Infomercial Producer Agrees to Pay $3.5 Million in Consumer Redress
to Settle FTC Charges That It Made False and Unsubstantiated Claims

FTC News Release
June 3, 1993

Synchronal Corporation, one of the nation's largest infomercial companies, has agreed to pay $3.5 million into a consumer redress fund as part of a proposed settlement of Federal Trade Commission charges that it and several other respondents made false and unsubstantiated claims in infomercials for a purported baldness cure and a cellulite treatment. The proposed settlement also would prohibit Synchronal and two of its former officers from making any unsubstantiated product claims in the future.

Two expert endorsers who appeared in the infomercials — Ana Blau, owner of Manhattan's Anushka Institute, and Dr Steven Victor, a New York City dermatologist — also agreed to settle FTC charges that they made allegedly false and unsubstantiated claims in the ads. In addition, the proposed order would require Ira Smolev, one of Synchronal's former officers, to maintain a $500,000 escrow account before advertising a wide variety of consumer products in the future.

The settlement stems from October 1991 FTC charges against Synchronal Corporation, Synchronal Group, Inc., Smoothline Corporation, and Omexin Corporation, all of the New York metropolitan area; Smolev, Richard E. Kaylor, and Thomas L. Fenton, who were officers of Synchronal; and expert endorsers Blau and Victor. All of these respondents have agreed to the proposed settlement except Fenton, whose case remains in litigation.

The FTC's investigation was conducted in close cooperation with the Texas Attorney General's office, which also has filed charges challenging Synchronal's advertising.

At issue in the FTC complaint were two 30-minute infomercials broadcast by Synchronal: "Can You Beat Baldness?" which advertised the Omexin System for Hair, and "Cellulite Free: Straight Talk with Erin Gray," which advertised the Anushka Bio-Response Body Contouring Program. In addition to allegedly false and unsubstantiated representations about the effectiveness of the products for treating baldness or cellulite, the FTC alleged that Synchronal falsely represented the infomercials to be independent television programming, rather than paid commercial advertising. Further, the FTC charged that, once customers ordered the products, many were enrolled without their permission in an automatic shipping program to receive additional supplies of the products, for which Synchronal billed their credit cards without authorization. The FTC also alleged that the defendants promised to send consumers free samples of a product, but then billed their credit cards without authorization.

The proposed consent agreement to settle the charges, announced today for public comment, would require Synchronal to pay the $3.5 million in consumer redress. If practicable, the funds would be used to provide refunds to consumers who purchased the Omexin or Anushka products. The proposed consent agreement also would prohibit the settling respondents from disseminating the two infomercials, and from misrepresenting the results of any tests or studies in connection with marketing any product or service, in the future.

In addition, the settlement would require the respondents to have competent and reliable evidence to support any representations they make about the performance or safety of any product or service they market. The evidence would have to be of a scientific nature for representations about any food, drug or device. Blau and Victor would be required to have competent and reliable scientific evidence to support any expert endorsement they provide, and to actually exercise their represented expertise by examining or testing the product.

Respondents Synchronal, Smolev, and Kaylor would be prohibited under the settlement from disseminating any advertisement that represents itself to be something other than a paid ad. Moreover, if these respondents disseminate any commercial 15 minutes in length or longer, the commercial would be required to include visual disclosures within the first 30 seconds and immediately before any ordering information, that the program is a paid ad.

Another provision in the order would prohibit Synchronal, Smolev, and Kaylor from selling products through "continuity" programs (wherein consumers receive and are billed for periodic shipments of products), without the express consent of the consumers, and without disclosing all the terms and conditions. Also, each shipment would have to be accompanied by a written statement of how to cancel, and include a toll-free 800 number or a postage-paid mailer.

In addition, Synchronal, Smolev, and Kaylor would be required to accompany any unsolicited product sent to a consumer with a statement that it is a gift. If these respondents offer a free trial period, they would have to disclose in written notices with the shipment that consumers can return the products by calling an 800 number, and that the respondents will pay the costs of the return.

The proposed settlement also contains provisions that would prohibit all respondents associated with each infomercial from making the false claims allegedly made in the program, and require them to have scientific support for any similar claim they make about any product they market in the future.

Specifically, in connection with the Omexin infomercial, the settlement would prohibit Synchronal, Smolev, Kaylor and Victor from representing that Omexin or any substantially similar hairloss treatment product or service has successfully curtailed hair loss or promoted new hair growth for thousands of men and women. Additional allegedly false claims prohibited under the order would be representations that such products contain an ingredient that, for a large majority of men and women, curtails hair loss or promotes the growth of significant numbers of new, pigmented terminal hairs where hair previously has been lost. Further, the settlement would prohibit claims that the ingredient has been scientifically proven to have such effects. The settlement also would prohibit the marketing of any baldness product not approved by the Food and Drug Administration.

Allegedly false claims prohibited under the order as it applies to Synchronal, Smolev, Kaylor and Blau would be those that the Anushka program, or any substantially similar product or service, contains any ingredient that substantially reduces or eliminates cellulite, or that it has done so for thousands of women. These respondents would be required to have substantiation before making certain cellulite, hip- or thigh-reduction, or weight-loss claims for any product they market in the future.

The $500,000 escrow account that Smolev would be required to maintain would be used to cover any future redress or disgorgement he may be required to pay pursuant to a resolution of allegations that he engaged in unfair or deceptive advertising in connection with the sale of any health-related, weight-loss, hair-care, cosmetic, or personal-improvement product or service, or of any houseware item.

Finally, the proposed settlement contains various reporting provisions designed to assist the FTC in monitoring the respondents' compliance.

The Commission vote to accept the proposed consent agreement for public comment was 5-0.

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