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NET PROMOTERS BARRED FOR LIFE FROM ALL FUTURE MLM PROJECTS
Two operators of an Internet-based business opportunity involving an
Internet shopping mall network agreed to an FTC settlement that
permanently bars them from participating in multi-level marketing
(MLM) opportunities. A third promoter is barred from taking part in
MLM opportunities for seven years. The harsh penalties were part of a
settlement of FTC charges that their project was an illegal pyramid
operation.
Darrin Epps and Edward Lamont are forever barred from participating
in MLM. Richard Slaback may not take part in MLM for seven years. All
three defendants are barred from making false or misleading claims in
selling any business venture or from assisting others to make false
claims. Slaback agreed to pay $38,000 in consumer redress. In March
2001, Bigsmart.Com L.L.C. principals, Mark and Harry Tahiliani,
agreed to provide up to $5 million in consumer redress and post a
$500,000 performance bond to settle FTC charges in this case.
According to FTC's complaint, Bigsmart marketed Internet theme
"malls" that it claimed would let investors earn substantial income
from commissions on products purchased through the Internet. The
malls were a collection of links to retail sites maintained by
independent third-party merchants, such as MarthaStewart.com, and to
a "Superstore" maintained by Bigsmart, itself. Traffic was directed
to the malls through the personalized Bigsmart "welcome pages" that
members bought access to for a $10 application fee and a $99.95
"hosting" fee. While Bigsmart claimed that members would make
substantial amounts of money, according to FTC, the project was
structured in such a way that realizing continued financial gains
would depend on ". . . the continued, successive recruitment of other
participants," not on retail sales of products and services to the
public.
FTC charged that--
* the claims that consumers who invested in Bigsmart would make
substantial income were false;
* promotional materials that made the false and misleading claims
provided the means and instrumentalities for others to deceive
consumers; and
* Bigsmart was actually a pyramid scheme.
Each of these practices violated the FTC Act, said FTC.
The orders were filed in U.S. District Court for the District of
Arizona.
NOTE: A Stipulated Final Judgment and Order is for settlement
purposes only and does not constitute an admission by the defendant
of a law violation. Consent judgments have the force of law when
signed by the judge.
(Bigsmart.Com L.L.C., FTC File No. 002 3365, Civil Action No. 00 226
PHX RCB, August 9, 2001.)
COMPANY OFFICER PERMANENTLY BARRED FROM CERTAIN NET ADVERTISING TO
SETTLE FTC CHARGES
An officer and director of an Internet company collected consumers' personal identifying information, including credit card information, by telling them they had to supply the data or lose access to the Internet, according to FTC. That officer and others agreed to settle FTC charges that their project violated the law. A preliminary order in the case required the defendants to destroy the collected information. This final settlement settles the remaining issues involved, permanently barring the defendants from misrepresentations in the advertising, marketing, promotion, distribution or sale of any products or services via the Internet, and barring use of personal information collected as a result of misrepresentations.
FTC charged that in mid-October 1999, Robert Stout, doing business as
Global Internet Federal Registry; Get Our From Under.com, Inc.; and
Donald J. Lytle, an officer and director of Get Out From Under.com,
sent unsolicited commercial e-mail (spam) to Internet news groups
notifying members that because of the Children's Online Privacy
Protection Act, consumers were required to certify their age to
maintain access to the Internet. The messages directed consumers to
defendants' Web sites. The sites advised consumers that, "all
Internet users are required to register here for Internet licensing,"
and provided an application form that collected information ranging
from consumers' names and addresses to credit card numbers and
expiration dates.
In December 1999, FTC filed a complaint in the U.S. District Court
for the District of New Jersey, charging that the defendants'
representations were false and deceptive. Shortly thereafter, FTC and
the defendants agreed to a preliminary order that required
destruction of all consumer information collected by defendants as a
result of the representations alleged in the complaint. The
Stipulated Judgment and Order for Permanent Injunction resolves that
court case.
The final order bars defendants, in connection with the advertising,
marketing, promotion, distribution, offering for sale or sale via the
Internet of any product or service, from misrepresenting:
any material fact;
that consumers must register in order to maintain access to
newsgroups or the Internet;
that consumers must provide personal information to maintain access
to newsgroups or the Internet;
that they represent an organization recognized by experts or
professionals in the field; or
that they are associated or affiliated with any federal, state or
local government organization.
Also, the settlement bars the defendants from collecting, using,
selling or transmitting consumers' personal identifying information
or credit card information obtained as a result of misleading
representations.
NOTE: A Stipulated Final Judgment and Order is for settlement
purposes only and does not constitute an admission of a law
violation.
(Global Internet Federal Registry, et al., FTC File No. X000 122,
August 24, 2001.)
FTC SETTLES COURT SUIT OVER ALLEGED VACATION TRAVEL SCAM
This FTC action involved a company that target-marketed its travel packages
primarily through unsolicited faxes. A recent settlement will bar
Resorts Exchange International of America, Inc. (REIA) and its owner
from similar actions in the future. FTC's complaint alleged
violations of the FTC Act and other alleged violations. It was
brought as part of Operation Travel Unravel. That 2000 joint federal
and state law enforcement sweep resulted in 85 actions against
companies and individuals allegedly involved in vacation travel
fraud.
According to FTC's complaint, since at least 1999, REIA and its owner
deceived consumers across the U.S. by deceptively marketing travel
packages. Using in-house sales personnel and a number of third-party
boiler rooms throughout Florida, FTC argued, REIA contacted consumers
by sending unsolicited faxes to their workplace promoting travel
packages at a deeply discounted rate. The faxes, which were addressed
to "All Current Employees," typically said that the "wholesale travel
department" was releasing reduced-price, corporate closeout discount
vacations.
In many cases, consumers who received the faxes at work believed
either that they were sent from the travel division of their company
or were approved or sponsored by their employer, FTC alleged.
FTC's complaint said that during the initial sales presentation, the
defendants misrepresented the material terms of their refund and
cancellation policies, at times telling consumers that they could
cancel their payment in the future if they wanted to. However, when
customers did call to attempt to cancel, they were told that they had
no right to do so.
Under the terms of the stipulated final judgment, defendants will,
among other things, be permanently barred from violating the FTC Act.
Also, the stipulated judgment requires defendants to post a $400,000
performance bond prior to engaging in telemarketing or the sale of
travel-related products.
The judgment also provides for a $4 million suspended judgment that
can be reinstated if defendants are found to have misrepresented
their financial situations.
The stipulated final judgment was filed in the United States District
Court for the Middle District of Florida, in Orlando, on August 8,
2001.
NOTE: Stipulated final judgments are for settlement purposes only and
do not constitute an admission by the defendants of a law violation.
Consent judgments have the force of law when signed by the judge.
(Resorts Exchange International of America, Inc., et al., FTC File
No. 002-3219, August 8, 2001.)
HEARINGS AND WORKSHOPS ON CONSUMER PROTECTION WOULD CONTINUE UNDER MURIS
One initiative that would continue under his Chairmanship,
said FTC Chairman Timothy J. Muris, is hearings and workshops on
consumer protection and competition matters that affect the economy.
Speaking at the 124th American Bar Association annual meeting in
Chicago, Chairman Muris said:
"These proceedings help us develop a better understanding of new
economic and business developments, and their consumer-related
implications, in a non-adversarial process, and are useful to the
Commission, the Congress, and others, by informing policy and
possibly future enforcement decisions. We have already continued the
practice of sponsoring these proceedings with our just concluded
conference on Gasoline Prices last week. There will be follow-up
hearings on this issue over the next several months, and we will have
similar hearings on other antitrust and consumer protection issues
over the next few years."
(Expect Continuity in Antitrust Enforcement FTC's Muris Tells ABA,
August 7, 2001.)
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