchase.

Xo limit. Any paint.

PAR. 5. Through the use of said advertisenlents, and others similar thereto not specifically set out herein, respondents have repre- , that the usual sented, and do represent, directly or by implication and Cl1stornal'j" retail price of each can of State Paint is the price designated in the advertisements; that this advertised price is a factory price; that the purchase of one can of State Paint together second can wil result in savings of up to with the gift of a "free" and that if one can of State Paint is pur. to the retaij purchasers, chased at the advertised price, a second can win be given "free that is, as a gift or gratuity without cost to the retail purchaser. Paragraph PAR. 6. The aforesaid advertisements referred to in the Four are false, misleading and deceptive. In truth and in fact, usual and customary retail price of each can of State Paint was not and is not now, the price designated in the advertisement but was and is now, substantially less than such price. The advertised prices were not, and are not no\'\, the prices charged by the factory for said &:

STATE PAINT MANUFACTCRING CO. ET AL. 663 660 initial Decision paint but were, and are now, substantially in excess thereof. Savings of up to $9 will not result to purchasers of one can of State Paint together with a free can. The second can of paint was not, and is not now, given without cost to the retail purchaser, as the purchaser paid the advertised price which was and is now the regular selling price for two cans of State Paint.

.PAR. 7. Respondents have caused to be printed upon Jabels attached to certain of their paint products the words "Factory Guarantee" thereby representing that said paint is fully and uncon. ditionally guaranteed. In truth and in fact there are conditions connected with the said g;'arantee which are not set forth. PAR. 8. In the conduct of their business, at all times mentioned herein, respondents have been, and are now, in substantial competition, in commerce, with corporations, individuals and firms engaged in the sale of paint and related products of the same general kind and nature as that sold by respondents.

PAR. 9. The use by respondents of the aforesaid false, misleading and deceptive statements, representations and practices has had, and now has, the capacity and tendency to mislead members of the pur. chasing public into the mistaken belief that said statements and representations were, and are, true and into the purchase of snbstantial quantities of respondents' products by reason of said erro. neous and mistaken belief. As a consequence thereof, substantial trarle in commerce has been, and is being, unfairly diverted to respondents from their competitors, and substantial injury has thercby been, and is being, done to competition in commerce. .PAR. 10. The aforesaid acts and practices of respondents, as herein alleged, were and are all to the prejudice and injury of the public and of respondents' competitors and constituted, and now constitute, unfair and deceptive acts and practices and unfair methods of competition in commerce within the intent and meaning of the Federal Trade Commission Act.

Mr. Garland S. Ferguson supporting the complaint. Mr. George W. Ericksen and Mr. William Terrell Hodges MacFarlane, Ferguson, Allison Kelly, of Tampa, Fla., for respond. ents.

INITIAL DECISION BY J OUX B. POINDEXTER, HEARING EX.AMINER On April 20, 1961, the Federal Trade Commission issued a com. plaint in this proceeding charging State Paint Manufacturing Com. pany, a corporation, and Xick G. Palermo, Kick O. Palermo and 664 FEDERAL TRADE COMMISSIO): DECISIONS Initial Decision 64 F.

Mario P. Charbonier, individually and as offcers of said corporation hereinafter called respondents, with false advertising, in violation of Section 5 of the Federal Trade Commission Act. The complaint is directed largely to respondents' use of the word " free" in the ad. vertising and sale of household paint and representing that the paint was sold at "factory" prices when, the complaint alleges, such is not the fact.

The respondents filed an answer to the compla.int, admitting some and dcnying other allegations therein. A hearing has been held at which documentary and oral evidence was received in support of and in opposition to the allegations of the complaint. Proposed findings of fact, the conclusions of law, order, and briefs thereon have been filed by respective counsel. The proceeding is now before the hearing examiner for initial decision. All proposed findings and conclusions not specifically found or concluded herein arc rejected. Upon con. sideration of the entire record, the hearing examiner makes the following findings of fact and conclusions of law, and issues the followmg order:

FINDINGS OF FACT 1. The respondent State Paint "Ianufacturing Company is a corp. oration organized and doing busines under the la \vs of the State of Florida with its principal place of business located at 4610 west Buf. falo Street, Tampa, Florida. The individual respondent Nick O. Palermo is president, the individual respondent Mario P. Charbonier is secretary treasurer, and one Ralph Poe is vice president of the corporate respondent. The individual respondent )lick O. Palermo and Mario P. Charbonier formulate and direct the policies, acts and practices of the corporate respondent. The address of the above. named individual respondents is the same as that of the corporate respondent.

2. The individual respondent Kick G. Palermo is the father Nick O. Palermo, president of the corporate respondent. )lick G. Palermo is a director and consultant to the corporate respondent as an honorarium. lie has no voice in the management or forrnu1ation of the practices and policies of the corporate respondent. 3. The corporate respondent State Paint Manufacturing Company manufactures its paints at its factory located in Tampa. The corp. orate respondent does not sell paint direct from its factory to the aeneral public. It sells the paints which it manufactures under the trade name "State Paints" through approximately 7 or 8 company owned and operated retail stores and approximately 130-135 fran. .;.

STATE PAINT MANeFACTURING CO, ET AL. 665 uno Initial Decision chise retail dealers located in Florida, Georgia, Alabama, Texas Louisiana and Tennessee. The individual respondent Xick O. Palermo, president of the corporate respondent, was formerly an employee of the 1hry Carter Paint Company, Tampa, Florida. While so employed, he decided to for11 a. similar paint company and go into business for himself. So, in 1055, in pa.rtnership with his brother-inla\v he individual respondent :Mario P. Charhonie.r, and his father the individual respondent ick G. Palermo, they began the manulecture and sale of household paint. ;\lr. Kick O. Palermo adopted the advertising anel sales technique used successfully by his former eJnployer l\lary Carter Paint Company of "Buy One Can, Every Second Can Free. The business was incorporated in farch 1056 under the name, State Paint :Manufacturing Company. Initially, paint sales were confined to the State of Florida. As sales of paint increased, the corporate respondent was i-nancially enabled to enlarge and extend its sales area. into the five additional States mentioned above.

4. In the conduct of its business, the corporate respondent ships and transports its paint products in its owned and operated trucks from its factory in Tampa, Florida, to its retail paint stores and franchise, retail deaiers located in Florida, Georg-in, AJabnma Texas, Louisiana. and Tennessee, where said paints are sold at retail. The corporate respondent maintains a substantial 'course of trade. in said paints in commerce as "couunerce" is defined in t.he Fedenll Trade Commission Act.

j, Since t.he company s inception in 195;j, the general format of its advel'Using has been the use of the phrase or a similar on8: " GA. X ,With Every Can Purchased Quart or Gallon, any Paint, no I.rimit... For the purpose of inducing the purchase of its paillts psponclent adveliises and has achTertisecl said pnillts in newspapers of general circulation, on radio, a.nd television stations, al1(l on labels attached to its cans or paint containers. Some of t.he statements and repre entations contained in said advertisement.s are the following: "\Yhate'- er paint needs on ilay have, visit one of yuur nenl'by State Pain!: Stoles, ami be n:, nrec1 that you wil be mdng the finest rlualit:; pl1int mnnnf"cturec1 at tue lowe,'"t price. SoJ( 11 t direct fa ctury price.

Slw1'e in State Paint s million (1011,11 0011\1. 1-n' 1'Y 2nc1 g-allon fJ'f'e Gallon with ehi"Y gn 110n pnrcl1asf'ct Buy I- Get:2 B\1Y :!-Gd-1 Buy ;) Get 10 Ko limit-- \.ny paint ::-1-rlli 'iI -1:

666 FEDERAL TRADE COMMISSIO). DECISIONS Initial Decision 64 F.

FREE! 'VITTI EVERY GALLON PURCHASED A GALLO:- FREE Super 'Vall Lat('"X Black Label 98 gal. $2.25 qt. Outside White $6.

Every 2nd can free Every 2nd can free $5.98 Interior Latex Alkyd Flat $5. 98 gal. $2.00 qt. $5. 98 gal. $2.00 qt. Every 2nd can free Every 2nd can free Save up to 89. 00 on every 2 gallons of nne quality paint. Participa te in the \",arld's most famous paint offer. Free gflllon with e\'ery gallon purchase.

1\0 limit. Any paint.

6. In sales of paint from the corporate respondent to its franchise retail dealers, it allows a 25% discount from the advertised price. CA-17 and CX 18 ate examples of two invoices from the corporate respondent to franchise dealers representing sales of paint. For example, if a franchise dcaJer orders eight gallons of paint State ships him sixteen gallons, but bills him for only eight gallons Jess a discount of 25% from the advertised price. The extra eight gallons are shipped so that the dealer can pass on a "free" gallon to each purchaser of one gallon. Company owned and operated stores receive no discount and are shipped on the same basis as a franchise dealer. If State ships its store 100 gallons of paint, State bills the store for 50 gallons, allowing the store 50 gallons to pass on to the purchaser of each gallon. Insofar as the manufacturing cost to State is concerned, there is no difference in cost between the first gallon of paint being sold and the "free" gallon of paint given away. It is the same paint. The dollar gross sales of paint by State for the yeflI' 1$):')8 ,,,ere 8395 241.61 on a volume of 143 72.+ gallons; for 1959, $704 649.46 on 256 236 gallons; for 1960, $848 537. 55 on 308 559 gallons; and for 1961, $1 069 547.94 on a total of 388 926 gallons. 7. Corporate respondent's advertising clearly states that the second can of paint \"ill be given (l\ya.y '; 1'1'ee " on the condition that the cus tamer buys the first can. It is also clear that, from the inception of State Manufacturing Company in 1955, as a partnership, its incorp' oration in 1956, and continuing to the present time, it has always used the sales and advertising technique of giving one can of paint free" with the purchase of one can of paint. The advertising complained about is, for all practical purposes, iclcntical "ith that in. volved in MOfY Oart.er Paint 00., et ai Docket No. 8290, issued by the Commission on .June 28, 1962 (60 F. C. 1827J, In that case the Commission held, among other things, that, since 1\iary Carter had always given away a "free" can of paint with the purchase of a first STATE PAINT :\IA?-TUFACTVRI:\TG CO. ET AL. 667 660 Initial Dedsion can, no usual and regular retail price had been established for the first can. This hearing exa.miner must follow that decision. Accordingly, it is found that, through the use of said advertisements reo spondents have represented that: the usual and customary retail price of each can of State Paint is the price designated in the advertise. ments; the advertised pric.e is a factory price, and the purchase of one can of State Paint together with the gift of a "free second can will result in savings of up to $9 to the retail purchaser, and, if one can of State Paint is purchased at the advertised price, a second can will be given " free " that is, as a gift or gratuity without cost to the retail purchaser.

8. Following the holding of the Commission in ilaTY CaTteT Paint 00.: supra it is found that the corporate respondent/s ad,'ertising is false, misleading and deceptive. The, usml. and customary retail price of each can of State Paint was not and is not the price designated in the, advertisements but substantially less than such price. The se,eond ca,n of paint is not "free :: that is, given without cost to the retail purchaseI' , since the purchaser pays tlle advertised price, which is the regular selling price for two cans of State IJaint. Savings of $9 "will not result to purchase.rs of one can of State Paint together with the second can since the second can is not free of cost to the purchase.r and State Pa.int has ne\'e1' sold two cans of the advert.ised paint at SD more than the advertised price. The advertised paint prices are not the prices charged by the corporate respondent's fa,etory for said paint but are the usual and customary prices at ,,,which the corpol' ate respondent s company owned retail stores and franchise retail dealers sell said paint to retail customers. The advertised prices are substantially in excess of the prices charged by the corporate respondent' s :factory to its company owned retail stores and franchise dealers.

9. It is further found that labels attached to the containers of State Paint contained the words "fact.ory guaranteed. " This is a representation that said paint is fully and unconditionally guaranteed. As a matter of fact, the said guarantee is a limited one, and the terms conditions and extent to which the f.llmrantee applies and the manner in which the guarantor will perform thereunder are not disclosed on said labels. under such circumst.ances, the Commission has held that failure io disclose the terms and conditions of the guarantee and manner of performance constitutes a yiobtion of the Act. 10. In the conduct of its business, the corporate. respondent is in snbstantid competition in commerce with corporations, individuals and firms engaged in the sale of paint and related products of the same general kind and nature as that sold by the corporate respond. 668 PEDERAL TRADE COMMISSION DECISIO Initial Decision 64 F, ent. The use by the corporate respondent or said false, misleading, and deceptive statements and representations has had and now has the capa.city and tendency to misle,ad members of the. purcha,sing public into the mistaken belief that said statements and representations were and are true, and into the purchase or substantial quantities or State Paint products by reason of said erroneous belief. As a con. sequence, substantial trade in commerce lws been and is bein!.t unfairly di,-cl'tecl to the corporate respondellt. from its cOllpetitol' ; and 1l1;titantial inj1lry lws thereby been, and is being clone to competitioll ill commerce.

CONCLUSIONS The aforesaid acts and practices of the corporate respondent found herein arc to the prejudice and injury or the public and respondent' competitors and constitute. unfair and deceptive acts and pnlctices and unfair methods of competition in commerce within the intent a.nd meaning of the Federal Trade Commission Act. It having been fou.nd that the individual respondent Nick G. Palermo, the father of Xick O. Palermo, president of the corporate respondent, has no voice in the management or formulation of the practices and policies of the corporate respondent, the order to be issued herein ".-ll not be directed against the said Kick G. Palermo.

ORDER Iti!5 oJ'rlei,t'd That respondents, State Paint J\Ianllfactllring COInpany, a. corporation, and its offcers: nncl :\ick O. Palermo, and \rario P. Charbonier, individually and as offcers of said corporatioTl: and respondents' agents, representatives and employees directly or through any corporate or other device, in connection "ith the offering for sale sale and distribution, jn commerce, as "commerce " is defined in the Federal Trade Commission Act: of paint, or any other product: do forth,,-ith cease and (lesist from representing, directly 01' by implication:

1. That any amount is respondents: cm:tomnl'Y and u nal retail price of any mCl'ChflH1ise when said amount i5 in cxces of the price at ,\.which such merchandise is customarily and usually sold by respondents at retail in the recent Hnd regular course or bU5iness.

2. That any article of mcrchflndise is being ginn free or as a g'jft OJ' 'I..ith01.t C() or rl1ntp.' 9. \ 1H) 1l ::u('h i:- not the bel 1. Tlwt any merchanc11se 1S sold or offered -for sale at fact()l' prices. \I-hell such is not the filet.

STATE PAI),TT MAXTFACTUnING CO. ET AL. 669 GGO Decision and Order 4. Representing that any product sold by respondents is guar. anteed unless the terms and conditions of such guarantee and the manner and form in which the guarantor wiil perform ate clearly and conspicuously set forth.

5. Representing in any manner that, by purcha.sing any of its merchandise, customers are afforded savings amounting to the higher price used for comparison with tlutt selling price, unless difference between respondents' stated selling price and any the higher price used represents the price at "which the merchandise is usually and customarily sold at retail in the trade area illyolved, or is the price at which such merchandise has been usually and regul!lrly sold by respondents !It ret!lil in the recent regular course of its business in the trade area involved. It is .hll'lhel' oi'dei'ed TImt the complaint herein he, Hnd the same hereby is, dismissed ns to respondent Nick G. Palermo. DECISIO:! OF THE COMMISSION AXD ORDER TO FILE HEPORT OF CO)I- PLIAXCE This matter having been heard by the Commission upon excep tions to the initi!lI decision filed by respondents, and upon briefs !lnd oral argument in support thereof and in opposition thereto; and The Commission having determined that the hearing examiner findings and cOIlcJusions are fully substantiated on the record and that the order contained in the initial decision is appropriate in all respects to dispose of this matter:

I t is ordered That respondents' exceptions to the initi!ll decision , and they hereby !lre, denied.

It 'i8 fll'!'heT ordered That the hearing examiner s initial decision filed October 16 , 19(,2 , be, and hereby is, adopted as the dccision of the Commission.

I t is furthe,. ordered Thlt respondents St!lte Paint hnufacturing Company, Niek O. Palermo and Mario P. Char bonier slmlJ, ".within sixty (60) d!lYs after service upon them of this order, file ,,'ith the Commission a report. in writing setting forth in detail the manner and form in which they have complied with the ordel' to cease and desist.

Commissioner EJman dissents for the reasons elaborated in his dissenting opinion in JJj aTY Cartel' Paint Company: 171(. Docket 8290, June 28, 1962 (60 F. C. 1827 , 1853J. Commissioner :MacIntyre did not participate in this decision. Commissioner Reilly did not particip!lte in this decision for the re:lson he did not hear oral argument.

Complaint 64 F.