OEC-10-04 18;ZA Fro.;FAIR BUSINESS PRACTICES 8119514792 THE COMPETITION TRIBUNAL IN THE MATTER OF THE COMJ-BTITION ACT, R..S.C. l 985. c. C-34, as amended; AND IN THE MA'ITER OF subsections 74.0l(l)(a)~ 74.0l(J)(b), 74.01(6), of the Competitian A.cl and certain marketing practioe3 of Performan~e Marketina L.td., Kevin Atlc.inson and Duane Gartman;
AND IN mE MATTER or the filin~ and reaistration of a consent aareement pursuil.llt to section 74.12 of the Competttion Act.
BETWEEN: THE COMMISSIONER OF COMPETITION COMPETITION TRIBUNAL Applicant TRIBUNAL DE LA CONCURRENCE F c:-l- aoo~-0 I '-t P I R L DEC 13 200f g -and-~ c.~ y REGISTRAR • REGISTRAIRE T PERFORMANCE MARKETING LTD. , OlTAWA, ON fbCO\b.) KEVIN ATKINSON and DUANE GARTMAN Rupondenta
CONSENT AGREEMENT WHEREAS the Commisaioner of Competition (the ''CommiHioner'') is resf'(>nsible for the adminiltration IUld the enforcement of the Competition Act (the "Act"), includin~ its civil deceptive marketina pncticeg provisions, which are contained in Pm1 VII.1 of the kt; AND WHEREAS the Respondent, Performance Marketini Ltd. C'Pcrfonnancc"). is a rorporation incorporated under the laws of the Province of British Columbia and the Respondonts, .K.evtn Atkinson and Duane Gartmon, are directors of Performance, alJ of whom are located in British Columbia~
AND WHEREAS the Respondents promote and/or seJl a variety or health and sexual aid
DEC-l0-D4 18:Z! Fr1,111;~AIR BUSINESS PRACTICES e11emm r-217 P.oa Jab-BB& -2~ products ~luding diet patches through various means including over the Internet; AND WHEREAS. beailliliDg in or abOut JanlW)' 2004. the Respondents, and/or their Affiliates (u defined hereinafter and listed in Appendix A), made and caused to be made representations
(the .. Reprexntationl!l 0 ) to the public thrOl.isl\, amona other chan.neh1, Perfonnance'g websi1as: 1. www.dyapex.com, 2. WWw. adults:upermart.com/more-sextoys-2-4 3. hnnl, J. www.buydietpatch.com, 4. www.cxiremcpay.com/paBeslproduct!tlzyapc:>t.html, S. www .gayboymall.com/indcx.php?sc_id ... 69, 6. www.rxpride.com. 7. www.herN.l-.healthline.oom, 8. www.herbalamerica.com, 9. www.bcrbulhookup.com. 10. www.herbalplatinum.com, 11. www.herbalgoldnow.com, 12. www.zyapcx.com and the distribution of bulk unsolicited email messages ~·SPAM•') in excess of 37,000, to potenti"1 eoosumerc. u well as an product packaging &nd in written materials found Inside such packaling. for the Plll'POSC of promoting the use of the Dyapex and Zyapex Diet Patches and the Respondents' business interests;
AND WHEREAS the Representations were in the form of statements regarding the performance and/or cffICaCy of the Dyapcx fUk1 Zynpex Diet Patches, that save thci ae.....t impression that the UK: of the patches. without ntcd for physical exercise or dieting;
1. would result in substantial weight loss (in the range of 3 to 8 pounds every week); 2. would reduce appetite, control cra.vinss and speed up mciabolisrn; and 3. are a ufe natural weigh& losa product. AND WHEREAS the Commissioner believes that these general imprcsaionll are materially false and/or mialeadinsi. that the Dyiq>cx and Zyapcx Diet Patches do not assist th~ user with weight loss. that the representations which were in the form of a staiement of lhe perfonnance and the
efficacy of the products were not based on adequate and proper tesu;
AND WHEREAS the Commissioner has concluded that tho Respondents have engaged In reviewablc conduct wUhin the mearung of paragraph 74.0l(l)(a) ("fm~ or misleading representations") and paragraph 74.0 l {1 ) (b) ("statements of performance not based on lt.dcquate
lliC-10w04 18:25 fre11:FAIR BUSINESS PRACTICES a1mum T•21T P.04/16 Job-88! -3-and proper te11t);
AND WHEREAS the Parties arc satisfied that this matter can be resolved with the registration of a con&enl ~ent; THEREFOR£ the Parties enter into this consent agreement to be registerad ~d on the following terms:
l. For the purpose of this cooscnt agreement, the following definitions shall apply: a) "AftililUcs'': one body co~orate is affiliated with atl(lther hody corpora:~ if: i) one of1 bcm is the subsldimy of the otber: ii) both are subsidiariea of the same body corporate;
iii) csh of them iii conrtolled by the same person; iv) both bodies corporate ooorate in olose connection. association or in coru:en with one another; or, both bodies corpor.tc IJJ>Cmte in close connecdon, association or in concert with a common third corporation; or v) the affiliate is the publisher/salesperson in an aUfiliate mllfkcting relationship who oanies out the lldvertising or aalC9 oflhe affiliate marketina relationship, giving wider di9tribution to the affiliate merchant's products in return for compensation based on f!Crfonnance and/or sales.
b) "Affiliate Merchant" mem111 the affiliate program manager/proprietor who may be the: manufactu.nsr, 1he re!'lallc:r, or the diatributor of the pioduot. The Affiliate Merchant is responsible for implementing a. aales tracki11a system, providin1 a selection of linking methods, attractins Affiliates, monitoring resul1s. increasing results, and paying
Affiliatm;
c) "Agreement" means this consent agreement; d) "Commissioner" means the Commissioner of Competitloo, appoimed pursuant to section 7 of the Act. and her authoriz.ed reprt!scntatives;
e) "Parties" means the Commissioner of Competition and the Respondents; f) "Respondcnu" means Kevin Atkinson am.1 Duane oartman and Performance Marketing Ltd;
DEC-10-04 ll:ZB Fr011:FAIR BUSINESS P~ACTICES g) "Tribunal" moans the Competition Tribunal establi!ihed under the Campetttion Trtbunal Act, R.S.C. 1983, c. 19 (2nd Supp.), 4S a.mandcd.
2. Thci provisions of the Agreement shall apply to: a) the Respondents, all corporations, partnerships or persons wider legal or contractual obligation of all or any of k Reapondoni3 or who, in connection with the marketing or Hlc of the Dyapex and Zyape)( Diet Patches. act for, on behalf of or in concert with all or any of the Respondents, including the directors, officers and employees of the Ro1JPOndent Perforrnuice, their resoective successors and assitms. and other persons including aaenu, represenwives and associates of all or any of the Responttonti; and
b) the Commissioner. 3. The Rcsprmdents shall ceue mald~ md causina to be made. Ol permit Affiliates to make, by any mean& whatsoeYer, any rcprc1entation:s io the publiCl, whether written or otherwilc, vla SP AM.
4. The Respondents shall cease making and causing to be made. or permit Affiliates to ml'lkc, by a.ny meam whatsoever, any l'Clpresentatione to the public, whethor written or otherwise, including on or through websites, via SPAM, on television> in printed material or verbally:
lhat ere false or misleading in a material res~ct; DI r~garding the performance and/or efficacy of any product supplied by the Respondents, that are not based on adequate and proper tc&ts, copies of which have been provided or received by the Commissioner and found by the
Commissioner to be adequate and pro.,.r.
5. Without limiting the geni:ralit)' of the for~going, the Respondents shrul cease making or causing to be made, or permit Affiliates to make statements regarding the performance andior efficacy of the Dyapex and Zyapex Oiet Patches., that give the ~eneral impression chat the use: of the patches will in any way assist the user of such patches in losing weight.
6. Within 30 days of 11 wriuen request ftom an authorized representative otthc Commilwioncr, for each sale of the Dyapex and Zyapex diet patches in the period from January J, 2004 tO the date of20 weekzt following the r~tiiatration of the Agrceme11t, the
1199!HT8Z T-Z17 P.06/lB Job·9B!
DEC-10-04 18:28 From:FAIR BUSINESS PRACTICES a1ma~m T-21T P.OS/16 Job-91! -5-Respondents shall provide to the Comrnissionor. a copy of such records as arc necessary to identify the purQba9er, 1he quantJty purchased and the amount paid.
7. The Reapondent11 1ilu1.ll post a corrective notice to the A11rcicment l!I set out in Appendix "'B" , accessible on their wchlites through a link (''ConmmiliWn Buro.Ill Agremncnt - Djm Patches"), appearing on the website home page. The link siulll be in 12-point font and be in a prom.ll1ent location (on Perfonnance's website home p141c, at the top of the right-hand margin). The corrective notice shall contain a hypcrlink to thi! Agreement as p0sted on
the TribunaJ'g website. This correctiv~ ootice shall be posted on the referenced websites for 20 weeks, commencing no later than l 0 days from registration of this Agreement.
8. The title "Notice by Performance Markctina Ltd. Re Diet Patch" found in Appen<lix "B" shall be in bold. 12-point font. The text of the corrective notice shall ho in 1O ~point font, in unembellished print. The foregoing specifications shall al.so apply to the "Refund Notice" (as defined hereinafter), which is ~ out in Appendix UC" to this Agreement.
9. The Resp0ndents shall refund the purchase price of the Oyapex end Zyapex Diet Patches to persons who purchased those paU:bcs directly from Performance, from any of its Affilizstc:5, or from a.ny person 1.1J1der lepl or contractual obli9ation 10 the Respondents. from any of the Respondents or, who in connection with the marketing or sale of the Dyapcx and Zyapex Diet Patches, acted for, on behalf of or in concert with all or any of the 1l1:u1pondenu1 upon receiving from such persons a refund request accompanied by proof of purchase in the form of i) a credit carc.1 statement or recaipt denoting the purcbas1E1; or ii) an e~mail confirmation of the purchase; or iii) other proof of purchase {c.a. pftck.a~ina, etc.). 10. To facilitate the refund process: The: Rc::spondcnta shall post a notice to the AgrHment u aet out in Appendix "C"("the Refund Notice"), accessible on their websites through a link ("Dypx ~ Diet Palch Refund''), appearing on the website home pAge. The link shall be in 12-point ront and be in a prominem location (on Performance's website home page, at the top of the right-hand margin,JUS1 below~ link to the corrective notice referred to in paracrapb 7). The refund notice shall ho posted on the referenced websiteis for 20 weeks, commencing no later than JO days from
·6-registration of this Agreement; and
the Rcspondent1 shall establish a toll free nwnbeT that will. betweM the hours of 9 AM and 5 PM (Pacific Standanl Time), be staffed by such person or persons as are necessary to field calls, in English and French. from prospective refwldees an<1 for the balance of the time (5 PM to 9 AM) will direct callers to a recorded messag~ identifying the Respondents and advising callers of the hours of operation of the toll free number and/or lf redlrectcd to a call center, the operators
will be provided with A script (Appendix uD'') to field calls. in English and French, from prospective rcfundees. Between the hours 9 AM and 5 PM (Pacific Standard Time), if~ toll free num~s) is busy, then callers will be direeted to a recorded message .tvising them of that fact and inviting lbem to call back at a later time. The toll free number shall remain operat10nal for 3 months after the la5lt requett for a refund is received by the Respondents.
11. Within 48 hours of posting both notices • the Respondents shall confirm in writing to the Commisaioner that those notices were poated in accordance wilh the terms of this AQrcement and pro\lide a "screen capture" of each notice and link.
12. Wilhin 45 days of the re~istration of this Agreement, the Respondents shall establish and implement and thereafter maintain, & corponU.e compliance program ("'Compliance Program") regarding the use and content of re.presentations. including testimonials, made to the public to promote the sale or use of their products and their business interests. The goal of the Compliance Pro(ll'am will ht!! tc prom.ot0 compliance with the Competllion Acr, and specifically, ..-ith the deceptive marketing provisions of the Act (Parts VI and
Vil. 1). The Compliance Program will b" fi'8med and implemented ln a mminer consi:!tent with the Conunissioner·s Infonn1tion Bulletin on ''Corporate Compliance Pro2rams".
13. Th" Compliance Program will include the following: (I) the destpiion of a corporate compli1U]4;C prognun officer within .lO days of the execution of this Agreement~
(ii) a written compliance policy ("Compliam;e Policy") which will include, among other thins11, a statement by senior management stressing the company's commitment tO the policies and procedures contained therein,
a reference to the purpose of the Act. a een11ral description of the Act, as
8188534792 T-217 P.07/!6 Job-985
DeC-111--04 18:Z7 Fr1111:FAIR BUSINESS PRACTICES ~7-well as a description of thoae provisions of the Act that are most relevant to the Respondents' business, includins the enforcement, ~nalty and remedy provisions;
clear examples to illustrate the specific practices lhat are prohibited, so that managers and staff' at all levels can easily unciemond the potential application of the Act to their own duties;
a practical code of conduct that identifies activities that are illegal or open to que&tion;
a statemont outlining lhe consequences oflnach.ing corporate policie~; and procedures that detail exactly what an employee should do when concerns arise out of certain situadons, <>r whon possible violations of the Act are suspected; and
(iii) Training SC5Sions to ensure that all persons to whom this Agreement applies, understand the terms afthil5 Agreement and tho Con\pliance Policy.
14. The Respondents shall provide the Commissioner with a copy of the Compliance Policy within SO chlys of the registration ofthit Agreement.
l~. The Respondents will pro\'ide a copy ofthi& Agreement and the Compliance Policy to such persons who faU within the definition of Respondents and Affiliates set out in paragraphs l(a) and (f). while the Agreement remains in force.
16. The RespondentA shall enstU'C that each person to whom this Agreement and the Compliance Policy are provided pursuant to paragraph 10, acknowledges in writing that
they have been provided Willi those documents and luave read and understand them. Copies of all such acknowledgments shall be retained by the Respondents for three years after this Agreement ceaaea to apply to any such person.
17. Eighty days following the registration of this Agreement, the Respondents !Uiall provide: a written report to the Competition Bureau advising in detail the 9teps iaken by the Respondents and Affiliate11 to ensure that "they have complied and w-e complying with this Agreement
18. Upon written request of the Deputy Commissioner of Competition. Fair Business. Practices Branch, the Respondents shall iwubnlit a written report and/or produce documents on 30 days notice, with respect to any aspect of this Agreement.
e1mum T-21T P.OB/16 Job-98&
aEC-10-04 18:28 FrOl:FAll BUSINESS P~ACTICES 19. This Agreement shall remain in force for l 0 years from the date of i3 registration. 20. Any notice required to be given pursuant to any tenn of this Agre"ment is valid if given by fac!imile transmission or registered mail to:
(a) For the Commissioner of Competition Attention: Raymond Pierce Doput)' Conuninioner of Cornpetition Competition Bureau 50 Victoria Street Oatinc:au, Quebec K1 A OC9 Facsimile: (819) 953-4792
(b) For the b~dent5 Attention: Kevin Atkinson US Oper•tional Offices President 710 E Street, Performance Marketing Ltd. Blaine, Washington. 98231 Canadian Corpond• Offtc:a 25 Cavan Street, Delaware Corponte Oft'tces Nanaimo, BC. V9R 2T9 1308 Delaware Ave., Facsimile: 250-716-8777 Wilmington, Delaware. 19806 21. For ~cater certainty, the Tribunal shall retain iurisdiotion for the purpose of any 8PJ)lication by the Commissioner or the Respondents to rosclnd or vary any of the provisions of this Ai1'1'8meQ.t in the event of a change of circumstances or otherwise
Bl 89634792 T-217 P.09/16 Job•986
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Appendix "A"
The following is a list of Affiliates who participated in the sale of the products marketing by Performance Marketing Ltd.
(CONFIDENTIAL)
-11-
oeC-10-04 11:29 rrDM;F~IR BUSINESS P~ACTICES Appendil B NOTICE BY Performance Marketln1 Ltd. Re: Diet Patehes
The Commissioner of Competition has concluded that certain representations made by Perfonnance Marketing Ltd, Kevin Atkinson an<t Duane Gartman, for the promotion of the Dyapex imd ZyapeK Dic:n Patches were false or misleading in a material mipCCt contrary to p&rairaph 74.0l(l)(a) ("false or misleading representation") and paragraph 74.01(1 )(b) ("adequate and proper test") of the misleading
reprcac::niations and deceptive rnarkating practices provisions of the Co111]Hlilion Act
Link: www .ct-tc.gc.ca RepreMeatattona These representations gave the false and mlsloadin1 general impression that the Ul'lc: of the Dyapex and Zyapex Diet Patches would, without the need for dieting or physical exercise::
- c:aua;e weiaht 101ts in tbe rangt of 3 to 8 pounds evezy week; • reduce appetite. control cravings and speed up metabolism~ and - is a safe natural weight loss product The company has agrMd, among other things, to stop using SPAM 11S a means of markeiini, to chanMe the representations it makes on its corporate and affiliate websites. to establish and maintain a. compliance program to ensure that U abides by the deceptive marketing provisions of the Competition
Act.
Refund The comp1my h~ "leo agreed to refund the purchue price of the patches to any person who purchased the Dyapex and/or Zyapex Diet Patches from the company in the period from January 1, 2004 to the present. Details with respect to how to obtain a roflmd may be found at .. DYipcx. Zyape3 WQl Pmch RefWld."
8188534192 T-217 P.13/16 Job-886 -12-
DEC-10-04 18:28 Fr111:FAIR BUSINESS PRACTICES -13-AppendiJC Dyapu aad Zy1pe1 Diet Patches • Btfuad of PurcbaM ~rice Any pc:rwn who p~hASCd the Oy4pcx IUld/or Zympcx Di~ Potch from Performance Marketing Ltd., either directly throuah its website, through an affiliated website, or from a person under the control of Perfonwm.ce, acting u an agent or representative of Performanc.e or in conccn with Perfonnancc, may
obtain a refund of the pu.rclla9e price an request to Perfonna.nce Marketing_
To obtain a refund, purchasers mU!1t make a rofund request in writing to Pcrfonnance Marketina Ltd. at the address set out below and include with their request proof of purchue in the form of:
i) a oredit card 11atement or receipt denoWia lhe pu.rohpe; or ii) an o·mail confirmation of lhe purchase; or iii) other proof of purchase (e.g. packagingt etc) Attention: Kevin Atkin11on President Performance Marketing Ltd.
Canadian Corponf8 Oftloiu 2S Cavan Street, Nanaimo,BC.V9R2T9
Facsimile: 250-716-8777
.. \ny questions regarding refunds should be directed to Perfonuance Marketin2 Ltd. At: 1 -888-777-6661
Bl995MT82 T~Z17 P.15116 Job-9B! -14-A1aond1JQ
Calla 1:oncemia1: the reimb•neme1at of die punllaae price for the Dyapes and Zyapex Diet Patches
The following information should bc.'J used for all cB.lls conccmina a refund for the purchase price of the Dyapex and Zyapex Diet Patches by persons who purchase those patches directly Crom Perfonnance Marketing Ltd., from its Affiliares or from any other sources acting on behalf of the Respondents.
A- Calls received between the houn of9 AM and 5 PM: - Detorminc if it is the relevant :groduct: All persons who: - purchased the Dyapcx or Zyapex Diet Patches:
• Alk que&tions to verify if it is onf'! of th0 rele\lant product~. • Octennine if it was purchased d.iroetly from Performance Marketing Ltd., from its AmUares or ftom any other sources acting on behalf of the Respondent~.
- If it is the rclcyant product: - Inform the persons that they are required to submit a refund request accompanied by proof of purchase in the form of:
- a credit card statement or receipt denoting the purchase; or - an e-mail confirmation of the purchue; or - other proof of purchase (e.g. packaging).
·Provide the address where the refund &hould be sent ana indicate the period oft ime it will
WI """""".,.I 'II .. -l 5-take for the refund to be received. u. . Call• between ! PM ••d 9 AM - Persons calling rhe toll froc number who are greeted by a J'eQOrded message should lutvc the following option: "If you are cal.ling for a refund for the p.Gbasc price of the DyP.pe'.K or Zyapex Diet Patches. please press ....... "
- A recorded mesaage would then inform the callers: ''You can obtain a refund for the purchase price of the Dyapex or Zyapex Diet Patches by sendinc a refund request to (give complete add.res!!) with a proof of purchase, which can be I! credit oard statom~nt, or
a receipt denoting the purchase1 an email confirmation of the purchase or the actual packaging of the product Please expect to recei"e the refund (mention period of time) after wo have received your roqueat. ''
-Persons calling Che toll free number who are greeted by a call center employee should be askod the same question!I and given the same information as provided during the 9am to Spm time. thme.