Hair Replacement Centers of Flushing, Inc., Etc

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

IN THE MATTER OF HAIR REPLACEMENT CENTERS OF FLUSHING, INC. ETC., ET AL.

CONSENT ORDER, ETC., IN REGARD TO ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION ACT Docket C-2727. Contplaint, Sept. 97.5-Dec', sion, Sept, 1975 Com;ent order requiring a Flushing, promoter of a hair implant system, among other things to cease misrepresenting the nature, appearance and other related characteristics of its system; and failing to disclose that their system involves surgical procedures and continually requires special care. J.' urther respondents are required to devote 15 percent of all of their advertisements to warning prospective customers of the inherent dangers associated with their system of hair implant replacement.

640 Complaint Appearances For the Commission: Lester G. Grey. or the respondents: Pro se.

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 Hair Replacement Centers of Flushing, Inc., a corporation, trading also as American Hair Design Centers, and Jan Felson, individually and as an officer of said corporation, hereinafter referred 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 interest hereby issues its complaint stating its che.rges in that respect as follows:

PARAGRAPH 1. Respondent Hair Repl2cement Centers of Flushing, Inc., trading also as American Hair Design Centers, is a corporation organized, existing and doing business under and by virtue of the laws of the State of New York with its p,e",cipal offce and place of business located at 33-21 Francis Lewis Blvd., Flushing, N. Respondent Jan Felson is an offcer of the corporate respondent. He formulates, directs and controls the acts and practices of the corporate respondent including the acts and practices hereinafter set forth. His business address is the same as that of the corporate respondent. PAR. 2. Respondents operate the Hair Replacement Centers of Flushing salon and promote on their own behalf, among others, the implant hair replacement system hereinafter sometimes referred to as the "system." The system involves a surgical procedure whereby synthetic sutures (prolene) or similar synthetic thread are .stitched into the scalps of respondents' customers. Hairpieces are then attached to the suture loops. Respondents sell, install and maintain 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, and by classified telephone directories which are distributed across State lines, and by mailing promotional literature to prospective customers who respond to such advertising. As a result of such directory, newspaper advertising, and literature mailing, respondent has 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 directory, newspaper , , , Complaint 86 F.

advertising and mailing of promotional literature, have disseminated and caused to be disseminated false advertisements by United States mails, within the meaning of Section 12(a)(I) 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 hair implant 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 lierature, but not all inclusive, are the following: IT IS A PATENTED TECHNIQUE OF PERMANENTLY IMPLANTING HAIR TO THE SCALP USED EXCLUSIVELY BY HAIR REPLACEMENT CENTERS. MEDICAL IMPLANTS DO NOT REQUIRE PERIODIC ADJUSTMENTS. CAN A HAIR IMPLANT BE DETECTED? NO, BECAUSE IT IS PERFECTLY MATCHED TO YOUR HAIR, REGARDLESS OF COLOR, TEXTURE AND TYPE. YOU CAN SWIM, SHAMPOO, SKI OR PARTICIPATE IN ALL SPORTS WITHOUT FEAR OF EMBARRASSMENT.

, , 'LESS THAN IF YOU OWNED TOUPEES.

PAR. 5. Through the use of the above advertisements, and others of similar import and meaning but not expressly set out herein, and by oral statements and representations made by employees and agents of the respondents, respondents have represented, directly or by implication, that:

1. The implant system does not involve wearing a hairpiece, or toupee.

2. The hairpiece applied becomes part of the anatomy like natural hair, 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. a. After the system has been applied, the wearer can care for it himself, and wil 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. 2. The hairpiece applied does not become part of the anatomy like natural hair. The system involves the suturing of synthetic threads into the scalp of the recipient by a surgical procedure and which may be 640 Complaint 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 clm;eup 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, may cause bleeding, and may cause the sutures to pull out. As a consequence washing the hair and scalp is difficult. Because washing is diffcult foreign particles and dead skin tissue tend to accumulate beneath the implant 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 get pulled, or become tangled, or strained. Discomfort and pain may be caused by common actions, such as rollng the head on a pilow durng 3. The wearer cannot in most instances care for the hairpiecesleep. himself; he must seek professional or skiled assistance on many occasions. Medical problems associated with the surgery or the continuing presence of synthetic thread in the scalp may require subsequent visits to a medical doctor. A substantial additional charge for such service could 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 replaeement hairpieces are required at intervals in order to maintain a color match with any natural hair the wearer may have.

The statements and representations set forth in Paragraphs Four and 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 the 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 Complaint 86 F.

surgical procedure, from the synthetic sutures themselves, and from pulling normally incident to wearing the hairpiece; (b) that clients wil be subject to the risk of irrtation, infections, and skin diseases as a result of the surgical procedure and as a result of the synthetic sutures remaining in the scalp;

(c) that permanent scarring to the scalp may result from the required surgical procedures, and as a result of the synthetic sutures 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 suffcient experimental period to determine the extent of seriousness of the above side effects and whether there are any other side effects, including but not limited to rejection of the synthetic sutures 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 the system respondents entice members of the purchasing public to their salon with advertisements of " It is a patented technique of permanently implanting hair to the scalp used exclusively by Hair Replacement Centers." as a solution to baldness and like advertisements 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 implant system, and to make a substantial down payment, 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 possibilties of discomfort, pain, disease, or disfigurement related to the continued presence of the synthetic suture in the sealp. 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 the psychological benefit of having hair replaced is so significant as to be of immediate necessity and that subconsciously, bald men are desperate for prompt relief. 640 Decision and Order 2. Inducing prospects to sign contracts and/or make down payments 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 synthetic suture 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. PAR. 9. In the course and conduct of their business, and at all times mentioned herein, respondents have been, and now 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 hurredly and precipitately sign contracts for the application of the implant 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 synthetic suture in the scalp, or to compare prices, techniques, and devices available from competing corporations, firms, and individuals sellng 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 disseminated 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 New York Regional Offce proposed to present to the Commission for its consideration and which (41) FEDERAL TRADE COMMISSION DECISIONS Decision and Order 86 F. 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 settement purposes only and does not constitute an admission by respondents that the law has been violated as alleged in such complaint and waivers and other provisions as required by the Commission 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 sixty (60) days, now in further conformity with the procedure prescribed in Section 2.34(b) of its rules, the Commission hereby issues its complaint, makes the following jurisdictional findings and enters the following order:

1. Respondent Hair Replacement Centers of Flushing, Inc., trading also as American Hair Design Centers, is a corporation organized existing and doing business under and by virtue of the laws of the State of New York, with its office and principal place of business located at 33-21 Francis Lewis Blvd., Flushing, N.Y. 11358. Respondent Jan Felson is an offcer 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.

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 is ordered That respondent Hair Replacement Centers of Flushing, Inc., a corporation, trading also as American Hair Design Centers, and/or under any other name or names, its successors and assigns and its officers, and Jan Felson, individually and as an officer of said corporation, and respondents' agents, representatives, and employees, directly or through any corporation, subsidiary, division or other device or through franchisees or licensees, in connection with the advertising, offering for sale, sale, or distribution of the implant replacement system or other hair replacement product or process involving surgery (hereinafter sometimes referred to as the " system 640 Decision and Order in commerce, as "commerce" is defined in the Federal Trade Commission Act, or by the United States mails within the meaning of Section 12(a)(1) of the Federal Trade Commission 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, and has the following characteristics of natural hair:

a. The same appearance in all applications as natural hair, upon normal observation, and upon extreme closeup examination; b. it may be cared for like natural hair where care involves 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 wil not have to seek professional or skilled assistance in maintaining the system, and that the customer wil not incur maintenance costs over and above the cost of applying the system. It is further ordered That respondents, in advertising, offering for sale, sellng or distributing the system, disclose clearly and conspicuously that:

1. The system involves a surgical procedure resulting in the implantation of synthetic sutures in the scalp, to which hair is affxed. 2. By virtue of the surgical procedure involving implantation of synthetic sutures in the scalp, and by virtue of the synthetic suture remaining in the scalp, there is a risk of discomfort, pain, infection scarrng, and other skin disorders.

3. 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.

4. 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 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 and periodicals, and in radio and television advertisements with a running time of one minute or less, respondents 217-1840- 76 - , Decision and Order H6 F'.T.C. may substitute the following statement, in lieu of the above requirements:

Warning: This application involves surgery whereby synthetic 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 shall 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, in connection with the sale of the system, provide prospective purchasers with a separate disclosure sheet containing the information required in the immediately preceding paragraph of this order, subparagraphs one through four thereof, and that respondents require that, prior to executing any contract to purchase said system, such prospective purchasers, sign and date the disclosure sheet after the sentence I have read the foregoing disclosures and understand what they mean," and that Hair Replacement Centers of Flushing, Inc. provide a copy of said disclosure sheet to the customers and retain such signed disclosure sheet for at least three years.

It is further ordered That, in connection with the sale of the system no contract for application of the system shall become binding on the purchaser prior to midnight of the third day, excluding Sundays and legal holidays, after the day on which said contract for application of the system was executed, 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 offce responsible for the sale prior to midnight of the third day, excluding Sundays and legal holidays, after the day on which said contract for application of the system was executed.

2. Respondents shall provide a separate and clearly understandable 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 on which said contract for application of the system was executed.

It is That respondents, in connection with the further ordered advertising, offering for sale, sale, or distribution of the system, serve a copy of this order upon each present and every future licensee or 640 Decision and Order franchisee, and upon each physician participating in application of respondents' system, and obtain written acknowledgment of the receipt thereof; and that respondents obtain from each present and future licensee or franchisee an agreement in writing, (1) to abide by the terms of this order, and (2) to cancellation of their license or franchise for failure to do so; and that respondents cancel the license or franchise of any licensee or franchisee that fails to abide by the terms of this order. Respondents shall retain such acknowledgments and agreements for so long as such persons or firms continue to participate in the application or sale of respondents' system. It is That respondents, in connection with the further ordered advertising, offering for sale, sale, or distribution of the system 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 (30) 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 fie promptly with the Commission a written agreement to 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 individual respondent .J an Felson promptly notify the Commission of the discontinuance of his present business or employment and of his affliation with a new business or employment. Such notice shall include respondent's current business address and a statement as to the nature of the business or employment in which he is engaged as well as a description of his duties and responsibilities.

I t is further understood that nothing contained in this order shall be construed in any way to annul, invalidate, repeal, terminate, modify or e"empt respondents from complying with agreements, orders or directives of any kind obtained by any other agency or act as a defense to actions instituted by municipal or State regulatory agencies. Order 86 r' T.G Nothing in this order shall be construed to imply that any past or future conduct of respondents is subject to and complies with the rules and regulations of, or the statutes administered by the Federal Trade Commission.

It is further ordered That the respondents herein shall within sixty file with the(60) days after service upon them of this order, Commission a report, in writing, setting forth in detail the manner and form in which they have complied with this order.