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L&S Research Corporation Proposed Consent Agreement (1994)

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L&S Research Corporation Proposed Consent Agreement (1994)

Case: L&S Research Corporation Proposed Consent Agreement (1994)

Subject Category: Consent Agreement

Agency Involved: FTC      

Complaint Synopsis: The FTC claimed that L&S Research claimed that its products were effective in achieving results that were not supported by reliable scientific research. 

Consent Details: L&S Research Corporation manufactured weight loss and body building supplements marketed under the Cybergencis trade name. The company agreed to stop advertising that the product would be effective in helping the user gain muscle or lose fat and that the product would work for all users. The company also agreed to stop using before and after photographs in the marketing of their products unless the photographs represent the typical experience of the users and the photographs are true representations. The company further agreed to pay a fine of $1.45 million, and maintain records of their compliance with the consent agreement.

Practical Importance to Business of MLM/Direct Sales/Direct Selling/Network Marketing/Party Plan/Multilevel Marketing: Photographs used to demonstrate a product's efficacy must properly demonstrate the typical experience of users, just as endorsements and client testimony are required to.

L&S Research Corporation Proposed Consent Agreement (1994) , File No. 912 3004 : L&S Research Corporation manufactured weight loss and body building supplements marketed under the Cybergencis trade name. The company agreed to stop advertising that the product would be effective in helping the user gain muscle or lose fat and that the product would work for all users. The company also agreed to stop using before and after photographs in the marketing of their products unless the photographs represent the typical experience of the users and the photographs are true representations. The company further agreed to pay a fine of $1.45 million, and maintain records of their compliance with the consent agreement.

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 [Federal Register: July 27, 1994]

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FEDERAL TRADE COMMISSION

[File No. 912 3004]

L&S Research Corporation, et al.; Proposed Consent Agreement With

Analysis to Aid Public Comment

 

AGENCY: Federal Trade Commission.

 

ACTION: Proposed consent agreement.

 

-----------------------------------------------------------------------

 

SUMMARY: In settlement of alleged violations of federal law prohibiting

unfair acts and practices and unfair methods of competition, this

consent agreement, accepted subject to final Commission approval, would

require, among other things, the New Jersey corporation and its officer

to pay $1.45 million to the United States Treasury, would prohibit the

respondents from making misrepresentations regarding the efficacy of

their bodybuilding an weight loss products, and would require them to

possess competent and reliable scientific evidence to substantiate

future bodybuilding and weight loss claims.

 

DATES: Comments must be received on or before September 26, 1994.

 

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,

Room 159, 6th St. and Pa. Ave., N.W., Washington, D.C. 20580.

 

FOR FURTHER INFORMATION CONTACT:

Richard Cleland or Nancy Warder, FTC/S-4002, Washington, D.C. 20580.

(202) 326-3088.

 

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal

Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Section 2.34 of

the Commission's Rules of Practice (16 CFR 2.34), notice is hereby

given that the following consent agreement containing a consent order

to cease and desist, having been filed with and accepted, subject to

final approval, by the Commission, has been placed on the public record

for a period of sixty (60) days. Public comment is invited. Such

comments or views will be considered by the Commission and will be

available for inspection and copying at its principal office in

accordance with Section 4.9(b)(6)(ii) of the Commission's Rules of

Practice (16 CFR 4.9(b)(6)(ii)).

 

Before Federal Trade Commission

 

    In the matter of L&S Research Corporation, a corporation, and

Scott Chinery, individually and as an officer of said corporation.

File No. 912-3004.

 

Agreement Containing Consent Order To Cease and Desist

 

    The Federal Trade Commission, having initiated an investigation of

certain acts and practices of L&S Research Corporation, a corporation,

and Scott Chinery, individually and as an officer of said corporation,

and it now appearing that L&S Research Corporation, a corporation, and

Scott Chinery, individually and as an officer of said corporation,

hereinafter sometimes referred to as proposed respondents, are willing

to enter into an agreement containing an Order to cease and desist from

the use of the acts and practices being investigated,

    It is hereby agreed by and between L&S Research Corporation, by its

authorized officer, and Scott Chinery, individually and as an officer

of said corporation that,

    1. (a) Proposed respondent L&S Research Corporation is a

corporation organized, existing, and doing business under and by virtue

of the laws of the State of New Jersey, with its office and principal

place of business located at 450 Oberlin Ave., S., in the City of

Lakewood, State of New Jersey.

    (b) Proposed respondent Scott Chinery is an officer of said

corporation. He formulates, directs, and controls the policies, acts,

and practices of said corporation, and his principal place of business

is located at the above stated address.

    2. Proposed respondents admit all the jurisdictional facts set

forth in the draft complaint here attached.

    3. Proposed respondents waive:

    (a) any further procedural steps;

    (b) the requirement that the Commission's decision contain a

statement of facts or conclusion of law;

    (c) all rights to seek judicial review or otherwise to challenge or

contest the validity of the Order entered pursuant to this agreement;

and

    (d) all claims under the Equal Access to Justice Act.

    4. This Agreement shall not become part of the public record in the

proceeding unless and until it is accepted by the Commission. If this

Agreement is accepted by the Commission it, together with the draft of

complaint contemplated thereby, will be placed on the public record for

a period of sixty (60) days and information in respect thereto publicly

released. The Commission thereafter may either withdraw its acceptance

of the Agreement and so notify the proposed respondents, in which event

it will take such action as it may consider appropriate, or issue and

serve its complaint (in such form as the circumstances may require) and

decision, in disposition of the proceeding.

    5. This Agreement is for settlement purposes only and does not

constitute an admission by the proposed respondents of facts, other

than jurisdictional facts, or of violations of law as alleged in the

draft complaint here attached, or that proposed respondents have

engaged in any other unlawful conduct.

    6. This Agreement contemplates that, if it is accepted by the

Commission, and if such acceptance is not subsequently withdrawn by the

Commission pursuant to the provisions of Sec. 2.34 of the Commission's

Rules, the Commission may, without further notice to the proposed

respondents, (1) issue its complaint corresponding in form and

substance with the draft of complaint here attached and its decision

concerning the following Order to cease and desist in disposition of

the proceeding, and (2) make information public in respect thereto.

When so entered, the Order to cease and desist shall have the same

force and effect and may be altered, modified, or set aside in the same

manner and within the same time provided by statute for other orders.

The Order shall become final upon service. Delivery to the U.S. Postal

Service of the complaint and decision containing the agreed-to Order to

proposed respondents' addresses as stated in this agreement shall

constitute service. Proposed respondents waive any right they may have

to any other manner of service. The complaint may be used in construing

the terms of the Order, and no agreement, understanding,

representation, or interpretation not contained in the Order or the

Agreement may be used to vary or contradict the terms of the Order.

    7. Proposed respondents have read the proposed complaint and Order

contemplated hereby. They understand that once the Order has been

issued, they will be required to file one or more compliance reports

showing they have fully complied with the Order. Proposed respondents

further understand that they may be liable for civil penalties in the

amount provided by law for each violation of the Order after it becomes

final.

    8. If it is accepted by the Commission, this Agreement constitutes

a full settlement between the Commission and proposed respondents as to

the activities alleged in the complaint to have constituted violations

of the Federal Trade Commission Act and which occurred prior to the

date of entry of the Order. As to those activities alleged in the

complaint, and which occurred prior to the date of entry of the Order,

the Commission hereby releases the proposed respondents from all other

further liability to the Commission.

 

Order

 

    For purposes of this Order the following definitions apply:

    A. ``Competent and reliable scientific evidence'' shall mean tests,

analyses, research, studies, or other evidence, based on the expertise

of professionals in the relevant area that has been conducted and

evaluated in an objective manner by persons qualified to do so, using

procedures generally accepted by others in the profession to yield

accurate and reliable results.

    B. ``Substantially similar product'' shall mean any product that is

substantially similar in composition, in terms of the types of

ingredients that it contains, or possesses substantially similar

properties.

I

    It is ordered That respondents, L&S Research Corporation, a

corporation, its successors and assigns, and Scott Chinery,

individually and as an officer of said corporation, and respondents'

agents, representatives, and employees, directly or through any

corporation, subsidiary, division, or other device, in connection with

the manufacturing, labeling, advertising, promotion, offering for sale,

sale, or distribution of the product component of Cybergencis Total

Body Building System, Cybergencis for Hard Gainers, or any

substantially similar product, in or affecting commerce, as

``commerce'' is defined in the Federal Trade Commission Act, do

forthwith cease and desist from representing, in any manner, directly

or by implication, that:

    A. Any such product component causes a user of such product to

achieve greater or more rapid loss of fat or gain of muscle than a non-

user of such product; or

    B. Any such product component works for all users.

II

    It is further ordered That respondents, L&S Research Corporation, a

corporation, its successors and assigns, and Scott Chinery,

individually and as an officer of said corporation, and respondents'

agents, representatives, and employees, directly or through any

corporation, subsidiary, division, or other device, in connection with

the manufacturing, labeling, advertising, promotion, offering for sale,

sale, or distribution of Cybergenics Mega-Fat Burner Tablet (also known

as Super Fat-Loss Tablet) [referred to herein as Cybergenics Mega-Fat

Burner Tablet], or the product component of Cybertrim, Cybergenics

QuickTrim, or any substantially similar product, in or affecting

commerce, as ``commerce'' is defined in the Federal Trade Commission

Act, do forthwith cease and desist from representing, in any manner,

directly or by implication, that:

    A. Any such product component or Cybergenics Mega-Fat Burner Tablet

causes a user of such product to maintain weight loss longer than a

non-user of such product; or

    B. Any such product component or Cybergenics Mega-Fat Burner Tablet

provides a benefit to a maturing person who uses such product which

causes that person to lose more weight than a non-user of such product.

III

    It is further ordered That respondents, L&S Research Corporation, a

corporation, its successors and assigns, and Scott Chinery,

individually and as an officer of said corporation, and respondents'

agents, representatives, and employees, directly or through any

corporation, subsidiary, division, or other device, in connection with

the manufacturing, labeling, advertising, promotion, offering for sale,

sale, or distribution of Cybergenics Mega-Fat Burner Tablet, or the

product component of Cybergenics Total Body Building System,

Cybergenics for Hard Gainers, Cybertrim, Cybergenics QuickTrim, or any

substantially similar product, (do forthwith cease and desist from

representing, directly or by implication, contrary to fact, that

scientific evidence demonstrates that:

    A. Any such product intended for body building causes a user to

lose more fat or gain more muscle than a non-user of such product; or

    B. Any such product intended for weight or fat loss causes a user

to lose more fat or weight than a non-user of such product.

IV

    It is further ordered That respondents, L&S Research Corporation, a

corporation, its successors and assigns, and Scott Chinery,

individually and as an officer of said corporation and respondents'

agents, representatives, and employees, directly or through any

corporation, subsidiary, division, or other device, in connection with

the manufacturing, labeling, advertising, promotion, offering for sale,

sale, or distribution of any product or program in or affecting

commerce, as ``commerce'' is defined in the Federal Trade Commission

Act, do forthwith cease and desist from representing, in any manner,

directly or by implication, that:

    A. Any such product or program causes, assists, or enables a user

to lose or control weight or fat loss, or maintain weight or fat loss,

or to suppress hunger or appetite;

    B. Any such product or program causes, assists, or enables a user

to achieve muscle gain or development;

    C. Any such product or program works for all users;

    D. Chromium picolinate in any such product, or used in conjunction

with any such program, builds muscle, reduces fat, or lowers

cholesterol; or

    E. Any such product or program intended for body building, weight

loss, or fat loss is more effective than other products or programs

intended for similar purposes; unless, at the time of making such

representation, respondents possess and rely upon competent and

reliable scientific evidence that substantiates the representation.

V

    It is further ordered That respondents, L&S Research Corporation, a

corporation, its successors and assigns, and Scott Chinery,

individually and as an officer of said corporation, and respondents'

agents, representatives, and employees, directly or through any

corporation, subsidiary, division, or other device, in connection with

the manufacturing, labeling, advertising, promotion, offering for sale,

sale, or distribution of any product or program in or affecting

commerce, as ``commerce'' is defined in the Federal Trade Commission

Act, do forthwith cease and desist from representing, in any manner,

directly or by implication, that any endorsement (as ``endorsement'' is

defined in 16 CFR Sec. 255.0(b)), including ``before'' and ``after''

pictures) of a product or program represents the typical or ordinary

experience of members of the public who use the product or program,

unless at the time of making such representation, the representation is

true, and respondents possess and rely upon competent and reliable

evidence, which when appropriate must be competent and reliable

scientific evidence, that substantiates such representation, provided,

however, respondents may use such endorsements, including accurate

``before'' and ``after'' pictures, if the statements or depictions that

comprise the endorsements are true and accurate, and if respondents

disclose clearly and prominently and in close proximity to the

endorsement what the generally expected performance would be in the

depicted circumstances or the limited applicability of the endorser's

experience to what consumers may generally expect to achieve, that is,

that consumers should not expect to experience similar results.

VI

    It is further ordered That respondents, L&S Research Corporation, a

corporation, its successors and assigns, and Scott Chinery,

individually and as an officer of said corporation, and respondents'

agents, representatives, and employees, directly or through any

corporation, subsidiary, division, or other device, in connection with

the manufacturing, labeling, advertising, promotion, offering for sale,

sale, or distribution of any product or program in or affecting

commerce, as ``commerce'' is defined in the Federal Trade Commission

Act, do forthwith cease and desist from misrepresenting, in any manner,

directly or by implication, that:

    A. Any such product or program is new or unique; or

    B. The ease of use of, or lack of effort required by, any such

product or program intended for weight or fat loss if achieving the

advertised results depends on adhering to a special diet or exercising.

VII

    It is further ordered That respondents, L&S Research Corporation, a

corporation, its successors and assigns, and Scott Chinery,

individually and as an officer of said corporation, and respondents'

agents, representatives, and employees, directly or through any

corporation, subsidiary, division, or other device, in connection with

the manufacturing, labeling, advertising, promotion, offering for sale,

sale, or distribution of any product or program in or affecting

commerce, as ``commerce'' is defined in the Federal Trade Commission

Act, do forthwith cease and desist from misrepresenting, in any manner,

directly or by implication, the contents, validity, results,

conclusions, or interpretations of any test or study.

VIII

    It is further ordered That within five (5) business days of the

date of service of this Order, respondent L&S Research Corporation, or

its successors and assigns, shall pay the sum of one million four

hundred fifty thousand dollars ($1,450,000.00) to the United States

Treasury. Such payment shall be by cashier's check or certified check

made payable to the United States Treasury. In the event of default of

payment, which default continues for more than ten (10) days beyond the

due date of payment, and without any notice required to be given to the

respondents:

    A. Respondent shall also pay interest as computed under 28 U.S.C.

Sec. 1961, which shall accrue on the unpaid balance from the date of

default until the date the balance is fully paid;

    B. Individual respondent Scott Chinery shall become liable for the

full unpaid balance and interest; and

    C. The Commission may draw the balance of the payment due on the

Irrevocable Standby Letter of Credit, which has been provided by

respondent as security for the payment provided for herein.

    No portion of the payment herein described shall be deemed a

payment of any fine, penalty, or punitive assessment against

respondents with respect to the acts and practices which are the

subject of the Complaint and which occurred prior to issuance of the

Order.

IX

    It is further ordered That the corporate respondent L&S Research

Corporation shall for five (5) years following the service of this

Order, notify the Commission at least thirty (30) days prior to any

change in the corporate respondent such as dissolution, assignment, or

sale resulting in the emergence of a successor corporation, the

creation or dissolution of subsidiaries, or any other change in the

corporation that may affect compliance obligations arising out of the

Order, or of any change in the position and responsibilities of the

individual respondent Scott Chinery in regard to L&S Research

Corporation or any subsidiary of which he is an officer. The expiration

of the notice provisions of this part shall not affect any other

obligation arising out of this Order. In addition, respondents shall

require, as a condition precedent to the closing of the sale or other

disposition of L&S Research Corporation or the right to the use of the

name Cybergenics or to market any of the products in its product line,

that the acquiring party file with the Commission, prior to the closing

of such sale or other disposition, a written agreement to be bound by

the provisions of this Order.

X

    It is further ordered That the individual respondent Scott Chinery

promptly notify the Commission of the discontinuance of his present

business or employment and of his affiliation with a new business or

employment. In addition, for a period of five (5) years from the date

of service of this Order, the individual respondent shall promptly

notify the Commission of each affiliation with a new business or

employment. Each such notice shall include the individual respondent's

new business address and a statement of the business or employment in

which the respondent is newly engaged as well as a description of

respondent's duties and responsibilities in connection with the

business or employment. The expiration of the notice provisions of this

part shall not affect any other obligation arising under this Order.

XI

    It is further ordered That for five (5) years after the last date

of dissemination of any representation covered by this Order,

respondents, or their successors or 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

    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.

XII

    It is further ordered That respondent L&S Research Corporation

shall:

    A. Within thirty (30) days after service of this Order, provide a

copy of this Order to each of respondent's current principals,

officers, directors and managers, and to all personnel, agents, and

representatives having sales, advertising, or policy responsibility

with respect to the subject matter of this Order;

    B. For a period of five (5) years from the date of entry of this

Order, provide a copy of this Order to each of respondent's principals,

officers, directors, and managers, and to all personnel, agents, and

representatives having sales, advertising, or policy responsibility

with respect to the subject matter of this Order who are associated

with respondent or any subsidiary, successor, or assign, within three

(3) days after the person assumes his or her position; and that

respondent secure from each such person a signed statement

acknowledging receipt of said Order.

XIII

    It is further ordered That the respondents herein shall within

sixty (60) days after service upon them of this Order, and at such

other times as the Commission may require, file with the Commission a

report, in writing, setting forth in detail the manner and form in

which they have complied with this Order.

 

Analysis of Proposed Consent Order to Aid Public Comment

 

    The Federal Trade Commission has accepted an agreement to a

proposed consent order from respondents L&S Research Corporation and

Scott Chinery.

    The proposed consent order has been placed on the public record for

sixty (60) days for reception of comments by interested persons.

Comments received during this period will become part of the public

record. After sixty (60) days the Commission will again review the

agreement and the comments received and will decide whether it should

withdraw from the agreement or make final the agreement's proposed

order.

 

Body Building Products

 

    The Commission's complaint charges that the respondents deceptively

advertised Cybergenics Total Body Building System and Cybergenics for

Hard Gainers, two body building products. According to the complaint,

the respondents' advertisements made false and/or unsubstantiated

representations that either or both body building products: (1) cause

users to lose more body fat and gain more muscle than non-users; (2)

cause users to lose body fat and gain muscle more rapidly than non-

users; (3) cause users to gain more muscle than users of other body

building products; (4) have been demonstrated by scientific research to

cause users to gain more muscle than non-users; (5) work for all

people; and (6) are new and unique.

 

Weight Loss Products

 

    The Commission's complaint also charges that the respondents

deceptively advertised there weight loss products, Cybergenics

CyberTrim, Cybergenics Mega-Fat Burner, and Cybergenics QuickTrim.

According to the complaint, the respondents' advertisements made false

and/or unsubstantiated representations that one or more of the wright

loss products: (1) cause users to lose body fat and weight more rapidly

than non-users; (2) cause users to lose weight and lose or burn more

body fat than non-users; (3) cause users to lose more body fat and

weight than users of all other weight loss products; (4) cause users to

lose weight more rapidly than the users of all other weight loss

products; (5) are superior to other appetite suppressants; (6) suppress

hunger and the biochemical message stimulated by the catabolism of fat;

(7) cause users to gain more muscle than non-users; (8) contain an

ingredient, chromium picolinate, that has been clinically proven to

reduce fat and lower cholesterol; (9) are new and unique; (10) cause

users to maintain weight loss longer than non-users; (11) cause

maturing women to lose more weight than non-users of the product; (12)

are easy to use; and (13) have been demonstrated by scientific evidence

to cause users to lose more fat and weight, and to gain more muscle,

than non-users.

 

Use of Testimonials

 

    The Commission's complaint also charges that statements and

depictions, including ``before'' and ``after'' pictures, in the

respondents' advertisements for their body building and weight loss

products, represent that the testimonials from consumers who use the

advertised product reflect the typical or ordinary experience of

members of the public who use the products. According to the complaint,

the respondents did not have a reasonable basis for this

representation.

    In addition, the complaint alleges that the use of a picture of a

man in an advertisement for Cybergenics Total Body Building System

``before'' and ``after'' he used the product for six months is false

and misleading. The man pictured in the advertisement, according to the

complaint, was a champion body builder prior to the time when the

``before'' picture was taken and, therefore, is not typical of users of

the product, and his results as shown in the ``after'' picture are not

typical of the experience of ordinary members of the public who use the

product.

 

Proposed Order

 

    Part I of the proposed order prohibits representations that the

product component of either of the body building products named in the

complaint, or any substantially similar product:

    (1) causes users to achieve greater or more rapid loss of fat or

gain of muscle than non-users of the product; or

    (2) works for all users.

    Part II of the proposed order prohibits representations that the

product component of any of the three weight loss products named in the

complaint, or any substantially similar product:

    (1) causes users to maintain weight loss longer than non-users; or

    (2) causes maturing women to lose more weight than non-users.

    Part III prohibits respondents from representing that scientific

evidence establishes that the product component of any of the body

building and weight loss products named in the complaint causes users

to lose more fat or weight, or gains more muscle, than non-users.

    Part IV requires the respondents to cease from making a number of

representations about any product or program unless they have

substantiation consisting of competent and reliable scientific

evidence. The claims that are prohibited unless substantiated are as

follows:

    (1) that any product or program causes or assists users to lose fat

or weight or to maintain weight loss, or suppresses hunger or appetite;

    (2) that any product or program causes or assists in muscle gain or

development;

    (3) that any product or program works for all users;

    (4) that chromium picolinate in any product or used in conjunction

with any program builds muscle, reduces fat, or lowers cholesterol; and

    (5) that any product or program intended for body building, weight

loss, or fat loss is more effective than other products or programs

intended for similar purposes.

    Part V of the proposed order requires respondents to have

substantiation, which when appropriate must consist of competent and

reliable scientific evidence, for believing that endorsements,

including ``before'' and ``after'' pictures, represent the typical or

ordinary experience of users of any product or program. However, the

respondents may use any endorsement if they disclose clearly and

prominently in close proximity to the endorsement what the generally

expected performance would be in the depicted circumstances, or that

consumers should not expect to achieve results similar to those of the

endorser.

    Part VI prohibits the respondents from misrepresenting that any

product or program is new or unique, or that any product or program

intended for weight loss is easy to use if achieving the advertised

results requires a special diet or exercise.

    Part VII requires the respondents to cease misrepresenting the

contents, validity, or results of any study in connection with the

marketing or any product or program.

    Part VIII requires the respondents to pay $1,450,000 to the United

States Treasury and provides that none of this amount is deemed to be a

fine, penalty, or punitive assessment.

    The remaining provisions are standard record keeping and reporting

provisions designed to ensure that the respondents remain in compliance

with the other provisions of the order.

    The purpose of this analysis is to facilitate public comment on the

proposed order, and it is not intended to constitute an official

interpretation of the agreement and proposed order or to modify in any

way their terms.

Donald S. Clark,

Secretary.

 

Concurring Statement of Commissioner Mary L. Azcuenaga in L&S Research

Corporation, File No. 912-3004

 

    The Commission has strong evidence supporting the central

allegations in this complaint, and I have voted to accept the

consent agreement for public comment. In my view, however, the

complaint should not allege that the maintenance claim for Mega-Fat

Burner and the maturing women weight loss claim for QuickTrim were

false. I am inclined to believe that the claims are false but I

would prefer to have some corroborating evidence of falsity before

finding reason to believe that Section 5 of the FTC Act has been

violated. Because the available information shows only that there is

no evidence that these claims are true, it seems to me more

appropriate to allege that they are unsubstantiated.

    In addition, the QuickTrim weight loss allegations seem

inconsistent in light of the evidence. The complaint alleges that

the weight loss claim for maturing women users of QuickTrim is false

but alleges that the same claim for all users of QuickTrim is

unsubstantiated. Yet we have no evidence indicating that the weight

loss claims are any more likely to be false for maturing women than

for users generally.

    I therefore do not support the complaint to the extent that the

maintenance claim for Mega-Fat Burner and the maturing women weight

loss claim for QuickTrim are alleged to be false, not

unsubstantiated.

 


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