Grapefruit 45 Firm Broke Pact, Judge Says
An administrative law judge has ruled that marketers of Grapefruit 45, the controversial mail-order diet plan, breached a 1984 consent agreement that prohibited it from making claims about any orally ingested weight-loss products.
Administrative Law Judge Quentin Grant on Friday ruled against Carlsbad-based World Communications Inc., an entertainment and direct-response marketing firm that sells Grapefruit 45, and its three top executives. The findings--which resulted in a mail-stop order and a cease-and-desist order--apply to money seized by authorities earlier this year from a previous Grapefruit 45 advertising campaign. The orders do not apply to the product’s current advertising effort, according to WCI President Jay Kholos.
Grant stayed implementation of his orders for 30 days, pending WCI’s expected appeal of the ruling.
The delay means that about $4 million worth of seized checks and money orders from about 160,000 Grapefruit 45 customers will remain in the possession of U.S. Postal Authorities, Kholos said.
Both Kholos and postal officials claimed victory in Grant’s ruling.
“We beat them on two major issues in their own backyard and on their own turf,” Kholos said Monday. “We can now get real due process and bring it into a neutral arena (by appealing in federal court).
“The power of the Postal Service must have boundaries. This case has far-reaching effects for the future of direct-response marketing.”
On the other hand, Nan Kalthoff, an attorney for the Postal Service’s Consumer Protection Division in Washington, maintained that Grant “gave us all the relief we asked for. If (WCI) had won on all points, then their mail wouldn’t be held.”
Kholos claimed victory because Grant found that the Grapefruit 45 commercials did not make any claims that the grapefruit pills alone would cause weight loss. In addition, Grant supported the ads’ contentions that if the diet plan were followed correctly, women could lose, on average, up to two pounds per week and men could lose an average 3 1/2 pounds weekly.
But Grant also ruled that the ads claimed dieters could expect greater weight loss than the average amounts, and it was that finding that sparked the mail-stop and cease-and-desist orders.
“Everybody won a little something,” surmised Sandy McFeeley, a senior attorney for the Postal Service.
The case was presented in April. Federal authorities claimed that WCI had violated a 1984 consent agreement that prohibited the firm from advertising orally ingested weight loss products. The firm previously had marketed diet plans known as Energizer and Slim Wrap.
An appeal must be filed within 30 days, but the process could take at least six months, Kholos said.
“As much as I’d like to have (the money) released, (at least) it stays where it is,” Kholos said.
The Postal Service in February began seizing all money and product orders for Grapefruit 45 mailed to three WCI post office boxes in Carlsbad. In March, authorities expanded the seizures to include boxes in Encinitas, the City of Orange, Long Beach and Orange City, Fla.
Products have been shipped for about three-quarters of the approximately $4 million being withheld from WCI, Kholos said. Those were primarily C.O.D. orders, where “we got the order, but not the money,” he said.
About 25% of the orders are in the form of personal checks. Those are simply being detained by the Postal Service, Kholos said.
Meanwhile, Grapefruit 45 is on-the-airwaves with a new set of ads--spots that are not included in Grant’s cease-and-desist order.
“We continue to do big business,” Kholos said.
The new ads feature large-type disclaimers that huge weight losses are not typical. Money and orders for the product now go to several post office boxes--most notably in Del Mar and Las Vegas--which are not covered under the Postal Service’s order.
Kholos conceded that he would “love to have” the money that has been detained, but that he is viewing those funds like a “forced savings plan.”
Despite the problems with Grapefruit 45, Kholos said WCI is still on target to generate about $50 million in revenues in 1985. The firm also markets record albums (Nat King Cole, Frankie Valli and the Four Seasons, Loretta Lynn), produces television programs and distributes a jewelry catalogue, a cookbook and makeup.
