NOTE: Here 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 September 2000.
FTC has approved a stipulated final judgment with QBI, Inc., a travel company, and its owner Jeffrey Allen Donohue. According to FTC's complaint, QBI marketed travel packages that promised "free airfare," using vouchers distributed at banks and retail businesses. Based on suggestions from QBI, the stores distributed the vouchers to their customers while expressly or impliedly representing that the airfare would be free. Neither QBI's suggested advertising nor its vouchers, however, disclosed that the "rack" rates that consumers would pay for their hotel accommodations were significantly more expensive than those of typically available hotel accommodations, FTC charged.
The cost of these peak-rate rooms, the complaint contends, along with other undisclosed charges, often negated savings the consumers realized through the free airline tickets. Also, QBI falsely represented that it would return consumers' travel deposits upon request, FTC argued. While the conditions for the return of the deposits was specified on the vouchers, in many instances the company failed to return the money to customers who had met these conditions, said FTC. Lastly, according to the Commission, QBI falsely represented that it would fulfill its customers' travel requests in a timely manner.
Under the court settlement, QBI must disclose the terms, conditions and fees required to redeem its travel vouchers. Also, if the company uses the terms "standard" or "rack" rates, it must disclose that such rates are higher than the typical rates a consumer would pay for hotel accommodations. QBI has already refunded more than $51,000 to its customers to resolve FTC's allegations.
(QBI, Inc., et al., FTC File No. 992-3196, Civ. Action No. CV-00-10304 JSL (Mcx), September 29, 2000.)
United Payphones of America, Inc., and Andrew Marcus, were charged by FTC as part of a nationwide crackdown on allegedly fraudulent business opportunities. Both recently agreed to pay a $22,000 civil penalty to settle the charges against them.
These settlements end the litigation in these cases. These cases were among 35 cases brought by FTC and the Department of Justice as part of "Project Biz-illion$," a multi-prong state/federal attack on alleged traditional business opportunity scams. These cases, like most of "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. According to FTC, defendants made unsupported earnings claims and failed to give consumers critical pre-purchase information about the business opportunities, as required by FTC's Franchise Rule.
According to FTC, United Payphones, sold payphone vending opportunities. FTC charged the company and its president with failing to comply with the provisions of the Franchise Rule designed to help potential purchasers protect themselves from false profitability claims. A minimum investment of $1,665 was required for a single payphone, or $13,000 for a start-up package of seven payphones. Under the consent judgment, United Payphones and Marcus are barred from violating the Franchise Rule and from misrepresenting any fact material to a consumer's decision in connection with the sale of business opportunity ventures. The settlement requires the court's approval. It would bar defendants from selling their customer lists, and requires them to pay a $22,000 civil penalty.
The stipulated judgment and order was filed in the U.S. District Court, Southern District of Florida, Ft. Lauderdale Division, by the Department of Justice on behalf of the FTC, and signed by the judge on September 18, 2000.
According to FTC, International Cigar Consortium sold cigar humidor display rack distributorships. FTC charged the defendants with failing to comply with the provisions of the Franchise Rule designed to help potential purchasers protect themselves from false profitability claims. A minimum investment of $6,950 was required for 15 humidors and an initial supply of cigars.
Douglas C. McGlothin and Anthony Simeonov are barred by the court judgment from violating the Franchise Rule and from misrepresenting any fact material to a consumer's decision in connection with the sale of business opportunity ventures. The settlement also prohibits the defendants from selling their customer lists.
The stipulated judgment and order was filed and approved by the U.S. District Court, District of Arizona, in Phoenix, Arizona, on August 28, 2000.
NOTE: These stipulated judgments and orders 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.
(United Payphones: FTC Matter No. X000044; Civil Action No. 00-6218, September 26, 2000; International Cigar: FTC Matter No. X000037; Civil Action No. 00 0243 PHX EHC, September 26, 2000.)
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