Titan Enterprises, Inc

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

In THe Matrer or TITAN ENTERPRISES, INC., DOING BUSINESS AS V.LP. INTERNATIONAL SCIENTIFIC CO., ET AL. CONSENT ORDER. ETC., IN REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION ACT Docket C-2173. Camploint, Mareh 20, 1972—Decision, March 20, 1972. Consent order requiring a Chicago, Il. corporation engaged in selling surgically-implanted hairpieces to cease making falxe claims for its PERMA- TITAN ENTERPRISES, INC., ET AL. ~ 397 396 Complaint TEQUE hair replacement system by misrepresenting that the replaced: hair has all the characteristics of natural hair and that no maintenance costs are necessary, respondents are also required to affirmatively disclose that the application of its system involves surgery wherein discomfort, pain and medical problems may occur, they are also required to notify prospective purchasers. to consult their personal physicians, no contract shall become binding prior to the third day after execution, nor shall any promissory note be negotiated to a third party until the fifth day after the physician consultation, and each prospective customer shall be notified of his right to cancel any contract within three days. ComeLaAINtT Pursuant to the provisions of the Federal Trade Commission Act, und by virtue of the authority vested in it by said Act, the Federal Trade Commission, having reason to believe that Titan Enterprises, Inc., a corporation trading as V.I.P. International Scientific Company, and Anthony J. Damato, individually and as an officer of said corporation, and Dean Forcucci,. individually, hereinafter referred to as respondents, having 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 interest, hereby issues its complaint stating its charges in that respect as follows: Paracrary 1. Respondent Titan Enterprises, Inc., is a corporation organized, existing and doing business under and by virtue of the laws of the State of Illinois with its principal office and place of business located at 173 W. Madison Street, Chicago, Illinois. Respondent Anthony J. Damato is an officer of the corporation respondent. He formulates, directs and controls the acts and practices of the corporate respondent including the acts and practices hereinafter set forth. His address is the same as that of the corporate respondent.

Respondent Dean Forcucci was the president of said corporation until November 1, 1971. He formulated, directed and controlled the policies, acts and practices of said corporation until that date. He is currently employed as the sales manager for said corporation and his address is the same as that of said corporation. Par. 2. Respondents operate the V.I.P. International Scientific Company salon and promote on their own behalf, among others, the PERMA-TEQUE hair replacement system (Hereinafter sometimes re- Complaint 80 F.T.C.

ferred to as the “System”.) The system involves a surgical procedure whereby a stainless steel thread treated with TEFrLon is used to stitch a perimeter into the scalps of respondents’ customers. Wefts of hair are then interwoven with the stainless steel perimeter. The V.1.P. International Scientific Company salon (hereinafter referred to as salon) sells, installs and maintains the system, except that the surgical procedure itself is performed by a medical doctor. Par. 3. In the course and conduct of their business, respondents promote the system by advertising in newspapers of general circulation which are distributed across state lines, and by mailing promotional literature to prospective customers who. respond to such advertising. Asa result of such newspaper advertising, and literature mailing, respondents have maintained a substantial course of trade in commerce, as “commerce” is used in Sections 5 and 12. of the Federal Trade Commission Act, and as a result of such newspaper advertising and mailing of promotional literature, have disseminated and caused to be dlisseminated false advertisements by United States mails, within the meaning of Section 12(a) (1) of the Federal Trade Commission Act. Par. 4. In the course and conduct of their business, and for the purpose of inducing the purchase of the perma-TEQuE hair replacement system, respondents, directly have made numerous statements and representations in advertisements inserted in newspapers of general circulation and in other promotional literature. Typical of the statements and representations contained in said advertisements and promotional literature, but not all inclusive, are the following: PERMA-TEQUE A new scientific discovery. A permanent head of hair that will not come off. Not a hairpiece, transplant or hair weave. Wash, Comb, Brush, Sleep, Live in it. PERMA-TEQUE IS A PERMANENT MEDICAL TECHNIQUE FOR HAIR REPLACEMENT * * * SHE CAN MUSS IT, BUT SHE CAN’T REMOVEIT * * * NOT TOUPEES OR HAIRPIECES NOT HAIR WEAVING NO MORE TIGHTENINGS Medical Science, using space-age products, has created a magnificent new technique which is permanent, secure and absolutely undetectable * * *.

Complaint 80 E.T.C.

2, The hairpiece applied becomes part of the anatomy like natural hair, teeth, fingernails or skin and has characteristics of natural hair, including the following:

(a) The same appearance as natural hair upon normal observation and upon extreme close up examination.

(b) It may be cared for like natural hair, particularly in that actions such as washing, combing, brushing and mussing may be performed on it in the same manner as might a person with natural hair.

(c) The wearer may engage in physical activities with as much disregard for his hairpiece as might a person with natural hair. 3. After the system has been applied, the wearer can care for it himself, and will not have to seek professional or skilled assistance in maintaining the system, and that the customer will not incur charges over and above the charge for installing the system. Par. 6. In truth and in fact:

1. The system does involve the wearing of a hairpiece or toupee, inasmuch as the interweaving of the wefts of hair to a perimeter creates what is essentially a hairpiece or toupee. 2, The hairpiece applied does not become part of the anatomy like natural hair, teeth and fingernails. The system involves a stainless steel perimeter which is stitched into the scalp by a surgical procedure and which may be rejected by the body. The hairpiece differs from natural hair in many respects, including the following: (a) It does not have the same appearance as natural hair in a substantial number of instances. It is often discernible as a hairpiece or toupee upon normal observation, and upon extreme close examination.

(b) It cannot be cared for like regular hair, but requires special care and handling. Strong pulling on the hair, such as may be expected to occur in washing, combing, brushing, and mussing, can cause pain because of the pressure exerted on the sutures in the scalp, many cause bleeding, and may cause the sutures to pull out. As a consequence, washing the hair and scalp is difficult. Because washing is difficult, foreign particles and dead skin tissue tend to accumulate beneath the prrms-TEQUE hair application and become a significant source of irritation. The hair styles into which the hairpiece may be combed or brushed without professional treatments are limited.

(c) The wearer may not engage in physical activities with as much disregard for his hairpiece as might a person with natural hair. The wearer must at all times be careful that the hair does not pull or TITAN ENTERPRISES, INC., ET AL. 401 396 Complaint get pulled, or become tangled, or strained. Discomfort and pain may be caused by common actions, such as rolling the head on a pillow during sleep.

8. The wearer cannot in most instances care for the hairpiece himself: he must seek professional or skilled assistance on many cccasions. Medical problems associated with the surgery or the continuing presence of stainless steel thread in the scalp may require subsequent visits to a medical doctor. Wearers having some natural hair under the hair applied by respondents would have to have a haircut at regular intervals and such hair would be difficult to cut without skilled assistance. A substantial additional charge for such services would be incurred. Respondents’ applied hair is subject to bleaching in sunlight and other discoloration normally associated with hairpieces, and where the hairpiece has been color-dyed, loss of dye through washing and normal wear; thus, replacement wefts of hair or hairpieces are required at intervals in order to maintain a color match with any natural hair the wearer may have. Because of the difficulty in washing the hair and scalp described previously in Paragraph Six, assistance is often required to wash the hair. The statements and representations set forth in Paragraph Four and Paragraph Five were and are false, misleading and deceptive. Par. 7. In the course and conduct of their business, respondents, have represented in advertisements the asserted advantages of their system, as hereinbefore described. In many cases, respondents have represented their system to be painless and have not disclosed in such advertisements that a surgical procedure is a required step in the system. In no case have respondents’ advertisements disclosed : (a) that clients may experience discomfort and pain as a result of the surgical procedure, from the stainless steel sutures themselves, and from pulling normally incident to wearing the hairpiece; (b) that clients will be subject to the risk of irritation, infections, and. skin diseases as a result of the surgical procedure and as a result of the stainless steel thread remaining in the scalp; (c) that permanent scarring to the scalp may result from the required surgical procedures, and as a result of the stainless steel thread remaining in the scalp.

The consequences described in this paragraph have in fact occurred, and to a reasonable medical certainty can be expected to occur, and respondents knew, and had reason to know, that they could be expected to occur. Furthermore, the surgical procedure has not been used in conjunction with respondents’ system for a sufficient. experimental period to determine the extent of seriousness of the Complaint 80 F.T.C.

above side effects, and whether there are any other side effects, including but not limited to rejection of the stainless steel thread through the human body’s natural rejection process. Therefore, the advertisements referred to in Paragraph Seven are false and misleading and the acts and practices referred to in said paragraph are unfair and deceptive.

Par. 8. For the purpose of inducing the purchase of their prrasreque hair replacement system, respondents entice members of the purchasing public to their salon with advertisements of “a permanent head of hair that will not come off” as a solution to baldness and like advertisments to attract members of the purchasing public concerned about their hair loss, and with offers of free information without any obligations. In most cases respondents do not disclose details of their system unless and until a prospect visits their salon. When members of the purchasing public have visited the salon, they have been subjected to emotional sales pressure, for the purpose of persuading them to sign a contract for the application of the prrara-TEQuE system, and to make a’ substantial downpayment, without being afforded a reasonable opportunity to consider and comprehend the scope and extent of the contractual obligations involved, the seriousness of the surgical procedure and the possibilities of discomfort, pain, disease, or disfigurement related to the continued presence of the stainless steel thread in the scalp. Persons are insistently urged to sign such contracts and make such down payments, through the use of persistent and emotionally forceful sales presentations employing the following tactics, among others: 1. Representing that consumer demands for application of the system was overwhelming, that most prospects preferred the system over other hairpieces, and that a prospect could only be assured of a PERMA-TEQUE hair replacement in the near future by signing a contract and/or making a downpayment immediately. 2, Inducing prospects to sign contracts and/or make downpayments before they have consulted a medical doctor and freely and openly discussed with such doctor the medical risks and consequences of the surgical procedure, and of the stainless steel thread being embedded in their scalp. Such consultations typically occur immediately before the commencement of surgery, by which time the client is likely to feel pressured to go through with the application. Therefore, the advertisements referred to in Paragraph Eight were and are false and misleading, and the acts and practices set forth in such paragraph were and are false and deceptive. TITAN ENTERPRISES, INC., ET AL. 403 396 Decision and Order Par. 9. In the course and conduct of their business, and at all times mentioned herein, respondents have been and are in substantial competition in commerce with corporations, firms, and individuals, in the sale of cosmetics, devices and treatments for the concealment of baldness.

Par. 10. The use by respondents of the above unfair and deceptive representations and practices has had, and now has, the capacity and tendency to mislead consumers, and to unfairly influence consumers to hurriedly and precipitately sign contracts for the application of the perma-TEQUE hair replacement system, and to make partial or full payment therefor, without affording them reasonable opportunity to consider and comprehend the scope and extent of the contractual obligations involved, or the seriousness of the surgical procedure, and the possibilities of discomfort, pain, disease or disfigurement related thereto, and related to the continual presence of the stainless steel thread in the scalp, or to compare prices, techniques, and devices available from competing corporations, firms, and individuals selling baldness concealment cosmetics, devices, and treatments to the purchasing public.

Par. 11. The respondents’ acts and practices alleged herein are to the prejudice and injury of the purchasing public, and to respondents’ competitors, and constitute unfair methods of competition in commerce, and unfair and deceptive acts and practices in commerce in violation of Section 5 of the Federal Trade Commission Act, and false advertisements disserninated by United States mails, and in commerce, in violation of Section 12 of the Federal Trade Commission Act.

Decision AND ORDER The Federal Trade Commission having initiated an investigation of certain acts and practices of the respondents named in the caption hereof, and the respondents having been furnished thereafter with a copy of a draft of complaint which the Chicago Regional Office proposed to present to the Commission for its consideration and which, if issued by the Commission, would charge respondents with violation of the Federal Trade Commission Act; and The respondents and counsel for the Commission having thereafter executed an agreement containing a consent order, an admission by the respondents of all the jurisdictional facts set forth in the aforesaid draft of complaint, a statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by respondents that the law has been violated as Decision and Order 80 F.T.C.

alleged in such complaint, and waivers and other provisions as required by the Commission’s rules; and The Commission having thereafter considered the matter and having determined that it had reason to believe that the respondents have violated the said Act, and that complaint should issue stating its charges in that respect, and having thereupon accepted the executed consent agreement and placed such agreement on the public record for a period of thirty (30) days, now in further conformity with the procedure prescribed in Section 2.84(b) of its rules, the Commission hereby issues its complaint, makes the following jurisdictional findings, and enters the following order: 1. Respondent Titan Enterprises, Inc., is a corporation organized, existing and doing business under and by virtue of the laws of the State of Illinois, with its office and principal place of business located at 173 West Madison Street, Chicago, Illinois. Respondent Anthony J. Damato is an officer of said corporation. He formulates, directs and controls the policies, acts and practices of said corporation, and his principal office and place of business is located at the above stated address.

Respondent Dean Forcucci was the president of said corporation until November 1, 1971. He formulated, directed and controlled the policies, acts and practices of said corporation until that date. He is currently employed as the sales manager for said corporation and his address is the same as that of said corporation. 2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondents, and the proceeding is in the public interest.

ORDER It 7s ordered, That respondents Titan Enterprises, Inc., a corporation, trading as V.I.P. International Scientific Company, or under any other trade name or names, its successors and assigns, and Anthony J. Damato, individually and as an officer of said corporation and Dean Forcucci, individually, (hereinafter sometimes referred to as “respondents”), and respondents’ officers, agents, representatives and empioyees, directly or through any corporation, subsidiary, division or other device, in connection with the advertising, offering for sale, sale, or distribution of the perma-TEQUE hair replacement system or other hair replacement product or process involving surgery (hereinafter sometimes referred to as the “System”), in commerce, as “commerce” is defined in the Federal Trading Commission Act, or by the United States mails within the meaning of Section 12(a)(1) of the Federal Trade Commission TITAN ENTERPRISES, INC., ET AL. 405 396 Decision and Order Act, do forthwith cease and desist from representing, directly or by implication :

1. That the system does not involve wearing a device or cosmetic which is like a hairpiece or toupee; 2, That after the system has been applied, the hair applied becomes part of the anatomy like natural hair, teeth, and fingernails and has the following characteristics of natural hair; a. The same appearance in all applications as natural hair, upon normal observation, and upon extreme close-up examination ;

b. It may be cared for like natural hair where care in- ‘volves possible pulling on the hair;

c. The wearer may engage in physical activity and movement with the same disregard for his hair as he would if he had natural hair.

3. That after the system has been applied, the wearer can care for it himself, and will not have to seek professional or skilled assistance in maintaining the system, and that the customer will not incur maintenance costs over and above the cost of applying the system.

It is further ordered, That respondents, in advertising and in all eral sales presentations, offering for sale, selling or distributing the system, disclose clearly and conspicuously that: 1. The system involves a surgical procedure resulting in the implantation of stainless steel sutures in the scalp, to which hair is affixed.

2. By virtue of the surgical procedure involving implantation of stainless steel sutures in the scalp, and by virtue of the stainless steel sutures remaining in the scalp, there is a high probability of discomfort and pain, and a risk of infection, skin: disease and scarring.

3. The system has been in use for too short a period of time to determine to a reasonable medical certainty the extent or seriousness of the above-described side-effects, or whether there are other side-effects.

4. Continuing special care of the system is necessary to minimize the probabilities and risks referred to in subparagraph two of this paragraph, and such care may involve additional costs for medications and assistance.

5. The purchaser is advised to consult with his personal physician about the system before deciding whether to purchase it. Respondents shall set forth the above disclosures separately and Decision and Order _ 80 E.T.C.

conspicuously from the balance of each advertisement or presentation used in connection with the advertising, offering for sale, sale, or distribution of the system, and shall devote no less than 15 percent of each advertisement or presentation to such disclosures: Provided, however, That in advertisements which consist of less than ten column inches in newspapers or periodicals, and in radio or television advertisements with a running time of one minute or less, respondents may substitute the following statement, in lieu of the above requirements:

Warning: This application involves surgery whereby stainless steel sutures are placed in the scalp. Discomfort, pain, and medical problems may occur. Continuing care is necessary. Consult your own physician. No less than 15 percent of such advertisements shall be devoted to this disclosure, such disclosure shali be set forth clearly and conspicuously from the balance of each of such advertisements, and if such disclosure is in a newspaper or periodical, it shall be in at least eleven point type.

It is further ordered, That respondents provide prospective purchasers with a separate disclosure sheet containing the information required in the immediately preceding paragraph of this order, subparagraphs one through five, thereof, and that respondents require that such prospective purchasers, subsequent to receipt of such disclosure sheet, consult with a duly licensed physician who is not associated, directly or indirectly, financially or otherwise, with the respondents regarding the nature of the surgery to be done, the probabilities of discomfort and pain, and risks of infection, skin disease, and scarring.

It is further ordered, That no contract for application of respondents’ system shall become binding on the purchaser prior to midnight of the third day, excluding Sundays and legal holidays, after the day of the purchaser’s above-described consultation with a duly licensed physician who is not associated, directly or indirectly, fnancially or otherwise, with the respondents, or after the day on which said contract for application of the system was executed, whichever is later, and that:

1. Respondents shall clearly and conspicuously disclose, orally prior to the time of sale, and in writing on any contract, promissory note or other instrument executed by the purchaser in connection with the sale of the system, that the purchaser may rescind or cancel any obligation incurred, by mailing or delivering a notice of cancellation to the office responsible for the sale prior to midnight of the third day, excluding Sundays and legal TITAN ENTERPRISES, INC., ET AL. 407 396 Decision and Order holidays, after the day of the purchaser’s above-described consultation with a duly licensed physician or after the day on which said contract for application of the system was executed, whichever day is later.

2. Respondents shall provide a separate and clearly under- . standable form which the purchaser may use as a notice of cancellation.

3. Respondents shall not negotiate any contract, promissory note, or other instrument of indebtedness to a finance company or other third party prior to midnight of the fifth day, excluding Sundays and legal holidays, after the day of the purchaser’s above-described consultation with a duly licensed physician, or after the day on which said contract for application of the system was executed, whichever day is later. 4. Respondents shall obtain for each purchaser a certificate signed by the physician who was consulted as required by this order, such certificate specifying that the said physician has explained to the purchaser the nature of the surgery to be done, and has advised him of the probabilities of discomfort and pain, and risks of infection, skin disease and scarring, and specifying the date and approximate time of the consultation; and respondents shall retain all such certificates for three years. Lt is further ordered, That respondents serve a copy of this order upon each physician participating in application of respondents’ system, and obtain written acknowledgement of the receipt thereof. Respondents shall retain such acknowledgements for so long as such persons continue to participate in the application of respondents’ system.

It is further ordered, That respondents forthwith distribute a copy of this order to each of their operating divisions or departments. It is further ordered, That respondents notify the Commission at least thirty (80) days prior to any proposed change in the corporate respondent, such as dissolution, assignment, or sale resulting in the emergence of a successor corporation, the creation or dissolution of subsidiaries, licensees, or franchisees, or any other change in the corporation which may affect compliance obligations arising out of the order.

It is further ordered, That in the event that the corporate respondent merges with another corporation or transfers all or a substantial part of its business or assets to any other corporation or to any other person, said respondent shall require such successor or transferee to filé promptly with the Commission a written agreement to to = 487-885—75 Complaint 80 F.T.C.

be bound by the terms of this order; Provided, That if said respondent wishes to present to the Commission any reasons why said order ‘should not apply in its present form to said successor or transferee, it shall submit to the Commission a written statement setting forth said reasons prior to the consummation of said succession or transfer. It is further ordered, That the respondents herein shall within sixty (60) days after service upon them of this order, file with the Commission a report, in writing, signed by such respondents, setting forth in detail the manner and form of their compliance with this order.