Estee Corporation

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IN THE MATTER OF ESTEE CORPORATION CONSENT ORDER, ETC., IN REGARD TO ALLEGED VIOLATION OF SECS. 5 AND 12 OF THE FEDERAL TRADE COMMISSION ACT Docket C-3126. Complaint, Nov. 16, 1983-Decision, Nov. , 1983 This coilsent order requires a Parsippany, N.J. manufacturer and marketer of healthrelated food products, among other things. to cease representing that any of its products have been accepted or recommended for use by diabetics or persons with hypoglycemia unless the identity of the endorser and the material qualifications or limitations placed on the endorsement are disclosed. If the company promotes a food as being appropriate for diabetics, it is required to disclose that the product is "not a reduced calorie food" in advertising and on package labels pursuant to FDA regulations. Representations that a foo wil or wil not affect blood sugar levels, or that it has any health-related property for diabetics or hypoglycemics must be substantiated. Further, the firm is barred from misrepresenting the existence or truthfulness of endorsements; the identity of any sweetener; or that food containing fructose contains no sugar, is reduced in calories and is appropriate for weight control The order additionally requires the company to provide the American Diabetes Association, Inc. or the Juvenile Diabetes Foundation with the sum of $25 000 and to maintain fies substantiating advertlling claims for a period of three years.

Appearances For the Commission: Robert C. Cheek and Joel Winston. For the respondent: Daniel L. Goldberg, Bingham, Dana Gould Boston, Mass.

COMPLAINT Pursuant to the provisions of the Federal Trade Commission Act and by virtue of the authority vested in it by said Act, the Federal Trade Commission, having reason to believe that Estee Corporation (hereinafter "Estee ), hereinafter at times referred to as respondent has violated the provisions of the 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. Estee is a corporation organized, existing and doing business under and by virtue of the laws of the State of New Jersey with its offce and principal place of business located at 169 Lackawanna Avenue, Parsippany, New Jersey.

1804 Complaint PAR. 2. Estee has been and now is engaged in the business of marketing and advertising health-related foods, including but not limited to foods promoted as appropriate for diabetics. PAR. 3. The above-named respondent, in connection with the manufacture and marketing of said foods, has disseminated, published and distributed, and now disseminates, publishes and distributes, advertisements and promotional material for the purpose of promoting the sale of Estee s "special foods." These foods are sweetened with fructose, sorbitol, or high fructose corn syrup. Each of these foods, as advertised, is a "food" within the meaning of Section 12 of the Federal Trade Commission Act.

PAR. 4. In the course and conduct of its said business, respondent has disseminated and caused the dissemination of certain advertisements concerning its special foods through the United States mail and by various means in or affecting commerce, as !(commerce" is defined in the Federal Trade Commission Act, including but not limited to the insertion of advertisements in magazines and newspapers with national circulations, the mailing of promotional booklets entitled "Estee. . . Special Foods For Special Diets" and "The Rationale For Special Dietary Foods Made With Fructose" for the purpose of inducing and which were likely to induce, directly or indirectly, the purchase of Estee s special foods.

PAR. 5. Respondent has, directly or by implication, through the advertisements referred to in Paragraph Four and others, made statements concerning the positions ofthe Food and Drug Administration and American Diabetes Association on the consumption by diabetics of the sweeteners used in Estee s special foods. Typical of the statements in said advertisements, but not necessarily all-inclusive there- , are the following:

The nutritive sweeteners Sorbitol and Fructose have been accepted by the ADA and the FDA as being useful in the diets of diabetics on the advice of a physician. Estee cookies are now sweetened with FRUCTOSE. The use of this all natural sweetener was recently reviewed by the American Diabetes Association. They concluded: Thus, from short-term studies there appears to be no need to restrict intake of Fructose as compared with complex carbohydrates as it relates to changes in plasma glucose levels in diabetes." LEmphasis in originaLl PAR. 6. Through the use of the statements set forth in Paragraph Five and others, in the context in which they appeared, respondent has represented, directly or by implication, that the Food and Drug Administration and the American Diabetes Association each has concluded that the sweeteners in Estee s special foods are useful without significant qualifications in the diabetic s diet. . . . .

Complaint 102 F.

PAR. 7. In truth and in fact, the statements and representations set forth in Paragraphs Five and Six, in the context in which they appeared, were and are false, misleading and deceptive, in that: (a) The Food and Drug Administration has made no conclusions about the usefulness of fructose, sorbitol, or high fructose corn syrup the sweeteners in Estee s special foods-in the diabetic s diet. (b) The American Diabetes Association has made no conclusions about the usefulness of Estee s high fructose corn syrup in the diabetics s diet, and its conclusions (as stated in Olefsky and Crapo, "Fructose, Xylitol, and Sorbitol Diabetes Care Vol. 3, No. 2 (March-April 1980)) about the usefulness offructose and sorbitol contain significant qualifications.

Therefore, neither the Food and Drug Administration nor the American Diabetes Association has concluded that the sweeteners in Estee special foods are useful without significant qualifications in the diabetic s diet. For the foregoing reasons, the advertisements referred to in Paragraphs Four and Five were and are misleading in material respects and constituted, and now constitute, false advertisements. PAR. 8. Respondent has, directly or by implication, through the advertisements referred to in Paragraph Four and others, made statements concerning the dietary qualities of Estee s special foods. Typical of the statements in said advertisements, but not necessarily all-inclusive thereof, are the following:

We know what it's like to live on a diet in a world filed with cookies, candies, and mouthwatering desserts. That' s why we ve created the world's largest assortment of diet treats.. We know you re always looking for ways to satisfy your desire for sweets while stil staying within your diet.

In an advertisement with the heading "LIFE CAN BE SWEET WITHOUT A LOT OF SUGAR" and with an image of Estee s "DIETETIC" coconut cookies prominently pictured:

Fructose is nature s sweetest sugar, commonly found in many fruits and berries. It' s up to 50% sweeter than regular sugar, and it' s even recommended for use by diabetics and hypoglycemics d like you to try our products made without sugar. PAR. 9. Through the use of the statements set forth in Paragraph Eight and others, in the context in which they appeared, respondent has represented, directly or by implication, that: (a) Estee s foods are significantly reduced in calories compared with comparable foods.

(b) Estee s foods are useful or appropriate for weight control. PAR. 10. In truth and in fact:

1804 Complaint (a) Many of Estee s foods are not significantly reduced in calories compared with comparable foods.

(b) Many of Estee s foods are not useful or appropriate for weight control.

Therefore, the advertisements referred to in Paragraphs Four and Eight were and are misleading in material respects and constituted and now constitute, false advertisements, and the statements and representations set forth in Paragraphs Eight and Nine, in the context in which they appeared, were and are false, misleading and deceptive.

PAR. 11. Respondent has, directly or by implication, through the advertisements referred to in Paragraph Four and others, made statements concerning the identity and properties of the sweeteners used in Estee s special foods, and the usefulness or appropriateness of Estee s special foods for diabetics. Typical of the statements in said advertisements, but not necessarily all-inclusive thereof, are the following;

Estee Cookies are sweetened with FRUCTOSE, the natural sweetener that delivers the clean, sweet sugar taste that diabetics and hypoglycemics have always been denied. At Estee, our business is making life a little sweeter for people who can t award a lot of ordinary table sugar (sucrose) in their diets. Instead, we use sorbitol and fructose the slowly absorbed sweeteners that avoid the "highs and lows" of ordinary table sugar. (Emphasis in original.) Here is a special cookie designed for people with diabetes, hypoglycemia and hypertension, who must restrict their intake of ordinary sugar and salt. It' s (fructose) up to 50% sweeter than regular sugar, and it' s even recommended for use by diabetics and hypoglycemics.

d like you to try our products made without sugar. . Meet the newest member of the Estee family of fine products LOW CALORIE AND NO SUGAR FOODS.

PAR. 12. Through the use ofthe statements set forth in Paragraph Eleven and others, in the context in which they appeared, respondent has represented, directly or by implication, that: (a) The sweetener in all of Estee s "fructose -sweetened special foods is fructose.

(b) Estee s special foods, including its "fructose sweetened special foods, do not contain any sugar.

Complaint 102 F.

PAR. 13. In truth and in fact:

(a) The sweetener in certain of Estee s "fructose" -sweetened foods is not fructose, but rather is high fructose corn syrup. (b) Estee s "fructose -sweetened foods contain fructose, which is a sugar, or high fructose corn syrup, which is comprised of sugars. Therefore, the advertisements referred to in Paragraphs Four and Eleven were and are misleading in material respects and constituted and now constitute, false advertisements, and the statements and representations set forth in Paragraphs Eleven and Twelve, in the context in which they appeared, were and are false, misleading and deceptive.

PAR. 14. Through the use of the statements set forth in Paragraph Eleven and others, in the context in which they appeared, respondent has represented, directly or by implication, that Estee s fructose- and sorbitol-sweetened special foods are useful or appropriate for the diabetic s diet.

PAR. 15. At the time of the disseminations of the statements and representations contained in Paragraphs Eleven and Fourteen, respondent did not possess and rely upon a reasonable basis for making such unqualified statements and representations, in that: (a) Estee s fructose- and sorbitol-sweetened special foods should not be eaten in more than limited amounts by any diabetic. (b) Many diabetics are on weight loss or weight control diets, and many ofEstee s fructose- and sorbitol-sweetened special foods are not reduced in calories and therefore are not useful or appropriate for purposes of weight loss or weight control.

(c) Estee s fructose- and sorbitol-sweetened special foods are not appropriate for diabetics who are untreated or who are out-of-control. Therefore, the making of said statements and representations as alleged constituted, and now constitutes, unfair and deceptive acts or practices in or affecting commerce.

PAR. 16. Through the use of the statements set forth in Paragraph Eleven and others, in the context in which they appeared, respondent has represented, directly or by implication, that: (a) the sweetener in Estee s cookies and other high fructose corn syrup-sweetened special foods has the same characteristics as fructose, including its effects on diabetics' blood sugar levels. (b) Estee s cookies and other high fructose corn syrup-sweetened special foods are useful or appropriate for the diabetic s diet and wil not cause undesirable elevations of diabetics' blood sugar levels. PAR. 17. At the time of the disseminations of the statements and 1804 Decision and Order representations contained in Paragraphs Eleven and Sixteen respondent did not possess and rely upon a reasonable basis for making such statements and representations. Therefore, the making of said statements and representations as alleged constituted, and now constitutes, unfair and deceptive acts or practices in or affecting commerce.

PAR. 18. In the course and conduct of its aforesaid business and at all times mentioned herein, respondent has been, and now is, in substantial competition in or affecting commerce with corporations, firms and individuals engaged in the food industry. PAR. 19. The use by respondent of the aforesaid unfair and deceptive representations and the dissemination of the aforesaid false advertisements has had, and now has, the capacity and tendency to mislead members of the consuming public into the erroneous and mistaken belief that said representations were and are true. PAR. 20. The aforesaid acts and practices of respondent, as herein alleged, including the dissemination of the aforesaid false advertisements, were and are all to the prejudice and injury of the public and of respondent's competitors, and constituted, and now constitute, unfair methods of competition in or affecting commerce, and unfair and deceptive acts or practices in or affecting commerce, in violation of Sections 5 and 12 of the Federal Trade Commission Act. DECISION AND ORDER The Federal Trade Commission having initiated an investigation of certain acts and practices of the respondent named in the caption hereof, and the respondent having been furnished thereafter with a copy ofa draft of complaint which the Bureau of Consumer Protection proposed to present to the Commission for its consideration and which, if issued by the Commission, would charge respondent with violation of the Federal Trade Commission Act; and The respondent, its attorney, and counsel for the Commission having thereafter executed an agreement containing a consent order, an admission by the respondent of all the jurisdictional facts set forth in the aforesaid draft of complaint, a statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by respondent that the law has been violated as alleged in such complaint, and waivers and other provisions as required by the Commission s Rules; and The Commission having thereafter considered the matter and having determined that it had reason to believe that the respondent has violated the said Act, and that complaint should issue stating its charges in that respect, and having thereupon accepted the executed Decision and Order 102 F. consent agreement and placed such agreement on the public record for a period of sixty (60) days, now in further conformity with the procedure prescribed in Section 2.34 of its Rules, the Commission hereby issues its complaint, makes the following jurisdictional findings and enters the following order:

1. Respondent Estee Corporation is a corporation organized, existing and doing business under and by virtue of the laws of the State of New Jersey, with its offce and principal place of business located at 169 Lackawanna Avenue, in the City ofParsippany, State of New Jersey.

2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondent, and the proceeding is in the public interest.

ORDER For the purposes of this order, the term foodshall mean and include any article used for food or drink for humans, chewing gum, and any article used for a component of any such article. Any provision ofthis order shall not cover labels or labeling if such provision is inconsistent with regulations of the Food and Drug Administration or with the statutes it enforces. The provisions of this order shall not apply to any label or labeling printed by respondent before the date of service of this order and shipped by respondent to distributors or retailers prior to January 1 1984 or the date of service of this order, whichever is later. It is ordered, That respondent Estee Corporation, a corporation, its successors and assigns, and respondent's offcers, agents, representatives, and employees, directly or through any corporation, subsidiary, division or other device, in connection with the advertising, offering for sale, sale or distribution of any food in or affecting commerce, as commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from:

A. Representing, directly or by implication, that any food is accepted or recommended by an individual or organization other than the advertiser for use by a diabetic or hypoglycemic, unless in immediate conjunction with such representation the following is disclosed with equal prominence:

1. the identity of the individual or organization, and 1805 Decision and drder 2. all material qualifications or material limitations, if any, placed on the acceptance or recommendation by the individual or organization.

B. Failing to clearly and prominently disclose in a non-label advertisement: "This food is not a reduced calorie food " when: 1. respondent makes a representation, directly or by implication, in the advertisement that any food is an appropriate part of a diabetic diet, and 2. a disclosure is required on the label that the food is not a reduced calorie food pursuant to regulations promulgated by the Food and Drug Administration.

Provided That, where more than one food is promoted by a single advertisement, and a label disclosure is required pursuant to regulations promulgated by the Food and Drug Administration for one or more of the advertised foods, this section shall be satisfied if the following statement is clearly and prominently disclosed in the advertising: "Some of these foods are not reduced calorie foods. C. Making any representation, directly or by implication, about the health-related comparabilty of one sweetener to another sweetener unless at the time of dissemination of each such representation respondent possesses and relies on a reasonable basis which substantiates each such representation, consisting of competent and reliable scientific evidence ofthe type and quantum appropriate for the representation made.

D. Representing, directly or by implication, that a food: 1. wil or wil not affect blood sugar levels in any manner, or 2. has any health-related property or quality for diabetics or hypoglycemics, unless at the time of dissemination of each such representation respondent possesses and relies on a reasonable basis which substantiates each such representation, consisting of competent and reliable scientific evidence ofthe type and quantum appropriate for the representation made.

E. Misrepresenting, directly or by implication: 1. the existence or truthfulness of any endorsement or recommendation 2. the identity of any sweetener 3. that any food which contains fructose or high fructose corn syrup does not contain any sugar provided that, this provision shall not prohibit respondent from truthfully representing that a food does not contain Hsucrose " or table sugar. Decision and Order 102 F. 4. that a food is reduced in calories compared to other foods or is appropriate for weight control.

It is further ordered That respondent shall, within twenty-four (24) months after the date of service of this order, provide the aggregate sum of $25 000 to the American Diabetes Association, Inc. or the Juvenile Diabetes Foundation. Said funds shall be designated as "for the purposes of research into dietary management of diabetes, providedthat if any of such funds are not used by the recipient organization(s) for said purposes, such funds shall revert to the general research funds of the organization(s).

It is further ordered, That respondent shall forthwith distribute a copy of this order to each of its operating divisions. It is further ordered That respondent notify the Commission at least thirty (30) days prior to any proposed change in its corporate structure such as dissolution, assignment or sale resulting in the emergence of a successor corporation, the creation or dissolution of subsidiaries or any other change in the corporation which may affect compliance obligations arising out of the order. It is further ordered, That respondent shall maintain fies and records of all substantiation for claims made under Parts IC and ID ofthis order for a period of three (3) years after the dissemination of any advertisement containing such claim. Additionally, such material shall be made available to the Federal Trade Commission or its staff within fifteen (15) days of a written demand for such material. It is further ordered That respondent shall, within sixty (60) days after the date of service of this order, fie with the Commission a report, in writing, setting forth in detail the manner and form of its compliance with this order.

1813 Modfying Order