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Three Health Care Cases - FTC Finalizes Consent Agreements.
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NOTE: Here is where you can find advertising law information based on news briefs that appeared in past issues of Advertising Compliance Service, "Your Single Essential Advertising Law Resource," during the month of May 2000.


Three Health Care Cases - FTC Finalizes Consent Agreements

FTC has finalized consent agreements with three companies as follows:

CMO Distribution Centers of America, Inc.

The Commission vote to finalize the consent order was 5-0.

(CMO Distribution Centers of America, Inc., FTC File No. 982-3180; C-3942; May 23, 2000; see Advertising Compliance Service, Tab #15, New Media, Article #92.)

EHP Products, Inc.

The Commission vote to finalize the consent order was 5-0.

(EHP Products, Inc., FTC File No. 982-3182; C-3940; May 23, 2000; see Advertising Compliance Service, Tab #15, New Media, Article #92.)

Natural Heritage Enterprises

The Commission vote to finalize the consent order was 5-0.

(Natural Heritage Enterprises, et al., FTC File No. 992-3125; C-3941; May 23, 2000; see Advertising Compliance Service, Tab #15, New Media, Article #92.)

These three FTC cases are important because the Commission used them to take additional powerful steps to yet again vastly increase its jurisdiction over the Internet.

In these FTC cases, the companies agreed to settle the charges and the now final settlement agreements were announced for public comment.

According to FTC, CMO Distribution Centers of America sold its--

"CMO capsules for approximately $100 per bottle. CMO Distribution Centers made claims that its product would regulate and normalize the immune system in a single course of treatment and would cure arthritis and reverse the effects of the disease. The product was also claimed to be effective in treating other conditions, including asthma, emphysema and certain cancers. The company claimed that its product has been recognized in medical newsletters and scientific journals to be a revolutionary breakthrough in treating arthritis. The complaint alleges that CMO's efficacy claims are unsubstantiated and that the claims about certain scientific studies, including statements that CMO is accepted in the medical community or by the Arthritis Foundation, are false."

The finalized settlements resolve the charges by barring CMO Distribution and EHP from making unsubstantiated claims for Essiac Tea and CMO, respectively. The companies are also barred from making unsubstantiated health claims for any food, drug, dietary supplement or program and from misrepresenting the results of any tests, study or research. The settlements further bar respondents from making any representations about the performance, safety, efficacy or health benefits of their products or any other food, dietary supplement or drug, without adequate substantiation.

Also, the settlements with CMO Distribution and EHP require respondents to offer full refunds to consumers who bought their products for personal use or that of their families, and to notify distributors of the settlements and to monitor their future advertising.

NOTE: Consent agreements are for settlement purposes only and do not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.


Karin Stevens, Inc. is a designer and importer of ladies dresses and pant suits. The firm recently agreed to pay a $20,000 civil penalty to settle FTC charges that it lacked a reasonable basis for the care instructions it placed on some garments, in violation of FTC's Care Labeling Rule. According to FTC's complaint, Karin Stevens failed to state on the "care label" for several of its garments, a regular care procedure needed for ordinary product use. Some garments were damaged when cleaned according to their recommended cleaning instructions, according to FTC.

The settlement would also bar Karin Stevens from violating the Care Labeling Rule in the future. Karin Stevens sells its garments under the "Karin Stevens," "Karin Stevens Petite" and "KSL" labels to various retailers.

The Care Labeling Rule requires manufacturers and importers of clothing to attach care labels that state what regular care is needed for the ordinary use of the garment. If the label includes a dry cleaning instruction, the Rule requires that "it must also state at least one type of solvent that may be used," unless all commercially available types of solvents can be used. FTC charged that Karin Stevens mislabeled several of its garment styles by failing to specify a solvent or provide warnings about necessary modifications of the normal drycleaning process. The company recommended on its care labels that the garments at issue be dry cleaned. However, when the most common dry cleaning solvent was used, the beaded trim on the garments was damaged, FTC charged.

The complaint and proposed settlement were filed at FTC's request by the Department of Justice in the U.S. District Court for the Southern District of New York on May 23, 2000. The consent decree is subject to court approval.

NOTE: This consent decree is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Consent decrees have the force of law when signed by the judge.

(Karin Stevens, Inc., FTC File No. 982 3186, Civil Action No. 00CV-3923, May 24, 2000.)

INTERNET MATERIALS: Materials relating to these FTC matters are available on the Internet at FTC's World Wide Web site at:




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