Blue Stuff Company Ordered To Pay $3 Million for Unsubstantiated Claims

WASHINGTON--A company selling topical creams for severe pain caused by such conditions as "crushed vertebrae" has agreed to pay $3 million to settle with the Federal Trade Commission (FTC) (www.ftc.gov). Blue Stuff Inc., McClung Advertising Inc. and the president of both companies, Jack McClung, are responsible for paying the settlement because of having made unsubstantiated claims regarding Blue Stuff and Super Blue Stuff topical creams. The Oklahoma City-based defendants made these claims in 30-minute television infomercials shown nationwide through most of 2001 and into 2002, in addition to having posted these claims on the Blue Stuff Web site (www.bluestuff.com).

The proposed settlement also requires the defendants to possess competent and reliable scientific evidence to support future claims on the benefits, performance, safety, efficacy or side effects of any product they promote in the future.

The active ingredients in both Blue Stuff and Super Blue Stuff include menthol and capsicum oleoresin, in addition to emu oil, aloe vera, methylsulfonylmethane (MSM) and witch hazel. The cost for an 8-ounce jar for either product is $59.95.

The FTC complaint also alleged that two other products--Essential Stuff and Her Stuff-- used false claims. Essential Stuff, a capsule containing emu oil and vitamin E, purportedly reduced cholesterol levels; Her Stuff, a topical natural progesterone cream, carried claims such as having "been medically proven to slow bone loss and improve bone density up to 15 percent."

The proposed final order, which still requires the court's approval, would prohibit the defendants from making severe pain relief claims for Super Blue Stuff or Blue Stuff unless they are backed by competent and reliable science. The order also would prohibit the defendants from making the challenged cholesterol reduction and bone-building claims.

The $3 million is to be paid in three parts: the first million is to be paid within 20 days of the date of entry of the order; the next million is to be paid by Dec. 31; and the third million will be paid in monthly installments throughout 2003, with a deadline for the total amount being Dec. 31, 2003. If the defendants default in their payments, the settlement will be increased to $4 million and become immediately due. In the event the court discovers the defendants materially misrepresented their finances, they will be ordered to pay a $15 million judgment.

In the face of this judgment, the Food and Drug Administration (FDA) issued a warning letter to Blue Stuff Inc. the same day as the settlement announcement, advising the company that its marketing of Blue Stuff and the aforementioned products is in violation of the Federal Food, Drug and Cosmetic Act.

One FTC commissioner, Orson Swindle, stated that while he supported the filing of the complaint, "I would have preferred the Commission to pursue all entities that received funds derived from payments by consumers as a consequence of the defendants' alleged deceptive practices and require those entities to turn over those funds for consumer redress."

One such entity that received funds from customer payment was the Loyd B. McClung Foundation, a nonprofit founded by the defendant, Jack McClung. Swindle said he was troubled by how it appeared Blue Stuff and the nonprofit had a close marketing relationship via their Web sites. "Regardless of any good work performed by this charitable organization, the foundation should not be permitted to keep money that rightfully belongs to deceived consumers," he said. However, Swindle added that if the defendants fail to honor their settlement, the Commission "can and should take action to collect outstanding funds and enforce the order."

In a separate statement, Commissioner Sheila Anthony reported having also reluctantly voted in favor of accepting the stipulated final order. "I am extremely frustrated that the Commission did not press the defendants harder to obtain more of the illicitly obtained funds for consumer redress," she said.

An attorney for Blue Stuff Inc., Jeffrey Knowles, told the Associated Press that the company continues to "stand behind the safety and effectiveness of its products," and they settled to avoid litigation costs.