American Home Products Corporation

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IN THE MATIER OF AMERICAN HOME PRODUCTS CORPORATION, ET AL. Docket 8918. Interlocutory Order, Jan. , 1982 ORDER DENYING PETITION FOR RECONSIDERATION Respondent American Home Products Corporation ("AHP") has requested Commission reconsideration of its opinion and final order in this matter, pursuant to Rule 3.55 of the Commission s Rules of Practice. Rule 3.55 reads, in relevant part, that any request for reconsideration "must be confined to new questions rajsed by the decision or final order and upon which the petitioner had no opportunity to argue before the Commission. Respondent argues that reconsideration should be granted because it was not given an opportunity to address the "substantial question theory which it alleges was the basis for the substantiation and disclosure requirements in the final order. It notes that the Commission decided the so-called "substantial question" allegations of the complaint on deception grounds, and argues that it could not have anticipated such a result given that the Administrative Law Judge relied on a theory of unfairness in resolving these allegations against respondent. AHP also challenges the basis for the Commission s conclusion that consumers were deceived by AHP's failure to disclose the existence of a substantial question in the scientificmedical community. AHP argues that the conclusion rests on assumptions regarding consumer beliefs about the level of proof for its comparative superiority claims for Anacin that were not in issue below and are unsupported by the record of this proceeding. Finally, AHP argues that it is especially important for the Commission to consider anew its decision in this matter not only because of the allegedly "new" question of consumer beliefs, but because the composition of the Commission has changed since the opinion and final order were issued on September 9, 1981. We believe that granting respondent' s request for reconsideration would be inappropriate. The complaint made it clear that the alleged failure to disclose the existence of a substantial question about AHP' s comparative superiority claims, if proven, was an unfair or deceptive practice in violation of Section 5 of the FTC Act. (Comp. 12- , 25, 27). Thus, AHP was placed on notice from the very beginning that there was a "substantial question" issue which might be decided on the basis of a finding of deception. Further, as the record clearly demonstrates and as complaint counsel point out Answer to Motion at 2- , Respondent AHP has vigorously litigated Interlocutory Order 99 F. and argued the merits of the "substantial question " allegations of the complaint throughout this proceeding before the Commission. Respondent' s assertion that it was denied notice and opportunity to address the "substantial question " theory as such is thus without merit. (See also C.Op. at 36-38).

In addition, AHP's charge that the differing lcgal theories of the Initial Decision and the Commission s Opinion on the "substantial question" issue constitute grounds for reconsideration-because it could not have anticipated that the Commission would depart from the approach taken by the ALJ-is also unfounded. The allegations of the complaint, and not the theory of the Initial Decision, sct the bounds for decision by the Commission. In this case, as we have noted, the complaint alleged that AHP' s failure to disclose the existence of a substantial question was deceptive or unfair. Contrary to what respondent's argument seems to imply, the mere fact that the ALJ's decision was based on an unfairness theory obviously could not have operated to erase the pleaded theory of deception from the case, or otherwise limit or foreclose the Commission s ability to decide the case on that ground. In any event, the distinction between the theories adopted by the Commission and the ALJ was not as dramatic as AHP implies. Both the ALJ and the Commission focused on the untrue implication in AHP's advertisements, absent disclosure of the existence of a substantial question, that it had a reasonable basis for the comparative claims made for its products. That the ALJ couched his conclusion in terms of unfairness rather than deception is, in the context of this case, a difference more of form than of substance.

We also reject respondent's contention that the question of consumer belief, which underlies its motion for reconsideration, was not an issue in the trial or could not have been anticipated by respondent to be an element of the Commission s decision. Again, we refer to the complaint. Paragraph 14 of the complaint alleged that in light of the comparative superiority claims allegedly made by AHP the existence of such a substantial question is a material fact which, if known to consumers, would be likely to affect their consideration of whether or not to purchase such products. " This count clearly implied an allegation that consumers may reasonably believe that unqualified comparative superiority claims signaled the absence of any substantial question about them in the scientificmedical community. From the outset, therefore, the nature of reasonable consumer beliefs about the level of support for these claims in the scientific-medical community was in issue. Furthermore, the question of reasonable consumer beliefs re- 301 Separate Statement mained very much in issue throughout this litigation. Respondent had abundant opportunity both to challenge the legal argument that extrinsic evidence of consumer beliefs was not essential to a finding of deception under complaint counsel's " substantial question " theory, and to offer such evidence of its own to demonstrate that contrary to the allegations of the complaint and the Commission conclusion, consumers would not reasonably believe that AHP' comparative superiority claims. were established beyond substantial question in the scientific-medical commun:iy. Finally, we believe respondent's view that the "new" Commission should have an opportunity to consider this case is improperly raised in the context of a motion for reconsideration under Rule 3. , which speaks solely in terms of new questions and not new Commissions. For lack of a majority, it is ordered that respondent AHP's motion for reconsideration and accompanying application for oral argument on its motion ' filed October 30 1981, are hereby denied. Chairman Miller and Commissioner Clanton favor reconsideration. See their attached separate statements. SEPARATE STATEMENT OF CHAIRMAN .JAMES C. MILLER III I agree with the views expressed by Commissioner Clanton in his separate statement. Given the posture of this case, I too think it would be wise for the Commission to stay, or reconsider, its order pending resolution of Bristol-Myers Company, No. 8917 and Sterling Drug, Inc. No. 8919, the other two analgesic cases that are before the Commission. Such action would give the Commission the opportunity to modify its order in AHP if necessary, and thereby ensure consistency with respect to the similar issues raised in all three cases.

SEPARATE STATEMENT OF COMMISSIONER DAVID A. CLANTON Respondent argues that the Commission majority s treatment of \ The Commission s ruling W3S based on the capacity of the unqualified Ildvertising claims in qu..stion to deceive reasonable consumers, and then-fore rested upon evid,'nce tending to show how the advertising coold reasonably have been interpreted by consum..rs, 3S well as upon th,' evidence of actual deception that is in the record. See C.Op at 29-32. While the evid..nce of actual deception, or countervailing evidence so gesting th..t consum.'rs, in fact had notb.."n misled mi"hthave been relevant, it was not dispositive of the issue. 2 In this application, respondent argues for the first time in conn,'clion with its motion for reconsideration thllt the Commission may want to reconsider its opinion and order in this matter in order to consider "nd possibly avoid potential conflict between its decision in this case and two other pending Ilnalgesics cases Bristol-Meyers Co. Doket No. 8917 and StalinK Drug, Inc. Docket No. 8919. The Commission was fully Ilware of the possible interrelationship between those cases and this One when it decided to if;sue its opinion and order in this matter. AHP' Concern that after all thes.' ""s"share decided itcoo!d be the only one of the three comp8niesop!rating under the kind oford,'r issof'd in this case rests at present on sheerspecu!..tion Should the situation th"tAPI! fears be the end r..solt of th..se proceedings, AHP may, of course, pursue whatever r..lief it believes is warnrntf'd through the reopening procedures of 16 C.F.R. :).72 Separate Statement 99 F. the substantial question issue in its opinion of September 9, 1981 raises a new question warranting reconsideration under Rule 3.55. I dissented from the majority position on the substantial question issue, but I do not believe that respondent's motion satisfies the criteria for further briefing on the matter. I do believe, however, that the Commission should preserve the option of reviewing the case at the time it resolves the appeals of the other analgesics proceedings (Bristol-Myers Company, No. 8917, and Sterling Drug, Inc. No. 8919). The three analgesics cases, at least in part, raise similar issues. It is conceivable that the opinion and order in American Home Products will require some modification to ensure that the company and its competitors are treated equally. Consequently, I think that, purely as an exercise of its discretion the Commission should have either stayed the order against American Home Products or voted to reconsider the case pending resolution of the other analgesics appeals. 305 Complaint