In the Matter of the Complaint Against

HAUSER, INC. HAUSER INTERNATIONAL, INC.
3198 J Airport Loop Drive at
Costa Mesa, CA 92626

P.S. Docket No. 7/77;

Cohen, James A.

APPEARANCE FOR COMPLAINANT:
DanielS. Greenberg, Esq.
Consumer Protection Division
Law Department
475 L'Enfant Plaza West
SW Washington, D.C. 20260

APPEARANCE FOR RESPONDENT:
Donald Segretti, Esq.
4910 Birch Street,
Suite 200
Newport Beach, CA 92660

POSTAL SERVICE DECISION

Respondent has appealed from the Initial Decision of Chief Administrative Law Judge William A. Duvall in which Judge Duvall holds that, with regard to the sale of its products Par-O-Star Hair Energizing Lotion and Par-O-Star Friction, Respondent is engaged in a scheme for obtaining money through the mail by means of false representations in violation of 39 U.S.C. § 3005.

BACKGROUND

On August 10, 1979, the Consumer Protection Division, Law Department United States Postal Service, filed a complaint alleging that Respondent is engaged in conducting a scheme for obtaining money through the mail in violation of 39 U.S.C. § 3005. Paragraph 3 of the complaint states:

"(3) By means of such materials, ^1/ and others similar thereto, Respondent represents, directly or indirectly, in substance and effect, whether by affirmative statements, omissions or implication that:

(a) PAR-O-STAR will stop excessive hair loss, often after the first treatment, with a success rate of over 90%;

(b) PAR-O-STAR will regenerate dormant hair roots and cause hair to grow again with a success rate of over 60%;

(c) PAR-O-STAR is a new scientific breakthrough;

(d) PAR-O-STAR is effective in treating the type of baldness pictured in Respondent's advertisement, i.e., male pattern baldness; and ^2/..."

The complaint further alleges that these representations are materially false.

At the hearing held to take evidence on the allegations made in the complaint some confusion developed withregard to the identification of Respondent's products. One of the advertisements upon which the complaint is based makes reference only to "Par-O-Star" (CX-1). Respondent's counsel stated that Respondent sells several products under the Par-O-Star name (Tr. 62). After discussion of the matter, the presiding Judge ruled that the complaint would be regarded as being limited to Par-O-Star liquid (i.e., Par-O-Star in liquid form a/k/a Par-O-Star Hair Energizing Lotion, CX-4(a)), and Par-O-Star Friction (Tr. 70).

Complainant's only witness, Dr. Gurevitch, was accepted without challenge as an expert in dermatology (Tr. 83). The doctor testified that approximately 60% of all men between the ages of twenty and fifty experience some degree of hair loss and that 95% of that hair loss is attributed to male pattern hair loss (Tr. 90, 131). The doctor stated that "before and after" photographs used in one of Respondent's advertisements (CX-1) depicted a hair loss pattern which is normally associated with male pattern hair loss (Tr. 96, 188). There is no known medicinal treatment for male pattern hair loss (Tr. 91, 111).

Dr. Gurevitch discussed various other types of hair loss whichgenerally occur following stress or trauma and testified that hair noamally will regrow without any treatment in such instances (Tr. 97-104, 115-123, 168-176, 181-182). Some of these types of hair loss can be treated by the use of various medications (Tr. 99, 135, 144).

The doctor expressed the opinion that Respondent's products will not stop excessive hair loss or cause the regrowth of hair regardless of the cause of hair loss (Tr. 104, 112-180). Although he had not tested Respondent's product, Dr. Gurevitch stated that he does not believe that it represents any scientific breakthrough (Tr. 105, 125). Dr. Gurevitch keeps abreast of developments in the field of dermatology and, on the basis of his medical training, teaching, responsibilities, experience, review of the relevant medical literature, and attendance at conferences and meetings, he stated that his testimony represents the consensus of informed medical opinion (Tr. 123, 131, 183, 191).

Notwithstanding the foregoing, the doctor acknowledged that he was not thoroughly familiar with all of the ingredients represented by Respondent's counsel as being contained in Respondent's products and stated that it was conceivable, but improbable, that Respondent's products could have some effect on some types of hair loss (Tr. 167, 178, 180-184).

Respondent presented the testimony of seven lay witnesses. These witnesses testified that they believed that Respondent's product had, for them, either stopped excessive hair loss or facilitated the growth of new hair or both (Tr. 5-71, 194-216). The testimony of Respondent's president was somewhat curtailed because of a ruling by the presiding Judge that he would not receive hearsay testimony concerning various herbs alleged to be included in Respondent's products but identified on the product label only as "extracts of medicinal plants" (Tr. 258-262). However, Dr. Gurevitch was questioned on cross-examination as to his knowledge of several herbs represented by counsel to be ingredients of Par-O-Star Lotion. He stated that he had no knowledge concerning the effect of those herbs on hair disorders (Tr. 160).

At the conclusion of the hearing the Chief Administrative Law Judge rendered an oral decision in which he held that Respondent makes materially false representations with regard to its products and that Respondent is engaged in activities which are in violation of 39 U.S.C. § 3005.

RESPONDENT'S EXCEPTIONS
TO THE INITIAL DECISION

Respondent has taken twelve exceptions to the Findings of Fact and Conclusions of Law contained in the Initial Decision. Each of these exceptions is addressed below.

Exceptions 1 & 7

Respondent argues in its first exception, and a portion of exception 7, that Findings of Fact 2 and 6.g. are in error because the presiding Judge excluded hearsay testimony with regard to the herbal ingredients of Respondent's product. According to Respondent, the list of ingredients found in Finding of Fact 2 is not complete and Finding of Fact 6.g. is in error because

Complainant's expert could not authoritatively state the consensun of medical opinion without knowledge of the contents of the product. Respondent does not challenge the Judge's ruling that the testimony was hearsay but argues that it was relevant and material and, therefore, admissible in an administrative hearing under the rationale of Jacobowitz v. United States, 424 F.2d 555 (Ct. Cl. 1970) and Fairbanks v. Hardin, 429 F.2d 264 (9th Cir. 1970).

In both Jacobowitz and Fairbanks, the Courts concluded that hearsay evidence may be admitted in administrative proceedings. Neither case requires the admission of such evidence. Thus, the cited cases are consistent with the requirements of the Rules of Practice in Proceedings Relative to False Representation and Lottery Orders, 39 CFR § 952 which also do not require the admission of hearsay evidence, but in § 952.18(a) allows its admission "to the extent that the presiding officer deems proper to insure a fair hearing." The presiding officer apparently concluded that the admission of the hearsay evidence was not required in order to assure a fair hearing. Respondent's arguments are not persuasive that the presiding officer erred in reaching this conclusion.

Respondent argues that it only intended to have its witness identify the ingredients not specifically listed on the product label in order to serve as a foundation for questioning the ability of the Postal Service expert to render an informed medical opinion. In this regard Respondent's counsel examined the Postal Service witness concerning his knowledge of various herbs which Respondent's counsel represented were contained in the product. Through such examination Respondent was able to show the witness' lack of knowledge of the effect of the various herbs. Therefore, Respondent suffered no harm as the result of the presiding officer's ruling.

Moreover, the witness' lack of familiarity with the various herbs does not significantly detract from his testimony. Assuming the excluded evidence had been admitted it would not have altered the finding that the expert's testimony represents the consensus of informed medical and scientific opinion. The testimony of a witness need not be based on absolute certainties and is sufficient to serve as a basis for a finding of fact if it constitutes the more reasonable of probabilities. See Michigan Bulb Co., P.S. Docket No. 7/43 (P.S.D. 1979). On the basis of the record, Dr. Gurevitch's testimony persuasivelyestablishes that the consensus of medical opinion is that Respondent's product, and similar products, will not accomplish the results represented. See Standard Research Laboratories, P.S. Docket No. 7/48 (P.S.D. 1980) and Rush Industries, P.S. Docket No. 7/50 (P.S.D. 1980).

Respondent also challenges the testimony of the Postal Service expert witness because he has not performed tests on the product. Absent such tests, Respondent argues, the testimony cannot be accepted as representing the consensus of informed medical opinion. It is well established that a doctor's training and background may provide a sufficient basis for him to give testimony on the efficacy of a product even though he has not tested the product. See Charles of the Ritz v. FTC, 143 F.2d 676, 678-79 (2d. Cir. 1944). Dr. Gurevitch's training and background leave no doubt that he is qualified to testify as to the efficacy of Respondent's product. As previously pointed out, Dr. Gurevitch did testify in some detail as to what had been reported in medical literature and that through this literature, and also through meetings, conferences, and clinics, he keeps abreast of developments in the field. Moreover, as Respondent has acknowledged, Dr. Gurevitch is a well qualified dermatologist who has demonstrated extensive knowledge of the medical state of the art with regard to the successful treatment of various types of hair loss (e.g., Tr. 131-141, 144-151). His testimony is believable and persuasive and properly serves as the basis for the findings of fact and conclusions of law in the Initial Decision. Accordingly, Respondent's Exceptions 1 and 7 do not provide a basis for reversing the Initial Decision.

Exception 2

In its second exception, Respondent challenges the findings of fact in paragraph 3.a., b. and c. of the Initial Decision. In those findings it was found that Respondent made the representations set forth in paragraphs (3)(a), (b) and (c) of the complaint. Respondent argues that there is no evidence that these representations were made with regard to its product Par-O-Star Friction. Complainant argues that Complainant's Exhibit 1 is at least ambiguous as to what product is being sold and should be construed as applying to the Par-O-Star hair care kit which it seems to argue includes Par-O-Star Friction.

The representations made in Respondent's advertisements and cited in Findings of Fact 3.a., b. and c., appear in Complainant's Exhibit 1. That advertisement makes reference only to "Par-O-Star." Complainant did not offer any evidence (and apparently did not know) which product or products were being sold in response to Complainant's exhibit 1. However, during the hearing Respondent's counsel acknowledged that Complainant's Exhibit 1 pertains to Par-O-Star in liquid form (Tr. 62). There is no evidence in the record that Complainant's Exhibit 1 makes representations about Par-O-Star Friction either by itself or as part of the kit. Par-O-Star Friction is a different product (Tr. 228). The only representations made in Respondent's advertising pertaining to Par-O-Star Friction, which solicits the payment of monies through the mail, is that set forth in Complainant's Exhibit 2 which states that Par-O-Star Friction will "stop hair loss" and that "your scalp will love it." This advertisement also includes dated before and after pictures which indicate substantial hair growth in a period of 90 days. Accordingly, Respondent does represent that Par-O-Star Friction will stop excessive hair loss, the representation made in the first phrase of paragraph 3(a) of the complaint. The remainder of the allegations of misrepresentations made in paragraphs 3(a), 3(b), and 3(c) of the complaint are not made with regard to Par-O-Star Friction. Therefore, to the extent that Findings of Fact 3.a., 3.b., and 3.c. of the findings could otherwise be considered applicable to Par-O-Star Friction, Respondent's exception has merit.

Exception 3

In its third exception, Respondent challenges the findings in paragraph 3.d. of the Initial Decision. In that finding it is concluded that Respondent represents that its product is effective in treating the type of baldness pictured in its advertising, "male pattern baldness."

Respondent argues that the finding pertaining to male pattern baldness is based solely on the photographs and the testimony of the Postal Service witness pertaining thereto. In particular, Respondent cites page 96 of the transcript where the witness, upon being requested to make "an educated guess" as to what was depicted in the "before and after" photograph in Complainant's Exhibit 1, testified that what is whown "is consistent with a pattern seen in male pattern hair loss." According to Respondent the testimony of Complainant's expert withregard to the photographs is insufficient to establish that what is depicted is male pattern hair loss.

Respondent's argument assumes that it is necessary that the Postal Service establish, with certainty, that the pictures depict male pattern baldness. It has previously been stated that Complainant is not required to prove the allegations of the complaint with certainty. Nonetheless, the testimony of Dr. Gurevitch establishes that the photographs in Complainant's Exhibit 1 resemble male pattern baldness more than any other form of hair loss and, becausse of a lack of public knowledge of other types of baldness, the public would assume it is male pattern baldness (Tr. 188). Accordingly, while Respondent is correct in asserting that the evidence does not establish with certainty that the photographs are of an individual with male pattern baldness, the evidence does establish that a reader would most probably believe that they depict an individual with that type of hair loss. Moreover, Complainant's Exhibit 1 represents that Respondent's product, Par-O-Star liquid, has a success rate of 90% in stopping excessive hair loss and a success rate of 60% in regrowing hair. Becauses male pattern hair loss comprises 95% of all cases of hair loss, the only reasonable conclusion to be reached from Complainant's Exhibit 1 is that Par-O-Star liquid will be effective in treating male pattern hair loss.

For the foregoing reasons, Respondent's third exception is without merit with regard to Par-O-Star liquid but, for the reasons noted in Exception 2 above, is correct as to Par-O-Star Friction.

Exception 4

Respondent's fourth exception is to Finding of Fact 4 in which it is found that the representations made are material representations. Respondent argues that this finding should be limited to Par-O-Star liquid and that there is no evidence to support this conclusion with regard to Par-O-Star Friction.

The advertisement for Par-O-Star Friction (CX-2) states that it will stop hair loss and, on the basis of the photographs, implies there will be additional hair growth in a period of 90 days. To that extent, with regard to Par-O-Star Friction, Finding of Fact 4 is correct. The other representations cited in the Initial Decision are not made with regard to Par-O-Star Friction and, therefore, except as noted, Respondent's exception has merit.

Exception 5

In its fifth exception, Respondent challenges that portion of paragraph 6.e. of the Initial Decision in which it is stated:

"It has been found that in order to produce hair growth, a product topically applied must first produce a dermatitis."

Respondent argues that the quoted portion of the finding is based on the direct examination of Complainant's expert witness, but on cross-examination the witness testified that there are reliable reports that some topical applications have shown a degree of success in growing hair without causing a dermatitis (Tr. 182).

Complainant contends that a review of the testimony given on cross-examination when considered in context reveals that the witness was referring to the use of prescription drugs and that even with those drugs the degree of success was poor (Tr. 99, 100, 182). Complainant then argues that in order for Respondent's nonprescription product to stimulate hair growth it must produce a dermatitis.

The evidence relied on by Respondent establishes that there are topical applications which have shown some degree of success in growing hair without causing dermatitis when an individual is suffering from alopecia areata. Therefore, the portion of the finding to which Respondent takes exception is in error. However, as Complainant has pointed out, the topical applications which do not produce dermatitis are prescription drugs which are not included as ingredients of Respondent's product. Therefore, even though there is merit in Respondent's exception it does not serve as a basis to alter the result reached in the Initial Decision.

Exception 6

Respondent takes exception to certain portions of Finding of Fact 6.f. which it contends are not supported by the evidence. The sentences of the finding which Respondent contends are unsupported by the record are:

"He knows other recognized and qualified dermatologists who also treat such patients...Furthermore, he knows of no qualified, reputable physician who does use these ingredients in the treatment of baldness. Nowhere are these ingredients mentioned in the reputable scientific medical literature."

The record does not include a specific statement of the witness which supports the first quoted sentence but the evidence in the record specifically supports the other sentences (Tr. 183, 187, 188, 191). However, from a review of the Curriculum Vitae of the witness and the witness' testimony regarding his attendance at meetings, conferences and clinics, there is little doubt that the first quoted sentence is also correct. Even if it were not it would have no effect on the result reached.

Exception 8

By this exception, Respondent challenges Finding of Fact 9 of the Initial Decision in which the testimony of Respondent's lay witnesses was reasonably explained as falling within those forms of hair loss in which natural and spontaneous regrowth of hair occurs. Respondent argues that statistical chance favors a conclusion that Respondent's products are effective.

The circumstances surrounding the experiences of hair loss and regrowth related by Respondent's witness are consistent with the symptoms of alopecia areata described by Complainant's expert. It was, therefore, reasonable for the presiding Judge to have concluded that the experiences related by Respondent's witnesses were caused by the existence of the condition known as alopecia areata and not the use of Respondent's products. Based on a review of the entire record, the testimony of Respondent's witnesses is not sufficient to cast substantial doubt on the testimony of the Postal Service expert witness that Respondent's product will not achieve the results represented.

Exceptions 9 through 12

Respondent's Exceptions nine and ten pertain to Conclusions of Law one and two of the Initial Decision. In those conclusions it is stated that "the opinion of doctors, which is in concurrence with medical knowledge gained over the years, is entitled to great credence..." and that " t he uncontradicted testimony of one qualified medical expert establishes a universality of medical opinion on the crucial issues." Respondent's exceptions do not challenge the accuracy of these statements of law. However, they do take issue with the reliance placed on the testimony of Complainant's expert in this case. Respondent argues that the testimony of Complainant's expert should be disregarded because he admitted that he did not possess full knowledge of all the possible effects of the ingredients in Respondent's products and his testimony was equivocal in important respects including his statement of the consensus of medical opinion. These points were addressed above in connection with Exceptions 1 and 7, and found to be without merit.

Exception eleven challenges Conclusion of Law 4 in which it is held that Respondent makes the representations set forth in paragraphs 3(a), (b), (c) and (d) of the complaint. As concluded above, there is some merit to this exception in that Respondent makes some, but not all, of the representations with regard to Par-O-Star Friction.

Respondent's final exception takes issue with Conclusions of Law 5 and 6 in which it is stated that Respondent's representations are materially false. For the reasons stated elsewhere in this decision the representations made by Respondent have been found to be false. Such representations induce readers to purchase Respondent's product and, therefore, are material. Accordingly, the Chief Administrative Law Judge's conclusion in this regard is proper.

CONCLUSIONS

Respondent has pointed out some inaccuracies in the Initial Decision which, in part, flow from the inadequacy of the record with regard to the product or products being sold through the advertisement in Complainant's Exhibit 1. Other cited errors, while being technically correct do not pertain to matters of substance and the Initial Decision is in accord with the totality of the evidence in the record. Accordingly, these discrepancies have no effect on the ultimate disposition of this matter.

Based upon consideration of the entire record and the exceptions to the Initial Decision, it is concluded that Respondent is engaged in a scheme for obtaining money through the mail by means of materially false representations. Accordingly, Respondent's appeal is denied and a remedial order under 39 U.S.C. § 3005 is being issued contemporaneously with this decision.

1/ The materials referred to are Exhibits 1, 2 and 3 to the complaint which are Complainant's Exhibits 1, 2 and 3 in the record (Tr. 72-78, 80).

2/ A fifth allegation, paragraph 3(e) of the complaint, was withdrawn by Complainant (Tr. 314).