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FTC FINAL ORDER IN CASE INVOLVING ALLEGED VIOLATIONS OF HEALTH WARNING FTC has finalized a consent agreement in an enforcement action challenging the adequacy of health warnings on the packages and in the advertisements of smokeless tobacco products. FTC had alleged that Stoker Inc. violated the Comprehensive Smokeless Tobacco Health Education Act of 1986 (Smokeless Tobacco Act) and its regulations by failing to place the health warning statements in conspicuous and legible type, and in a conspicuous and prominent place on the package. Under the now-final agreement, Stoker is barred from violating any provision of the Smokeless Tobacco Act or the regulations. The Smokeless Tobacco Act was enacted in 1986 following a report from the U.S. Surgeon General concluding that the use of smokeless tobacco products poses significant health risks. Congress empowered FTC to bring suits for violations of certain provisions of the Act, including the health warnings on packages and in advertisements. The Act requires three rotational warnings on product packages and in most advertisements. NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000. (Stoker Inc., FTC File No. 012 3015, June 5, 2001.) Watch the latest videos on YouTube.com VENDING MACHINE FRANCHISOR PAYS $33,000 CIVIL PENALTY TO SETTLE FTC CHARGES North American Marketing Systems, Inc. (NAMS) and its owner, Patrick Wherley, agreed to pay a $33,000 civil penalty to settle FTC charges that they failed to provide the pre-sale disclosures required by FTC's Franchise Rule to prospective purchasers of their gumball vending machine business opportunities. The Department of Justice (DOJ), at FTC's request, filed suit against the defendants as part of "Project Biz-illion$," a nationwide crackdown on allegedly fraudulent business opportunities. Under the settlement's terms, defendants are also barred from violating FTC's Franchise Rule and making false and misleading representations in connection with the sale of business opportunity ventures. This settlement ends the litigation in this case, which was among 22 cases FTC referred to DOJ for filing as part of "Project Biz-illion$," a multi-prong state/federal attack on business opportunity scams. This case, like most of the "Project Biz-illion$" actions, was launched against defendants who advertised in the classified section of daily newspapers to peddle payphone, vending machine, display rack, and work-at-home scams. According to FTC, defendants promoted and sold gumball vending machines that resemble antique gas pumps. The defendants' advertisements contained statements such as: "**MUST SELL** Local Vending Route $1000/wk Potential Only $4995 Invest." When potential investors called the toll-free number listed in the ads, FTC said, they were sent a package of promotional materials, including an introductory letter, a publication entitled "Vending ... The Good Life!," a purchase agreement, an audio tape entitled "Vending Overview," and samples of gourmet gumballs. The company offered consumers four different purchase plans: Plan A consisted of eight gumball machines for $9,495; Plan B -- 16 machines for $16,995; Plan C -- 24 machines for $24,995; and Plan D -- 32 machines for $32,000. Prospective purchasers were told that because of the novelty of the gumball machines, they would be able to obtain prime vending locations, according to FTC. FTC alleged that defendants' promotional materials included claims of specific earnings that prospective purchasers could expect to achieve from each vending machine. However, according to FTC's complaint, defendants failed to provide prospective purchasers with an earnings claim document providing written substantiation for the defendants' earnings claims, including the number and percentage of prior purchasers who had earned that much, as the Franchise Rule requires. The complaint also alleged that the defendants failed to provide prospective purchasers with a basic disclosure document that included the names, addresses, and telephone numbers of prior purchasers, as required by the Franchise Rule, to help potential purchasers protect themselves from false profitability claims. In addition to the civil penalty, the settlement bars future violations of the Franchise Rule; false and misleading representations in connection with the sale of business opportunities; and the sale of the defendants' customer lists. The stipulated judgment and order was filed in the U.S. District Court for the District of Colorado, in Denver, and approved by the court on May 18, 2001. NOTE: This stipulated judgment and order is for settlement purposes only and does not constitute an admission by the defendants of a law violation. Consent judgments have the force of law when signed by the judge. (North American Marketing Systems, Inc., FTC Matter No. X000040; Civil Action No. 00-N-317) (NAMS), June 8, 2001.) TWO DISPLAY RACK FRANCHISORS SETTLE FTC CHARGES Cigar Manufacturers Outlet, Inc. and its president, Jose Ernesto San Martin, agreed to settle FTC charges that they failed to provide the pre-sale disclosures required by FTC's Franchise Rule to prospective purchasers of their cigar display rack business opportunities. In a separate action, Bruce Feinstein, an officer of the Cigar Factory Outlet, Inc., also agreed to settle charges of Franchise Rule violations. DOJ, at FTC's request, filed a suit against the defendants as part of "Project Biz-illion$." Under the terms of the two settlements, defendants are barred from violating the Franchise Rule and making false and misleading representations in connection with the sale of business opportunities. This settlement end the litigation in these cases, which were among 22 cases FTC referred to DOJ for filing as part of "Project Biz-illion$." These cases, like most of the "Project Biz-illion$" actions, were launched against defendants that advertised in the classified section of daily newspapers to peddle payphone, vending machine, display rack, and work-at-home scams. NOTE: These stipulated judgments and orders are for settlement purposes only and do not constitute an admission by the defendants of a law violation. Stipulated judgments have the force of law when signed by the judge. (Cigar Factory Outlet, Inc., FTC Matter No. X000067; Civil Action No. 00-6209-CIV-GRAHAM/TURNOFF), June 12, 2001; Cigar Manufacturers Outlet, Inc., et al, FTC Matter No. X000068; Civil Action No. 00-6210-CIV-GRAHAM/TURNOFF), June 12, 2001.)

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