FTC vs. Fong Wan Herbs

by Andy Vile - OCOM


In 1967, in the town of John Day, Oregon, a virtual time capsule of Chinese Medicine was unlocked. Within the walls of the Kam Wah Chung and Company building, over twenty thousand artifacts had laid, virtually undisturbed by the passing of time, since Ing Hay, a Chinese immigrant Herbalist, had locked the doors and shut up shop nearly 30 years before (Barlow & Richardson, 1979).

Among the many thousands of documents, in both Chinese and English, was a small paperback book, entitled “This Transcript of the Federal Trade Commission Proves Fong Wan Herbs Give Wonderful Results.” This book, published by Fong Wan Herbs of Oakland, California as an advertising piece in 1941, is the verbatim transcript of the first 300 pages of testimony of the Federal Trade Commission Hearing against Fong Wan Herbs on five counts of breaches of the Federal Trade Commission Act for making false claims regarding the curative powers of Chinese herbs and the selling of these herbs across state lines (Wan, 1941).

‘Doc’ Hay, and Fong Wan could not be more dissimilar. ‘Doc’ Hay, is described as a quiet man, who kept much to his traditional Chinese roots. He, and his partner, Long On, originally moved to the John Day area in 1887, to serve the burgeoning Chinese mining community (Barlow, 1979). When, the Chinese mining community declined, they turned their hand to serving the local white community. Fong Wan, on the other hand, was the model of a ‘modern’ American businessman of his time. Always depicted smartly dressed in a business suit, his business acumen, which extended to many businesses besides his Herb business, including nightclubs, restaurants, real-estate and a shrimping business, had garnered him a small fortune. The San Francisco Chronicle, in a two-part article published in June of 1949, described him as a multi-millionaire (Hemp, 1949). Fong Wan garnered his fortune using the simple business model of charging $10 for a week’s supply of one of his herbal remedies. He did not charge his clients for their consultations. According to the Bureau of Labor Statistics Consumer Price Index website, this would be the equivalent of just over $165 per week in 2014 dollars.

Neither, ‘Doc’ Hay, nor Fong Wan, had received any formal education in Chinese Herbalism (Wan, 1936). Both had learned through a mixture of apprenticeship and/or were self-taught. Both, were highly skilled in the art of pulse diagnosis, and face or eye reading, and in the case of Fong Wan, in the sound of the voice (Wan, 1936). Both were also hugely successful in treating their patients, in comparison, to the results being achieved by Western Medical Doctors of the time. This high degree of success is what led to their persecution, in a large part by the Medical establishment, through the auspices of the authorities of their time (Wan, 1936).

Historical Context – The Exclusion Acts

By the time that ‘Doc’ Hay and Fong Wan had immigrated to America in the late 1800s, there had already been a substantial increase in anti-Oriental sentiments. As early as 1852, the governor of California had imposed restrictions on the immigration and settlement of ‘Chinese Coolies.’(McKenzie, 1928)
Although initially welcomed as a cheap source of labor, these ‘Coolies,’ or laborers, were seen as a threat to the economy in the years following the decline in the gold reserves after the 1849 Gold Rush.
The effect of restrictive legislation regarding the immigration of Chinese labor, was that there was a growing population of predominantly male Chinese ‘bachelor’ communities within the larger population centers on the West Coast of America. The self-contained nature of the Chinese communities, led to growing distrust and suspicion in the eyes of the white population, against a rising background of nationalism. Tensions ran high, and attacks on individual Chinese, and on ‘Chinatowns’ in general , became increasingly violent and deadly (Hsu, 2000).
State or provincial level legislation became elevated to a national level in 1880 when President Arthur approved a bill restricting the immigration of Chinese and Mongolian laborers for a period of 10 years, while allowing for the re-admission of lawfully admitted persons (McKenzie, 1928).

The Fong Wan Hearings

It is against this background of distrust and racial bigotry that the cases against prominent Chinese, like Fong Wan, and to a lesser extent, against small-town Chinese, like ‘Doc’ Hay, were played out. At the local level, these cases almost always were dismissed based on the overwhelming support for the Chinese herbalists by their loyal, and satisfied, white customers (Barlow, 1979). However, when these cases were elevated to the national level, the outcome was far less predictable.

1932 Postal Fraud Hearing

In July of 1931, The U.S. Postal Inspector indicted Fong Wan on 16 counts of Postal Fraud. The case went to Federal Court in 1932. Following ‘Expert witness’ testimony on behalf of the Postal Service, and testimony from many Fong Wan customers, the jury returned a ‘Not Guilty’ verdict (Hemp, 1949).

1940 Federal Trade Commission Hearing

The 1940 Federal Trade Commission Hearing revolved around a complaint containing six counts that it was claimed were breaches of the Federal Trade Commission Act. The main thrust of these charges was that the business practices of Fong Wan Herbs constituted false advertising, and were designed specifically to induce unwitting buyers to purchase their herbs in large quantities, based on claims of efficacy that were not scientifically verified.
This case fell under Federal jurisdiction, as the herbs being sold were being transported across State lines, and therefore, Fong Wan Herbs were involved in Interstate Commerce, as defined in the Federal Trade Commission Act, and which falls under the regulation of the Federal Government.
Namely these six counts were:

Paragraph 1 of the Complaint:
Respondents Fong Poy, also known as Fong Wan, Fong Kwongli, Yee Nun Yet, Chan Woon Sheung, and Lee Bing Lim are co-partners operating, trading and doing business under the firm name of Fong Wan, with their principal place of business being located at 576 Tenth Street, in the City of Oakland, State of California. Respondents in the year last past have been, and still are, engaged in the business of the sale and distribution of Chinese herbs which are offered for sale and are sold as a treatment for diseases and disorders of the human body. In the course and conduct of their business cause said herbs, when sold, to be transported from their place of business in the State of California to the purchasers thereof, located in various other states of the United States and in the District of Columbia. Respondents maintain, and at all times herein mentioned have maintained, a course of trade in said herbs in commerce among and between the various states of the United States and in the District of Columbia.

Paragraph 2 of the Complaint:
In the course and conduct of their aforesaid business, the respondents have disseminated, and are now disseminating, and have caused, and are now causing, the dissemination of false advertisements concerning their said product, by United States mails, and by insertion in newspapers and periodicals having a general circulation, and also in circulars and other printed or written matter, all of which are distributed in commerce among and between the various states of the United States, and by other means in commerce, as defined in the Federal Trade Commission Act, for the purpose of inducing, and which are likely to induce, directly or indirectly, the purchase of their said products and have disseminated and are now disseminating, and have caused, and are now causing, the dissemination of false advertisements, concerning their said products, by various means, for the purpose of inducing, and which are likely to induce, directly or indirectly, the purchase of their said products in commerce, as defined in the Federal Trade Commission Act. Among and typical of the false statements and representations contained in said advertisements, disseminated and caused to be disseminated, are the following:

Paragraph 3 of the Complaint:
Through the use of the statements herein-above and forth and where similar thereto not specifically set out here-in all of which purport to be descriptive of the remedial, curative or therapeutic properties of respondent’s herbs, respondents have represented and do now represent , directly and indirectly, that their herbs are a remedy or cure, or a competent and effective treatment for practically all diseases and ailments of the human body, including cancer, tuberculosis, ulcers, tumors, diabetes, Bright’s disease, kidney, bladder and prostate gland troubles, paralysis, rheumatism and arthritis, high and low blood pressure, asthma, influenza, coughs and colds, varicose veins, cross eyes, neuritis, heart trouble, blood disorders, pyorrhea, stomach trouble, dysentery, pains, dizziness, hardening of the arteries, goiter, bronchial trouble, sinus trouble, liver and gall bladder troubles, nervous attacks and disorders, obesity, headaches and piles; that said herbs build up the body, purify the blood, renew the strength and stop pain; that said herbs wash away diseases from the body; that Fong Poy or Fong Wan is able, by observation alone, to diagnose numerous diseases and ailments and has the power to heal numerous disorders; that he has restored the health of numerous persons by the use of said herbs; that respondent’s herbs are compounded individually for each purchaser.

Paragraph 4 of the Complaint:
In truth and in fact, the respondent’s Chinese herbs are not a remedy or cure for, nor have they any therapeutic value in the treatment of cancer, tuberculosis, ulcers, tumors, diabetes, Bright’s disease, kidney, bladder and prostate gland troubles, paralysis, rheumatism and arthritis, high and low blood pressure, asthma, influenza, coughs and colds, varicose veins, cross eyes, neuritis, heart trouble, blood disorders, pyorrhea, stomach trouble, dysentery, pains, dizziness, hardening of the arteries, goiter, bronchial trouble, sinus trouble, liver and gall bladder troubles, nervous attacks and disorders, obesity, headache, piles, or any other diseases or ailments of the human body. Said herbs will not build up the body, purify the blood, renew the strength or stop pain. They do not and cannot wash away the diseases from the human body. Fong Poy or Fong Wan is not able to diagnose or heal diseases or ailments, nor has he restored the health of any persons by use of Chinese herbs. Respondents do not in all cases or generally compound their herbs individually for each purchaser.

Paragraph 5 of the Complaint:
The use by the respondent of the foregoing false, deceptive and misleading statements, representations and advertisements, disseminated as aforesaid, with respect to said Chinese herbs, has had and now has the capacity and tendency to mislead a substantial portion of the purchasing public into the erroneous and mistaken belief that such statements, representations and advertisements are true and that said herbs are a cure, remedy or effective treatment for various diseases and disorders of the human body as represented. As a result of such erroneous and mistaken belief the purchasing public is induced to and does purchase substantial quantities of the respondent’s product.

Paragraph 6 of the Complaint:
The aforesaid acts and practices of the respondents, as herein alleged, are all to the prejudice and injury of the public and constitute unfair and deceptive acts and practices in commerce within the intent and meaning of the Federal Trade Commission Act. WHEREFORE, THE PREMISES CONSIDERED, the Federal Trade Commission on this 7th day of December, A. D., 1939, issues its complaint against said respondents.

The First Hearing - January 1940

On January 10th, 1940, opening testimony was heard before Trial Examiner, Miles J. Furnas, in room 542 of the Federal Office Building in San Francisco. William L. Pencke, was counsel for the FTC and Frank M. Carr counsel for the respondents, Fong Wan.
The FTC opened the proceedings by calling a series of ‘Expert Witnesses’ to debunk the claims detailed mainly in the respondent’s publication “Herb Lore.” In response, Mr. Carr, acting for Fong Wan Herbs called a large number of former patients of Fong Wan to provide personal testimony of the effectiveness of the herbal treatments they had received versus the apparent lack of effect of the treatments they underwent at the hands of Licensed Physicians. This was the same strategy that Mr. Carr had used with success during the 1932 Postal Fraud trial. However, that was a jury trial, not a closed hearing with a Trial Examiner, as this was. Swaying the opinion of the Trial Examiner would prove to be a far different task than swaying the opinion of a jury.
After six days of testimony from both sides, the hearing was concluded on January 16th, 1940, and no opinion was rendered at that time, by Trial Examiner Furnas.

The Second Hearing - May 1940

On May 10th, 1940, a second hearing was called by the Federal Trade Commission, without proper notice to the respondents. Despite the objections of the respondent’s counsel, the discussion as to the reason for the second hearing was conducted ‘off the record’ at the insistence of the FTC’s Counsel. The justification for the second hearing is therefore lost to history.

The hearing was conducted under a new Trial Examiner, William C. Reeves, and with new counsel on the part of the FTC, Robert Mathis, Jr.. Frank M. Carr, continued to act as counsel for the respondents.

On May 24th, 1941, the FTC issued their findings:

The evidence shows, and the Commission finds, that it is impossible correctly to diagnose human ailments or disorders through the method employed by respondents. The diagnosis of human ailments is a complicated and difficult matter, even for the trained and experienced physician who has available all the necessary instruments and apparatus for making tests of the various organs of the body. Moreover, frequent and repeated examinations and tests must be made in many cases if intelligent and accurate conclusions are to be reached. The brief inquiry and cursory observations made of prospective purchasers by the respondents is wholly inadequate to reveal the actual physical condition of such persons. There is no factual or scientific basis for respondent’s theory that ailments can be diagnosed by listening to the voice…
As indicated by respondent’s publication “Herb Lore,” Commission’s Exhibit No. 11, the methods of diagnosis and treatment of disease used by Fong Poy, also known as Fong Wan, are based upon doctrines which are of historical interest only, and which have no acceptability in the scientific sense for several centuries. The “Doctrine of Significances,” as it is known historically and which involves analogy between color of plant preparations and color of organs of the body, was abandoned, so far as Western civilization was concerned, during the Middle Ages, when the obvious lack of any relationship as having a reasonable basis was appreciated. During the nineteenth century, with the rise of, particularly, organic chemistry and the study of drugs under controlled conditions on animals, most of the folklore regarding remedies upon which Fong Poy apparently relies were abandoned.

The many thousands of materials discussed in the Chinese material medica have been thoroughly investigated by scientists all over the world and notably in this country. Those drugs which have therapeutic value are known to the medical profession and are in use in various forms. Modern medicine, however, has in many cases extracted the useful chemicals, which are used in preference to the crude drugs as the doses can be more carefully controlled without the interference by the gum or tannin or other more or less inert materials that are in crude drugs. Among the drugs of herbal origin now being used in modern medicine are digitalis, derived from foxglove; opium, from poppy; ephedrine, from the herb Ma Huang; the laxatives cascara, rhubarb, and senna; and the expectorant ipecac.

The practice of Fong Poy of compounding various crude drugs for use in the form of tea and his methods of diagnosis have no scientific basis in the treatment of diseases and conditions of the human body. In addition to the inability to definitely determine the exact dosage free from the interference of other materials, the prolonged boiling of such herbs as recommended by the respondents would have a tendency to destroy the chemical agents or the medicinal materials upon which such herbs depend for their reported efficacy…
On the subject of the therapeutic value of Chinese herbs, five expert witnesses were called at the instance of the Commission. Two of these witnesses were professors of pharmacology in outstanding medical schools and have devoted much of their study to the subject of herbs. Two of the remaining three witnesses were physicians and members of the faculties in prominent medical schools, while the third was a practicing physician of many years’ experience. All five of these witnesses occupy eminent places in their professions.

The respondents offered no expert testimony in support of their claims for their herbs, but confined their evidence to the introduction of a number of lay witnesses. The testimony of these witnesses was, in substance, that they had formerly suffered from various ailments which had been diagnosed as such by certain physicians, that the drugs and treatments prescribed by the physicians had proved little or of no value, but that upon taking the respondent’s herbs they had been cured or relieved of their ailments. Much of this testimony was in the nature of hearsay, and much of it was contradicted in material respects by the testimony of the physicians in question, which were introduced by the Commission as witnesses in rebuttal. After giving full consideration to the testimony of these lay witnesses, the Commission is of the opinion and finds that the testimony is of little probative value as compared to the expert testimony in the record…

The Commission finds that the respondent’s representations with respect to their herbs are grossly exaggerated, false, and misleading and constitute false advertisements. Respondent’s herbs or any combination of such herbs do not constitute a cure or remedy for nor do they possess any therapeutic value in the treatment of cancer, tuberculosis, diabetes, Bright’s disease, influenza, prostate gland troubles, paralysis, varicose veins, hardening of the arteries, cross-eyes, obesity, gallstones or stomach ulcers.
The representation that respondent’s various herbs are of value in the treatment of heart trouble is too general in its scope, as heart trouble includes many disease and conditions usually of a chronic or organic type, for which no herb product would be of any value whatsoever. Furthermore, the drug digitalis, the more effective of respondent’s drugs, must be carefully controlled in dosage in the treatment of certain well recognized specific heart conditions and its administration should be limited to such specific conditions. In some heart conditions this drug has no recognized useful effect. The use of the general term “heart trouble” to designate conditions for which respondent’s herbs might be efficacious is misleading to the general public and causes it to believe that respondent’s preparations are effective in all cases of heart trouble, even of a chronic or organic nature.
The same tendency to mislead the public exists in the use of the terms “kidney trouble,” “blood disorders,” “high or low blood pressure,” and “bronchial disorders,” which cover a number of diseases and conditions affecting those particular organs for which respondent’s herbs have absolutely no useful therapeutic value when taken as directed.

There are a number of other diseases and conditions named by the respondents in their advertising in the treatment of which the use of respondent’s herbs has no therapeutic value in excess of the temporary alleviation of certain symptoms associated with such conditions. Among these are arthritis, rheumatism, asthma, and colds. Drugs of herbal origin which have an analgesic action might afford a temporary relief from the symptoms of pain associated with arthritis and rheumatism; drugs containing ephedrine might afford temporary relief from the paroxysms of asthma and also afford temporary relief from the symptoms of congestion of the mucous membrane in colds. The use of the preparations, however, would have no effect upon the underlying causes of these conditions and would not constitute a cure or remedy for such conditions.
There are some types of goiter which are due to the deficiency of iodine, and as to such types the use of herb preparations containing iodine might be of some value. There are, however, other types of goiter in which the use of iodine would be definitely harmful. The therapeutic value of respondent’s herbs is limited to the extent that a deficiency of iodine is supplied when the condition is due to an iodine deficiency.
The use of respondent’s herbs in the form of tea has no therapeutic value in the treatment of pyorrhea.

Respondent’s herbs will not build up the body, purify the blood, or renew strength. The use of said herbs will not wash away diseases from the body. Neither the respondent Fong Poy nor any of the other respondents have the ability to properly or scientifically diagnose disease or ailments of prescribe remedies therefor…

The use by the respondents of the false advertisements referred to herein has the tendency and capacity to and does mislead and deceive a substantial portion of the purchasing public with respect to the therapeutic properties and values of respondent’s herbs and to cause the purchasing public to purchase substantial quantities of respondent’s herbs as a result of the erroneous and mistaken belief engendered by such false advertisements.

The overarching principle in reaching this conclusion was based on what was seen as the primacy of ‘Science’ and the ‘Scientific Method’ over all other ways of knowing. During the latter part of the 19th Century and the first half of the 20th Century, the ‘Scientific Model’ gained ascendancy throughout the Western world. It became elevated to the level of a ‘Truth’, against which no argument could be admitted. Alternative explanations and models, such as those presented by Chinese Medicine, were dismissed as superstition and folklore - even if the models, within themselves, were self-consistent and provided a reliable method of defining the problem within their own terms. The role of ‘Empirical Evidence’ was relegated to being poor evidence at most, if not confirmed through a ‘Controlled Study’, usually performed on animal models - which, later research has shown, may, in reality, have no bearing on how a substance is metabolized within the human body (Pickstone, 2001).

Ultimately, a ‘Cease and Desist’ order against Fong Wan Herbs was issued by the Federal Trade Commission, ordering them to cease and desist from directly or indirectly:
(1) Disseminating or causing to be disseminated any advertisement, by means of the United States mails or by any means in commerce as “commerce” is defined in the Federal Trade Commission Act, which advertisement represents, directly or through inference,
(a) That respondent’s herbs constitute cures or remedies for, or possess any therapeutic value in the treatment of, cancer, tuberculosis, diabetes, Bright’s disease, influenza, prostate gland disorders, paralysis, varicose veins, hardening of the arteries, cross-eyes, obesity, gallstones, stomach ulcers, or pyorrhea;
(b) That respondent’s herbs are cures or remedies for heart trouble, kidney trouble, bladder trouble, liver trouble, stomach trouble, blood disorders, high or low blood pressure, or bronchial disorders, or constitute competent or effective treatments therefor;
(c) That respondent’s herbs constitute cures or remedies for arthritis or rheumatism or have any therapeutic value in the treatment of such conditions in excess of affording temporary relief from the symptoms or pain;
(d) That respondent’s herbs constitute a cure or remedy for asthma or have therapeutic value in the treatment of such condition in excess of furnishing temporary relief from the paroxysms of asthma;
(e) That respondent’s herbs constitute cures or remedies for colds or have any therapeutic value in the treatment thereof in excess of affording temporary relief from the symptoms of congestion of the mucous membrane;
(f) That respondent’s herbs constitute a cure or remedy for goiter or have any therapeutic value in the treatment of such condition in excess of that afforded by supplying iodine in those cases where a deficiency of iodine exists;
(g) That said herbs will build up the body, purify the blood, or renew strength;
(h) That said herbs wash away diseases from the body;
(I) That respondent Fong Poy or Fong Wan, or any of the respondents, have the ability to diagnoses diseases or ailments or prescribe remedies therefor.
(2) Dissemination or causing to be disseminated any advertisement, by any means, for the purpose of inducing, or which is likely to induce, directly or indirectly, the purchase in commerce as “commerce” is defined in the Federal Trade Commission Act, of respondent’s herbs, which advertisement contains any of the representations prohibited in paragraph (1) herefor and respective subdivisions thereof.

Conclusion

Firstly, as modern day practitioners of Chinese Medicine, we owe a debt of gratitude to those Chinese practitioners who decided to teach the medicine to non-Chinese. Their persistence in keeping the medicine alive, despite almost constant persecution, is the reason we are able to practice at all today.
The findings in this case still govern our ability to practice today, nearly 75 years later. The echoes of these decisions still form the heart of the Dietary Supplement Health and Education Act (DSHEA) of 1994. The statement that appears on all supplements declaring, "This product is not intended to diagnose, treat, cure, or prevent any disease", is a legacy of the rulings made in this and similar cases. The requirement that we individually compound herbal formulas for each patient, or be treated as a ‘manufacturer’, and held to those standards, also owes its legacy to this time period.
In the end, the weight of testimony from five ‘Expert Witnesses’ called by the FTC, was considered to be more valid than the combined testimony of the dozens of satisfied customers who volunteered to testify for Fong Wan. The validity of the Chinese Government textbooks on Herbal Medicine, was dismissed as ‘folklore’. Throughout the entire hearing, in not one single instance was it proved that the herbal medicines caused actual harm. The only argument that was made was that their use might delay necessary surgery. Essentially, these are the same arguments used today.

Bibliography

Barlow, J. G., & Richardson, C. (1979). China doctor of John Day. Portland, Ore.: Binford & Mort
Hemp, D. (1949, June 19). I push away hardships and gain power from enemies. The Chronicle, San Francisco, Calif.
Hemp, D. (1949, June 20). The story of fabulous Fong Wan. The Chronicle, San Francisco. Calif.
Hsu, M. Y. (2000). Dreaming of gold, dreaming of home: transnationalism and migration between the United States and South China, 1882-1943. Stanford, Calif.: Stanford University Press.
McKenzie, R. D. (1928). Oriental exclusion: the effect of American immigration laws, regulations, and judicial decisions upon the Chinese and Japanese on the American Pacific coast. Chicago, Ill.: University of Chicago Press.
Pickstone, J. V. (2001). Ways of knowing: a new history of science, technology, and medicine. Chicago: University of Chicago Press.
Wan, F. (1936). Herb lore (5th ed.). Oakland, Calif: [Fong Wan].
Wan F. (1941).This transcript of the Federal Trade Commission proves that Fong Wan herbs give wonderful results. Oakland, Calif.: [Fong Wan].