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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 June 2002.





Advertising Disclosures
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Health Claims
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Internet Mktng.
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Made in USA #1
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In a coordinated attack on alleged business opportunity and work-at-home fraud, FTC, the Department of Justice (DOJ) and 17 state law enforcement agencies launched a law enforcement sting and consumer education campaign targeting those who use deceptive earnings claims or otherwise violate consumer protection laws. The law enforcers caught 77 operations in the sting.

Business Opportunity Advertisements

Using undercover investigators and special computer tools, FTC identified business opportunity advertisements that made earnings claims without including cautionary language required by FTC's Franchise Rule. The operations ranged from envelope stuffing work-at-home schemes to snack and soda vending machine businesses. In some cases, like medical billing work-at-home schemes, the sellers overstate the demand for the services, according to FTC. In others, like vending machine businesses, the operators allegedly misrepresent the amount of assistance they would provide to the franchisee. All of the operators targeted by FTC were allegedly characterized by one key element:

earnings claims that were unsubstantiated or deceptive.

FTC Filed Complaints

In 11 cases, FTC filed complaints in U.S. District Court seeking a permanent halt to the deceptive claims and, where franchises are involved, court orders requiring the defendants to provide future investors the disclosures required by the Franchise Rule. The agency also will seek redress for consumers.

Four Related Cases

In four related cases, promoters of medical billing, paralegal and craft work-at-home schemes have settled FTC charges filed earlier. The settlement in two of the cases permanently bans the defendants from selling business ventures, employment opportunities or work-at-home opportunities and requires that they post a $1 million bond before engaging in telemarketing. In the other two cases, the settlements require the defendants to post $1 million bonds before engaging in the promotion of work-at-home opportunities.

11 Cases Coordinated With
DOJ Office of Consumer Litigation

In 11 cases coordinated with the DOJ Office of Consumer Litigation, the agencies will seek consumer redress, civil penalties, and a permanent halt to the deceptive claims.

17 State Law Enforcement Agencies

In addition to the FTC and DOJ cases, 17 state law enforcement agencies have announced 48 actions against business opportunity sellers. Those actions include lawsuits, cease and desist orders, consent agreements, and fines.

State Participants in Sweep

State participants in the sweep include: Alaska Attorney General, Arkansas Attorney General, California Attorney General, Florida Attorney General, Florida Department of Agriculture and Consumer Services, Indiana Attorney General, Iowa Securities Bureau, Kentucky Attorney General, Louisiana Attorney General, Maryland Attorney General, Michigan Attorney General, North Carolina Department of Justice, North Dakota Attorney General, Ohio Attorney General, Texas Attorney General, Washington State Department of Financial Institutions, Securities Division and the Wyoming Attorney General.

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.

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.

(FTC Release, June 20, 2002.)


In an initial decision, Administrative Law Judge (ALJ) James P. Timony ordered a series of companies, all of which are subsidiaries of French corporation Vivendi Universal S.A., among other things to cease and desist from entering into "any combination, conspiracy, or agreement"--with producers or sellers at wholesale of audio or video products--to "fix, raise, or stabilize prices or price levels" in connection with the sale in or into the U.S. of any audio or video product.

Also, under the order's terms, respondents are barred from entering into agreements that prohibit, restrict, regulate, or otherwise place any limitation on "any truthful, nondeceptive advertising or promotion in the United States" for any audio or video product.

The judge's order comes following the conclusion of administrative proceedings conducted to address allegations in an administrative complaint issued against the respondents alleging that they entered into an agreement with Warner Communications, Inc. to fix prices and limit advertising for a certain period of time for the first two of three compact disc and video products developed from a series of concerts by The Three Tenors - Luciano Pavarotti, Placido Domingo, and Jose Carreras.

(PolyGram Holding, Inc., et al., FTC File No. 001-0231, June 20, 2002.)
















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