Brog, Roy

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

IN THE MATTER OF ROY BROG CONSENT ORDER, ETC. , IN REGARD TO ALLEGED VIOLATION OF SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT Docket 9197. Complaint, Sept. 10, 1985-Decision, July, 1986 This consent order requires a former chief executive offcer of a Salt Lake City, Utah manufacturer and distributor ofa dry milk substitute, among other things, to cease making any representations concerning the health benefits or expected shelf life for "Meadow Fresh White, a powdered, dairy-based milk substitute, or other food products, without reliable and competent substantiation. Also, respondent is prohibited from excluding some distributors in computing "average" distributor earnings without proper disclosures concerning the method of computation. Appearances For the Commission: Lawrence M. Hodapp. For the respondents: H. Harris and Joseph M. Chambers, Harris Preston, Gutke Chambers Logan, Utah.

COMPLAINT The Federal Trade Commission, having reason to believe that Roy Brog, individually and as an offcer and director of Meadow Fresh Farms, Inc., ("respondent") has violated the provisions ofthe Federal Trade Commission Act, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest alleges:

PARAGRAPH 1. Respondent Roy Brog is an offcer and director of Meadow Fresh Farms, Inc. He formulates, directs and controls the acts and practices of said corporation, including the acts and practices alleged in this complaint. His principal offce or place of business is in Salt Lake City, Utah.

PAR. 2. Respondent manufactures, offers for sale, and sells food products, including Meadow Fresh, a powdered, dairy-based drink through a multilevel business opportunity. PAR. 3. Respondent has caused to be prepared, published and disseminated advertising and promotional material, including, but not limited to, the promotional material referred to herein, to promote the sale of Meadow Fresh and membership in a multilevel business opportunity.

Complaint PAR. 4. The acts and practices of respondent alleged in this complaint have been in or affecting commerce. PAR. 5. In the course and conduct of his business, respondent has disseminated and caused the dissemination of advertisements and promotional material for food products, including Meadow Fresh, and for a multilevel business opportunity involving the sale of such food products, by various means in or affecting commerce, for the purpose of inducing and which were likely to induce, directly or indirectly, the purchase of said products and business opportunities. PAR. 6. Typical statements in said advertisements and promotional materials, disseminated as previously described, but not necessarily inclusive thereof, are the following:

(A) Contains over twenty times less "XQ"* than the whole version of the other product.

XQ" is xanthine oxidase, a major contributor to cardivascular problems. (B) Meadow Fresh has an expected dry shelf life of 5 to 10 years. PAR. 7. Through the use ofthe statements referred to in Paragraphs Six (A) through Six (B), and other statements contained in other advertisements and promotional materials not specifically set forth herein, respondent has represented, directly or by implication, that: (A) The use of Meadow Fresh instead of milk wil reduce the incidence of cardiovascular disease due to reduced levels of xanthine oxidase.

(B) Xanthine oxidase is a major contributor to cardiovascular problems.

(C) Meadow Fresh has an expected storage life of up to 10 years under reasonable storage conditions.

PAR. 8. Through the use of the statements referred to in Paragraph Six (A) through Six (B), and other statements contained in other advertisements and promotional materials not specifically set forth herein, respondent has represented, directly or by implication, that at the time of initial dissemination of the statements and of each subsequent dissemination, he possessed and relied upon a reasonable basis for the representations set forth in Paragraphs Seven (A) through Seven (C).

PAR. 9. In truth and in fact, at no time has respondent possessed and relied upon a reasonable basis for making the representations set forth in Paragraphs Seven (A) through Seven (C). Therefore, respondent's representation as set forth in Paragraph Eight was, and is, false and misleading.

PAR. 10. In the course and conduct of his business, respondent has disseminated, as previously described, promotional flpcharts upon . . .

Complaint 108 F.

which the current average monthly income of each level in the distributor hierarchy is to be entered. (A copy ofthis flipchart is attached to this complaint as Exhibit These flipcharts are headed "CUR- RENT AVERAGE INCOMES FOR EACH BONUS LEVEL" and contain blanks following the terms "ADVISOR. . .; COORDINATOR ; MANAGER. . .; AMBASSADOR. . ." for income figures to be entered. These flipcharts have represented, and now represent, directly or by implication, that the income figures shown thereon reflect an average which is computed by taking into account the total number of distributors who have advanced to the specified bonus level and the amount of money earned by each of them during the month in question.

PAR. 11. In truth and in fact, the income figures shown on the flipcharts do not reflect an average which is computed by taking into account the total number of distributors who have advanced to the specified bonus level and the amount of money earned by each ofthem during the month in question. Respondent provides distributors with monthly income figures for use on the flipchart which are computed by taking into account only those distributors who earn some income during the month in question, and the total amount of money earned by them. Because the large majority of distributors earn no income during a given month, this manner of computation results in average income figures which are substantially larger than would be the case if the figures were computed by the method set forth in Paragraph Ten. Therefore, respondent' s representation as set forth in Paragraph Ten was, and is, false and misleading.

PAR. 12. The acts or practices of respondent as alleged in this complaint constitute unfair or deceptive acts or practices in or affecting commerce in violation of Section 5 of the Federal Trade Commission Act.

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Decision and Order 108 F. DECISION AND ORDER The Federal Trade Commission having issued its complaint charging Roy Brog ("respondent" ) with violation of Section 5 of the Federal Trade Commission Act, and the respondent having been served with a copy ofthat complaint, together with a notice of contemplated relief; and The respondent, his 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 com plant, 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 Secretary ofthe Commission having thereafter withdrawn this matter from adjudication in accordance with Section 3.25(c) of its Rules; and The Commission having considered the matter and having thereupon accepted the executed consent agreement and placed such agreement on the public record for a period of sixty (60) days, now in further conformity with the procedure prescribed in Section 3.25(D of its Rules, the Commission hereby makes the following jurisdictional findings and enters the following order:

1. Respondent Roy Brog is a former offcer and director of Meadow Fresh Farms, Inc. His address is 1320 East 2300 North, Logan, Utah. 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 It is ordered That respondent Roy Brog, individually and as a former offcer and director of Meadow Fresh Farms, Inc., and respondent' s agents, representatives, and employees, directly or through any corporation, subsidiary, division or other device, in connection with the manufacturing, advertising, offering for sale, sale, or distribution of a powdered, dairy-based drink called "Meadow Fresh" or any other food product in or affecting commerce, as !Icommerce is defined in the Federal Trade Commission Act, do forthwith cease and desist from representing, directly or by implication, unless at the Decision and Order time of such representation respondent possesses and relies upon reliable and competent scientific evidence that substantiates any such representation: (a) any benefit in preventing cardiovascular or other disease through the use of such product; (b) any nutritional or other health related attribute of such product; or (c) any expected shelf life of such product.

Reliable and competent shall mean for purposes of this order those tests, analyses, research, studies, or other evidence conducted and evaluated in an objective manner by persons qualified to do so, using procedures generally accepted in the profession or science to yield accurate and reliable results.

II.

It is further ordered That respondent Roy Brog, individually and as a former offcer and director of Meadow Fresh Farms, Inc., and respondent's agents, representatives and employees, directly or through any corporation, subsidiary, division or other device, in connection with the manufacturing, advertising, offering for sale, sale or distribution of any product or service in or affecting commerce, as t!commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from representing as an Haverage " directly or by implication, any computation of income levels, earnings, sales or other payments received by distributors as a whole or by a specified distributor category which is based on less than all distributors in the stated category, unless the fact that some distributors are excluded and the basis for any such exclusion are clearly and prominently disclosed in close proximity to such representation. Distributor as used in this order shall refer to any person, partnership or corporation which is granted the right to offer, sell or distribute goods or services manufactured, processed, distributed, offered or sold by respondent or to recruit other persons, partnerships or corporations to be distributors of respondent' s goods or services. It is further ordered That respondent shall, for at least three years after the date the representation is last disseminated, maintain and upon request make available to the Federal Trade Commission for inspection and copying copies of:

1. All materials relied upon to substantiate any representation covered by this order; and 2. All test reports, studies, surveys, or demonstrations in his posses- Decision and Order 108 F. sion or control, or of which he has knowledge, that contradict any representation covered by this order.

IV.

It is further ordered, That respondent shall promptly notify the Commission of the discontinuance of his present business or employment and that, for a period of four years from the date of service of this order, respondent shall promptly notify the Commission of each affliation with a new business or employment, with each such notice to 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 well as a description of respondent's duties and responsibilities in connection with the business or employment. It is further ordered That respondent shall forthwith distribute a copy of this order to all distributors of products manufactured or marketed by respondent.

VI.

It is further ordered That respondent shall, within sixty (60) days after service of this order, fie with the Commission a report, in a writing, setting forth in detail the manner and form in which he has complied with this order.

, , AMERICAN ACADEMY OF OPTOMETRY, INC.

Complaint