In the Matter of the Complaint Against

HANOVER HOUSE at
Hanover, Pennsylvania 17331 and
ROMAR SALES CORP.
227 East 45th Street at
New York, New York 10017

P.S. Docket No. 2/143; P.S. Docket No. 2/149;

APPEARANCES:

Thomas A. Ziebarth, Esq.
Law Department
United States Postal Service
Washington, D.C. 20260
for Complainant

Jerold W. Dorfman, Esq.
Friend and Dorfman
747 Third Avenue
New York, New York 10017
for Respondents

POSTAL SERVICE DECISION

The subject cases are before the undersigned on appeal from an Initial Decision to which each party takes partial exception. These proceedings arose out of Complaints filed by the General Counsel of the Postal Service charging that the Respondents were in violation of 39 United States Code § 3005 in that certain advertising related to the sale thorough the United States mail of the product "Hungrex" contained materially false representations. The two cases were consolidated on motion of Respondents and the Initial Decision by Chief Administrative Law Judge William A. Duvall upheld one substantially similar charge in each complaint and found the evidence insufficient to uphold the remaining charges.

"Hungrex" is the trade name for a nonprescription appetite depressant pill distributed by the Alleghany Pharmacal Corporation. Each tablet contains 25 milligrams (mg) of Phenylpropanolamine Hydrochloride which is also referred to as "P.P.A.". "Hungrex" advertising has been made the basis of two earlier actions by federal agencies against Alleghany Pharmacal Corporation. In the first of these two actions the Post Office Department, in 1957, instituted proceedings (In re Fisk, H.E. Docket No. 5/67; In re Alleghany, H.E. Docket No. 5/68) seeking a mail stop order for alleged violation of 39 U.S.C. § 4005, the predecessor statute to the current false representation statute, differing from it however in that it required proof of fraudulent intent in addition to material falsity of the representation. That proceeding was terminated when an Affidavit of Agreement was executed in July 1957 wherein Alleghany Pharmacal agreed to refrain from making the representations therein complained of and further agreed to other advertising claim restrictions set forth in the Affidavit of Agreement. The procedure for handling an alleged breach of the Affidavit of Agreement was also spelled out. The present action is not based upon a breach of that Agreement nor is a breach of the Agreement alleged.

The second action was before the Federal Trade Commission (FTC) in June 1958 (Docket No. 7176) relating to advertising representations that the product was safe to use for all obese persons and promising specific weight losses within specific time frames. In September of 1958 a Consent Agreement was entered into, based upon which a cease and desist order was then issued in November 1958, and new advertising, substantially similar to that now in issue was submitted by Alleghany Pharmacal to the FTC as part of a 1959 report showing compliance with the cease and desist order, and accepted as such by the FTC. ^1/ In 1965 the FTC reopened the earlier proceeding on the basis of the decision of the United States District Court for the District of New Jersey in The United States of America v. 60 28-Capsule Bottles, More or Less, of an article of drug labeled in part: "--Unitrol * * *", 211 F.2d 513 (1963), an action brought under 21 USC § 301 et seq. of the federal Food, Drug and Cosmetic Act, for misbranding, wherein the Court held that P.P.A. had no significant pharmacological value as a weight-reducing agent. After detailed findings of fact the Hearing Examiner recommended dismissal of the FTC complaint, concluding that the Complainant had not carried the burden of proof on the three allegations in issue; namely that:

"1. HUNGREX * * * with P.P.A. is not safe to use by all obese persons having heart disease, high blood pressure, diabetes, or thyroid disease;

2. The preparation has no significant pharmacological value as an appetite depressant or weight-reducing agent;

3. The preparation is not adequate or effective in the treatment, control or management of obesity."

The basis for his recommendation that the first allegation be dismissed was that the advertising claim regarding safe use for all obese persons was not proven to have been made since the advertisement in evidence did not contain any such claim and the label on the product contained a caution that it should not be used by persons with heart or thyroid disease, high blood pressure or diabetes except on medical advice. ^2/ The basis for his recommendation of dismissal of the other two allegations rested in large part upon his finding that the Complainant relied "wholely (sic) on the Fazekas report" ^3/ which he concluded, based on his earlier findings in the reopened proceeding, contained errors, misstatements and inaccuracies detracting from its reliability. The final order of the Federal Trade Commission, issued in June 1969, is brief. It recites the reopening of the proceedings, the referral to the hearing examiner, his certification of the record to the Commission in March 1967 and concludes:

"The Commission having determined, without expressing any opinion as to the accuracy of the findings and conclusions in the Certification of Record, that it would not be in the public interest to pursue this matter further:

It is ordered, That the amended complaint issued on November 15, 1965, be dismissed as to all respondents without prejudice to the right of the Commission to take such further action in the future as may appear to be appropriate.

It is further ordered, That the order to cease and desist issued by the Commission November 7, 1958 remain in effect as to all respondents named therein."

The Postal Service Complaints in the instant proceedings were filed in October 1973. The first charge in each Complaint is the only charge upheld in the Initial Decision. While basically similar the language of this charge differed slightly in each Complaint. In the Hanover Complaint it is that "Hungrex" tablets "help the user to start losing weight the first day" and in the Romar Complaint that the tablets "will cause the user to lose weight the first day". This charge was upheld as a materially false representation on the basis that it conveyed the meaning that at least one pound would be lost the first day and the evidence showed that to be untrue. Respondents object to this as going beyond the meaning of the advertisement and the allegations of the Complaint and as precluded by the previous action taken by the FTC. ^4/ The Initial Decision found insufficient evidence to establish the material falsity of the remaining charges; namely, that the use of "Hungrex" tablets "will banish hunger pains", ^5/ that the use of "Hungrex" tablets "will cause calorie intake to go down," that "Hungrex is the most powerful reducing aid ever released for public use without prescription" and that "Hungrex has been proved safe by laboratory tests to effectively reduce excess food craving." ^6/Complainant objects to the Initial Decision's conclusion regarding insufficiency of the evidence contending that an improper evidentiary standard was employed and also to the evaluation of the expert witness' testimony. With respect to whether the Chief Administrative Law Judge applied an erroneous evidentiary standard, Complainant acknowledges that the conclusion at page 51 of the Initial Decision ^7/ "might be read that he considered the evidence to be a standoff", but contends that earlier statements in the decision reveal that this is not the case. The earlier statements relied upon by Complainant are the references at pages 42 and 43 of the Initial Decision to American School of Magnetic Healing v. McAnnulty, 187 U.S. 94 (1902), and Reilly v. Pinkus, 338 U.S. 269 (1949). Complainant contends that such references "suggest that the trial judge felt that the presentation of any contrary scientific opinion by respondents automatically precludes a finding of misrepresentation" and that the Chief Administrative Law Judge thereby imposed the evidentiary standard of "universality of medical opinion" which it contends is inapplicable since the amendment of the false representation statute in 1968 removed proof of intent to deceive as a necessary element for violation of the statute. ^8/ Respondents' Reply Brief does not take issue with Complainant's reasoning but rather maintains that the Chief Administrative Law Judge did not hold Complainant to the standard of "universality of medical opinion".

In the McAnnulty case the Postmaster General had forbidden use of the mails upon finding as a fact that the American School of Magnetic Healing was guilty of fraud in obtaining money by representations that "the mind of the human race is largely responsible for its ills, . . . and that the human race does possess the innate power, through proper exercise of the faculty of the brain and mind, to largely control and remedy the ills that humanity is heir to . . . ." The Supreme Court set aside the fraud order pointing out that there were two widely held schools of opinion as to whether the mind could affect bodily diseases, and that scientific knowledge had not advanced to the point where actual intent to deceive could be attributed to one who held either opinion. See also Reilly v. Pinkus at page 273. The Reilly case rejected the view that any conflict of medical opinion would suffice. In setting aside the fraud order in that case because of the denial of a right to cross-examine the government's medical witnesses regarding statements in medical texts the Court placed emphasis upon the importance of the opportunity to lessen the inference of intent to deceive, essential under the then existing statute, by showing that the scientific belief was less universal than the witness had first testified. 338 U.S. 269 at 276. As previously stated, under the 1968 amendment to the statute the element of intent to deceive is no longer necessary it being sufficient to establish that the complained of representation was in fact made and that it is materially false.

Complainant's exception must be disallowed because the Initial Decision does not hold Complainant to the strict evidentiary test of "universality of medical opinion". The inability of the Chief Administrative Law Judge to find that the record established the falsity of the representations was quite obviously based upon his thorough consideration of the extensive expert testimony on both sides of the question. His references to McAnnulty and Reilly must be read in this light. After reviewing in detail the expert testimony, he concluded:

"The foregoing points are mentioned to show that there are competent, qualified men of medicine and other sciences whose opinions on some of the crucial questions involved in this case are diametrically opposed to the opinions of another group of competent, qualified experts. Support for each group's views can be found in the evidence and there are discoverable, also, weaknesses in the positions of the adherents to both sides of the controversy. The result of this situation is that the question of the efficacy of PPA, in the quantity in which it appears in Respondent's product, when taken as directed as an aid to achieving a loss of weight, is a question that has not been satisfactorily resolved. In part, the matter is, insofar as this record shows, still a question that has not been 'reduced to one of fact as distinguished from mere opinion'. American School of Magnetic Healing v. McAnnulty, 187 U.S. 94, 106 (1902). On the other hand, the record in regard to certain aspects of this case does not present the situation in which 'medical witnesses can be produced who blindly adhere to a curative technique thoroughly discredited by reliable scientific experiments.' Reilly v. Pinkus, 338 U.S. 269, 274 (1949).

What are presented concerning portions of this case are questions upon which experts differ -- and widely differ."

Thus his conclusion that "the state of medical and scientific opinion as reflected in this record is so divided as to preclude a determination that Complainant sustained its burden of proof" with respect to these charges is most consistent with the interpretation that he considered the evidence a standoff. The quotations from the two Supreme Court cases I take as intended to be no more than statements of fact, applicable to the fact situation in the instant case as detailed in the findings of fact. Consideration of Complainant's further exceptions to some of these findings of fact, next taken up, will further serve to illustrate the point.

Complainant's exceptions to the findings of fact center upon its disagreement that there was a substantial divergence of expert opinion on the basic factual issues in the case. Its argument centers principally around the testimony of its witnesses as to the limited usefulness of amphetamines in weight reduction programs and the validity, contested by Respondents' experts, of drawing comparisons to Phenylpropanolamine. The testimony goes largely to the quantitative, rather than qualitative aspects of the use of P.P.A. While the misrepresentation charges do not involve claims of specific weight losses within prescribed periods of time, the testimony is relevant to the efficacy of the product in terms of whether it would produce any significant weight losses over any period of time. The problem confronting the Chief Administrative Law Judge was that Respondents' expert testimony, by no means minimal, had also to be given proper weight and the thrust of that evidence indicates weight losses attributable to the product which are not insignificant.

Complainant has made the most cogent arguments it could have on appeal, given the state of the evidence in this record, and its bearing upon the particular charges in the Complaints. Its case is not, as Respondents urge, "without a scintilla of evidence", and I think Judge Duvall's findings make that perfectly clear. But neither is it so persuasive as to require the finding that it is supported by a preponderance of the evidence. I have thoroughly reviewed the testimony and exhibits in the light of the arguments and see no reason to disturb Judge Duvall's evaluation of the evidence and ultimate conclusion that Complainant has not carried its burden of proof on the charges found wanting. Therefore its exceptions are disallowed.

Respondents appeal from the conclusion upholding the charge of material falsity as to the representation that "Hungrex will help the user to start losing weight the first day" (Hanover advertisement) and "will cause the user to lose weight the first day" (Romar advertisement), urging a variety of arguments for reversal of the holding. One will suffice, however. The holding was based upon the conclusion that the representation implied the loss of at least one pound the first day. This in turn was based upon the testimony of one of Complainant's medical witnesses that to be significant the loss would have to be at least one pound. I consider the connection too tenuous to uphold the charge of material falsity here. While the record is clear that a weight loss of one pound the first day will not be achieved it also contains evidence (Respondents' Exhibits 26, 27) of weight losses of one-half pound the first day and in fact the totality of the evidence supports the conclusion that the largest losses will occur at the inception of taking the product. With all due respect to the testimony of the witness I do not think it sufficient to translate the wording of the advertisement into a promise of "at least one pound the first day." Accordingly, Respondents' exception is allowed and the Complaints are dismissed.

12/05/75

Lussier, Edward F.

____________________

1/ See Finding of Fact 5 In the Matter of Alleghany Pharmacal Corp. et al, 75 FTC 990 at 996.

2/ Findings of Fact 69, 75 FTC 990 at 1032. In the instant case the Hanover advertisement contains wording that the product is "Proved safe by laboratory tests to effectively reduce excess food craving . . . calorie intake goes down, so does your weight". The label on the product introduced in evidence as Complainant's Exhibit 3 contains the same caution mentioned above.

3/ It is apparent from a reading of the District Court decision in the Unitrol case referred to above that the "Fazekas" study was also relied upon by the Court in reaching its decision upholding the FDA charges of misbranding.

4/ Respondents' res judicata and collateral estoppel contention presents a complex question in light of the peculiar circumstances of this case. While normally a threshold issue it is not here decided since the merits of the substantive issues on appeal, based upon the findings of the Chief Administrative Law Judge, clearly require the result reached herein.

5/ The Romar Complaint adds the words "by limiting the ability of the body to produce hunger sensations."

6/ This last charge is applicable only to the Hanover Complaint.

7/ "* * * the state of medical and scientific opinion as reflected in this record is so divided as to preclude a determination that Complainant sustained its burden of proof * * * "

8/ See Lynch v. Blount, 330 F.Supp. 689 (1971), aff'd 404 U.S. 1007 upholding the amendment.