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EXHIBIT 10.42
B234118
UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION
COMMISSIONERS: Robert Pitofsky, Chairman
Mary L. Azcuenaga
Sheila F. Anthony
Mozelle W. Thompson
Orson Swindle
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)
In the Matter of )
)
JENNY CRAIG, INC., ) DOCKET NO. 9260
a corporation, and )
) DECISION AND ORDER
JENNY CRAIG INTERNATIONAL, INC., )
a corporation. )
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The Commission having heretofore issued its complaint charging the
respondents named in the caption hereof with violation of Sections 5 and 12 of
the Federal Trade Commission Act, as amended, and the respondents having been
served with a copy of that complaint, together with a notice of contemplated
relief; and
The respondents, their attorneys, and counsel for the Commission having
thereafter executed an agreement containing a consent order, an admission by the
respondents of all the jurisdictional facts set forth in the complaint, a
statement that the signing of said agreement is for settlement purposes only and
does not constitute an admission by respondents that the law has been violated
as alleged in such complaint, or that the facts as alleged in such complaint,
other than jurisdictional facts, are true, and waivers and other provisions as
required by the Commission's Rules; and
The Secretary of the Commission having thereafter withdrawn this matter
from adjudication in accordance with Section 3.25(c) of its Rules; and
The Commission having considered the matter and having thereupon
accepted the executed consent agreement and placed such agreement on the public
record for a period of sixty (60) days, and having duly considered the comments
filed thereafter by interested persons
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pursuant to Section 3.25(f) of its Rules, and having modified the order in
several respects, now in further conformity with the procedure prescribed in
Section 3.25(f) of its Rules, the Commission hereby makes the following
jurisdictional findings and enters the following order:
1. Respondent Jenny Craig, Inc. is a corporation organized, existing,
and doing business under and by virtue of the laws of the State of Delaware,
with its office and principal place of business located at 445 Marine View
Avenue, #300, Del Mar, California, 92014.
Respondent Jenny Craig International, Inc. is a corporation organized,
existing, and doing business under and by virtue of the laws of the State of
California, with its office and principal place of business located at 445
Marine View Avenue, #300, Del Mar, California, 92014.
2. The Federal Trade Commission has jurisdiction of the subject matter
of this proceeding and of the respondents, and the proceeding is in the public
interest.
ORDER
DEFINITIONS
For the purposes of this order, the following definitions shall apply:
A. "Competent and reliable scientific evidence" shall mean those tests,
analyses, research studies, surveys or other evidence based on the expertise of
professionals in the relevant area, that have been conducted and evaluated in an
objective manner by persons qualified to do so, using procedures generally
accepted in the profession to yield accurate and reliable results.
B. "Weight loss program" shall mean any program designed to aid consumers
in weight loss or weight maintenance.
C. "Broadcast medium" shall mean any radio or television broadcast,
cablecast, home video, or theatrical release.
D. For any order-required disclosure in a print medium to be made "clearly
and prominently" or in a "clear and prominent manner," it must be given both in
the same type style and in: (1) twelve point type where the representation that
triggers the disclosure is given in twelve point or larger type; or (2) the same
type size as the representation that triggers the disclosure where that
representation is given in a type size that is smaller than twelve point type.
E. For any order-required disclosure given orally in a broadcast medium to
be made "clearly and prominently" or in a "clear and prominent manner," the
disclosure must be given at the same volume and in the same cadence as the
representation that triggers the disclosure.
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F. For any order-required disclosure given in the video portion of a
television or video advertisement to be made "clearly and prominently" or in a
"clear and prominent manner," the disclosure must be of a size and shade and
must appear on the screen for a duration sufficient for an ordinary consumer to
read and comprehend it.
G. "Short broadcast advertisement" shall mean any advertisement of thirty
seconds or less duration made in a broadcast medium.
I.
IT IS ORDERED that Jenny Craig, Inc., a corporation, and Jenny Craig
International, Inc., a corporation ("respondents"), their successors and
assigns, and respondents' officers, representatives, agents, and employees,
directly or through any corporation, subsidiary, division, or other device,
including franchisees or licensees, in connection with the advertising,
promotion, offering for sale, or sale of any weight loss program, in or
affecting commerce, as "commerce" is defined in the Federal Trade Commission
Act, do forthwith cease and desist from:
A. Making any representations, directly or by implication, about
the success of participants on any weight loss program in achieving or
maintaining weight loss or weight control unless, at the time of making
any such representation, respondents possess and rely upon competent
and reliable evidence, which when appropriate must be competent and
reliable scientific evidence, that substantiates the representation;
provided, further, that for any representation that:
(1) any weight loss achieved or maintained through the
weight loss program is typical or representative of all or any
subset of participants of respondents' program, said evidence
shall, at a minimum, be based on a representative sample of:
(a) all participants who have entered the
program, where the representation relates to such
persons; provided, however, that the required sample
may exclude those participants who dropped out of the
program within two weeks of their entrance or who
were unable to complete the program due to change of
residence or medical reasons, such as pregnancy; or
(b) all participants who have completed a
particular phase of the program or the entire
program, where the representation only relates to
such persons;
(2) any weight loss is maintained long-term, said
evidence shall, at a minimum, be based upon the experience of
participants who were followed for a period of at least two
years from their completion of the active maintenance phase of
respondents' program, or earlier termination, as applicable;
and
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(3) any weight loss is maintained permanently, said
evidence shall, at a minimum, be based upon the experience of
participants who were followed for a period of time after
completing the program that is either:
(a) generally recognized by experts in the field
of treating obesity as being of sufficient length for
predicting that weight loss will be permanent, or
(b) demonstrated by competent and reliable
survey evidence as being of sufficient duration to
permit such a prediction.
B. Representing, directly or by implication, except through endorsements
or testimonials referred to in paragraph I.E. herein, that participants of any
weight loss program have successfully maintained weight loss, unless respondents
disclose, clearly and prominently, and in close proximity to such
representation, the statement: "For many dieters, weight loss is temporary.";
provided, further, that respondents shall not represent, directly or by
implication, that the above-quoted statement does not apply to dieters in
respondents' weight loss program;
provided, however, that a truthful statement that merely describes the
existence, design or content of a weight maintenance or weight management
program or notes that the program teaches clients about how to manage their
weight will not, without more, be considered for purposes of this order a
representation regarding weight loss maintenance success;
C. Representing, directly or by implication, except through short
broadcast advertisements referred to in paragraph I.D. herein, and except
through endorsements or testimonials referred to in paragraph I.E. herein, that
participants of any weight loss program have successfully maintained weight
loss, unless respondents disclose, clearly and prominently, and in close
proximity to such representation, the following information:
(1) the average percentage of weight loss maintained by those
participants,
(2) the duration over which the weight loss was maintained,
measured from the date that participants ended the active weight loss
phase of the program, provided, further, that if any portion of the
time period covered includes participation in a maintenance program(s)
that follows active weight loss, such fact must also be disclosed, and
(3) if the participant population referred to is not
representative of the general participant population for respondents'
programs:
(a) the proportion of the total participant population in
respondents' programs that those participants represent,
expressed in terms of a percentage or actual numbers of
participants, or
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(b) the statement: "Jenny Craig makes no claim that this
[these] result[s] is [are] representative of all participants
in the Jenny Craig program.";
provided, however, that for representations about weight loss
maintenance success that do not use a number or percentage, or
descriptive terms that convey a quantitative measure such as "most of
our customers maintain their weight loss long-term," respondents may,
in lieu of the disclosures required in C.(1)-(3) above,
(i) include, clearly and prominently, and in immediate
conjunction with such representation, the statement: "Check at
our centers for details about our maintenance record."; and
(ii) for a period of time beginning with the date of the
first dissemination or broadcast of any such advertisement and
ending no sooner than thirty (30) days after the last
dissemination or broadcast of such advertisement, give to each
potential client, upon the first presentation of any form
asking for information from the potential client, but in any
event before such person has entered into any agreement with
respondents, a separate document entitled "Maintenance
Information," which shall include all the information required
by paragraph I.B. and subparagraphs I.C.(1)-(3) of this order,
formatted in the exact type size and style as the example form
described in paragraph I.D.(2)(a) and set out below;
provided, further, that compliance with the obligations of this
paragraph I.C. in no way relieves respondents of the requirement under
paragraph I.A. of this order to substantiate any representation about
the success of participants on any weight loss program in maintaining
weight loss.
D. Representing, directly or by implication, in short broadcast
advertisements, that participants of any weight loss program have successfully
maintained weight loss, unless respondents:
(1) include, clearly and prominently, and in immediate conjunction
with such representation, the statement: "Check at our centers for
details about our maintenance record.";
(2) for a period of time beginning with the date of the first
broadcast of any such advertisement and ending no sooner than thirty
days after the last broadcast of such advertisement, comply with the
following procedures upon the first presentation of any form asking for
information from a potential client, but in any event before such
person has entered into any agreement with respondents:
(a) give to each potential client a separate document
entitled "Maintenance Information," which shall include all
the information required by paragraph I.B. and subparagraphs
I.C.(1)-(3) of this order and shall be formatted in the exact
type size and style as the example form below, and shall
include the heading (Helvetica
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14 pt. bold), lead-in (Times Roman 12 pt.), disclosures
(Helvetica 14 pt. bold), acknowledgment language (Times Roman
12 pt.) and signature block therein; provided, further, that
no information in addition to that required to be included in
the document required by this subparagraph I.D.(2) shall be
included therein;
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MAINTENANCE INFORMATION
You may have seen our recent ad about maintenance success. Here's some
additional information about our maintenance record.
[DISCLOSURE OF MAINTENANCE STATISTICS GOES HERE
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX XXXXXX] FOR MANY DIETERS,
WEIGHT LOSS IS TEMPORARY.
I have read this notice. __________________________________ _____________
(Client Signature) (Date)
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(b) require each potential client to sign such document;
and
(c) give each client a copy of such document; and
(3) retain in each client file a copy of the signed maintenance
notice required by this paragraph;
provided, further, that: (1) compliance with the obligations of this paragraph
I.D. in no way relieves respondents of the requirement under paragraph I.A. of
this order to substantiate any representation about the success of participants
on any weight loss program in maintaining weight loss; and (2) respondents must
comply with both paragraph I.D. and paragraph I.C. of this order if respondents
include in any such short broadcast advertisement a representation about
maintenance success that states a number or percentage, or uses descriptive
terms that convey a quantitative measure such as "most of our customers maintain
their weight loss long-term";
provided, however, that the provisions of paragraph I.D. shall not apply to
endorsements or testimonials referred to in paragraph I.E. herein.
E. Using any advertisement containing an endorsement or testimonial about
weight loss success or weight loss maintenance success by a participant or
participants of respondents' weight loss program if the weight loss success or
weight loss maintenance success depicted in the advertisement is not
representative of what participants of respondents' weight loss programs
generally achieve, unless respondents disclose, clearly and prominently, and in
close proximity to the endorser's statement of his or her weight loss success or
weight loss maintenance success:
(1) What the generally expected success would be for Jenny Craig
customers in losing weight or maintaining achieved weight loss;
provided, however, that in determining the generally expected success
for Jenny Craig customers, respondents may exclude those customers who
dropped out of the program within two weeks of their entrance or who
were unable to complete the program due to change of residence or
medical reasons, such as pregnancy; and that for endorsements or
testimonials about weight loss success, respondents can satisfy the
requirements of this subparagraph by accurately disclosing:
(a) the generally expected success for Jenny Craig
customers in the following phrase: "Weight loss averages
(number) lbs. over ___ weeks;" or
(b) the average number of pounds lost by Jenny Craig
customers, using the following phrase: "Average weight loss
(number) lbs. More details at centers;" and, for a period of
time beginning with the date of the first dissemination of any
such advertisement and ending no sooner than thirty days after
the last dissemination of such advertisement, making in any
on-
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site video promotion the preceding disclosure orally and
complying with the following procedures upon the first
presentation of any form asking for information from a
potential client, but in any event before such person has
entered into any agreement with respondents:
(i) give to each potential client a separate
one-page document with an appropriate title that
alerts customers that important information follows,
which shall disclose, clearly and prominently, what
the generally expected success would be for Jenny
Craig customers in losing weight, expressed in terms
of both average number of pounds lost and average
duration of participation in the Jenny Craig program;
such document shall be formatted in the following
type size and style: heading (Helvetica 14 pt. bold),
disclosures (Helvetica 14 pt. bold), signature block
(Times Roman 12 pt.), and any other language (no
larger than 14 pt.); provided, further, that no
information that contradicts this information shall
be included in the document required by this
subparagraph;
(ii) ask each potential client to sign such
document;
(iii) give each client a copy of such document;
and
(iv) retain in each client file a copy of the
notice provided to clients under the requirements of
this subparagraph; or
(2) the limited applicability of the endorser's experience to what
consumers may generally expect to achieve; i.e., that consumers should
not expect to experience similar results; respondents can satisfy the
requirements of this subparagraph by clearly and prominently disclosing
in close proximity to the representation one of the following
statements:
(a) "You should not expect to experience these results."
(b) "This result is not typical. You may not do as well."
(c) "This result is not typical. You may be less
successful."
(d) "_____________'s success is not typical. You may not
do as well."
(e) "_____________'s experience is not typical. You may
achieve less."
(f) "Results not typical."
(g) "Results not typical of program participants."
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provided, however, that a truthful statement that merely describes the
existence, design or content of a weight maintenance or weight management
program or notes that the program teaches clients how to manage their weight, or
which states either through the endorser or in nearby copy that under the
program "weight loss maintenance is possible," or words to that effect, will
not, without more, be considered for purposes of this paragraph a representation
regarding weight loss maintenance success or trigger the need for separate or
additional maintenance disclosures required by other paragraphs of the order;
provided, further, that:
(i) a representation about maintenance by an endorser that states
a number or percentage, or uses descriptive terms that convey a
quantitative measure, such as "I have kept of most of my weight loss
for 2 years," shall be considered a representation regarding weight
loss maintenance success;
(ii) if endorsements or testimonials covered by this paragraph are
made in a broadcast medium, any disclosure required by this paragraph
must be communicated in a clear and prominent manner and in immediate
conjunction with the representation that triggers the disclosure.
F. Representing, directly or by implication, that the price at which any
weight loss program can be purchased is the only cost associated with losing
weight on that program, unless such is the case.
G. Representing, directly or by implication, the price at which any weight
loss program can be purchased, unless respondents disclose, clearly and
prominently, either (1) in close proximity to such representation, the existence
and amount of all mandatory costs and fees associated with the program offered;
or (2) in immediate conjunction with such representation, the following
statement: "Plus the cost of [list of products or services that participants
must purchase at additional cost].";
provided, further, that in a broadcast medium, if the representation that
triggers the disclosure is oral, the required disclosure must also be made
orally.
H. Failing to disclose over the telephone, for a period of time beginning
with the date of any advertisement of the price at which any weight loss program
can be purchased and ending no sooner than 180 days after the last dissemination
of any such advertisement, to consumers who inquire about the cost of any weight
loss program, or are told about the cost of any weight loss program, the
existence and amount of any mandatory costs or fees associated with
participation in the program.
I. Representing, directly or by implication, that prospective participants
in respondents' weight loss program will reach a specified weight within a
specified time
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period, unless at the time of making such representation, respondents possess
and rely upon competent and reliable scientific evidence substantiating the
representation.
J. Misrepresenting, directly or by implication, the rate or speed at which
any participant in any weight loss program has experienced or will experience
weight loss.
K. Failing to disclose, clearly and prominently, in writing either:
1) to all participants when they enter the program; or
2) to each participant whose average weekly weight loss exceeds
two percent (2%) of his or her initial body weight, or three pounds,
whichever is less, for at least two consecutive weeks;
that failure to follow the program protocol and eat all of the food recommended
may involve the risk of developing serious health complications.
L. Misrepresenting, directly or by implication, the performance, efficacy,
price, or safety of any weight loss program or weight loss product.
M. Representing, directly or by implication, that participants on any
weight loss program recommend or endorse the program unless, at the time of
making any such representation, respondents possess and rely upon competent and
reliable evidence, which when appropriate must be competent and reliable
scientific evidence, that substantiates such representation.
N. Misrepresenting, directly or by implication, the existence, contents,
validity, results, conclusions, or interpretations of any test, study, or
survey.
II.
IT IS FURTHER ORDERED that respondents shall notify the Commission at
least thirty (30) days prior to the effective date of any proposed change such
as dissolution, assignment, or sale resulting in the emergence of a successor
corporation(s), the creation or dissolution of subsidiaries, or any other change
in the corporation(s) that may affect compliance obligations arising out of this
order.
III.
IT IS FURTHER ORDERED that for three (3) years after the last date of
dissemination of any representation covered by this order, respondents, or their
successors and assigns, shall maintain and upon request make available to the
Federal Trade Commission for inspection and copying:
A. All materials that were relied upon in disseminating such
representation; and
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B. All tests, reports, studies, surveys, demonstrations or other
evidence in their possession or control that contradict, qualify, or
call into question such representation, or the basis relied upon for
such representation, including complaints from consumers.
IV.
IT IS FURTHER ORDERED that respondents shall distribute a copy of this
order to each of their officers, agents, representatives, independent
contractors and employees who are involved in the preparation and placement of
advertisements or promotional materials or in communication with customers or
prospective customers or who have any responsibilities with respect to the
subject matter of this order; and, for a period of ten (10) years from the date
of entry of this order, distribute same to all future such officers, agents,
representatives, independent contractors and employees.
V.
IT IS FURTHER ORDERED that:
A. Respondents shall distribute a copy of this order to each of
their franchisees and licensees and shall contractually bind them to
comply with the prohibitions and affirmative requirements of this
order; respondents may satisfy this contractual requirement by
incorporating such order requirements into their current Operations
Manual; and
B. Respondents shall further make reasonable efforts to monitor
their franchisees' and licensees' compliance with the order provisions;
respondents may satisfy this requirement by: (1) taking reasonable
steps to notify promptly any franchisee or licensee that respondents
determine is failing materially or repeatedly to comply with any order
provision that such franchisee or licensee is not in compliance with
the order provisions and that disciplinary action may result from such
noncompliance; and (2) providing the Federal Trade Commission with the
name and address of the franchisee or licensee and the nature of the
noncompliance if the franchisee or licensee fails to comply promptly
with the relevant order provision after being so notified; provided,
however, that the requirements of this Part V will not, by themselves,
increase the liability of respondents for any acts and practices of
their franchisees or licensees that violate this order.
VI.
IT IS FURTHER ORDERED that this order will terminate on February 19,
2018, or twenty (20) years from the most recent date that the United States or
the Federal Trade Commission files a complaint (with or without an accompanying
consent decree) in federal court alleging any violation of the order, whichever
comes later; provided, however, that the filing of such a complaint will not
affect the duration of:
A. Any paragraph in this order that terminates in less than
twenty (20) years;
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B. This order's application to any respondent that is not named
as a defendant in such complaint; and
C. This order if such complaint is filed after the order has
terminated pursuant to this paragraph.
Provided, further, that if such complaint is dismissed or a federal court rules
that the respondent did not violate any provision of the order, and the
dismissal or ruling is either not appealed or upheld on appeal, then the order
will terminate according to this paragraph as though the complaint was never
filed, except that the order will not terminate between the date such complaint
is filed and the later of the deadline for appealing such dismissal or ruling
and the date such dismissal or ruling is upheld on appeal.
VII.
IT IS FURTHER ORDERED that respondents shall, within sixty (60) days
after the date of service of this order, and one year thereafter, file with the
Commission a report, in writing, setting forth in detail the manner and form in
which they have complied with this order.
By the Commission, Chairman Pitofsky recused and Commissioner Azcuenaga
not participating.
Donald S. Clark
Secretary
ISSUED: February 19, 1998
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