Simeon Management Corporation

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IN THE MAlTER OF SIMEON MANAGEMENT CORPORATION, ET AL.

ORDER , OPINION?\' , FTC. , I REGARD 1"0 ALLEGED VIOLATION OF SEe' S. 5 AND 12 OF THf FEDERAL TRADE COI\1MJSSJON ACT Doket 8996. Compwint, Oct. l.974-Final Order " Aprl, 1976 Order requiring five independent California weight reduction clinic operawrs, among other things to CCa."H2 failing to make conspicuous disclosure statements in advertising, and to potential purchasers that drugs used in weight reducing programs have not been approved by the Foo and Drug Administration as safe and effective for weight control; drugs do not cause more attractive redistribution of weight; and treatment required adherence to a 500 calorie daily diet.

Appearances and Paul For the Commission: ALfred Lindwman, Harvey M. Freed D. Hodge respondents: Grayson Gross Los Angeles, Calif. , for For the Simeon Management Corporation, John D. Howell, Simeons Weight Clinics Foundation, Robert Van Dine, J. William Byrd and Medical Weight Loss, Inc. Rob€rt M. AranBeverly BiJJs, Calif., for Darre! P. Simpson. David L. Cunningham Sausalito, Calif. , for Bariatric Medical Clinics Management Corporation and David L. Cunningham. ue Shau.' San Diego, Calif. , for Harvey J. Lobelson and Weight Reduction Medical Clinic. Cocrer ScarpnUa San Francisco, Calif. C),!I. orcal, Inc., HCG Weight Clinics Foundation, Peter J.for Marengo, III and Joseph Costa.

Complaint COMPLAII- Pursuant to the provisions of the Federal Trade Commission Act in it by said Act, the Federal and by virtue of the authority vested' Trade Commission, having reason to believe that Simeon Management Corporation, a corporation, and John D. Howell, individually and as principal investor in Simeon Management Corporation; Simeons Weight Clinics Foundation, a corporation, and Robert Van Dine and J. William Byrd, individual11y and as officers of Simeons Weight Clinics Foundation; Medical Weight Loss, Inc., a corporation, and Darrel P. Simpson, individual11y and as an officer of Medical Weight Loss, Inc. Bariatric Medica! Clinics Management Corporation, a corporation, and David L. Cunningham, individual11y and as an officer of Bariatric . lWporte as c:rr€:te by Commission orrlerdate July i, 1976 SIMEON MANAGEMENT CORP., ET AL. 1185 1184 Complaint Medical Clinics Management Corporation; Harvey J. Lohelson, an individual doing business as Weight Reductio" Medical Clinic; C. M. Norcal, Inc. , a corporation, HCG Weight Clinics Foundation, a corporation, and Peter J. Marengo, III and Joseph Costa, individually and as officers of C. M. Norcal, Inc. and HCG Weight Clinics Foundation, 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 charges in that respect as follows:

PARAGRAPH 1. (A) Respondent Simeon Management Corporation is a corporation organized, existing and doing business under and hy virtue of the laws of the State of California, with its principal office and place of business located at 7712 Densmore Ave. , Van Nuys, California. Respondent John D. Howell is the principal investor in said corporate respondent Simeon Management Corporation, which has not yet named officers and directors or issued stock. He formulates, directs and controls the acts and practices of said corporate respondent including the acts and practices hereinafter set forth. His business address is the same as that of said corporate respondent. Respondent Simeons Weight Clinics Foundation is a corporation organized, existing and doing business under and by virtue of the laws of the State of California, with its principal office and place of business located at 7712 Densmore Ave., Van Nuys, California. Respondents Robert Van Dine and J. William Bj'd are officers of said corporate respondent Simeons Weight Clinics Foundation. Their business address is the same as that of said corporate respondent. Said individual respondents and respondents Howell and Simeon Management Corporation cooperate and act together to bring about the acts and practices hereinafter sct forth, including the operation of numerous clinics known by the name Simeons Weight Clinics Foundation located in the State of California, and by other names located elsewhere in other States in the United States. (B) Respondent Medical Weight Loss, lnc. is a corporation organized existing and doing business under and by virtue of the laws of the State of California with its principal office and place of business located at 1901 Avenue of the Stars, Suite 470, Los Angeles, California. .fespondent Darrel P. Simpson is an officer of Medical Weight Loss Inc. Said individual respondent formulates, directs and controls the acts and practices of said corporate respondent, including the acts and practices hereinafter set forth. His business address is the same as that of said corporate respondent. He and respondent Medical Weight Loss Inc. cooperate and act together to bring about the acts and practices 1186 FEDERAL TRADE COMMISSION DECISIO:-S Complaint 87 F.

hereinafter set forth, including the operation of numerous clinics known by tbe name Medical Weigbt Loss ioeated in the State California and by the same name or other names located elsewhere other States in the United States.

(C) Respondent Bariatrie Medical Clinics Management Corporation is a corporation org-anized, existing and doing business under and by virtue of the laws of the State of California, with its principal office and place of business located at 560 Battery St. , San Francisco California.

Respondent David L. Cunning-ham is an officer of Bariatric Medical Clinics Management Corporation. Said individual respondent formulates, directs and controls the acts and practices of said corporate respondent, including thc acts and practices hereinafter set forth. His business address is 680 Beach St., San Francisco, California. He and respondent Bariatric :\medical Clinics Management Corporation cooperate and act together to bring about the acts and practices hereinafter set forth, including the operation of numerous clinics known by the name Bariatric Medical Clinics located in the State of California. (D) Respondent Harvey J. Lobelson is an individual trading and doing business under the name of Weig-ht Reduction :\medical Clinic with his principal office and place of business located at 6505 Alvarado Rd. , San Dieg-o, California, and with numerous other clinics known hy the same name located elsewhere in the State of California. (E) Respondent C. M. Norcal, Inc. is a corporation organized, existing and doing business under and by virtue of the laws of the State of California, with its principal office and place of business located at 6 West Swain Rd., Stockton, California.

Respondent HCG Weight Clinics Foundation is a corporation organized, existing and doing business under and by virtue of the laws of the State of California, with its principal office and place of business located at 6 West Swain Rd., Stockton, California. Respondents Peter J. YIarengo, III, and Joseph Costa are officers of C. M. Norcal, Inc. and HCG Weig-ht Clinics Foundation. Their business address is the same as that of said corporate respondents. Said individual respondents formulate, direct and control the acts and practices of said corporate respondents, including the acts and practices hereinafter set forth. They and said corporate respondents cooperate and act together to bring about the acts and practices hereinafter set forth, including the operation of numerous clinics known by the name HCG Weig-ht Clinics Foundation located in the State of California.

PAR. 2. Each of the respondents is engaged in the business of operating weight reduction clinics, and the advertising, offering for SIME01' MA;\AGEMENT CORP. , ET AL. 1187 1184 uJmplaint sale and sale of weight reduction treatments by said clinics, which treatments are purported to produce significant loss of weight by persons who desire to lose weight. Said treatments are sometimes referred to as the "Simeon" method or " Simeons" method, and consist of five or six daily injections per week of a prescription drug, human chorionic gonadotropin (hereinafter referred to as HCG), which is a hormone derived from the urine of pregnant women, and adherence to a 500 calorie diet daily, both for a period of about four to six weeks. Said drug falls within the classification of "drug" as said term is defined in the Federal Trade Commission Act. PAR. 3. In the course and conduct of their businesses as aforesaid each of the respondents has disseminated and caused the dissemination of certain advertisements concerning the said reducing clinics and treatments in newspapers which are distributed by United States mails and by various means in commerce, as "commerce" is defined in the Federal Trade Commission Act, for the purpose of inducing and which are likely to induce, directly or indirectly, the purchase of said treatments including the drug HCG.

PAR. 4. Typical of such advertisements disseminated as aforesaid, but not all inclusive thereof, are the following: ,: ,,,(,;( ... : j:,j, .j... , : ;,_ ..,..: ,. ....:::: :: ..(:\ : :: .;. /;.,......... !,,,),.. ...,.,,...... . . \.. ,,,,:, :::,::.::!, .;;j.,:,:.,, \, : :\ , .:.;:; :. . , ,,:, . .. : ,. .. 1188 FEDERAL TRADE COMMISSIO;\ DECISIONS Complaint 87 F. T. rf! P r."' Mnl\ Q'''. ;J H.JLhl1a'I1J" f.. J' 'IL LJ. Ju; JIl r"

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THROUGH A PROVEN METHOD-FAST. , .

. . . using the safe and practical Dr A. T. W. Simeons method of weight reducticn. Expeci dramatic resu its in just weeks. Call your nearest c.c clinic today for II consultation at ;:1. no charge. You '1 also receive a copy of Dr. Sirr, eons book POUNDS AND INCHES," at no charge. Enroll in 11he world.s largest group of I)oelor owned, Doctor 'oprated medical wt:ightl05S clinics.

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ffll husand J.d the money-but guarantee! The doctors and nu Wte jllt great! l,ifc relly chang w yoo sl (br:HLWp.,dCY"tow_t. San JOle 291-200 South Slon.Jon 267- 31'31 Loa Altol/Mt. V"Iew 9"'1- "-0 San Mateo J"'7 991 Redwo City 369- 0333 'NEIGHT REDUCTIN MIDICAL A1dy thl?iht: tho' .l"a1"" '-O II" 0Q easy it and can Weight HCG you... .80, Plan. or make \8 we . and. lemale, Credit improvevourappearanc 1''' METHOD or r;n to. , rnh in new andhelPvoustaythatway Cree INCHES" are not SIMEON' & you weight our Modesto521-8030 9382565 Jlj Walnut I A.TW. Obesitvaffccts4outOfSf3milie- lose POUNDS whetherCtjnicsFoundat;on"UfJctiveness affordwith lode FEATURING DR. $tot:lon78-S0QO 7362142 TI'::':\JH Mather C:1Kland MOW llMlIlM CAll 938-2565 SIMEON MANAGEMENT CORP., ET AL. 1193 1184 Complaint PAR. 5. Through the use of the advertisements set forth in Paragraph Four, and others similar thereto but not specifically set forth herein, each of the respondents directly or indirectly invites and induces persons seeking to lose weight to attend its respective clinics and purchase its respective treatments to achieve this purpose. Said advertising fails to disclose the following material facts to prospective consumers:

1. The treatment offered hy each respondent involves injections of the drug HCG;

2. The drug H CG is not approved by the Food and Drug Administration as safe and effective for the treatment of obesity or weight control.

T;oerefore, each respondent's advertisements 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; and the aforesaid advertisements were, and are false, misleading, deceptive and unfair.

PAR. 6. The drug laws of the united States have been established by Congress to protect consumers from being subjected to certain drugs before such drugs have been approved by the Food and Drug Administration as both safe and effective for specific uses. Each respondent' s advertising, promotion and marketing has the capacity to induce potentially large numbers of persons who desire to lose weight to be subjected to its respective treatments. Said treatments include numerous injections of the prescription drug HCG, which has not been appmved by the Food and Drug Administration as safe and effective for the treatment of obesity or weight control, as provided for in the Federal Food, Drug and Cosmetic Act. Furthermore, the total cost of said treatments to each patient is substantial. Therefore, each respondent' s advertising, promotion and marketing of a costly treatment which involves the use of a prescription drug prior to appmval by the Food and Drug Administration as both safe and effective for its intended use is unfair.

PAR. 7. The aforesaid acts and practices of respondents as herein alleged, including the dissemination of "false advertisements " were and are all to the prejudice and injury of the public and constituted and now constitute, unfair or deceptive acts or practices in violation of Sections 5 and 12 of the Federal Trade Commission Act. 216. 96!J O- LT - 77 - 75 Initial Decision 87 F.

INITIAL DECISIO BY JOSEPH P. DCFRESl'E, ADMINISTRATIVE LAW JUDGE AS TO J. WIl.LJAM BYRD , MEDICA!. WEIGHT Loss, INC. AND DARREL P. SIMPSON JAI'UARY 7 , 1975 PREU\1II-ARY STATEMPH (2J In a complaint issued on Odoher 15, 1974, in accord with its Rule , the Federal Trade Commission instituted a proceeding charging respondents with false, misleading, deceptive and unfair advertising for their weight reduction clinics where the "Simeon" or "Simeons Method is used.

In the complaint it was alleged (I) that the method includes numerous injections of the prescription drug human chorionic gonadotropin (HCG) which has not been approved by the Food and Drug Administration (FDA) as safe and effective for the treatment of obesity or for weight control (complaint, Pars. Two and Six), and (2) that the total cost of the treatments per patient is substantial (complaint, Par. Six).

Therefore, it was alleged, it is unfair and violative of Sections 5 and 12 of the Federal Trade Commission Act (15 V. C. !!45 and 52) for respondents to advertise, promote and market their method prior to FDA approval of HCG as being both safe and effective for its use in treating either ohesity or weight control (complaint, Pars. Six and Seven).

(3J Commission records show that respondent J. William BYTd received a copy of the Complaint on :-ovember 21, 1974 (PI'. 9 and 10 transcript of prehearing conference). Respondents Medical Weight Loss, Inc. , and Darrel P. Simpson received their copies on October 21 1974 (I'. 8 , transcript of prehearing conference). However, none of these three respondents filed an answer to the complaint within the thirty (30) days allowed under Commission Rule 4. , nor have they done so to date. The other respondents in this matter have filed answers to the allegations.

The failure by the three respondents to file an answer constitutes a waiver of their right to appear and contest the allegations. This is noted in the notice section* of the complaint (PI'. 6 and 7). The same section also alerts respondents to the fact that failure to answer authorizes the administrative law judge to find the facts as alleged and to enter an initial decision (see also Commission Rule 3. 12(c)). On the basis of the allegations, it is clear that this proceeding is concerned with risks to which members of the public are exposed particularly if they contract with respondents for obesity or weight ':rotreprodnc.ehcreln SIMEON MA;\AGEMENT CORP., ET AL. 1195 1184 Initia! Decision control treatments in accord with the Simeon Method. Such proceeding', are within the purview of Sections 12 and 13 of the Federal Trade Commission Act (15 U. C. 52 and 53) which, in pertinent part, have to do with bringing an end, as promptly as possible, to the false advertising of drugs; and HCG is a drug (complaint, Par. Two). Consequently, I am of the opinion that my initial decision in this matter, insofar as the three non answering respondents are concerned should be rendered as promptly as possible, consistent with their being aecorded due process. My view that the decision should be rendered as promptly as possible is huttressed by the fact that the Commission sought to obtain a preliminary injunction in the United States District Court for the Northern District of California (C74-2226 WHO) to bring an end to the offensive practices pending litigation of the allegations made in the complaint.

(4J With regard to their rights to due process, deferral of the rendition of this decision as to these three respondents until after the prehearing conference, which none of the three attended, has accorded them more than the right to due process requires. They have had ample notice both of the charges and of their opportunity to contest them. 5 C. 554(b) and (c), (formerly the Administrative Procedure Act); United Staws v. San Jnan Lumber Co. 313 F. Supp. 703 (U. Dist. Ct. Colo. - 1969); Goldberg v. Kelly, 397 U. S. 254 (1970); Gold.en Grain Macaroni Company v. Fedeml Tradr; Commission 472 F.2d 882 (9th Cir. 1972), cert. denied 412 U. S. 918 (1973). Accordingly, complaint counsel's motion that these three respondents be declared in default and that an initial decision, conclusion and order against them should issue, which motion was made to me at the prehearing conference (p. 7, transcript of prehearing conference), is granted.

Complaint counsel's motion for a summary decision against respondents Harvey J. Lobelson and Weight Reduction Clinic (p. 44 transcript of prehearing conference) is denied because those respondents have amended their answer to deny the key charge in Paragraph Six of the complaint which formed the primary basis for that motion. Any motions not heretofore or herein specifically ruled upon, either directly or by the necessary effect of the conclusions in the initial dec:ision, are hereby denied. The findings of fact made herein are based on the failure to answer, on a review of the allegations made in the complaint and on an examination of the transcript of the prehearing conference which was held in San Francisco on December 2 1974. In accord with Rule 3.12(c), the undersigned hereby makes the fon.owing findings of fact, conclusions and order. Initia! Decision 87 F.

FINDI"GS OF FACT AS TO RESPONDENTS J. WILLIAM BYRD MEDICAL WEIGHT Loss, 11'c., AN DARL P. SIMPSON. (1) Respondent J. William Byrd is, or when the complaint was filed was, an officer of said corporate respondent Simeons Weight Clinics Foundation. His business address is (5) or was, the same as that of said corporate respondent. Respondent J. William BYTd and respondents John D. Howell and Simeon Management Corporation cooperated and acted together to bring about the acts and practices hereinafter set forth, including the operation 01 numerous clinics known by the name Simeons Weight Clinics Foundation located in the State of California and by other names located elsewhere in other States of the United States.

Respondent Medical Weight Loss, Inc. is a corporation organized existing and doing business under and by virtue of the laws of the State of California with its principal office and place of business located at 1901 Avenue of the Stars, Suite 470, Los Angeles, California. Respondent Darrel P. Simpson is an officer of Medical Weight Loss Inc. Said individual respondent formulates, directs and controls the acts and practices of said corporate respondent, including the acts and practices hereinafter set forth. His business address is the same as that of said corporate respondent. He and respondent Medical Weight Loss Inc. cooperate and act together to bring about the acts and practices hereinafter set forth, including the operation of numerous clinics known by the name Medical Weight Loss located in the State California and by the same name or other names located elsewhere in other States in the United States.

(2) Each of the respondents is, or was, engaged in the business of operating weight reduction clinics and the advertising, offering for sale and sale of weight reduction treatments by said clinics, which treatments were and are purported to produce significant loss of weight. Said treatments are sometimes referred to as the "Simeon " or Simeons" method, and include (a) five or six daily injections per week of HCG, which is a hormone derived from the urine of pregnant women, and (b) adherence to a 500 calorie diet daily, both for a period of about four to six weeks. HCG falls within the classification of drug" as said term is defined in the Federal Trade Commission Act. (6) (3) In the course and conduct of their business each of the three respondents has disseminated and caused the dissemination of certain advertisements concerning the said reducing clinics and treatments in newspapers which arc distributed by United States mails and by various means in commerce, as "commerce" is defined in the Federal Trade Commission Act, for the purpose of inducing and which arc SIMEON MANAGEME:-T CORP., ET AL. 1197 1184 Initial Decision likely to induce, directly or indirectly, the purchase of said treatments including the drug HCG.

(4) Typical of such advertisements, but not all inclusive thereof, are the following:

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l n P I-.- "'A , J I ' \! ; i oJ r 1"" rm U U Du U ; F"",:"tJ, ryr,\1 0 '1 r" WMt Il'fI hli J L, lL.; " lJ, l;!Dfj nll.cts/,K.110WA';"111 ose wel9 t: safe y, qUlc )' ilnd :"m;;OIt 1 cffort!-.ss1y throun h Clr prol'en' r d" Jt:If.fdJ 1 ! weight reduction p ogrc;m devel j;icli ;cs cpe y.f?!Ca oc ars anu .a' rJ: !IC"'i" II'" 11; r 'I\II!!'"' KI.. supervl!:cd tor our Physicians ,'ild "':ft' lii' ""d Nurses. Simeon \V0ight ' '!I';:L" Y(", o" 1ClinicsJ its Do.:brs, Nu e:; ncJ ';"',.',:. /10 ::ri:lne stu 1- pro e:SSI"Oa,l)'II "'.'V. ,- "' ..o "i"""J" 1" --I. 2 f. 4 is I) bring YO:J a quick i)nd safe wily, ,,:: tO melt away unwi:ni:cd L:c St01ri: touay by ce: lling 1 c ii pounds. i 2 c.allsu I'b::ion. ' d(,,,, I L ! ;for your free fl -3 lUSE\:(EW1 \H nel; lut r; Enc l StlPEt: r' "\ r, VJf'p kdays 8 i:o 7. SahJljay 9 to! J,-..

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8anllAmeriCo1rd or ""a I'!r Ct1Jfl!e Wl'kOM TOR mfORMATOH CAl (41 SI69J-OSO I f,. I"''' 'I' "f"""'"""Fi';JjFS;Z::i;:r:" I\. / ,c"" - :k''' ''ft' W';. :-""""''J J.. - 1'0WI, Initial Decision 87 F.

(9) (5) Through the use of the advertisements set forth in Paragraph Four, and others similar thereto but not speeifieally set forth herein each of the three respondents directly or indirectly invited and induced persons seeking to lose weight to patronize their clinics and to purchase the Simeon method of treatment. Said advertising, however, fails to disclose the following material facts to prospective eonsumers: 1. The treatment offered by each of the three respondents involves injections of the drug HCG;

2. The drug HCG is not approved by the Food and Drug Administration as safe and effective for the treatment of obesity or weight control.

Therefore, each of the three respondents' advertisements 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; and the aforesaid advertisements were, and are false, misleading, deceptive and unfair.

(6) The drug laws of the United States were established by Congress to protect consumers from being subjected to certain drugs before such drugs have been approved for specific uses. Each of the three respondents' advertising, promotion and marketing has the capacity to induce potentially large numhers of persons who desire to lose weight to purchase and undergo the three respondents' respective treatments. The treatments include numerous injections of the prescription drug HCG, which has not been approved by the Food and Drug Administration as safe and effective for the treatment of obesity or weight control, as p"ovided for in the Federal Food, Drug and Cosmetic Act (21 FS. C. 321). Furthermore, the total cost of said treatments to each patient is substantial. Therefore, each of the three respondents advertising, promotion and marketing of a costly treatment which involves the injection into persons of a prescription drug prior to approval by the Food and Drug Administration as both safe and effective for its intended use is unfair.

(10) (7) The aforesaid acts and practices of the three respondents including the dissemination of "false advertisements " were and are all to the prejudice and injury of the public and constituted, and now constitute, unfair or deceptive acts or practices in violation of Sections 5 and 12 of the Federal Trade Commission Act. CONCLUSION'JS 1. The Federal Trade Commission has jurisdiction of and over respondents and the suhject matter of this proceeding. 2. The complaint herein states a cause of action, and this proceeding is in the public interest.

SIMEON MA;\AGEMEKT CORP., ET AL. 121 1184 initial Decision 3. The acts and practices charged in the complaint took place in commerce as "commerce" is defined in the Federal Trade Commission Act.

4. The three respondents have engaged in unfair or deceptive acts and practices in commerce in that they have disseminated false and misleading advertisements in violation of Sections 5 and 12(a) of the Federal Trade Commission Act (15 1.. C. 45 and 52). ORDER It is ordered That respondents J. William BYTd, individually and as an officer of Simeons Weight Clinics Foundation, a corporation Medical Weight Loss, Inc., a corporation, its successors and assigns and its officers, and Darrel P. Simpson, individually and as an officer of Medical Weight Loss, Inc., respondents' agents, representatives and employees, directly or through any corporation, subsidiary, division or other device, in connection with the offering for sale, sale or distribution of the " Simeon " or "Simeons" method for weight reduction or of any other weight reducing service or treatment, do forthwith cease and desist from:

(II) 1. Disseminating, or causing the dissemination of any advertisement, by means of the United States mails, or by any means in commerce, as "commerce" is defined in the Federal Trade Commission Act, promoting any service or treatment which involves the use of HCG or any other drug required under the Federal Food, Drug and Cosmetic Act to be approved by the Food and Drug Administration (FDA) as both safe and effective for thc treatment of the conditions for which it is to be used, until such drug has received the required FDA approval1.

2. Disseminating, or causing to be disseminated, by any means, for the purpose of inducing, or which is likely to induce, directly or indirectly, the purchase of any such weight reducing service or treatment in commerce, as "commerce" is defined in the Federal Trade Commission Act, any advertisement which fails to comply with the requirements of paragraph 1 hereof.

It is further ordered That each of the three respondents is to deliver a copy of this order to cease and desist to all persons now engaged, or who become engaged, in the management, (12) advertising, promotion or marketing of weight reducing treatments as their agents, salesmen representatives, or employees and to secure from each of said persons a signed statement acknowledging receipt of a copy thereof. It is further ordered That the corporate respondent Medical Weight Loss, Inc. is to notify the Commission at least thirty (30) days prior to any proposed change in the corporate respondent, such as dissolution 1202 FEDERAL TRADE COM ISSIO;\ DECISIOKS Initial Decision 87 F.TC. assignment, or sale resulting in the emergence of a successor corporation,. the creation or dissolution of subsidiaries, Jicensees, or franchisees, or any other change in the corporation which may affect compliance ohligations arising out of this order. It is furtlwr ordered That each of the individual respondents named herein is to promptly notify the Commission of the discontinuance of his present business or employment and of his affiliation with a new business or employment. Such notice shall include his current business address and a statement as to the nature of the business or employment in which he is engagcd as well as a description of his duties and responsibilities.

INITIAL DECISION BY JOSEPH P. DlJFRESNE , ADMINISTRATIVE LAW JUDGE JUM 18 , 1975 PRELIMINARY STATEMP';T (2) In a complaint dated October 15, 1974, the Commission charged respondents with violations of Sections 5 and 12 of the Federal Trade Commission Act (15 U. C. 45 and 52).

(3) Thc gravamen of the charges was that respondents' advertising in newspapers distributed by the United States mails and various other means in commerce invited and induced persons seeking to losc weight to attend their clinics and to purchase treatments without disclosing in the advertising that the treatments used the Simeon or Simeons method, involve injections of the drug, human chorionic gonadotropin (HCG).

It also was alleged that HCG has not been approved by the Food and Drug Administration (FDA) as safe and effective for the treatment of obesity and weight control, that the advertisements were misleading in material respects in that they failed to disclose lack of FDA approval constituted "false advertisements " and were, and are, misleading, deceptive and unfair.

Lastly, it was alleged that it is unfair for respondents to promote and market a costly treatment involving use of HCG-- a prescription drug-prior to its approval by the Food and Drug Administration as safe and effective for its intended use by respondents in treating obesity and weight control.

After issuance of the complaint and prior to the start of the adjudicative hearings on the charges, counsel for the Commission sought a preliminary injunction in the United States District Court for the Northern District of California (:'0. (, 74-225 WHO) to enjoin pending the completion of the Commission proceedings, the dissemination by respondents of the advertisements alleged to be false and SIMEON MANAGEMENT CORP., ET AL. 123 1184 Initial Decision misleading. In a memorandum opinion dated March 11 , 1975, the court declined to issue the injunction.

Three of the respondents named in the Commission s complaint (J. William Byrd, individually and as an officer of Simeons Weight Clinics Foundation; Medical Weight Loss, Inc. ; and Darrel P. Simpson individually and as an officer of Medical Weight Loss, Inc.) did not answer the complaint. Consequently, an initial decision predicated on their default was fied by me on January 7, 1975, in accord with Commission Rule 3. 12(c). By order dated March 7, 1975, the Commission stayed the effective date of that initial decision until its further order issues.

(4) The remaining respondents (i. those listed in the caption hereof) answered in timely fashion. In addition to denying that they were violating Seetions 5 and 12 of the Federal Trade Commission Act various defenses were asserted. These defenses, in essence, were that: (I) This matter lies within the jurisdiction of the Food and Drug Administration rather than the Federal Trade Commission; (2) The advertisements are not violative of Sections 12 and 15 of the F. C. Aet because (a) it is not customary or usual for a doctor to advertise the use of HCG, (b) it is customary and usual for a doctor to use HCG for weight control purposes, and (c) it is not customary to tell a patient that HCG has approval for other purposes but not for weight control; (3) California law precludcs a finding of violation of the Federal Trade Commission Act in that California s Knox-Mills Act regarding prepaid medical plans, under which respondents are registered, calls for submittal of advertisements to the Attorney General of the State, and prohibits their use if disapproved by him. Respondents' advertiscments have not been disapproved; (4) The treatments are administered by medical doctors and the Federal Trade Commission has no jurisdiction to interfere with the doctor-patient relationship; (5) No "sale " of the drug HCG takes place within the meaning of Section 12 of the F. Act; (6) HCG is safe and not harmful as used by respondents; (7) A substantial number of doctors in the United States have used HCG as an integral part of their weight reduction programs for a substantial period of time and the failure of the F. C. to challenge such use has estopped the Commission "* , * from prosecuting this action based on the doctrine of laches; " and (8) HCG is exempt from the new drug requirements of the Federal Food, Drug and Cosmetic Act (FFDCA). Each of these defenses is addressed below in this initial decision. Complaint counsel and counsel for ,"orcal, et aI., filed cross motions for summary decision on January 27 and February 4 1975 , respectively. These were denied by me on February 10, 1975. Complaint counsel's 1204 FEDERAL TRADE COM:IISSION DECISIONS Initial Dccision 87 F.

request for reconsideration was also denied in an order issued on February 21 , 1975.

(5) Adjudicative hearings were held in San Francisco and Los Angeles, California, on February 25, 26 and 27, and March 6 and 7 1975, respectively. The record was closed for the reception of evidence on March 24, 1975. Thereafter, in accord with Commission Rule 3.46 proposed findings, conclusions and order, together with reasons and briefs in support thereof were filed by the parties on YIay 9 , 1975. The findings of fact made herein are based on a review of the allegations made in the complaint, respondents' answers, stipulations entered by counsel, written admissions by respondents, the evidentiary record of this matter and upon consideration of the demeanor of the witnesses at the hearings in this proceeding. In addition, the proposed findings of fact, conclusions and order, together with reasons and briefs in support thereof, which have hecn filed by the parties, have been given careful consideration. To the extent not adopted by this decision in the form proposed or in substance, they are rejected as not supported by the record or as immaterial.

References to the record are intended to serve as guides to the testimony, evidence and exhibits supporting the findings of fact. They do not necessarily represent complete summaries of the evidence considered in arriving at such findings. The following abbreviations have been used:

ex - Commission s Exhibit, followed by number of exhibit being referenced.

RX - Respondents' Exhibit, followed by number of exhibit being referenced.

Tr. -- Transcript, preceded by the name of the witness testifying and followed hy the page number being referenced. (6) FINDI GS OF FACT 1. RESPOt-uEI"TS ENTITIES (A) Respondent Simeon Management Corporation is a corporation organized, existing and doing business under and by virtue of the Jaws of the State of California, with its principal office and place of business located at 7712 Densmore Ave., Van Nuys, California. The corporation has not yet named officers and directors or issued stock. Respondent John D. Howell is the principal investor in Simeon Management Corporation. He formulates, directs and controls the acts and practices of said corporate respondent, including the acts and practices set forth in the complaint. His business address is the same as that of said corporate respondent.

,, p.p.

SIMEON MANAGEMENT CORP., ET AL. 1205 1184 Initial Dccision Respondent Simeons Weight Clinics Foundation is a corporation organized, existing and doing business under and by virtue of the laws of the State of California, with its principal offce and place of business located at 7712 Densmore Ave., Van Nuys, California. Respondent Robert Van Dine is an officer of corporate respondent Simeons Weight Clinics Foundation. His business address is the same as that of said corporate respondent. He and respondents Howell and Simeon Management Corporation cooperate and act together to bring about the acts and practices set forth in the complaint, including the operation of numerous clinics known hy the name Simeons Weight Clinics Foundation located in the State of California, and by other names located elsewhere in other States in the United States. (All the findings in (A) were admitted since these facts were set forth in the complaint but Simeon did not address them in its answer. See Commission Rule 3.12(h)(I)(ii).

(7) (B) Respondent Bariatric Medical Clinics Management Corporation (Bariatric) is a corporation organized, existing and doing business under and by virtue of the laws of the State of California, with its principal office and place of business located at 560 Battery St., San Francisco, California.

Respondent David L. Cunningham is an officer of Bariatric Medical Clinics Management Corporation. He formulates, directs and controls the acts and practices of said corporate respondent, including the acts and practices set forth in the complaint (Cunningham, Tr. 102); however, he does not personally engage in any practices that may be regarded as medical treatment (Bariatric Answer p. 2; Cunningham Tr. 108). His business address is 680 Beach St. , San Francisco California. He and respondent Bariatrie cooperate and act together to bring about the acts and practices set forth in the complaint, including the operation of numerous clinics known by the name Bariatric Medical Clinics located in the State of California (Bariatric Answer 2; Cunningham, Tr. 102).

(C) Respondent Harvey J. Lobelson (Lobelson) is an individual trading and doing business under the name of Weight Reduction Medical Clinic, with his principal office and place of business located at 6505 Alvarado Rd., San Diego, California. He also operates numerous other clinics known by the same name located elsewhere in the State of California (Lobel son Answer, p. 1).

(D) Respondent C. M. Norcal, Inc. (Norcal) is a corporation organized, existing and doing business under and by virtue of the laws of the State of California, "with its principal office and place of business located at 6 West Swain Rd. , Stockton, California (Norcal Answer 2).

, p.

Initial Decision 87 F.

(8) Respondent HCG Weight Clinics Foundation is a corporation organized, existing and doing business under and hy virtue of the laws of the State of California, with its principal office and place of business located at 6 West Swain Rd., Stockton, California (Norcal Answer 2).

Respondents Peter J. :varengo, III, and Joseph Costa are officers of C. M. Korcal, Inc. and HCG Weight Clinics Foundation. Their business address is the same as that of said corporate respondents (Norcal Answer, p. 2).

Other than those activities related to the doctor-patient relationship (Norcal Answer, p. 2), the individual respondents Marengo and Costa formulate, direct and control the acts and practices set forth in the complaint. These include the operation of numerous clinics known by the name HCG Weight Clinics Foundation located in the State of California (Norcal Answer, p. 2).

2. RESPONDEJ'TS ' ACTIVITIES (A) Each of the respondents is involved in the business of operating weight reduction clinics, and in the advertising, offering for sale and sale of weight reduction treatments by the clinics, which treatments are designed to produce significant loss of weight through use of the Simeon or Simeons method (complaint Par. 2, respondents Simeon, et al. Answer, Commission Rule 3.12(b)(I)(ii); Cunningham, Tr. 102, 108 IW- 1I1; Lobelson Answer, pp. 1-2; Norcal Answer, p. 2). (B) Respondents' weight reduction treatments are not unreasonably costly. " Their cost is comparable to physicians' charges for office visits for medical attention of various tnJes including other weight reduction treatments (Parker, 'rr. 658- 659; Polsky, Tr. 669-670). Simeons Clinics charge patients anywhere from $188 to $368 or more per set of treatments (Simeon Stipulations #4). HCG Weight Clinics charge from $195 to $395 or more, with the average cost having been calculated to be $302 (Norcal Stipulations #4). Weight Reduction Medical Clinic s charges to patients are $170 for 23-shot treatments and $240 for 40-shot treatments (Lohelson Requests for Admissions and Responses # 4). Bariatric s clinics charge $165-$170 per set of sixweek treatments (Tr. p. 98). (9 3. THE SIMEO"(S) METHOD (ex s 1--) The " Simeon " or "Simeons" method is followed in the treatments respondents advertise. That method includes five or six injections per week, one injection per visit, for from four to six weeks, of human chorionic gonadotropin (HCG), a prescription drug. HCG is a hormone SIMEON MANAGEME!\T CORP., ET AL. 127 1184 Initial Decision derived from the urine of pregnant women and is a "drug" as that term is defined in the Federal Trade Commission Act (15 L'. 55( c)). The method also cans for adherence to a 500 calorie a day diet (CX 22; Respondents Simeon, et a1. Answer, Commission Rule 12(b)(1)(ii); Bariatric et a1. Answer, p. 2; Lobelson et a1. Answer, p. 2; N orca I Answer, p. 2).

(Note: Pursuant to Commission Rule 3. , in order to make it clear that the Simeon(s) method is not limited absolutely merely to five or six injections per week, on a daily basis, of RCG, and a 500 calorie a day diet, both for a period of about four to six weeks, at a prebearing conference on December 2, 1974, the words "consist of" were deleted and "include" was substituted in paragrapb two of tbe complaint with the agreement of both sides (Tr. 31-35).

4. THE CO:\MISSION:- S JURISDICTION Each of the respondents has disseminated and caused the dissemination of advertisements concerning the reducing clinics and treatments (admitted in each respondent's Answer). These have appeared in newspapers of intra and interstate circulation. In addition, each respondent except Bariatric has advertised on television (Simeon Stipulation, Norcal Stipulation and Lobelson Stipulation). (10) Tbe newspapers in which their advertisements were placed have interstate circulations, Tlw San Fmncisco Chronicle, The Los Angeles Times and Th" Sacram nto Bee (Simeon, Lobclson and Norcal Stipulations and/or Admissions). Similarly, the television stations over which each but Bariatrie advertised arc interstate in range. ln addition, respondents, in the course of operating the weigbt reduction clinics, purchase RCG from drug manufacturers located throughout the L'united States and have it shipped to their receiving points for distribution to the clinics at which it is injected into persons wbo have subscribed for the course of treatments. Therefore respondents are "in commerce " within the meaning of the Federal Trade Commission Act (Marengo, Tr. 397-398). 5. ADYERTISEMp.ns USED Typical advertisements each of the respondents bas disseminated fonow on pages 10a-lod. Eacb of the advertisements was disseminated by a different respondent; however, they are sufficiently alike in their representations and omissions to be considered and discussed together (see page II infra).

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(11 J The impression conveyed by respondents' advertisements is that the weight reduction plan offered involves doctors using a method whereby those taking the treatments will lose weight. The advertisements are an inducement to subscribe to the regimen offered but no information is given as to its specifics.

Each of the advertisements reproduced ahove, as well as others in the record, fails to disclose the material facts that: (1) the treatments offered by each respondent involve injections of the drug HCG; or that (2) HCG is not approved by the Food and Drug Administration as safe and effective for the treatment of obesity or weight control. (See Simeon Stipulations, Exhibits A and B, K orcal Stipulations A, Band C (RX 3), Lobelson Responses to Requests for Admissions #5 (Exhibit and CX 17a-17m (Bariatric).

6. Effect OF TIIE ADVERTISEMENTS (A) By use of such advertisements, and others, each of the respondents directly or indirectly invites persons to attend its clinics and to purchase treatments in order to lose weight. (Simeon stipulated it advertised in newspapers and on television, and as noted before admitted (par. 5, above) disseminating the advertisements reproduced on page loa hereof. Admitted by Bariatric, et aI., Commission Rule 12(b)(1)(ii); Lobelson Answer, par. 5, p. 3; Norcal Answer, par. 5, p. 3. (B) Each respondent's advertising, promotion and marketing effort has the capacity to induce potentially large numbers of persons who desire to lose weight to purchase its respective treatments. (I2J (C) Each respondent' s advertising, promotion and marketing of a treatment which involves the injection of HCG prior to its approval by the Food and Drug Administration as being both safe and effective is unfair to rivals of respondents who offer other methods, devices or texts for the purpose of losing weight.

DISCUSSIO JURISDICTIQ;-' Respondents have at all times relevant hereto been engaged in interstate commerce within the intent and meaning of Sections 4 and 5 of thc Federal Trade Commission Act. (See Findings, pp. 9-11 above regarding newspaper advertisements and interstate shipments. The Commission s jurisdiction over the advertising of treatments or services as well as products under Section 5 is dearly established under existing case Jaw. Abel Allan Goodman v. Federal Trade Commission SIMEON MA AGEMENT CORP., ET AL. 1213 1184 Initial Decision 24 F.2d 584 (9th Cir. 1957); Federal Trade Commission v. Civil Serve Training Bureau, 1m. 79 F.2d 113 (6th Cir. 1935). It is sufficient for establishing the "in commerce" jurisdictional requirement of Section 5 of the Federal Trade Commission Act, if the advertisements of the respondents have been disseminated interstate. Intent to attract out-of-State customers is not necessary. Jurisdiction under Section 12 of the F. C. Act exists if the U.S. mails have been used by respondents in the dissemination of their advertisements. John A. Guziak v. Federal Trar Commissio 361 F.2d 700 (8th Cir. 1966); S. Klein Dept. Stoes, 1m. Dkt. 7891, 57 F. C. 1543, 1544 (1960) Interlocutory Order; Surrey Sl.ep Products 73 FTC 523 , 553-554 (1968); Sidney J. Mueller v. United States 262 F.2d 44, 446-48 (5th Cir. 1958); Kenneth W. Shafe, et al. v. Federal Trade Commission, 256 2d 661 (6th Cir. 1958). (Note: The "in commerce " jurisdictional requirements of Sections 5 and 12 of the F. C. Act were changed to in or affecting commerce " in essence by the Magnuson-Moss Warranty- Federal Trade Commission Improvement Act (88 Stat. 2193- Jan. 4, 1975), some months after instant complaint issued. (13) An the acts and practices which were and are part of the mode of operation of respondents in effecting the sale of treatments for the purpose of losing weight were methods of competition or acts and practices in commerce within the purview of the Federal Trade Commission Act. Standard Oil Co. v. Federal Trar Commission, 340 S. 231 , 236-238 (7th Cir. 1951); Holland Furnae Company v. Federal Trar Commission 269 F.2d 203 (7th Cir. 1959), cert. denied 361 U. 932; John A. Guziak v. Federal Trar Commission, supra; United States v. South-Eastern Underwriters Association et al. 322 U.S. 533 549-553 (1944).

C. and FDA Responsibilities The determinations as to (I) whether HCG is a new drug, and (2) whether HCG is safe and effective, insofar as its use for treating ohesity and weight control are concerned, are for the Food and Drug Administration to make. That, however, does not deprive the Federal Trade Commission of its authority to take action to bring an end to false, misleading, deceptive or unfair advertising or unfair trade practices used in connection with the offering of treatments involving the administration of HCG to ultimate consumers of the drug. Except for jurisdictional exclusions not pertinent here (see Sec. 5(a)(6) of the F. C. Act), Sections 5 and 12 of the F. C. Act (15 U. 45 and 52) authorize the Commission to initiate proceedings to bring an end to any unfair method of competition or unfair or deceptive act or practice in commerce when it is to the interest of the puhlic to do so. Initial Decision 87 F.

The Food and Drug Administration operates primarily pursuant to authority contained in the Federal Food, Drug and Cosmetic Act (FFDCA) which deals with the introduction and delivery for introduction into interstate commerce of foods, drugs and cosmetics by manufacturers, packers and distributors (21 U. C. 331). (I4J Since there was no indication prior to the initiation of these proceedings, or since, that respondents state anything specifically about HCG in their advertising, the Food and Drug Administration determined respondents' advertising is not suhject to FDA regulation (Dr. Temple, Tr. 152-153). Moreover, there is no evidence to suggest that respondents are manufacturers or distributors; and FDA corrective actions focus on violations of the FFDCA by manufacturers or distributors (Dr. Temple, Tr. 164).

To avoid duplication or overlapping of their regulatory functions the Food and Drug Administration and the Federal Trade Commission have entered into a Liaison Agreement (Trad Reg. Rep. 9850 and 9851; 36 F.R. 18539, September 16, 1971; also see F. C. Rules of Practice Section 4.6). By its terms, the FDA has primary responsibility with respect to the regulation of the truth or falsity of prescription drug advertising. However, even if respondents' practices in some respects were clearly within the FDA' s power to challenge, there is ample precedent for the proposition that the Food and Drug Administration and the Federal Trade Commission may assert jurisdiction concurrently in their respective areas of responsibility. The Federal Trade Commission s responsibility is to bring an end to false or misleading advertising or to those trade practices which are unfair. The representations of and the advertising of the medicinal qualities or properties of HCG itself would be primarily within the purview of the FDA's responsibilities. United States v. Research Laboratows, Inc. 126 F.2d 42 45 (9th Cir. , 1942), cert. dRnwd 317 U. 656; United States v. Various Quntitws of Articles of Label€d in DrPart: "Instant Alberty Food etc. 83 F. Supp. 882, 887 (D. 1949).

The Commission s jurisdiction and power to enforce the F. C. Act has been consistently sustained against challenges that statutes enforced by other agencies should be construed to preclude such jurisdiction. Fedrral Trade Commission v. Cement Institute, et al., 333 S. 683 (7th Cir. 1948); (15J Charles of the Ritz Distrilrtos Cororation v. Federal Trade Commission 143 F.2d 676, 679 (21 Cir. 1944); Irwin et a!. v. Fedrral Trad Commission 143 F.21 316, 325 (8th Cir. 1944); Waltham Watch Company et al. v. Fedrral Trad Commission 318 F.2d 28, 31-32 (7th Cir. 1963), cert. dRnwd 375 U. 944; Carl Brandnfels v. J. Edward Day, Postmaster General et al., 316 SIMEON MANAGEMENT CORP., ET AL. 1215 1184 Initial Decision 2d 375, 378 (D. C. Cir. 1963), cert. iknwd 375 U. S. 824; American Cyanamid Co. v. Feikral Trade Commission 363 F.2d 757, 769 (6th Cir. 1966), 401 F.2d 574 (6th Cir. 1968), cen. denwd 394 U.S. 920 (1969). Drug Laws The drug laws of the United States, and the Federal Food, Drug and Cosmetic Act in particular, were enacted by the Congress to protect consumers from being subjected to certain drugs before the drugs had been approved by the Food and Drug Administration as both safe and effective for specific usc.

Senate Report 1744, p. 8, 87th Congo 2nd Sess. (1962) makes it clear that this, in fact, was the Congressional purpose: The purpose of the proposed legislation, as amended, is strengthen and broaden existing laws in the drg field so as to bring about better, safer medicine and to establish a more effective system of enforcement of the drg laws. The amended bil would help assure a safer and more reliable drg supply for the Nation by requiring registration of all prescription drug manufacturers and more effective inspection of their plants to determine whether such drgs are being manufactured in acrdance with the law. In addition, the bil requires the jnstallation and maintenance of acceptable drug manufacturing and control procures and a pre. marketing showing that all new drgs are effective as well as safe for their intended uses.

In short, the purpse of this bil, as amended, is to strengthen the laws designed to keep unfit drugs (16) off the market in the first instance and sped their removal should they reach the market.

And from page 16 of the Report:

. . . the Committee wants to make sure that safe new drugs beme available for use by the medical profession so long as they are supportd as to effectiveness by a responsible boy of opinion.

As described by the FDA:

The major objective of the drug provisions of the Federal Foo, Drug and Cosmetic Act is assure that drugs will be safe and effective for use under the conditions of use prescribed, recommended, or suggested in the labeling thereof. Thus, new drg approval and antibiotic drug certification are regulated by law, both in the prescriber s and the patient' s interest.

Thus although it is clear that Congress did not intend the Foo and Drug Administration regulate or interfere with the practice of medicine, it is equaUy clear that it did intend that the Foo and Drug Administration detennine those drgs for which there exisw substantial evidence of safety and effectiveness and thus will be Initial Decision 87 F.

available for prescribing by the medical profession, and additionally what information about the drgs constitutes truthful, accurate and full disclmmre to permit safe and effective prescription by the physician. As the law (FFDCA) now stands, therefore, the Food and Drug Administration is charged with the responsibility for judging the safety and effectiveness of drugs and the truthfulness of their labeling. (17) The physician then responsible for making the final judgment as to which, if any, of the available drgs his patient will receive in the light of the information contained in their labeling and other scientific data available to him. (37 F.R. 158, August 15, 1972, pp. 16503-16504) The Status of HCG with FDA On December 5 , 1974 , the FDA announced in the Feikral Register (at p.(CX 6; 39 F. R. 235, pp. 4297-42403) that HCG is a "new drug" 42401) and subject to the terms of the FFDCA insofar as the use of HCG for treating obesity and weight control are concerned. Thus, HCG is a drug which has not been approved by the Food and Drug Administration as safe and effective for the treatment of obesity or weight control, as provided for in the Federal Food, Drug and Cosmetic Act (Dr. Temple, Tr. 120 , 126, 130 , 147-148, 212). A "new drug" by definition in the FFDCA (21 U. C. 321(p)(I) and (2)) is:

Any drug . " " the composition of which is such that such a drug is not generally recognized, among experts qualified by scientific training and experience to evaluate the conditions safety and effectiveness of drugs, as safe and effective for use under the prescribed, recommended, or suggested in the labeling thereof, except that such a drg not so recogniz shall not be deemed to be a "new drug" if at any time prior to the June 30, 190, as enactment of this chapter it was subject to the Foo and Drugs Act of amended, and if at such time its labeling contained the same representations concerning the conditions of its use; or " " " the composition of which is such that such drug, as a result of (18) Any drug investigations to determine its safety and effectiveness for use otherwise than in such underinvestigations,such conditionsben but which has not, has become so recognized, used to a material extent or for a material time under such conditions. As for when a drug is "generally reco"rnized" as being safe and effective, in Weinberger, Secretary of Health, Education and Welfare v. Hynson, Westcott Dunning, Inc. 412 U. S. 609, 629, 632 (4th Cir. 1973), the Supreme Court had this to say:

In the absence of any evidence of adequate and weJI-cntrolJed investigation supporting the efficacy of . . . (a drug J a forWr . . . lthe drg J would be a "new drug" subject to the provisions of the Act. We accordingly have concluded that a drug can be "generany recognized" by expert as effective for intended use within the meaning of the Act only when that expert consensus is founded upon " substantial evidence" as defined in 505(d). (21 V. 355(d), that needed to support a new drug application. SIMEON MANAGEMENT CORP., ET AL. 1217 1184 Initial Decision The FDA has regulations (21 C. R. 130.12(a)(5)(ii)) which describe what is required for an investigation to be adequate and well controlled. These regulations have been upheld by the Supreme Court (Weinberger v. Hynson, Westcott Dunning, Inc., supra). (19) Anecdotal evidence, such as is mentioned in the record here (Presley, Tr. 484; Lobelson, Tr. 536-37; Eisenberg, Tr. 616) consisting of the impressions and beliefs of physicians is not substantial evidence of efficacy or of safety. Pharmaeutical Manufacturers Association Elliot L. Richardson, et aI. 318 F. Supp. 301, 306-311 (D. Del. 1970); The Upjohn Company v. Robert H. Finch, et al. 42 F.2d 944, 950-954 (6th Cir. 1970).

The Federal Food, Drug and Cosmetic Act provides in Section 355 (21 U. C. 355) that approvals of drugs for particular uses may be obtained by submitting a new drug application (NDA) together with supporting documentation to the Secretary of the Department of Health, Education and Welfare (HEW) who is to take action on the application within specified times.

In the December 5 , 1974 announcement the Food and Drug Administration made it clear, however, that "* there is a lack of substantial evidence in the form of adequate and well-controlled studies meeting the requirements of 21 C. R. 314.111(a)(5) showing that (1) HCG is safe and effective * * *" for use in the treatment of obesity (p. 42397), and (2) for its 'use "* * * as an adjunct to diet in weight reduction programs.

Thus, HCG in FDA parlance is a "new drug" insofar as its use in treating obesity and for weight control are concerned because the Food and Drug Administration has not approved HCG for such use (Temple Tr. 120). At the same time, however, HCG is not a "new drug" insofar as it is used in treating (1) sterility, (2) cryptorchidism undescended testicles not due to anatomical obstruction, and (3) in inducing ovulation (FDA Notice, 39 F.R. 235, December 5 1974, p. 4297). (20) The result of this "new not new" status is that HCG is available to respondents simply because it legally may be marketed in the United States for the FDA approved uses, and under the FFDCA thereafter may be put to such use as the purchaser chooses (37 F. 16503, August 15, 1972).

Omission of Material Facts from Advertisements Section 15 of the F. C. Act defines "false advertisement" so that both affirmative representations which are misleading in material respects and the failure to reveal facts material in the light of the representations made in an advertisement constitute a false advertisement (15 U. C. 55).

Initial Decision 87 F.

It is well estahhshed that it is an unfair trade practice to make statements in advertising which have the tendency and capacity to deceive the prospective customer. Cartr Products, Inc. v. Federal Trad Commission 323 F. 2d 523 (5th Cir. 1963); Spigel, Inc. v. Federal Trade Commission 494 F.2d 59, 62 (7th Cir. 1974). It is not essential that the Commission find actual deception to support its complaint when the representations have the capacity to deceive. Charles of tlw Ritz Dist. Cor. v. Federal Trad Commission 143 F.2d 676 (2d Cir. 1944); TIw Regina Cororation v. Federal Trade Commission 322 F. 765 (3d Cir. 1963); Montgomery Ward Co. v. Federal Trad Commission 379 F .2d 666 (7th Cir. 1967).

Where the advertisements themselves sufficiently demonstrate their capacity to deceive, the Commission can find the requisite deception or capacity to deceive on a visual examination of the exhibits without evidence that the public was actually deceived. Federal Trad Commission v. CoLgaw-Palrrtive Co., et at. 380 U. S. 374 (1st Cir. 1965); Double Eagl€ LuiYants,Inc. , et at. v. Federal Trade Commissi, 360 2d 268 , 270 (10th Cir. 1965); Mitclwll S. Mohr, et at. v. Federal Trad Commission 272 F.2d 401 405 (9th Cir. 1959), een. denied 362 U. S. 920 (1960).

(21 J It is no defense to a charge of engaging in unfair trade practices to assert that the customer was advised of the truth or of al1 material facts before making his choice of purchase. The initial contact, if deceptive, may be prohibited under the Federal Trade Commission Act. Exposition Press, Inc. , et at. v. Federal Trade Commission 295 F. 869, 873 (2d Cir. 1961), cert. denied 370 U. S. 917 (1962); Cartr Products, Iru;. , et at. v. Federal Trad Commission 186 F.2d 821, 824 (7th Cir. 1951).

The failure to disclose material facts which if known to prospective purchasers would influence their decision as to whether to purchase, is an unfair trade practice in violation of Section 5. Haskeliw Mfg. Corporation v. Federal Trad Commission 127 F. 2d 765 (7th Cir. 1942); L. Heller Son, Inc. , et at. v. Fedeml Trad Commiss.i.n 191 F.2d 954 (7th Cir. 1951); Fedeml Trade Commission v. Colgaw-Palrrlive Co. et al. 380 U. S. 374 (1st Cir. 1965); TIw J. B. Williams Company, Inc., et al. v. Federal Trad Commission 381 F.2d 884 (6th Cir. 1967); Company, Inc. , et at. v. Federal TTad Commission 416 F.2d 226, 231 (6th Cir. 1969). The Commission may utilize its accumulated expertise to determine what facts are material to consumers and whether such information has been withheld. Pfizer Inc. C. Dkt. 8819, 81 F. 23 (1972).

There is ample precedent for the proposition that the Commission may require affirmative disclosures where necessary to prevent SIMEON MA;\AGEME;\T CORP., ET AL. 1219 1184 Initial Decision deception. Accordingly, the Commission has the authority to require disclosure of material facts when a respondent advertises misleadingly due to a failure to reveal facts material in the light of the representations made. All-State 1ndustrUs of NCYh Carolina, 1m., et al. v. Federal Trade Commission 42 F.2d 42 (4th Cir. 1970); Portwood Co. , et al. v. Federal Trade Commission 418 F.2d 419, 42 (10th Cir. 1969); Leon A. Taslwf v. Federal Trad Commission 437 F. 707, 714, n.37 (D. C. Cir. 1970); Ward LaboraWrs, 1m. , et al. v. Federal Trad Commission 276 F.2d 952 , 954 (2d Cir. 1960), cert. denwd, 364 S. 827.

(22) It is not a violation of a respondent's First Amendment rights to require affirmative disclosure of material facts. They are free to advertise; but they are prohibited from making false or misleading statements- , failing to disclose material facts. No one has the constitutional right to disseminate false or misleading representations in advertisements. The Regina Cororation v. Federal Trad Commission 322 F.2d 765 , 770 (3d Cir. 1963); S. Company, 1m. , et al. Federal Trade Commission 416 F.2d 226, 231 (6th Cir. 1969). Is there an Inducement to Buy or an Actual Purchase of HCG? Advertisements are to be interpreted on the basis of the net general impression conveyed to the reader of the advertisement. National Bakers Servces, 1m. v. Federal Trad Commission 329 F.2d 365 (7th Cir. 1964); Rhodes PhJ:rmaaL Co. , 1m. v. Federal Trad Commissio 208 F.2d 382 , 387 (7th Cir. 1953), F. C. affirmed 348 U. S. 940 (1955). Respondents' ads induce the purchase of HCG. Section 12(a) of the Federal Trade Commission Act, in pertinent part, prohibits dissemination of a false advertisement which is likely to induce the purchase of a drug. An advertisement which does not disclose material facts is false per Section 15 (15 U.S. C. 55). Section 12(b) provides that such dissemination violates Section 5 of the Act. There is no question as to whether a purchase, or from the other perspective a sale, takes place when a product is injected into a person paying for it. There can be no serious question as to whether the advertisements in newspapers with extensive circulation is likely to induce the purchase of respondents' treatments which include the injection of HCG; and the drug does not need to be personaUy handled by the buyer. Rati.gan v. United States 88 F.2d 919 (9th Cir. 1937); SUiney J. Muell€r v. United States 262 F.2d 44 , 447 (5th Cir. 1958). (23) The injection of HCG in the course of the treatments offered by respondents contains aU of the elements within the definition of Juris Secundum (73 CJS 286): " purchase " found in Cors Initial Decision 87 F.

purchase' in the popular acceptance of thc term is the transfer of property from one person to another by his voluntary act and agreement founded on a valuable consideration. Sh€pard Paint Company, et al. v. Board of Truswes of Franklin County Vewrans Merral et al. 100 N. E. 2d 248, 251 (Court of Appeals of Ohio Franklin County, 1950).

The Doctor-Patient Relationship After a purchaser of a course of respondents' treatments enrolls, he is examined by a physician before he actually begins the treatments (Presley, Tr. 480). The injections of HCG are given by nurses at thc clinics (Harris, Tr. 418).

The Food and Drug Administration has made it clear that, insofar as that agency is concerned, a physician in treating his patients may lawfully prescribe a dosage differing from that indicated in thc labeling of a drug. The physician also may vary the conditions of use from those approved in the package inserts without informing the Food and Drug Administration or obtaining their approval (37 F. 16503)(Aug. 15, 1972). "The labeling is not intended either to preclude thc physician from using his bcst judgment in the intercst of his patient, or to impose liability if he docs not follow the package insert (37 F. R. supra at 16504). (Dr. Temple, Tr. 163-164, 184). With regard to F. C. jurisdiction, however, the focus of the Commission s complaint is on the advertising, primarily in newspapers by respondents, each of whom has denied being involved in the medical aspects of the operation of the weight reduction clinics. Thus, these C. proceedings are rwt focused on what a physician may in his professional judgment conclude is the appropriate treatment for a particular patient.

(24) The fact that a physician-patient relationship may be involved in respondents' operations does not preclude assertion of F. jurisdiction to bring an end to violation of the Federal Trade Commission Act. AnwrUan Medical Associat.ion v. Uniwd Staws, 317 S. 519 (1943); North€rn California Plurmaeutical Associatio, et al. v. Uniwd Statrs 306 F. 2d 379 (9th Cir. 1962), cert. denied 371 V. S. 862; also see Sections 5 and 12 of the F. C. Act (15 V. C. SS 45(a)(b) and 52(a)).

The Impact of Respondents' Practices on Competitors Although I do not agree with complaint counsel's position that the treatments respondents offer are unduly costly (supra par. 2B), I am of SIMEON MANAGEME;\T CORP., ET AL. 121 1184 Initial Decision the view that respondents' advertising promotion and marketing of the Simeon(s) method of weight control is unfair. The reason is that since respondents do not disclose in their advertising that their treatments involve the injection of HCG or that HCG has not been approved for such use by the Food and Drug Administration, respondents' operations injure or tend to divert trade from competitors for the trade of those who are interested in fat reduction and who disclose all the material facts pertinent to their remedies. Such competitors would include those engaged in the sale of medicines, preparations, systems, methods, books of instruction, and other articles and means designed, intended and used for the purpose of reducing weight. Raladm Co. v. Federal Trad Commissum, 316 S. 149, 151 (1942).

A competitor is prejudiced when business that would have come to him is diverted to another who is unscrupulous in the conduct of his business. Federal Trade Commission v. Algoma Lumber Co. , et al., 291 S. 67, 78 (1934). (25J California s Knox-Mills Act and Its Effect Respondents are registered under California s Knox-Mils Health Plan Act. The Act was passed by the State legislature to provide a means whereby private organizations, very much like insurance companies, could enroll so that they could be registered by the State as having complied with the requirements of the Act. For example, the registrants are companies and doctors, which furnish health care to individuals who formerly had been covered under the State s Medical program and who now pay for the care either through prepayment or periodic payment plans. The Act was designed essentially to cover the financial aspects of such plans and to determine whether the contracts with subscribers arc fair. It was not designed to cover all aspects of their operation (Elkins, Tr. 734-740; RX 4 - 4y). The Act also calls for submittal of the advertisements of organization or physician registered under the Knox-Mils Act to the Attorney General of the State. The Deputy Attorney General responsible for administering the Act (Elkins, Tr. 732) testified that his office s actions in examining such advertisements do not constitute a judgment that a particular advertisement is not violative of either the State or Federal law (Elkins, Tr. 742-745). He also testified that review of an advertisement by his office and expression of an opinion as to its propriety or impropriety would not constitute a determination binding on the State of California (CX 19 21; Elkins, Tr. 748, 762 790-791), and would not foreclose action by the Federal Trade Commission to challenge respondents ' advertising. Uniwd Staws v. Califoria, 297 Initial Decision 87 F.

s. 175 (1936). The Deputy Attorney General also testified that as a practical matter the State probably would not challengc an advertisement regarding which his office had given no adversc opinion (Elkins Tr. 762), provided all facts had been truthfully disclosed when thc advertisement was submitted for approval.

(26) The Federal Government in comparable circumstances is neither bound nor estopped by acts of its officers or agents. It is not irrevocably bound by a Federal employee entering an arrangement or agreement to do or cause to be done what the law does not sanction or permit. United Swtes Immigration and Naturalization Service v. Hibi 414 U. S. 5, 8 (1973). The Government is not in a position identical to a private litigant with respect to its enforcement of laws enacted by the Congress. Uwh Power Light Co. v. United Swtes 24 U. S. 389, 409 (1917). Certainly, the activities of employees in the office of the Deputy Attorney General of the State of California would be of no greater effect in foreclosing action by the Federal Trade Commission. Estoppel-Laches The Federal Trade Commission Act does not prescribe a minimum period within which the Commission must challenge a practice or lose the right to challenge it. To the contrary, Section 5(b) authorizes the Commission to take action to bring an end to apparent violations of the Act whenever it has reason to believe that doing so would be "to the interest of the public" (15 U. C. 45). The Commission, in fact, acted promptly in this matter to challenge respondents' advertisements by issuing its complaint and by seeking a preliminary injunction pending the trial of this matter. (See Preliminary Statement supra.

As for the law on the subject, the general rule is that an administrative agency charged with protection of the public interest is not precluded from taking appropriate action because of mistaken action or a lack of any action on its part in the past. Feckral Trad Commission v. Algoma Lumber Co. , et al. 291 U. S. 67 78-79 (1934); National Labo Relations Board v. Baltirnore Transit Co. , et al. , 140 2d 51-55 (4th Cir. 1944); P. LoUard Co. v. Federal Trad Commission 186 F.2d 52 (4th Cir. 1950). The principle of equitable estoppel-laches-may not be applied to deprive the public of the protection of a statute because of mistaken action or lack of action on the part of puhlic officials. United Swtes v. City and County of San Francisco 310 U. S. 16 31-32 (9th Cir. 1940). (27) SIMEON MANAGEMENT CORP., ET AL.

1184 Initial Decision CONCLUSIONS 1. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondents under both Section 5 and Section 12 of the Federal Trade Commission Act. 2. Respondents have been at all times relevant hereto engaged in interstate commerce within the meaning of Section 5 of the Federal Trade Commission Act and have caused to be disseminated false advertisements by United States mails, or in commerce, within the meaning of Section 12, which are likely to induce, directly or indirectly, the purchase of the drug human chorionic gonadotropin (HCG). 3. Respondents have been at all times relevant hereto in substantial competition in commerce with others engaged in the sale of medical and other treatments, and other means of weight reduction. 4. The aforesaid acts and practices of respondents were and are all to the prejudice and injury of the public and of respondents' competitors, and constituted and now constitute unfair methods of competition in commerce and unfair or deceptive acts or practices in commerce in violation of Section 5 of the Federal Trade Commission Act.

THE REMEDY It is well settled that the Commission may, and should, enter an order of sufficient breadth to insure that a respondent will not engage in future violations of the law. To this end the Commission has wide discretion in fashioning an appropriate order. See Jw;ob Swgd Co. Federal Trade Commission 327 1.. S. 608, 611- 13 (1946); Fedrral Trad Commission v. Ruberoid Co. 343 U.S. 470 , 473 (1952); Fedrral Trad Commis0-on v. National Lead Co. 352 U. S. 419 428-30 (1957); Fedrral Trad Commission v. Colgate-Palrrlive Co. 380 U. S. 374, 392 (1965). Commission orders have been consistently upheld whenever the orders are reasonably related (28) to the unlawful practices found to exist and are clear and precise so that they may be understood by those against whom they are directed. Jw;ob Swgel, supra at 611-13; v. CementRuberoid, supra at 473; Federal Trade Commission Institute 333 U. S. 683, 726 (1948).

It is also firmly established that, where appropriate, the Commission is authorized to require affirmative action in its orders. Pharrr=eutical Co. , Inc. v. Federal Trad Commission 408 F.2d 487 489 (5th Cir. 1969); An-State Industnes of North Carolina, Inc. Fedrral Trade Commission 42,S F.2d 423, 425-426 (4th Cir. 1970), cert. denwd 400 1.. S. 828; Tashof v. Federal Trade Commissicm 437 F. 707 (D. C. Cir. 1970).

. . .

Initial Decision 87 F.

In drafting the order in this proceeding, I have been influenced by the fact that it must he designed to protect a11 members of the consuming public which includes both the sophisticated and intelligent as well as the unthinking and the credulous. See Aronberg, et al. Federal Trade Commissum 132 F.2d 165 , 167 (7th Cir. 1942); Charws of the Ritz Distributors Cororatwn v. Federal Trade Commisswn, 143 2d 676, 679 (2d Cir. 1944).

I also am not unmindful of the precept that "* * * once the Government has successful11y borne the considerable burden of establishing a violation of law, a11 doubts as to the remedy are to be resolved in its favor. United States v. E. 1. du Pont de Nerrrs Co. et ai. 366 U. S. 316 334 (1961); Ford Moto Co. v. United States et ai. 405 U. S. 562, 575 (1972). I have deleted, however, the notice order provision proposed by complaint counsel prohihiting any advertising of treatments involving use of a drug required under the Federal Food Drug and Cosmetic Act to be approved for such use until the drug has received the required FDA approval. The notice order immediately raises First Amendment questions in that it would effect an absolute prohibition of advertising rather than require respondents simply to advertise in a manner which is not false, misleading or unfair. An obligation (29) to advertise truthfully bears no resemblance to restriction on the exercise of free speech. Grosjean, Supervisor of Public Accounts of Loisiana v. American Press Co., Inc., et al., 297 S. 233 250 (1936); Rodle Press, Inc. , et al. Dkt. 8619, 71 F. C. 1184 1234 (1967). I believe that an absolute prohibition of advertising does. the Court must always keep in mind the conficting impact of the constitutional right of freedom of speech with the limitation upon the right if there is false advertising. If the advertisement is not false, defendants have a constitutional right to utilize it even though its cont€nt and blatancy may annoy both the Commission and the general public. 215 F. Supp.Federal Trade Commission v. Sterling Dr, Inc., et al. 327 332 (D. , 1963), aff'd 317 F.2d 669 (2d Cir. 1963). The Commission may, of course, prohibit false statements or true statements which in total effect are misleading. Murray Space Sho Cor. v. Federal Trade Commission 304 F.2d 270, 272 (2d Cir. 1962); Ward LaboaUJs v. Federal Trade Commission 276 F.2d 952, 954 cert. denwd 364 U.S. 827 (1960). But the Commission may not prohibit the telling of a true statement. See Crosley v. Bradstreet Co. 312 F. 483 (2d Cir. 1963), cert. denwd 373 U. S. 911 (1963); Scwntific Mfg. Co. v. Federal Trade Commission 124 F.2d 640 (3d Cir. 1941). Instead of the notice order provision, I have substituted provisions calling for (1) disclosure in advertising of (a) the fact that the . NotreprolJceherein SIMEON MANAGEME T CORP., ET AL.

1184 Initial Decision treatment involves injections of HCG and, usually, adherence to a 500 calorie daily diet, and (b) HCG's unapproved-hy-FDA status for use in treating obesity and weight control, and (2) a statement in the receipt or contract provided to subscribers to respondents' treatment plans as to the nature of the treatments and HCG's status with FDA. (30) I have also deleted the notice order provision calling for notification to the Commission of all changes in employment by individual respondents. I see no useful purpose in requiring an individual respondent in this case to report th"the has entered some totally dissimilar line of business. The Commission should follow the individual's career in the weight reduction business but need not have such information regarding other businesses he may enter. The order now calls for notification only when the individual leaves or reenters the weight reduction business.

ORDER It is ordered That respondents Simeon Management Corporation Simeons Weight Clinics Foundation, Bariatric Medical Clinics Management Corporation, C. M. NorcaJ , Inc., and HCG Weight Clinics Foundation, corporations, their successors and assigns and their officers, and Harvey J. Lobelson, individually and trading and doing business as Weight Reduction Medical Clinic, or under any other name or names, his successors and assigns, and John D. Howell, Robert Van Dine, David L. Cunningham, Peter J. Marengo, III , and Joseph Costa individually and as officers, respondents' agents, representatives and employees, directly or through any corporation, subsidiary, division or other device, in connection with the offering for sale, sale or distribution of the "Simeon " or "Simeons" treatment for (31) weight reduction, or of any other weight reducing service or treatment, do forthwith cease and desist from:

1. Disseminating, or causing the dissemination of any advertisement, by means of the United States mail, or by any means in commerce, as "commerce" is defined in the Federal Trade Commission Act, promoting any service or treatment which involves the use of HCG or any other drug required under the Federal Food, Drug and Cosmetic Act to be approved by the Food and Drug Administration as both safe and effective for the treatment of thc conditions for which it is to be used without disclosing in the advertisement in print equally conspicuous to that in the bulk of the text that: (I) The treatments include injections of HCG and, usually, adherence to a 500 calorie daily diet; and that (2) HCG is a drug which has not been approved by the Food and Drug Administration as safe and effective for the treatment of obesity or weight control. 21G- 969 Q- LT - 77 - 78 Initial Decision 87 F.

(32) 2. Disseminating, or causing to be disseminated, by any means for the purpose of inducing or which is likely to induce, directly or indirectly, the purchase of any such weight reducing service or treatment in commerce, as "commerce" is defined in the Federal Trade Commission Act, any advertisement which fails to comply with the requirements of paragraph 1 hereof.

It is further ordered That each respondent is to forthwith cease and desist from failing to furnish each subscriber to the course of weight reduction treatments he offers with a fully completed receipt and/or copy of any contract executed when the treatments are subscribed for which receipt and contract ls to bear in boldface type of a minimum size of 10 points in close proximity to the signature element(s) thereon a statement in substantially the following form: THESE WEIGHT REDUCTION TREATMENTS INCLUDE THE I;\JECTIO;\ OF HCG, A DRUG WHICH HAS NOT BEEN APPROVED BY THE FOOD AND DRUG ADMmISTRATION AS SAFE AND EFFECTIVE IN THE TREATMENT OF (33) OBESITY OR WEIGHT CONTROL. THERE IS NO SUBSTANTIAL EVIDENCE THAT HCG INCREASES WEIGHT LOSS BEYO;\D THAT RESULTING FROM CALORIC RESTRICTION , THAT IT CAUSES A MORE ATTRACTIVE OR NORMAL" DISTRIBUTION OF FAT, OR THAT IT DECREASES THE HUNGER AND DISCOMFORT ASSOCIATED WITH CALORIE-RESTRICTIVE DIETS. It is further ordered That each respondent and its successor or assignce is to deliver a copy of this order to cease and desist to all persons now engaged, or who become engaged, in the management advertising, promotion, or markcting of weight reducing treatments as respondent' s agents, salesmen, representatives, or employees, and secure from each of said persons a signed statement acknowledging receipt of a copy thereof.

It is further ordered That each respondent and its successor and assignee is to notify the Commission at least thirty (30) days prior to any proposed change in their respective corporate respondent successor or assignee, such as dissolution, assignment, or sale resulting in the emergence (34) 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 this order.

It is further ordered That each of the individual respondents named herein is to promptly notify the Commission of the discontinuance of his present business or employment and of his affiliation with a new business or employment involved in the offering of treatments or other methods for reduction of wcight. Such notice shall include respondents' current business address and a statement as to the nature of the SIMEON MA;\AGEMENT CORP., ET AL.

1184 Opinion business or employment in which he is engaged as well as a description of his duties and responsibilities.

It is furtlwr 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, setting forth in detail the manner and form in which they have complied with this order. OPI"1O" OF THE COmllSSION By DOLE Commissioner:

(2J Respondents arc corporations and individuals in the business of setting up, operating and promoting weight reduction clinics. ! They provide management and support services to licensed physicians and nurses who administer the treatments offered by the clinics. The clinics advertise in newspapers that their programs are safe, effective and medically approved. ' The cost of respondents' treatment programs ranges from $165 to more than $395.

All of thc clinics use the "Simeon " or "Simeons" method for weight reduction. After an initial examination by a licensed physician patients are given a four to six week treatment program consisting of a 500 calorie daily diet, medical counseling and five or six injections per week of human chorionic gonadotropin ("HCG"), a prescription drug HCG is approved by the Food and Drug Administration ("FDA") for some purposes ' but not for treatment of obesity '" Indeed, the FDA has found that there is a lack of substantial evidence that HCG is safe and effective in the treatment of obesity' FDA , accordingly, ordered (3J that effective on February 3, 1975 8 labeling reveal the "material" fact that there is a lack of substantial evidence that thc drug is effective as adjunctive therapy in the treatment of obesity 9 All advertisements for the drug HCG must include the following disclosure:

HCG has not been demonstrated to be effective adjunctive therapy in the treatmcnt of obesity. There is no substantial evidence that it incrcases weight loss beyond that resulting from , The following ahhrcviation will be U8eU throughout this opinion in citations to the record: ex - Commis. ion Exhibitb; RX - Rcspondcnt. ' BxhihitB; Comp!. Complaint; Tr. - Trani!ript of Testimony; J.D. - Initial Deision of the Administrative Law Judge (June 18, 1975); RE - Respondent. ' appeal brief; CAB - Complaint Counsel's answer brief , 1.D. 9, IOa-lod, 11, RE 2. All but one of the rc. pondcnt. have also advertise on wlevision. J.D. 9. o I, 8 (Stipulation, RX:-a) . I.D.

, Treatment of sterility and crytorchidism and inducing Ovu111tion " I.D.

139 F. R.4Z397(Dce- , 1974), ex 6-3.

i Tr.170.

. 39F. at422 CX6-f.

Opinion 87 F.

caloric restriction, that it causes more attractive or "normal" distribution of fat, or that it decreases the hunger and discomfort associated with calorie-restricted diets.

In October 1974, the Commission issued a complaint alleging that respondents had engaged in false, deceptive and unfair advertising, in violation of Sections 5 and 12 of thc Federal Trade Commission Act, 15 C. , 52, by failing to disclose in their advertising that their treatments involve injections of the drug HCG and that the drug is not approved by FDA for weight reduction purposes. The complaint also alleged unfairness in advertising, marketing and promoting a costly treatment involving a prescription drug required to be approved by FDA, but unapproved by FDA for that purpose. Respondents J. William Byrd, Medical Weight Loss, Inc., and Darrel P. Simpson failed to answer the complaint. Administrative Law Judge Joseph P. Dufresne found against them on all (4J charges and imposed on them the order requested by complaint counsel." Judge Dufresne subsequently found the other respondents liable for failing to disclose mr.terial facts in their advertising. 13 He declined, however, to find that respondents had acted unfairly in advertising, marketing and promoting a "costly" treatment involving a prescription drug required to be approved by FDA, hut unapproved by FDA for that purpose14 The law judge accordingly denied complaint counsel's request for a broad order prohibiting respondents from advertising any service or treatment which involves the use of a drug required to be approved by FDA until it has been approved. He instead prohibited advertisements for respondents' weight reduction treatment unless they disclose the facts that the treatments include injections of HCG and adherence to a 500 calorie daiJy diet and that HCG has not been approved by FDA for weight reduction purposes. He further ordered respondents to furnish their customers the following disclosure as a part of each contract or as a receipt:

THESE WEIGHT REDUCTION TREATME;\TS INCLUDE THE INJECTION OF HCG, A DRUG WHICH HAS NOT BEEN APPROVED BY THE FOOD AND DRUG ADMINISTRATION (5) AS SAFE AND EFFECTIVE IN THE TREAT- MENT OF OBESITY OR WEIGHT CONTROL. THERE IS NO SUBSTANTIAL EVIDENCE THAT HCG I;\CREASES WEIGHT LOSS BEYOND THAT RESL"LTIKG FROM CALORIC RESTRICTION, THAT IT CAL"SES A MORE !Dld 11 Gompl., Pargraphs 5 12 initial Decision, Januar 7, 1975. Se 16 C. R. l2c), The Commission ha. stayed the effective date of the law judge s oruer. 16 C. R. 51(a), Respondent Simpson subsuently moved to repen the dch-ult decision entered in this matter as to him(Se 86 F, C. 895 and 1568J- On remand, the law judge denied the motion. Order Denying Motion Reopen the Default Decision, February 26 1976 '3 I.D. 2022 ,. I.D. 24 SIMEON MANAGEMENT CORP., ET AL.

1184 Opinion ATTRACTIVE OR "NORMAL" DISTRIBUTION OF FAT, OR THAT IT DECREASES THE HU;\GER AND DISCOMFORT ASSOCIATED WITH CALORIE-RESTRICTIVE DIETS.

Complaint counsel and respondents Simeons Weight Clinics Foundation, John D. Howell, Simeon Management Corporation, Robert Van Dine, C.M. ,"orcal, Inc., HCG Weight Clinics Foundation, Peter J. Marengo, III, Joseph Costa, Bariatric Medical Clinics Management Corporation and David L. Cunningham appeal from the order of the administrative law judge.

RESPOL'' DPHS' Appeal Respondents assert that complaint counsel failed to meet their burden of proving the lack of safety and effectiveness of respondents weight reduction program. However, the complaint does not allege that respondents' treatment is in fact (6) unsafe or ineffective for treatment of obesity. Instead, it claims that respondents violated Sections 5 and 12 by failing to disclose in their advertising the material facts that the treatments involve injections of the drug HCG and that HCG is not approved by FDA as safe and effective for weight reduction purposes.

The Commission believes that the failure to disclose that respondents' treatments involve the administration of a drug which has not been approved by FDA for weight reduction renders respondents advertising false, deceptive and unfair.

FALSITY A DECEPTION Capacity to deceive and not actual deception is the criterion by which practices are tested under the Federal Trade Commission Act. See, e. Gooman v. Federal Trad Commission 24 F. 2d 584 (9th Cir. 1957). Advertising capable of being interpreted in a misleading way should be construed against the advertiser. Neither actual damage to the public nor actual deception need be shown. Resort Cat Rental System Jm. v. Federal Trade Commission 518 F.2d 962 964 (9th Cir. 1975). What constitutes deception in advertising is clearly within the realm v. Federal Tradof the Commission s expertise. Feddrs Corp. Commission 529 F.2d 1398 , ,"0. 75-4051 (2d Cir. , Jan. 21, 1976). The Commission may utilize its accumulated expertise in analyzing the facts of each case to determine what (7) direct and implied representations are contained in advertising. It may also use its 10 Subsequent to the i suance of the complaint, the Commigsion Sought an injunction in the l:nite State Di trict Court for the Northern District of California against advertising hy I'spondents ' weight reduction clinics. The district court denied the injunction, 391 F. Supp. 697 (1975), and the district court s order hM been affirred by the Court of ApJ'ls. 532F.2d 708 1\0. 75-2363 (9th Cir, March 2, 1976). 120 FEDERAL TRADE COM)!ISSION DECISIONS Opinion 87 F.

expertise in evaluating what facts are material to consumers, and thereby to determine the situations in which material facts have not been disclosed. See 81 F. C. 23, 58 (1972). Pfizer, Inc. It is deceptive, and, therefore, a violation of Section 5, to fail to disclose in advertisements promoting respondents' weight reduction program that the treatments employ prescription drugs not approved for weight reduction by FDA. Some consumers will reasonably believe and indeed have a right to assume, that controls are exercised by the government over the promotion and use of prescription drugs. This assumption is understandable in view of the elahorate regulatory scheme established by the Federal Food, Drug, and Cosmetic Act FFDCA"J and FDA' s implementing regulations. (8) Moreover, the consumer s expectations in these respects are intensified by the challenged advertisements which represent respondents' treatments as safe, effective and medically approved. For these reasons, we find that advertising for a treatment involving the use of the prescription drug, HCG, representing that it is safe and effective may reasonably lead consumers into a mistaken belief that these claims are based, not on the advertisers' opinions alone, but on a determination by the Federal agency responsible for drug regulation and approval. That implication, under the circumstances here hcfore us, is clearly false. 17 In addition, in view of the public s belief that the government strictly regulates therapeutic drugs, we find that the fact a weight reduction treatment involves the administration of a drug lacking FDA approval for weight reduction therapy may materially affect a consumer s decision to undergo the treatment. Respondents' failure to disclose this fact, therefore, renders their advertising deceptive.

Further, under Section 15 of thc F. C. Act defining "false advertisement" for the purposes of Section 12, it is a violation to fail to disclose in advertisements promoting, directly or indirectly, the sale of a drug "facts material in the light of (the) representations (madeJ or 16 "Few other products are legally reuir tD undergo wr.h extkn ive pre-market testing and approval." Merrll Compenstio far Prescriptio Dr lnjuriea 59 VIL, L. Rev. , 8 (1973). The FFDCA prohibit. the introduction or delivery for introduction into intcr.t.t( commerce of any "new drg, unless an approval of an applic.tion ' . 'is effective with respect sllch drg." 21 V. C. 35a). A "new drg" is a drug not gtmeral1y regniz among expert.!; as cff€(.tive!! well 11 sae for its intended use. 21 r. c. 321(p)(I)- A new drg may not be marketed unless II new drug application filed with FDA is in effect and FDA is direte w refuse approval of an application if substantial evidence€" that the drg is effective for its in1Anded use is I king. 21 V. C, 35d) and (e), A drg may be "new" even if it hM already ben approved ior another use,See, Merrtt Cor. v. Fo/. 165 F. Supp. 418, 421 (D. 1958).

" Respondents acknowledge that their advertisements "suggest that the treatment method is sae, effective and medicallyapprovcd." RB2.

SIMEON MA;\AGEMENT CORP., ET AL. 121 1184 Opinion material with respect to consequences which may result from the use of the commodity to (9) which thc advertisement relates. 18 The lack of FDA approval for a drug used in the advertised treatments is obviously material "in the light of (the) representations" that the treatments are safe, effective and medically approved. The lack of an FDA determination that the drug is safe and effective for weight reduction is also obviously material "with respect to consequences which may result from the use" of the drug, especially in view of the belief held by many consumers that any drugs used are being employed only for government approved uses.

On the other hand, we disagree with the law judge that the name of the drug is a material fact to consumers that must be included in order to prevent advertising of the treatments from being false or deceptive. (IO) L'NFAIR.'\ESS Among the factors the Commission considers in determining whether a practice is "unfair" within the meaning of Section 5 is whether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise - whether, in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness Food and Drug Administration regulations, promulgated pursuant to the FFDCA, provide that advertisements for prescription drugs approved by FDA may not recommend or suggest any use that is not indicated in the labeling as approved by the FDA in the new drug application.'! Respondents, therefore, cannot advertise the use of HCG in connection with weight reduction therapy. To advertise a treatment that involves the use of HCG for weight reduction without any qualifying language is to circumvent the FDA prohibition. We therefore, conclude that respondents' advertising offends public policy as it has been established by the Federal Food, Drug, and Cosmetic Act. (11) IS F. Act l5(aXI); 15 V. C. 55a)(l) 19 Subsuent to the i&!U1HIC€ of the complaint, FDA issued a stat€ment that became effective on Februar 3 1975, which found that there was lack of substantial evidence that HCG WiJ 3afe and effective in the tretment of ohesity. However, no evidence was introduce that rc. pond..nt. have diiJminate advertising after Februar 3, 1975 that failed w diocloS€ the FDA finding Statement of Basis and Purpose of Trade R€!ilation Rule 400, Unfair or Deceptive Advertising and LabelinJl of Cigattes in Relation the H,"alth Hazrd of Smoking," 29 F. R 8a5. (1%4), cite inPe.ml T"r Cmmi8si v. Sperr JIuthinscm Co., 405 U.S, 23, 2M n. ;) (1972). 21 21 C, R. 202, 1(eX4).

..

Opinion 87 F.

RESPO:\DENTS' OTHER CONTENTIONS We reject respondents' other claims. Respondents assert that HCG is not a "new drug" as defined by the Food, Drug, and Cosmetic Act and therefore, did not have to be pre-cleared by FDA before being marketed. FDA has determined that, when used for weight reduction HCG is a "new drug." We see no reason to challenge this finding, especially in view of the "ahsence of any evidence of adequate and well-controlled investigation supporting" HCG' s efficacy. Respondents also argue that, even if HCG is a "new drug," the prior approval requirement applies only to manufacturers and distributors of the drug and not to physicians or clinics that administer the drug. However, the fact that the drug cannot be introduced or distributed in commerce for weight (12) reduction purposes is itself material to consumers. 23 (I3) COMPLAINT COCNSEL s APPEAL Complaint counsel contend that the law judge erred in failing to find that, even with disclosures, any advertising of a treatment involving a drug which is required to be approved by FDA but which has not received FDA approval for the advertised purpose is inherently unfair. They ask us to reverse this finding and to remedy the alleged violation by imposing an unconditional han on all advertising for treatments involving any drug required to be approved by FDA until it has received approval for the advertised purpose. In this contention, complaint counsel place their primary reliance on Se Weinbrger Hyn.on, WeBtcott Dunning, 412 U.S. 60, 629 (1973). " We rejed respondent.' argument that the instant wmplllint improperly intnJde. on the physicilln-plltient relationship. We are not challenging the physician s right administer or pre-'IcribcIIIIY medication he deems appropria.te in the treatment of his patient..See Legal Status of Approved Labeling for Prription Drug!; Pre3cribing for U Unapproved by the Foo and Drug Administration " 37 F. R. 165 (1972) (physician rry prefIribe drug for U other thfln tho approved by FDA). The CommiBlion is, inste, prohibiting dereptivc and unfair advertisemento. That respondento provide medical servces doe not immuniz them from liability under Sections 5 and 12. Sa Goldfarbv. Virginia State Bar 421 U.S. 773, 787-8(1975); A1'rian Mwical ABB Unite StateB 317 S, 519 52829(1943).

We also reject respondento' claim that, beuse their advertising has not bcndispproved by the California Attorney General, purnuant to the Knox-Mills Health Plan Act, Cal. GDv t COe U2530-.7 (West Supp. 1975), it is not suhject to review hy the Commi$. ion The Attorney General's office advise couill for certin respondent. that in administering the Knox-Mills Health Plan Act, it does not detennine that the pia!\ "ar in compliance with other statutes and regulations" CX 19. Moreover, the Attorney General hll made it clear that his failure to di. approve the advertisemento of certin respondent. did not constitute an approval of the advertisement. . CX 20. In any event, the actions of a State agency would not be dispoitive of whether respondent. have violate Federal law or are we pernuaded hy respondent.' claim that their patient. do not "purchase" HCG, within the meaning of Section 12a), since the injections of BCG are merely one segment of the tretment prof.m, Se Muel v. United SwteR 262 F.2d 44 (5th Cir 19:1) Of cours, rc.pondento' ar!0ment hM no bearng on the allegation that their advertiseme!1toviolateSetion5.

Finally, the Commision s jurisdiction is no. pre-empte by the FFDCA. The statute provides that " advertisement of a preription drg-" shall with respet to mattcrn covered by the statute or FDA regulations be subject to Sections 12 to 17 of the F. C. Act, 15 t;, c. 5Z-7. However, none of the paries has claimed that respondents ' advertisements, which did not mention the drg HCG, were advertisemento of a preription drg. In any event, the Commission would retainjuri5diction under Section S ,. , SIMEON MANAGEMENT CORP., ET AL. 123 1184 Opinion Sperry Hutchinson, sUJYra holding that the Commission has broad authority to prohibit "unfair" commercial practices. Here, however, we are faced with competing policies. On the one hand, there is a clear policy in the FFDCA to prevent drugs such as HCG from being marketed for unapproved purposes until FDA approval for that purpose has been received. On the other hand, there is a policy to allow physicians to utilize, for any purpose, any drug which has lawfully come into their hands. " Balancing these competing considerations, we cannot conclude that there is a clear public policy against allowing these physicians to advertise their treatments in a non deceptive manner. We believe that, circumscribed as they wil (14J be by our order, any advertisements run by respondents will sufficiently apprise consumers of the negative features of respondents' services. REMEDY Advertising Disclos?lre Since we have found that respondents' advertising has run afoul of the law by failing to disclose a material fact, it is obviously appropriate for us to require disclosure of that fact in the future. We have determined, however, that substantial variations from the law judge disclosure should be made. As J udgc Dufresne recognized, advertising disclosures should not be Jimited to advertisements for treatments involving HCG, but should apply to advertisements for treatments which involve the use of any drug required to be approved by FDA which has not received that approval. Judge Dufresne, however failed (15 J to word his disclosure to provide for the possibility that respondents might switch to the use of another drug unapproved by FDA. We have reworded the disclosure to this end and have also expanded it, drawing on the FDA warning which is required in prescription drug advertising,27 so that it will effectively convey the &enou:Z3 upro ,. It is arguable that the mere advertising of II treatment program involving the U of II drug for purp unapprovet by FDA may be inconsistent with the FDA prohibition against a.vertisement for prescription dru that recommend or sllggesl II use that is not iodit:te in the approved labeling. However, the FDA policy is adequately protecte if the fact the treatment invoives a drug unapproved by FDA is disclose. Even if there is arguably some conflict with the objectives of th" FDA prohibition, We bdieve this result repre!!nt.s the most semi hie acmmodation of the above.inrlicate compet.ing policies '" The Commission may, and should close all roads tv the prohihitt I!oal."FTCv. R11ro Co. S, 470 473 (1952) " 39 F, R. 4202, CX 5-f, The Commission s dekrmination t.hat the failure to rlisdose that. FDA had not approved HCG for weight reduction rendererl respondents ' advertising decept.ive and unfair under Set.ion 5 and fal!! under Section 12 applies perforc tv a failure to disclo!! that. FDA hM actually found HCG had not. ben shown tv be gafe and effective for weight reduction, Although there has ben no finding t.hat repond"mts have violate Setions 5 and 12 by failing tv disclose the FDA det.rmin8t.ion tree now 19 1WPra it. is well e. t.blished that. "t.he Commission is not limited to prohihitinl' the illegal practice in the precise fonn in which it is found tv have existed in the past." R11ro, supr, lit 473 123 FEDERAL TRADE COMM1Sslon DECISIONS Opinion 87 F.

import of FDA's non-approval.

Office Disclosure Like Judge Dufresne, we do not believe that a disclosure in advertising will constitute a sufficient remedy for the abuses found here; therefore, our order wi1 also require that each customer receive a disclosure at the time the contract is signed.'9 (16) Several reasons support the need for disclosures during the first office visit. Many of respondents ' prospective clients may have learned about respondents' services from advertising prior to the time the advertising contained the ordered disclosures. Stil others may come to respondents on the advice of friends and acquaintances 30 who in turn learned about respondents' services from the earlier advertising. Without in-office disclosures, these prospective patients wi1 suffer from the deception caused by the original advertisements.31 Moreover when so serious a matter as the safety and efficacy of a prescription drug is concerned, every precaution must be taken that cautionary information is effectively communicated to the prospective client. Other Order Changes As requested by complaint counsel " we wi1 make two minor modifications to Judge Dufresne s order. First, since it has come to our attention that several of the respondents (17) have sold some of their clinics to parties previously affiliated with them, we will require that the details of these transactions be set forth in respondents' compliance report. Second, we will broaden the order to include acts and practices which "affect" commerce, as well as those which are " " commerce. We wi1 also modify the individual reporting of change in employment requirement. While we agree v,'ith Judge Dufresne that it is unnecessary in this case to require each individual respondent to report each change of employment for the remainder of his life, we do believe that reporting is appropriate for the following changes in employment: (1) For the first ten years following the effective date of the order .. Respondent, made no 8peific objection On apprl to the order provision reuiring disdoBurc in advertisinj. thllt their treatmcnt. incluue a.'iOOcalorie daily diet. We will, therefore, retain that provision in the order. We have however, eliminate any reference to the drug HCG from the advertising and officediocIOlure"- See p. 9 pm. :I Cnlike the law judge s order. OUf order requires that thi ,:I() ure be made belon the contract i5 signed, The purpse of the disclosure is 1, enllhle the cor.sumer 1, make an informed purcha.'W decision; only II disclosure effccte before the decision is irreyocble cannethi purpose '0 Tr. 649 " See Trowl Ki11g, I'l. Okt. 1'0. 8949 (Sept. 30 , 1975) r86 F. C. 715J. "While it may be arguedthattherepresenta ionsmadelJyaphysiciar. t.aprOEpetiYepatientarcnotgenerally in or affecting commerce " we need not decide that question, These respondent.s have conducted their operat.ions on Buch a scale t.hat, even apart from their adverti ing, their operat.ions are in or affect inu' tate commerce and promote the sale of drugs in or having an effect U "m COmmCfCi. 3' CAB 15-16.

SIMEON MANAGEMENT CORP., ET AL. 1237 1184 Final Order effect upon commerce, or where said purchase would be in or affecting or having an effect upon commerce, as "commerce" is defined in the Federal Trade Commission Act) without disclosing, in a clear and conspicuous manner, that the treatments usually include adherence to a 500 calorie daily diet.

It is further ordered That each respondent forthwith cease and desist from failing to furnish the following disclosure to each potential subscriber to the course of weight reduction treatments he offers (where such treatment involves the use of HCG or any drug in any manner or for any purpose, which manner or purpose would, if included in the laheling of such drug when such drug was introduccd into commerce, cause such drug to be misbranded under the terms (6) of the Federal Food, Drug, and Cosmetic Act, or which the Secretary of the Department of Heath, Education, and Welfare or his delegate has, under color of authority of that Act, determined would cause said drug to he so misbranded) unless at the time of sale and prior to the sale becoming final and prior to the commencement of the treatment or service or transfer to the purchaser of the product or drug, there is clearly and conspicuously disclosed to the purchaser, in WTiting, the following statement:

THESE WEIGHT REDVCTlON TREATMENTS I;\VOLVE THE INJECTlON OF A PRESCRIPTlON DRUG WHICH HAS NOT BEEN APPROVED BY THE S. FOOD AND DRUG ADMINISTRATION AS SAFE AND EFFECTIVE IN THE TREATMENT OF OBESITY OR WEIGHT CONTROL. THERE IS NO SUBSTANTIAL EVIDENCE THAT THIS DRUG INCREASES WEIGHT LOSS BEYOND THAT RESULTING FROM CALORIC RESTRICTlON, THAT IT CAUSES A MORE ATTRACTIVE OR "NORMAL" DISTRIBUTION OF FAT OR THAT IT DECREASES THE HUNGER AND DISCOMFORT ASSOCIATED WITH CALORIE-RESTRICTIVE DIETS.

It is hereby provid that: (a) if the drug employed is not a prescription drug, respondents shall omit the word "prescription " (b) if the drug is not to be injected, respondents shall employ the word "use instead of "injection.

(7) It is further ordered That each respondent and its successor or assignee (1) deliver a copy of this order to cease and desist to all persons now engaged, or who become engaged, in the management advertising, promotion, or marketing of weight reducing treatments as respondent' s agents, salesmen, representatives, franchisees or employees, (2) secure from each of said persons a signed statement acknowledging receipt of a copy thereof and (3) continue to engage such a person only so long as such person abides by the terms of this order.

It is further ordered That each respondent and its successor or 1238 FEDERAL TRADE COMMISSION DECISIOKS Final Order 87 F.

assignee notify the Commission at least thirty (30) days prior to any proposed change in their respective corporate respondent, successor or assignee, 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 this order.

It is furtlwr ordered That each individual respondent named herein promptly notify the Commission of the discontinuance of his present business or employment and of his affiliation with (8) a new business or employment. In addition, for a period of ten years from the effective date of this order, the respondent shan promptly notify the Commission of each affiliation with a new business or employment whose activities include the offering of treatments or other methods for reduction of weight or in the use of drugs which are required under the Federal Food, Drug, and Cosmetic Act to be approved by the Food and Drug Administration as safe and effective for the conditions for which they are to be used and arc not so approved. Such notice shan include the respondent's new business address and a statement of the nature of the business or employment in which the respondent is newly engaged as wen as a description of respondent's duties and responsibilities in connection with the business or employment. The expiration of the notice provision of this paragraph shan not affect any other obligation arising under this order.

It is furtlwr ordered That the respondents herein shan, within sixty (60) days after service upon them of this order, file with the Commission a report, in writing, setting forth in detail the manner and form in which they have complied with this order; and the fun names and addresses of any parties to whom any respondent has sold transferred or conveyed any interest in a business subject to the complaint which led to (9) this order, since the date of service of said complaint. With respect to any such sale, transfer or conveyance, the report shan set forth in detail the date of each transaction, the nature and extent of any respondent's continuing interest in the business resulting from said transaction, the manner and form in which any purchaser was given notice of the pendency of the subject complaint and any other information which may affect compliance obligations arising out of this order.

Chairman Conier having not participated in the oral argument in this matter, did not participate in its resolution. SIMEON MANAGEMENT CORP., ET AL. 125 1184 Final Order wherever the new job involves the offering of treatments or other methods for reduction of weight or entails the use of any drug required under the FFDCA to be approved by FDA as safe and effective but which drug is not so approved; and (2) each individual respondent' first change of employment subsequent to the effective date of the order.

The findings and conclusions of the administrative Jaw judge are adopted as the findings and conclusions of the Commission, except to the extent that they are inconsistent with this opinion. An appropriate ord.er is appended.

FINAL ORDER (2) This matter having been heard by the Commission upon the separate appeals of complaint counsel and respondents from the initial decision; and The Commission having considered tbe oral arguments of counsel their briefs, and tbe whole record; and The Commission, for reasons stated in the accompanying opinion having denied in part and granted in part the appeal of complaint counsel and having denied in full the appeal of respondents' counsel; accordingly It is ordered That, except to the extent that it is inconsistent with the Commission s opinion, the initial decision of the administrative law judge he, and it hereby is, adopted together with the opinion accompanying this order as the Commission s final findings of fact and conclusions of Jaw in this matter;

It is further rYrdered That the following cease and desist order be and it hereby is, entered:

ORDER It is ordered That respondents Simeon Management Corporation Medical Weight Loss, Jnc. , Simeons Weight Clinics Foundation Bariatric Medical Clinics Management Corporation, C. M. Korcal, Inc. and HCG Weight Clinics Foundation, corporations, their successors and assigns and their officers, and (3) Harvey J. Lobelson, individually and trading and doing business as Weight Reduction Medical Clinic, or under any other name or names, his successors and assigns, and John D. Howell, Robert Van Dine, Darrcl P. Simpson, J. Wiliam Byrd David L. Cunningham, Peter J. :varengo, III , and Joseph Costa individually and as officers, respondents' agents, representatives and employees, directly or through any corporation, subsidiary, division or other device, in connection with the offering for sale, sale or Final Order 87 F.

distribution, directly or indirectly, of the "Simeon" or "Simeons treatment for weight reduction, of any other weight reducing service product or treatment, or of any drug do forthwith cease and desist from disseminating or causing the dissemination of any advertisement for the purpose of inducing or which is likely to induce, directly or indirectly, the purchase of any drug or any weight control or reduction service, treatment, or product (where such advertisement is disseminated by means of the United States mail, or by any means in or affecting or having an effect upon commerce, or where said purchase would be in or affecting or having an effect upon commerce, as commerce" is defined in the Federal Trade Commission Act) when performance of said treatment or service or use of said product or drug may involve the use of HCG or any drug in any manner or for any purpose, which manner or purpose would, if included in the (4J labeling of such drug when such drug was introduced into commerce, cause such drug to be misbranded under the terms of the Federal Food, Drug and Cosmetic Act, or which the Secretary of the Department of Health, Education, and Welfare or his delegate has, under color of authority of that Act, determined would cause said drug to be so misbranded, without making the following disclosure in a clear and conspicuous manner:

THESE WEIGHT REDUCTIO" TREATMENTS INVOLVE THE INJECTION OF A PRESCRIPTION DRUG WHICH HAS ;\OT BEE" APPROVED BY THE S. FOOD AND DRUG ADMINISTRATIO;\ AS SAFE AND EFFECTIVE IN THE TREATMENT OF OBESITY OR WEIGHT CONTROL. THERE IS NO SUBSTANTIAL EVIDENCE THAT THIS DRUG INCREASES WEIGHT LOSS BEYOND THAT RESULTING FROM CALORIC RESTRICTION, THAT IT CAUSES A MORE ATTRACTIVE OR ";\ORMAL" DISTRIBUTION OF FAT OR THAT IT DECREASES THE HUNGER AND DISCOMFORT ASSOCIATED WITH CALORIE-RESTRICTIVE DIETS.

It is hereby provided that: (a) if the drug employed is not a prescription drug, respondents shall omit the word "prescription " (b) if the drug is not to be injected, respondents shall employ the word "use instead of "injection " (c) if the advertised product, service, or treatment does not (5J relate to weight reduction, respondents shall petition the Commission to request that the disclosure be reworded as is appropriate for the particular product, service, or treatment offered. It is further orckred That respondents cease and desist from disseminating or causing the dissemination of any advertisement for the purpose of inducing or which is likely to induce, directly or indirectly, the purchase of the " Simeon " or "Simeons" treatment for weight reduction (where such advertisement is disseminated by means of the United States mail, or by any means in or affecting or having an HERTZ CORP. 129 1239 Order IN THE MATIER Of HERTZ CORPORATION Doket 9033. Orfkr, Aprl, 1976 In an FOIA proceeding, members of General Counsel's staff permitted immediately to examine and copy pages 15.20 of complaint counsel's expanded statement of facts and to examine contracts upon which the statement is based. Appearames For the Commission: Thomas F. McNerrwy. For the respondent: Schnader, Hamson, Segal & Lewis Philadelphia, Pa.

ORDER The General Counsel has represented to the Commission that a suit has been filed by Patricia Kennedy pursuant to the Freedom of Information Act to enjoin the Commission from withholding pages 15- 20 of the Complaint Counsel's Expanded Statement of Facts in this matter, which pages have been removed from the public record pursuant to a protective order dated November 7 , 1975, issued by Administrative Law Judge Miles J. Brown. The General Counsel's Office requires access to this Expanded Statement of Facts and to the contracts upon which it is based in order to adequately describe the Statement to the District Court, to defend the action, and to respond, if necessary, to interrogatories issued by plaintiffs. The General Counsel's Office also needs to copy the Statement in the event the District Court requires its in camera submission. It is ordered That members of the General Counsel's staff be immediately permitted to examine and copy pages 15-20 of the Complaint Counsel's Expanded Statement of Facts in Dkt. No. 9033 and to examine the contracts upon which this statement is based. , .

Order 87 F.