NOTE: This website is where you can find advertising law information based on news briefs that appeared in past issues of Advertising Compliance Service, "Your Single Essential Advertising Law Resource," during the month of April 2000. Advertising Compliance Service was published from Sept. 1981 through Dec. 2015.
FTC STOPS ALLEGED PYRAMID SCHEME
At FTC's request, a federal court Judge has halted the operation of an alleged pyramid scheme and frozen the defendants' assets, pending trial. FTC charged that consumers lost substantial sums of money as a result of the alleged scheme and has asked the court to order consumer redress after a trial on the merits of FTC's charges.
On December 9, 1999, FTC filed suit in U. S. District Court for the District of Maryland seeking a Preliminary Injunction and an asset freeze, pending trial. After a two-day preliminary injunction hearing that concluded February 25, 2000, Judge J. Frederick Motz found that based on FTC's preliminary evidence, it's likely to succeed in proving in a full trial that the defendants deceived consumers. Judge Motz issued preliminary injunctions barring defendants from operating illegal pyramid schemes and from making various misrepresentations pending trial. The injunctions also froze the individual and corporate assets to preserve them for consumer redress.
FTC's complaint alleges that Dallas-based 2Xtreme Performance International, and its successor, Denver-based USAsurance Group/Akahi, used Web sites, direct mail, infomercials, telemarketing and seminars to convince consumers they could make substantial income by investing in their multi-level marketing scheme, which marketed nutritional supplements, beauty, weight-loss and other products. Marketing materials claimed that consumers could expect to earn enough income to retire in two to five years.
FTC alleged that the earnings claims are false and that 2Xtreme's practices violated federal law. FTC charged that since 2Xtreme is actually a pyramid, consumers won't earn the specific levels of income touted in the marketing materials. In fact, most consumers will lose money, the complaint says. Also, by providing promotional materials containing the misrepresentations about income to its participants, 2Xtreme was providing them with the "means and instrumentalities" to violate federal law. A trial date has not yet been set by the court.
(2Xtreme and USAsurance Group/Akahi, et al., FTC File No. 992 3103, Civil Action No. JFM 99CV 3679, April 10, 2000.)
COMPANY CHARGED WITH MISREPRESENTING AVAILABILITY OF U.S. POSTAL SERVICE AND FEDERAL WILDLIFE JOB OPPORTUNITIES
A federal district court has issued a Temporary Restraining Order against Federal Data Service, Inc. (FDS), and its principals, following FTC charges that the firm falsely claimed that entry-level Postal Service positions and federal wildlife jobs were available. According to FTC, the firm placed classified ads in the "help wanted" section of newspapers across the U.S. The ads announced that jobs were available at generous wages and invited consumers to call a toll-free number to receive application and exam information. When consumers called, they were told that for a fee ranging from $46 to $80, they would receive a list of available jobs, information on when and where required exams would be held, and practice tests to prepare for the exams, according to FTC.
FTC's complaint alleges that the company misrepresented:
Also, FTC charged that FDS charged or debited consumers' credit cards, debit cards or checking accounts without their consent.
FTC has asked the court to issue a permanent injunction and order the defendants to pay consumer redress.
FTC filed the complaint, under seal, in the U.S. District Court, Southern District of Florida, Fort Lauderdale Division, on April 3, 2000. The seal was lifted on April 13, 2000.
FTC noted that federal agencies and the U.S. Postal Service never charge application fees, or guarantee that an applicant will be hired; and
"If positions require a competitive examination--and many do not--hiring agencies typically offer free sample questions to consumers who sign up for the exam."
NOTE: The Commission files a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant has actually violated the law. The case will be decided by the court.
(Federal Data Service, Inc., Civil Action No.: 00-6462-CIV-FERGUSON, FTC File No. 992 3028, April 17, 2000.)
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