Blue Stuff Company Ordered To Pay $3 Million forUnsubstantiated Claims

Blue Stuff Company Ordered To Pay $3 Million forUnsubstantiated Claims

WASHINGTON--A company selling topical creams for severe paincaused by such conditions as "crushed vertebrae" has agreed to pay $3million 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 madeunsubstantiated claims regarding Blue Stuff and Super Blue Stuff topical creams.The Oklahoma City-based defendants made these claims in 30-minute televisioninfomercials shown nationwide through most of 2001 and into 2002, in addition tohaving posted these claims on the Blue Stuff Web site (www.bluestuff.com).

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

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

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

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

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

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

One FTC commissioner, Orson Swindle, stated that while he supported thefiling of the complaint, "I would have preferred the Commission to pursueall entities that received funds derived from payments by consumers as aconsequence of the defendants' alleged deceptive practices and require thoseentities 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. Swindlesaid he was troubled by how it appeared Blue Stuff and the nonprofit had a closemarketing relationship via their Web sites. "Regardless of any good workperformed by this charitable organization, the foundation should not bepermitted to keep money that rightfully belongs to deceived consumers," hesaid. However, Swindle added that if the defendants fail to honor theirsettlement, the Commission "can and should take action to collectoutstanding funds and enforce the order."

In a separate statement, Commissioner Sheila Anthony reported having alsoreluctantly voted in favor of accepting the stipulated final order. "I amextremely frustrated that the Commission did not press the defendants harder toobtain more of the illicitly obtained funds for consumer redress," shesaid.

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