In the Matter of the Complaint Against

WORLD COMMUNICATIONS, INC.
6361 Yarrow Street
Carlsbad, CA 92008-4829

and

6992 El Camino Real
Carlsbad, CA 92008-5249

and

JAY M. KHOLOS
6361 Yarrow Street
Carlsbad, CA 92008-4831

and

ENERGIZER
Box 75 and Box 9000-173
Carlsbad, CA 92008-0975

and Box 31696
Omaha, Nebraska 68131-0696

P.S. Docket No. 19/33;

08/23/85

Grant, Quentin E.

APPEARANCES FOR COMPLAINANT:
Nan M. Kalthoff, Esq.
Richard T. Cooper, Esq.
Consumer Protection Division
Law Department
United States Postal Service
Washington, DC 20260-1112

APPEARANCES FOR RESPONDENTS:
Peter O. Safir, Esq.
Nancy Singer, Esq.
Kleinfeld, Kaplan & Becker
1140 Nineteenth Street, N.W.
Washington, DC 20036-6601

DECISION ON PETITION AND SUPPLEMENTAL PETITIONS
FOR BREACH OF CONSENT AGREEMENT

On February 20, 1985, Complainant, the United States Postal Service, filed a Petition for Breach ("Breach Petition") of an Agreement Containing Consent Order to Cease and Desist entered on May 7, 1984, with respect to the product Energizer, a weight loss product containing phenylpropanolamine ("PPA"), caffeine and pyroxidine hydrochloride ("Energizer Consent Agreement").

In Paragraph 12 of the Energizer Consent Agreement, World Communications, Inc. (WCI) and Jay M. Kholos, individually and as president of WCI, agreed to the issuance of a Cease and Desist Order. The Order (Section I, paragraphs (b), (c), and (d)) provided that WCI, in connection with the advertising of Energizer, the Energizer Weight Loss Plan, or any product that is orally ingested which is marketed as a weight loss product, would cease and desist from making the following representations unless at the time of such representation WCI possesses and relies upon reliable and competent scientific evidence that substantiates such representations:

(a) that the ordinary person who takes as directed, the product, whether or not as part of a weight loss plan, will lose substantial amounts of weight in a short period of time;

(b) that the ordinary woman who takes, as directed, the product, whether or not as part of a weight loss plan, will lose more than two pounds a week; or

(c) that the ordinary man who takes, as directed, the product, whether or not as part of a weight loss plan, will lose more than three and one-half pounds a week.

The Breach Petition alleged that WCI, in violation of paragraph 12 of the Agreement (agreement to abide by the terms of the Cease and Desist Order), was advertising that a weight loss pill, called variously "Fat Burner" or "Grapefruit 45," will cause loss of as much as a pound or more per day without possessing the required reliable and competent scientific evidence to substantiate that representation.

On February 21, 1985, Judge Carroll C. Dicus, Jr., entered an Interim Stop Order under the terms of the Energizer Consent Agreement. On March 4, 1985, WCI filed Respondent's opposition to the Breach petition denying any violation of the Agreement or the Cease and Desist Order, and requesting a hearing. On March 8, 1985, Complainant filed a Supplemental Petition For Issuance of Supplemental Order Against Jay M. Kholos, Lois S. Kholos, and Brian Bernheim in Their Individual Capacities alleging that, as officers of WCI, they had actively participated in the alleged breach activities.

On March 15, 1985, Complainant filed a Second Supplemental Petition for Orders Based on Breach of Consent Agreement ("Second Supplemental Petition"), alleging that Respondents were attempting to circumvent the interim detention order of February 21, 1985, by changing remittance addresses on television advertising and by commissioning a one-million-piece direct mail solicitation substantially similar to the newspaper advertisements which were the basis of the interim detention order but solicited remittances to new addresses. Complainant averred in this Petition that Respondents' disregard of Postal Service orders supports a request for the issuance of a supplemental cease and desist order against the officers of WCI in their individual capacities.

On March 11, 1985, the Judicial Officer designated Administrative Law Judge Quentin E. Grant as representative of the Judicial Officer, to hear, consider and decide the issues raised in connection with the breach proceedings.

On March 18, 1985, the undersigned, based on a prima facie showing of a breach of the Consent Agreement, issued an additional interim detention order pursuant to paragraph 14 thereof, against Grapefruit 45, Fat Burner, or Sunshine at the following addresses: Box 93005, Long Beach, California 90809 or 90884; Box 9090, Carlsbad, California 92008; 103 N. Highway 101, Box 1014, Encinitas, California 92024; Suite 315, P. O. Box 5950, Orange, California 92667; and Box 1147, Orange City, Florida 32763.

On March 20, 1985, Respondents filed an opposition to the Supplemental and Second Supplemental Petitions in which they denied that the direct mail solicitation makes the representations proscribed in the cease and desist order attached to the Agreement and argued that to bind Jay Kholos, Lois Kholos, and Brian Bernheim individually to a cease and desist order would be a denial of due process. Respondents also alleged that the Consent Agreement had been rendered void because of Complainant's failure to give advisory opinions on certain advertisements which Respondents had earlier submitted to Complainant's counsel pursuant to the Agreement.

On April 8-12, 1985, a hearing on the Petitions was held in Los Angeles and San Diego, California. Evidence was taken on the following issues of fact:

1. Whether Respondents' TV advertisements make the representation that the ordinary person who takes the Grapefruit 45 pills alone will lose a substantial amount of weight in a short period of time;

2. Whether Respondents' newspaper advertisements and printed promotional materials make the representation that the ordinary person who takes the Grapefruit 45 pills alone will lose a substantial amount of weight in a short period of time;

3. Whether reliable and competent scientific evidence exists that substantiates the representation that the ordinary person who takes The Grapefruit 45 Fat Burner Plan in accordance with the directions provided by Respondents will lose a substantial amount of weight in a short period of time;

4. Whether Respondents' TV advertisements make the representation that the ordinary woman who takes as directed The Grapefruit 45 Fat Burner Plan will lose more than 2 pounds a week;

5. Whether Respondents' newspaper advertisements and printed promotional material make the representation that the ordinary woman who takes as directed The Grapefruit 45 Fat Burner Plan will lose more than 2 pounds a week;

6. Whether Respondents' TV advertisements make the representation that the ordinary man who takes as directed The Grapefruit 45 Fat Burner Plan will lose more than 3 1/2 pounds a week;

7. Whether Respondents' newspaper advertisements and printed promotional material make the representation that the ordinary man who takes as directed The Grapefruit 45 Fat Burner Plan will lose more than 3 1/2 pounds a week;

8. Whether Complainant has violated paragraph 15 of the Consent Agreement with respect to proposed new advertisements and, if so, whether such breach should be held to nullify the agreement; and

9. Whether Respondents possessed and relied upon reliable and competent scientific evidence that substantiates the following representation at the time made: that the ordinary person who takes The Grapefruit 45 Fat Burner Plan in accordance with the directions provided by Respondents will lose a substantial amount of weight in a short period of time.

At the hearing, Complainant introduced the expert testimony of Ernst J. Drenick, M.D. and Paul Scipione, Ph.D., which supplemented their declarations filed in support of the Breach Petition. Respondents presented the testimony of Jay M. Kholos, Sharon Moon, Belva Hazzard, Steve Jackman, and Chad Everone, and the expert testimony of George Belch, Ph.D. and Michael Belch, Ph.D.

INTRODUCTORY DISCUSSION

The basic issue for decision on this petition alleging breach of the Energizer Consent Agreement is whether Respondents' post-Consent Agreement advertisements violate the Consent Agreement by making, without the required scientific substantiation, the representations specified in Section I, paragraphs (b), (c), and (d) of the Cease and Desist Order.

This case presents a number of subsidiary issues appropriate for preliminary discussion.

a. Disclaimers

Respondents' defense relies heavily on disclaimers relating to testimonials contained in both its televised and printed advertisements. The Energizer Consent Agreement contains the following provision relevant to the disclaimer issue:

"9. All televised promotional materials that invite a purchaser to remit payment for the Energizer or any substantially similar product directly through the mails or via a C.O.D. system will contain the following or substantially similar statements. The statements shall be made audibly and shall appear simultaneously on the screen in easily readable font for an aggregate minimum of eight (8) seconds:

These testimonials are not typical. By following the Energizer plan, the average weight loss for a woman is limited to two pounds a week and the average weight loss for a man is limited to three and one-half pounds a week."

Respondents assert that the foregoing provision specifically allowed WCI to continue to advertise Energizer using testimonials in ads attesting to successful weight loss results obtained with Energizer without being deemed to make the prohibited representations providing the quoted disclaimer, drafted by USPS, was used. Respondents say that in accordance with paragraph 9, supra, a new television commercial for Energizer was made employing the agreed on disclaimer, that this commercial was shown from May 1984 through October 1984 in over 150 television markets to millions of viewers resulting in hundreds of thousands of mail order sales, and that USPS, which closely monitored WCI's advertising, never filed a breach petition based on that commercial or contacted WCI in any manner with respect thereto.

Respondents say that based on absence of USPS action with respect to the Energizer commercial WCI fashioned the advertising campaign for the Grapefruit 45 Fat Burner Plan, using the same type of testimonials and same disclaimer. Citing Mark Eden v. Lee, supra, Respondents argue that it is arbitrary and capricious of the Postal Service to bring this breach proceeding since its inactivity with respect to the revised Energizer Commercial led WCI to believe, reasonably, that it would avoid breach by conforming the Grapefruit 45 Fat Burner Plan to the apparently acceptable Energizer Commercial.

Complainant does not deny that the text of the Grapefruit 45 disclaimers conforms substantially to the wording prescribed in paragraph 9 of the Consent Agreement but argues that mere conformity in that respect does not end the matter because the disclaimers are displayed, or made, in such an obscure, perceptually disadvantageous manner as to render them ineffective to dispel the weight loss representations conveyed by the testimonials as prohibited by the Agreement. Complainant makes essentially the same argument with respect to disclaimers contained in Respondents printed advertisements.

b. The Printed Advertisements

Respondent argues that Complainant has failed to introduce any evidence whatsoever supporting its interpretation of Respondents' newspaper ads and direct mail solicitations and, therefore, has failed to sustain its burden of proof as to the issues relating to printed promotional materials. (Issues 2, 5 and 7)

The printed material itself is in evidence. No other evidence, expert or otherwise, is required to enable findings by the presiding judge as to whether such materials make the alleged representations. Vibra Brush Corp. v. Schaffer, 152 F. Supp. 461 (S.D.N.Y. 1957), rev'd on other grounds, 256 F.2d 681 (2nd Cir. 1958); Ralph J. Galliano, et al., P.S. 19/15 (P.S.D. May 2, 1985).

The single case cited by Respondent for the proposition that expert or other evidence is required for such findings does not stand for that proposition. In California Pacific Research, Inc. v. U.S.P.S., Civ. R-83-173 (D. Nev. 1985), there was unopposed expert testimony and lay testimony of user witnesses supporting Respondent's position on the interpretation issue. The Court held that it was error for the Judicial Officer to disregard such testimony and to arrive at a contrary interpretation in the circumstances of that case. There is no basis on which to construe the decision as holding that Complainant must produce expert or lay evidence on the interpretation issue in every case. This would be contrary to long established precedent (see Conclusion of Law No. 6, below).

c. Alleged Breach of Agreement by Complainant

Early in this proceeding Respondents requested the addition of an alleged breach of the Agreement by Complainant to the issues to be tried (Issue No. 8). The alleged breach was based on Complainant's failure to render, pursuant to paragraph 15 of the Agreement, an advisory opinion on certain of WCI's advertising for The Grapefruit 45 Fat Burner Plan. Complainant countered this issue on the basis of evidence (1) that Respondent, contrary to the Agreement, had run the commercial prior to seeking an opinion and (2) that Complainant had advised Respondent as early as August 3, 1984, that its TV Commercials for Grapefruit 45 Fat Burner were making representations prohibited by the Energizer Consent Agreement unless WCI had the required scientific support for such representations.

Respondent has not argued this issue in its post-hearing memorandum and its reply. Accordingly, it is treated as abandoned.

d . The Credibility of Ernst J. Drenick, M.D.

Respondents attack the credibility of Complainant's medical expert witness, Ernst J. Drenick, M.D., on the basis (1) of certain changes made at the hearing, by Dr. Drenick, in his affidavit submitted by Complainant in support of its request for an interim mail detention order and (2) of an asserted bias of Dr. Drenick against Respondent and The Grapefruit 45/Fat Burner Plan because of Dr. Drenick's association with Weight Loss Clinics of America (WLCA) which pays him $500 per month and which, according to Respondents, is in competition with Respondents' product.

The changes by Dr. Drenick in his affidavit were very minor, not affecting the essential substance thereof (Tr. 31, 32). They have no adverse impact on his credibility.

The record does not support a finding of bias as asserted by Respondents. There is no reliable evidence of competition between WLCA and Respondents. Dr. Drenick has no pecuniary or financial interest in WLCA and has no knowledge of, and does not participate in, its promotional activities. His retainer by WLCA is purely for medical counseling (Tr. 49, 87-89).

FINDINGS OF FACT

1. By means of television commercials, newspaper advertisements, direct mail solicitations, C.O.D. instructions, and reorder forms, in late June 1984, Respondents commenced soliciting remittances of money through the mails to the following addresses for the product Fat Burner/Grapefruit 45:

Grapefruit 45 and Fat Burner, P. O. Box 15, Carlsbad, California 92008

Grapefruit 45, Fat Burner, or Sunshine, P. O. Box 93005, Long Beach, California 90884 or 90809

Grapefruit 45, Fat Burner, Sunshine or WCI, P. O. Box 9090, Carlsbad, California 92008

Grapefruit 45 and Fat Burner, P. O. Box 75, Carlsbad, California 92008. Grapefruit 45, Fat Burner, or Sunshine at the following addresses:

103 N. Highway 101, Box 1014,

Encinitas, California 92024

Suite 315, P. O. Box 5950, Orange,

California 92667

Box 1147, Orange City, Florida 32763

2. Fat Burner/Grapefruit 45 is a weight loss product. Persons ordering the product receive a container of tablets the primary constituent of which is grapefruit extract (500 mg. per tablet), and a pamphlet containing two menus entitled "The Fat Burner Plan" and "The Fat Burner Choice Alternate Diet Plan" (CX-14, 15; CX-A, par. 4).

3. The pamphlet directs the oral ingestion of one Grapefruit 45 tablet before each meal. The "Fat Burner Plan" menu sets forth a low calorie, high protein, low carbohydrate diet to be followed for two weeks to be followed by "The Fat Burner Choice Alternate Diet Plan" menu, a more varied, less carbohydrate-restricted diet (CX-15).

RESPONDENTS' NEWSPAPER ADVERTISEMENTS

4. The outstanding features of Respondents' newspaper advertisements (CX-10, 21A) are testimonials, some accompanied by before-and-after photographs, of weight losses ranging from 10 to 15 pounds the first week and almost 30 pounds in 30 days of using Respondents' product. The ads make reference to "the wave of astounding testimonials to its amazing effectiveness" (CX-10, Col. 1) and "thousands and thousands of testimonials from delighted users" (CX-21A, Col. 1) and, in the context of such testimonials, readers are presented with Respondents' guarantee that the product will work for them.

5. Although testimonials are illustrated with pictures of women, the ads are directed to men as well as women.

6. The advertisements contain a disclaimer similar to that prescribed for television commercials in the Energizer Consent Agreement (para. 9) as to typicality of testimonials and weekly amounts of weight loss for women and men (2 pounds for women and 3 1/2 pounds for men). They also contain statements that Grapefruit 45 is to be used as a grapefruit substitute only, that results achieved directly relate to the degree to which the Fat Burner Plan is followed, and that testimonials are representations of actual Grapefruit 45 customers on file and photographs are dramatic reenactments of weight loss case histories. One of the ads (CX-21A) also contains the following statement:

Dramatic weight loss achieved through calorie controlled diet plan.

7. The disclaimers and other statements described above are in smaller typeface than the balance of the ads (much smaller in CX-21A) and are relatively inconspicuous compared to the testimonials and other efficacy claims.

8. The disclaimer related to that set forth in the Energizer Consent Agreement, although similar to the latter, varies therefrom in certain significant respects. Instead of stating that testimonials are not typical, it states that testimonials and results may not be typical and goes on to say that many people have reported weight losses of "20, 30 pounds and more" emphasis supplied . Following the statement of average woman/man weekly weight losses (2 and 3 1/2 pounds) appears the statement "Dramatic Weight-loss reports are received every day."

9. Although the newspaper ads employ the word "plan" throughout, there is no disclosure that the plan includes a diet except for one inconspicuous line in one ad (CX-21A). They convey, in fact, the opposite impression through assurances that dramatic weight losses may be achieved without starvation, self-denial or strong will power, without skimping at meals, and by continuing to enjoy delicious foods such as pork chops, bacon, eggs, thick juicy roasts, hamburgers and alcoholic beverages. CX-10 negates the idea of the need of dieting in its statement that people who have spent a lifetime dieting without dramatic or lasting results can't really believe what happens to them when they follow the "Grapefruit 45" Plan.

10. The ads focus the reader's attention on the "Grapefruit 45" pill as the effective agent in producing the promised weight loss. The lead testimonial in each ad is that of Donna R. who says "All I did was take a single, tiny 'Grapefruit 45' pill before each meal and enjoyed the easy to follow Fat Burner Plan" to lose 12 pounds the first week and almost 30 pounds in just over 30 days. Although she mentions the Fat Burner Plan, the fact that it involves a severely calorie-restricted diet is not mentioned and, in fact, conveys the opposite impression in her statement that she didn't skimp at meals and continued to enjoy delicious foods. Following are other portions of the ad which fix the reader's mind on "Grapefruit 45", the pill, as the cause of weight reduction:

Ms. W. G. of Texas lost 56 pounds in just two months with "Grapefruit 45". CX 10, col. 1.

G. S. of Los Angeles lost 10 pounds the first week on "Grapefruit 45". "It works," she writes, "and I don't always feel on edge like I did with diet pills that had drugs in them." CX-10 and 21A, col. 2.

W. M. of Indiana says, "I had to lose weight fast. And 'Grapefruit 45' is the only plan that has ever worked for me. No strenuous exercise. No starvation...." CX-10, col. 2.

You see, for years people have thought that grapefruit produced amazing weight-loss powers. They believe that grapefruit can help turn any body into a fat-burning machine that works day and night.

But who wants to eat a whole large grapefruit before each meal? It's messy. It's inconvenient.

That's where the miracle and marvel of all-new "Grapefruit 45" enters the picture. We've concentrated the essence of 1/2 ruby red grapefruit into a single tiny pill. That's right] One single tiny "Grapefruit 45" pill packs many of the super-concentrate of one-half large juicy grapefruit] CX-10, col. 1.

"GRAPEFRUIT 45" IS 100% NATURAL -- AND JUST TAKE IT LIKE EATING GRAPEFRUIT

We feel that one of the most important things about new - 'Grapefruit 45' - THE FAT BURNER PLAN - is that it's 100% natural . . . . Many people write to tell us they're so happy to be finally off those pills that contain drugs. That constant edgy nervous feeling caused by appetite suppressant pills with potentially dangerous drugs is just not a part of our 'Grapefruit 45' weight loss plan." CX-10, col. 2, bottom.

We've concentrated the essence of one half, ruby red grapefruit into a single tiny pill. CX-21A, col. 1.

11. The attribution of weight-loss efficacy to the "Grapefruit 45" pill is confirmed (a) by Respondent's offer to send a second order of "Grapefruit 45" pills free if a user should fail to reach a selected weight-loss goal with the initial order and (b) the discount offer of three orders of "Grapefruit 45" for $44.85 (CX-10, 21A). Respondent's failure to even mention a diet (except in one inconspicuous case) as an essential part of the Fat Burner plan reinforces the impression that weight-loss is caused by the "Grapefruit 45" pill.

RESPONDENT'S DIRECT MAIL SOLICITATION

12. Respondent's direct mail solicitation (CX-47) differs slightly from its newspaper advertisements in that in addition to two pages very similar in content to the newspaper ads it contains a "Dear Friend" letter (4 pages) expanding on the weight-loss to be expected from use of the product. However, the content of the solicitation is essentially the same as the newspaper ads with respect to testimonials, before-and-after photos, disclaimers, lack of indication of diet as part of the plan, and attribution of weight loss to the "Grapefruit 45" pill. It differs from the ads in that the testimonial of Donna R. has changed from a weight loss of almost 30 pounds in 30 days to 48 pounds in over 30 days and in offering unlimited (instead of just one) free resupplies of "Grapefruit 45" pills until desired weight loss is achieved up to one year from the date of the original purchase. At the bottom of one of the solicitation's seven pages, in very small print, appears the statement, "Dramatic weight loss achieved through calorie-controlled diet plan."

CONCLUSORY FINDINGS AS TO ISSUES 2, 5, AND 7
INVOLVING PRINTED PROMOTIONAL MATERIAL

13. The Energizer Consent Agreement and the related Cease and Desist Order do not define the terms "substantial amounts of weight" and "short period of time" as used in paragraph I (a) of the order. However, the parties do not appear to be in serious disagreement that 2 pounds of weight loss per week for women and 3 1/2 pounds per week for men, or the dramatically larger losses reported in the testimonials, constitute substantial amounts of weight loss in a short period of time. Therefore, I find that both the newspaper ads and the direct mail solicitation promise the loss of substantial amounts of weight in a short period of time and, based on Findings 9 through 12, supra, I find that Respondents represent that the ordinary person who takes Grapefruit 45 pills alone will realize such losses.

14. Respondent's disclaimers, as described in Findings 6 through 8, and 12, supra, are too inconspicuous and ambiguous to negate or limit the strong impression conveyed by the testimonials and other conspicuous portions of the newspaper advertisements and direct mail solicitation that the ordinary woman and the ordinary man who take as directed The Grapefruit 45 Fat Burner Plan will lose respectively, more than 2 and 3 1/2 pounds a week.

RESPONDENT'S TELEVISION ADVERTISEMENTS

15. Six of Respondents' television advertisements are in evidence. They are referred to as Grapefruit Grower No. 1 or GG-1 (CX-1, 6), Grapefruit Grower No. 2 or GG-2 (CX-2, 7), Bob (CX-3, 8), Bob-D (CX-5, 9), RX-C, and RX-D. They offer for sale the weight loss product Fat Burner/Grapefruit 45 described in Finding 2, supra. RX-C and RX-D are not mentioned in the following findings because they do not differ significantly from the other TV ads in evidence.

16. The television advertisements refer to the product variously as The Grapefruit 45 Fat-Burner Plan, Fat-Burner, Grapefruit 45 plan, and the Fat Burner plan. The word "plan" appears several times, both in sound and graphics, more or less prominently in all the ads. The ads do not define the plan as distinguished from the pill. The Grapefruit 45 pill, or containers thereof, and audible references thereto, occur frequently and prominently throughout the ads. The word "diet" occurs once in GG-1, three times in GG-2, and once each in Bob and Bob-D, always unconspicuously relative to displays of, or reference to, the pill. All the ads display, prominently, large arrays of "delicious foods" and make audible references thereto as being consumable, consistent with the use of the plan.

17. All the ads attribute weight loss efficacy, directly or indirectly, at least in major part, to the Grapefruit 45 pills. Following are examples of audible attribution:

Do you know anyone who eats Grapefruit who doesn't lose weight?

(CX-2, 7, scene 1)

Nature's best kept weight loss secret is now ours

(and)

The Grapefruit 45 diet. . .

(CX-2, 7, scenes 2 and 3 with

picture of pile of grapefruit)

Apparently the secret's in the Grapefruit 45 plan which helps speed up the fat-burning process.

(CX-2, 7, scene 11 with picture of woman holding a box containing the pills)

I take a Grapefruit 45 pill a few minutes before each meal.

(CX-2, 7, scene 13)

What would you rather have three times a day? This - - or this?

(CX-2, 7, scenes 26, 27 with picture of man holding a pill in one hand, a grapefruit in the other)

18. The ads include testimonials of dramatic weight losses of up to one pound a day, thirty pounds in just over 30 days (CX-2, 6, 7), nine pounds the first week (CX-3, 8) and testimonials of fast weight losses ranging from 24 to 48 pounds (CX-3, 8).

19. All the television ads contain visual disclaimers such as the following (numbers in parentheses are approx. no. of seconds the disclaimers appear):

GG-1

Testimonials are not typical. (2)

Best results are achieved by closely following copyrighted weight loss plan. (1.85)

A woman following the plan can lose an average of 2 lbs. per week; a man 3 1/2 lbs. per week. (4.9).

GG-2

Testimonials are not typical. Representations are re-enactments. (2.5)

Results directly related to the degree which fat burner plan is followed. Grapefruit 45 is to be used as a grapefruit substitute only. (4)

Best results are achieved by closely following copyrighted weight loss plan. (4.1)

A woman following the plan can lose an average of 2 lbs. per week; a man 3 1/2 lbs. per week. (4.9)

Bob

Results achieved directly relate to the degree which the Fat Burner Plan is followed. (5.0)

Testimonials may be representations of actual Grapefruit 45 customers on file & photographs are dramatic re-enactments of weight loss case histories. (2.6 and 2.5)

A woman can lose an average of 2 lbs. per week and a man can lose an average 3.5 lbs. per week. (3.2)

As with any diet it is recommended that you consult a physician.

Testimonials are not typical. (2.3)

Bob-D

Based on independent survey ... "Fat Burn" perception scientifically unsubstantiated.

Most of the disclaimers are in yellow print, much smaller than the print sizes used for other visual messages. In most cases they conflict with the major thrust of the ads and the visual and/or graphic messages appearing simultaneously with the disclaimers. For instance in GG-2, the 2 lbs. per week - 3 1/2 lbs. per week disclaimer appears for only 4.9 seconds in a visual sequence under the much more prominent message in bold red type, "30 LBS . . . 30 DAYS" and simultaneously with the audio message, delivered by a young woman, "Thirty pounds in just over 30 days. My results may not be typical but I'll take them anyway." In the Bob Commercial, the same disclaimer appears for only 3.2 seconds immediately following a prominent visual and audio assertion of a pound-a-day weight loss and almost simultaneously with a background picture change to a display of grapefruit and the Grapefruit 45 pills.

21. Upon the first two viewings of the television ads by the undersigned, prior to the hearing and familiarization with the issues herein, I did not comprehend the content of the disclaimers because of small print size and weak color (relative to the color of simultaneous scenes or messages), inadequate time, and distraction by the simultaneous and more prominent visual and audible messages. On subsequent viewings, directing special attention to the disclaimers, I found them difficult to read.

Respondents' Consumer Perception Survey

22. Respondents placed in evidence a survey entitled "Final Report - World Communications-Commercial Perceptions Survey-March 1985" (RX-24) referred to hereinafter as the March Survey or the Survey. WCI hired Luth Research, Inc. of San Diego to conduct the survey. Luth employed Drs. George and Michael Belch to design it. The Luth firm has a very good reputation as a research organization (Tr. 442). The Drs. Belch are tenured professors of marketing at San Diego State University and highly qualified to testify in the field of consumer perception and research and advertising and marketing research (RX-29, 30; Tr. 431-441, 590-595).

23. The survey involved two of WCI's television commercials, GG-2 (RX-26B) and Bob (RX-26A) (Tr. 458, 459).

24. The objective of the study was to determine overall impressions of the Grapefruit 45 product that consumers were drawing from the TV commercials and, specifically, whether the commercials were perceived by consumers as advertising just a grapefruit pill or, rather, a weight-loss program consisting of a pill and a plan (RX-24, p. 2; Tr. 445). The study was designed with these objectives in mind (Tr. 444, 445).

25. A consumer survey, as opposed to the subjective impressions of an expert in the field, is the preferred method of determining consumer perceptions of television advertisements (Scipione, Tr. 226, 227; G. Belch, Tr. 445, 446).

26. The survey was conducted in the Plaza Bonita Shopping Center in San Diego. The demographic profile of individuals shopping at this mall is fairly, though not perfectly, consistent with that of the U. S. population and is quite consistent with the target market of WCI (Tr. 598, 599). San Diego is much used as a test market. Research results obtained there are generalized by many companies to other markets. The sample size was 300 (150 interviews for each commercial), an adequate number (Tr. 450, 451). The universe for the study was overweight people between the ages of 25 and 54, corresponding to the target market of greatest interest to WCI and the most relevant to a weight-loss product (Tr. 482-489). The sample was a probability sample in the sense that it was done on a random mall-intercept basis (Tr. 500-501). Some degree of bias may have been introduced by the screening question and some closed end questions but the degree of bias, if any, did not constitute a major defect and was insufficient to invalidate the study (Tr. 598-606). The confidence level achieved was 95% + 4% (Tr. 450). The design of the study meets the general standards of consumer perception studies involving television commercials (Tr. 521).

27. The survey was conducted in accordance with the basic requirements set forth in the Manual for Complex Litigation (1 Pt. 2 Moore's Federal Practice 2.71 (1982)). It was conducted in accordance with accepted principles of survey research in that (a) a proper universe was represented and a representative sample was obtained from that universe, (b) the mode of questioning interviewees was correct, (c) the persons conducting the actual survey research were recognized experts, (d) the data gathered were accurately reported, (e) the sample design was in accordance with generally accepted standards of objective procedure in the field of such surveys, and (f) the questionnaires were in accordance with generally accepted standards of objective procedures in the field of the survey (Tr. 472-473).

28. The Survey results showed that 84% of the respondents perceived the GG-2 commercial as attempting to sell a weight-loss program consisting of a diet plan and a diet pill. Nine percent saw it as selling a weight-loss program consisting only of a plan, and seven percent saw it as selling a weight-loss program consisting only of a grapefruit pill (Tr. 456). Ninety percent of the people surveyed with respect to the Bob commercial saw it as attempting to sell a weight-loss program consisting of a diet plan that included the Grapefruit 45 pill. Seven percent perceived it as attempting to sell a weight loss program consisting only of a plan and three percent as a weight-loss program consisting only of a grapefruit pill (Tr. 466-467). To the question "Thinking about the pill mentioned in the commercial, do you think it is possible to lose weight by using just the grapefruit," the response given for the GG-2 commercial was 77% no and 23% yes. With respect to the Bob commercial 83% answered no and 17% answered yes. The percentages of yes answers are consistent with the average level of miscomprehension of television advertising reported in advertising literature (22%-29% (Tr. 468-469) and found in a commercial comprehension study conducted by the Drs. Belch (Tr. 470-472).

29. Complainant's witness, Dr. Paul A. Scipione, is an expert in the fields of consumer psychology and consumer survey methodology of stature at least equal to the Drs. Belch (CX-54; Tr. 200-228). He expressed opinions relative to a typical viewer's perception of Respondent's television commercials opposite to those of the Drs. Belch although he did not have the benefit of a consumer perception survey of Respondent's commercials or other research to support those opinions. Dr. Scipione admitted that he is not an average viewer of television ads (Tr. 226, 227) and stressed the importance of consumer research in making determinations as to typical consumer perceptions of TV advertisements (Tr. 227, 273, 277, 278). Although he criticized the methodology of the Survey, he admitted that the methodology he would have used is not the only proper one (Tr. 339) and that other experts with credentials as impressive as his could disagree with his opinions (Tr. 327). He explained that he used frequently in his declaration the words "probably," "likely," and "most likely" in qualification of his opinions because he did not do any consumer research on Respondents' ads. Although he criticized the sample used in Respondents' survey on the ground that it was not representative of the total U. S. population that would view the ads, he stated that in designing an adequate sample he would obtain from the client (as the Drs. Belch did from WCI) an indentification of the particular audience, or market segment, among which the survey would be conducted (Tr. 233). Dr. Scipione also stated that his firm had done consumer surveys at a single mall (Tr. 567) and that a target market survey can be valid (Tr. 577, 578).

CONCLUSORY FINDINGS AS TO ISSUE No. 1

30. I find the results of Respondents' survey and the expert opinion of Drs. George and Michael Belch as to Issue No. 1 to be more persuasive than the contrary opinion expressed by Dr. Scipione. Therefore, I find that Complainant has failed to sustain its burden of proving that Respondents' TV advertisements make the representation that the ordinary person who takes the Grapefruit 45 pills alone will lose a substantial amount of weight in a short period of time.

CONCLUSORY FINDINGS AS TO ISSUES Nos. 4 and 6

31. The evidence concerning the representations of specific amounts of weight loss made in the TV commercials consists of the commercials and Dr. Scipione's opinions. Respondents' Survey did not include consumer perceptions of this aspect of the ads and the Drs. Belch expressed no opinions thereon. Based on findings numbered 18 and 20, supra and Dr. Scipione's opinions on this matter (GG-2, Tr. 268-269; GG-1, Tr. 280-281; Bob, Tr. 288, 289; Bob-D, Tr. 295; RX-D, Tr. 296). I conclude that Respondents' TV commercials represent that the ordinary woman who takes as directed The Grapefruit 45 Fat Burner Plan will lose more than 2 pounds a week and that the ordinary man who takes as directed the Grapefruit 45 Fat Burner Plan will lose more than 3 1/2 pounds a week.

THE QUESTION OF SCIENTIFIC SUBSTANTIATION

32. The Cease and Desist Order (para. I (c)) prohibits WCI from representing the product's efficacy to produce substantial amounts of weight loss in a short period of time, more than 2 pounds a week for the ordinary woman, and more than 3 1/2 pounds a week for the ordinary man unless at the time of such representations WCI possesses and relies upon substantiation in the form of reliable and competent scientific evidence. The Order defines reliable and competent evidence as 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.

33. Complainant's expert witness Ernst J. Drenick is a medical doctor, board certified in internal medicine. He is Chief of General Medicine Section at the Veterans Administration Hospital in Los Angeles. He is Professor in Residence at the UCLA Medical School. He is outstandingly qualified to testify in the area of obesity, weight-loss, the conduct of clinical trials on drugs and low calorie diets, and the scientific standards applicable to proof of efficacy of weight-loss programs and oral medication taken to aid in weight loss (CX-C, CX-53, Tr. 17-24). Dr. Drenick was the only expert witness who testified on the scientific substantiation issue.

34. Respondent placed in evidence a report entitled "Grapefruit 45 Weight Loss Study Clinical Test" (RX-12). The study was performed by Health Testing Center, Berkeley, CA for Protein Research Associates, also of Berkeley, acting on behalf of WCI. The study involved 6 male and 4 female overweight subjects (baseline weight ranging from 135 to 234 lbs.) who were placed on the Grapefruit 45 Weight Reduction Program (Grapefruit 45 Fat Burner Plan) for a period of 15 days. The tabulated data of the report showed an average weight loss of 5.45 lbs. The report concluded that "Grapefruit 45 is safe and effective when used according to the recommended guidelines in the Grapefruit 45 Product literature." The report was not introduced through the medical doctor who designed and conducted the study or another expert witness. The introducing witness merely testified about the conduct of the study and as to that he had very limited personal knowledge (Tr. 98).

35. The following findings are based on the written declaration (CX-C) and testimony of Dr. Drenick which is in accord with the medical and scientific consensus (Tr. 39):

a. Grapefruit concentrate will not cause weight loss nor will it contribute to the weight-loss effects of reduction of caloric intake or increased caloric expenditure through exercise. None of the ingredients of the Grapefruit 45 pill as listed on the label will, alone or in combination, cause or aid in weight loss. The pill will not have any effect on hunger. It will not accelerate fat metabolism or "speed up the fat-burning process." (CX-C, pp. 2, 3; Tr. 24, 25)

b. The failure of the "Fat Burner Plan Daily Menu" to restrict quantities of some of the foods listed therein makes it difficult to determine how much, if any, weight the average overweight user might lose following that menu. If such a person should limit intake to 300-600 calories on that menu, he (or she) might lose 2 to 3 1/2 pounds a week, or roughly 1/2 pound per day (Tr. 63, 64). It is not possible for the average overweight person to lose fat at the rate of 1 pound or more per day following such a menu (Tr. 28). During the first few days a rate of 1 pound a day may be experienced but a large part of such loss will be water (Tr. 82). Only a very obese person on a total fast can lose weight at the average rate of 1 pound per day (Tr. 34).

c. The Fat Burner "Choice" Alternate Diet Plan is a balanced 800 calorie diet (Tr. 33). Use of this diet will not produce a weight loss averaging 1 pound per day but could produce a loss of under 2 pounds for a sedentary user expending 1700 calories a day or between 2 1/2 and 3 pounds for an active person expending 2200 calories a day. Overweight persons are relatively inactive (CX-C, pp. 5, 6; Tr. 33, 34).

d. There is a body of knowledge constituting substantial scientific evidence that a normally obese person following a diet of less than 1200 calories per day will lose weight and that such a diet is the cause of the weight loss (Tr. 81, 82).

e. A scientifically valid and acceptable study of a weight loss program for degree of efficacy or for assessment of an oral medication to aid in weight loss should be a double blind study with an adequate number of subjects divided into two groups (one a control group, reasonably evenly matched as to age, sex, and weight range) and conducted over a sufficiently long period of time (Tr. 22, 78).

(f) Respondent's study (RX-12) is not a scientifically valid study because (1) the number of subjects is too small considering the wide weight range (2) it contained no examination of the statistical significance of the results and (3) the Grapefruit 45 Pill was not tested against a placebo in double blind fashion, a necessary procedure to determine the benefit of the pill when dietary restriction by itself is known to produce weight losses similar to those produced in this study. The study demonstrates nothing more than that calorie restriction results in weight loss. It does not prove that the Grapefruit 45 Pill contributes to weight loss.

CONCLUSORY FINDINGS ON ISSUES 3 and 9

36. Based on findings 35(c) and (c) sic supra, I find that Complainant has failed to sustain its burden of proof as to Issues 3 and 9 insofar as 2 lbs. of weight loss per week for a woman and 3 1/2 lbs. of weight loss for a man constitute substantial weight loss. However, I find that Respondents did not possess and rely on reliable and competent scientific evidence to substantiate represented weight losses in excess of those amounts up to or exceeding one pound per day.

PRIVITY OF INDIVIDUALS WITH WCI

37. Jay M. Kholos signed the Energizer Consent Agreement individually and as President of WCI. He is instrumental in formulating, directing, and controlling the acts and practices of WCI and was directly and intimately involved in the Grapefruit 45 Fat Burner promotion which gave rise to the petitions (Tr. 116, 121, 128-156).

38. Lois S. Kholos is the treasurer and secretary of WCI. Brian Bernheim is Vice President and General Manager of WCI. They were furnished a copy of the Energizer Consent Agreement and the related Cease and Desist Order in May 1984. Thus, they were on notice of the Agreement and the Cease and Desist Order (CX-39). Lois Kholos was actively involved in the business of WCI including the Grapefruit 45 Fat Burner promotion (CX-12, 13, 38, CX-L). Brian Bernheim plays a prominent role in the management of WCI and was very active in the Grapefruit 45 Fat Burner promotion (CX-11, 23, 34, 40; CX-K, L, M; Tr. 167, 168).

CONCLUSIONS OF LAW

1. Respondents advertise or offer for sale Fat Burner/Grapefruit 45 pills which are orally ingested and marketed as a weight loss product. The product is therefore subject to the terms of the Cease and Desist Order attached to the Consent Agreement.

2. The following principles applicable to interpretation of advertising in proceedings under 39 U.S.C. § 3005 have been applied in reaching the conclusory findings as to Issues 1, 2, 4, 5, 6, and 7 supra: The meaning of advertising representations is to be judged from a consideration of an advertisement in its totality and the impression it would most probably create in ordinary minds. Donaldson v. Read Magazine, 333 U.S. 178 (1948); Vibra-Brush Corp. v. Schaffer, 152 F. Supp. 461 (S.D.N.Y. 1957); Borg-Johnson Electronics v. Christenberry, 169 F. Supp. 746 (S.D.N.Y. 1959). Express representations are not required. It is the net impression which the advertisement is likely to make upon purchasers to whom it is directed which is important, and even if an advertisement is so worded as not to make an express representation, if it is artfully designed to mislead those responding to it the mail fraud statutes are applicable. G. J. Howard v. Cassidy, 162 F. Supp. 568. See also Virginia State Board of Pharmacy v. Virginia Citizens Council, 425 U.S. 748 (1976).

The ultimate impression on the reader results not only from what is stated but also from what is reasonably implied from an advertisement. Vibra-Brush Corp. v. Schaffer, supra; Aronberg v. Federal Trade Commission, 132 F.2d 165 (7th Cir. 1942).

3. Neither expert or lay testimony nor consumer surveys are required to support the interpretations of advertising made above as to the issues where such testimony and evidence were lacking. Numerous decisions confirm judicial competence to make interpretations of advertisements without benefit of evidence other than the advertisements themselves. Vibra-Brush Corp. v. Schaffer, supra; Ralph J. Galliano, et al., P.S. 19/15 (P.S.D. May 2, 1985); Standard Research Labs, P.S. 7/78, 7/86 (P.S.D. 1980). This judicial competence extends to the interpretation of television commercials. See, e.g., Kingsbridge Media & Marketing, Inc., P.S. 20/17 (I.D. May 14, 1985).

4. The finding that Complainant has failed to sustain its burden of proof as to Issue No. 1 was based on the greater weight given to the results of Respondent's Survey and the opinions of the Drs. Belch based thereon than to the testimony of Dr. Scipione.

5. The unopposed expert testimony of Dr. Ernst J. Drenick was the basis for the conclusory findings as to Issues 3 and 9.

6. On the basis of the above conclusory findings of fact as to Issues 2 through 7 and 9 it is concluded that Respondents have made in their printed and television advertisements representations prohibited by paragraphs (b), (c), and (d) of section I of the Cease and Desist Order lacking, at the time, reliable and competent scientific evidence to substantiate such representations. Respondents have, therefore, breached the Consent Agreement.

7. Except as to Issue No. 1, Complainant has established its case by a preponderance of the competent, reliable, and probative evidence of record.

8. There is no merit in Respondents' argument that Complainant's failure to complain about the post-Consent Agreement Energizer television ads should bar it from taking this action against the Grapefruit 45 Fat Burner commercials. For one thing, there is no evidence that USPS monitored or was otherwise aware of the new Energizer ads. For another, USPS expressed prompt and serious concern about the Grapefruit 45 ads in its letter of August 3, 1984, to Respondent's counsel. This letter pointed to several representations made in a Grapefruit 45 ad aired on July 18, 1984, in San Diego, perceived as within the scope of the Energizer Consent Agreement. Although several months passed before this breach proceeding was commenced, there was some intervening correspondence about the matter. Certainly Respondent was put promptly on notice of the possibility of such action. Consequently, Respondents' assertion of arbitrariness and capriciousness lacks foundation.

9. As noted earlier, Respondents seem to have abandoned their claim of breach of contract based on Complainant's failure to render an advisory opinion on the Grapefruit 45 ads pursuant to paragraph 15 of the Consent Agreement. Nevertheless, it is appropriate to state that paragraph 15 does not apply to Grapefruit 45. It applies only to lotteries and to diet products containing phenylpropanolamine.

10. The making of representations prohibited by the Agreement is not excused by the inclusion of disclaimers. The disclaimers employed in the printed ads were inconspicuous and ambiguous and varied significantly from those set forth in paragraph 9 of the Consent Agreement in that they use the words "may not be" rather than "are not" with regard to the typicality of the testimonials. The televised disclaimers do not comply with paragraph 9 in that (1) important parts of them are not made audibly at all, or if made audibly, are not simultaneous with the video disclaimers, (2) are not presented in easily readable font and (3) important parts of them are not presented for an aggregate minimum of eight seconds. (Finding No. 19, supra) Inconspicuous disclaimers are ineffective to dispel representations found elsewhere in advertisements. Gottlieb v. Shaffer, 141 F. Supp. 7 (S.D.N.Y. 1956); Porter & Dietsch, Inc. v. FTC, 605 F.2d 294, 301, 303, 306 (7th Cir. 1979); Fort Morgan Vapor Jet, P.S. Docket No. 12/64 (P.S.D. Sept. 29, 1982 at 9-10).

11. On the basis of their privity with the Respondents in Docket No. 19/33 and their active involvement in the breach of the Consent Agreement herein, Complainant requests that Lois S. Kholos and Brian Bernheim be added as individual respondents in this proceeding and that they and Jay M. Kholos be included by name in a supplemental cease and desist order. Respondent opposes the request on the ground that the remedy for breaching a contract, i.e., the Consent Agreement, may be applied only to the parties that signed the Agreement. Respondent argues that since Lois S. Kholos and Brian Bernheim were not parties to the Agreement no sanction for breach thereof may be applied to them. Further, Respondent opposes the naming of Jay M. Kholos in a supplemental cease and desist order on the ground that an integral part of the bargain resulting in the Energizer Consent Agreement was the omission of his name from the original cease and desist order and that such bargain is binding in the instant breach proceeding.

39 U.S.C. § 3005(a)(3) provides for the issuance of an order which "requires the person or his representative" found to be engaging in a false representation scheme to cease and desist from engaging in such scheme.

Paragraph 14 of the Consent Agreement provides for the issuance of a supplemental cease and desist order, as authorized under 39 U.S.C. § 3005(a)(3), if appropriate, in the event of a breach of the agreement "by Respondents or any party in privity with any of the Respondents."

Respondents' arguments are not persuasive. The original cease and desist order binds WCI and is also directed to its officers, employees, agents, and representatives who, though unnamed, are bound equally with WCI. This is consistent with § 3005(a)(3) which neither requires nor prohibits the naming of representatives of Respondents to be bound by the orders. Although only WCI and Jay M. Kholos, individually and as president of WCI, executed the Consent Agreement, in paragraph 14 thereof they effectively bound not only themselves, but any party in privity with them, to sanctions for breach of the Agreement. Lois S. Kholos and Brian Bernheim were clearly in privity with WCI and Jay M. Kholos. In accordance with paragraph 21 of the Agreement they were furnished copies thereof within 10 days after its execution and were, therefore, on notice of the provision relating to breach contained therein, particularly their exposure, as parties in privity with WCI and Jay M. Kholos, to breach sanctions. They were served with copies of the Supplemental Petition in this breach proceeding for issuance of a supplemental cease and desist order including them by name. At the hearing there was no offer of evidence on their behalf disputing the allegations of privity made in the Supplemental Petition.

As persons in privity with WCI in the breach of the Agreement and afforded ample opportunity to present evidence and argument in this breach proceeding, it is entirely appropriate that they, along with Jay M. Kholos, be named in the supplemental cease and desist order to be entered herein.

The bargain outside the written Agreement struck by Jay M. Kholos and Complainant for omission of his name from the original cease and desist order has no force or application to a supplemental cease and desist order occasioned by his breach of the Consent Agreement. Kholos was, in fact, advised to this effect by Complainant's counsel before he signed the Agreement (CX-M).

12. It is concluded that Respondents have breached the terms of the Consent Agreement in privity with and with the active participation of Lois S. Kholos and Brian Bernheim and, therefore, that a False Representation Order and a supplemental Cease and Desist Order, naming Jay M. Kholos, Lois S. Kholos, and Brian Bernheim should issue. Such orders are, therefore, being issued contemporaneously with this decision.