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Note:This website is where you can find advertising law information based on archived news briefs from past issues of Advertising Compliance Service. These archived advertising law-related news briefs were published in Advertising Compliance Service in February 2002.





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A federal judge temporarily halted the operations of two companies that sell programs and services purported to reduce one's income taxes, for their alleged failure to live up to their refund guarantees. According to FTC, National Audit Defense Network, Inc. (NADN); Tax Coach, Inc., doing business as Tax Ready (Tax Ready); Robert Bennington, NADN's and Tax Ready's president; Cort Christie, NADN's chief executive officer; and Al Rodriguez, NADN's and Tax Ready's general manager misrepresented that they will provide consumers with refunds, and misrepresented that they will provide consumers with refunds in a timely manner, in violation of the FTC Act.

According to FTC, defendants advertise programs and services that purport to assist consumers in reducing their tax liabilities. The defendants have promoted their tax-related services and programs through a variety of media, including advertisements on national radio talk shows, said FTC. Consumers call a toll-free telephone number in response to the ads, and the defendants' salespeople state that their programs and services will save consumers money on their income tax returns. The defendants' programs cost from around $400 to more than $1,400.

FTC's complaint said that in connection with the sale of these programs and services, the defendants offer consumers an unconditional 30-day money-back guarantee. The defendants represent that if consumers want to cancel the purchase for any reason, they may do so within 30 days and receive a full refund. The defendants also tell consumers that if they are unable to achieve tax savings of $3,000 after implementing or using defendants' tax-saving strategies, they will receive a full refund.

When describing these guarantees, the defendants allegedly failed to disclose certain conditions. Before consumers are eligible for a refund under the 30-day guarantee, they must obtain a "return authorization" number from the defendants, and before consumers are eligible for a refund under the $3,000 guarantee, they must have attempted for one full year to implement the defendants' recommended tax-saving strategies, most of which require the operation of a home business, according to FTC.

FTC's complaint alleged that when consumers who meet the requirements of the guarantees contact the defendants to attempt to obtain a refund, the defendants fail or refuse to make such refunds, or otherwise frustrate consumers in a variety of ways from receiving refunds in a timely manner. If issued, many refunds take an inordinate amount of time to be received. Some consumers never receive a refund. Other consumers receive refunds only through the intercession of law enforcement agencies or consumer protection organizations such as the Better Business Bureau.

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.

(National Audit Defense Network, Inc., FTC File No. 012-3138, Civil Action No. CV-S 02-0131-LRH-PAL, February 5, 2002.)


POPCORN COMPANY SETTLES FTC PRIVACY VIOLATION CHARGES--American Pop Corn Company (APC) will pay $10,000 to settle FTC charges that it violated the Children's Online Privacy Protection Rule (COPPA Rule) by collecting personal information from children on its "Jolly Time" Web site without getting parental consent. The settlement also will bar future violations of the COPPA Rule.

In its complaint, FTC alleged that APC maintained a Web site,, with a "Kids Club" section that features games, crafts, contests, and jokes directed to children under the age of 13. Without obtaining parental consent, the company collected personal information, including names, e-mail addresses, and home addresses, from children who went to the "Kids Club" section. It also conditioned participation in certain prize offers on children's providing more information than was necessary to participate in the activity, FTC alleged. Both practices violate the COPPA Rule, FTC says.

Also, APC posted a privacy policy statement on its Web site stating that it would notify parents or guardians by e-mail whenever "guests" under the age of 18 registered at its site. It stated that parents or guardians would be given the option to invalidate the registration. But APC did not contact the parents of children who registered and provided personal information, and so the privacy policy statements were false, in violation of the FTC Act, FTC alleged.

NOTE: A consent decree is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Consent decrees have the force of law when signed by the judge.

(American Pop Corn Company, FTC File No. 012 3026, Civil Action No. C02-4008DEO, February 14, 2002.)
















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