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False and Unsubstantiated Earnings Claims Alleged - News Brief.
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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 July 1998.



As part of its stepped-up attacks on "fraudulent" or scam unsolicited commercial e-mail (UCE), FTC announced a proposed consent agreement with Kalvin P. Schmidt, an alleged promoter and operator of a high-tech chain letter software program. According to FTC's complaint, Schmidt, doing business as DKS Enterprises, DS Productions, DES Enterprises, and, operated a web site promoting two chain letter or pyramid marketing programs, "Mega$Nets" and "MegaResources." Among other allegations, FTC charged that Schmidt made false and unsubstantiated earnings claims.

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.

(Kalvin P. Schmidt, FTC File No. 972 3308, July 14, 1998.)


Uncashed checks and money orders totaling some $50,000 will be returned to 139 U.S. consumers who were the alleged victims of an allegedly fraudulent Canadian-based advance fee loan company. The uncashed checks and money orders were confiscated as a result of a recent action in Canada by the British Columbia Attorney General in cooperation with FTC. According to FTC, the checks and money orders were sent in January and February 1998 by consumers in over 25 states hoping to obtain loans from Allied Credit Referral Service, operating out of Richmond, British Columbia.

Allied Credit advertised advance fee loans in newspapers and tabloids in the U.S. Consumers who called Allied's telemarketers were told that they were certain to be approved for a loan and were asked to pay an upfront fee, said FTC. After receiving the consumers' money, Allied then referred the consumers to a U.S. "turndown room," according to the Commission. Consumers' loan applications were turned down and consumers lost their upfront fees, FTC said.

As part of Project Loan Shark II, the British Columbia Ministry of Attorney General issued a Cease and Desist Order against Allied Credit Referral Services. Along with that order, the Ministry also obtained a court order requiring United Parcel Service Canada and Federal Express Canada Ltd. to hold any packages sent to Allied and to turn the packages over to the Ministry. By taking this action, the Ministry was able to stop the flow of consumer funds sent to defendants from the U.S. into Canada. A later order by the Supreme Court of British Columbia authorized the Ministry to return the seized checks to the alleged victims.

(FTC Release, July 16, 1998.)


On May 27, 1998, FTC announced an administrative complaint against a New York-based drycleaner, Continental Gown Cleaning Service, Inc., for providing wedding gown manufacturers with care labels that falsely advertised that the company was the only drycleaner able to clean the gowns. Most recently, on July 20, 1998, FTC announced that two wedding gown manufacturers agreed to pay civil penalties to settle FTC charges that the companies violated the Care Labeling Rule by using Continental's labels. A complaint against a third manufacturer has been filed in U.S. District Court.

The Care Labeling Rule, which has been in effect since 1972, requires manufacturers and importers of clothing to attach care labels that state what regular care is needed for ordinary use of the garment. For this reason, care labels usually specify either a washing instruction or a dry cleaning instruction. According to FTC, Continental's labels violate the rule since they fail to provide adequate instructions for drycleaning these garments. The labels fail to state at least one type of solvent that may be used on the gowns and fail to explain how the normal drycleaning process must be modified for these delicate garments, FTC said.

NOTE: The Commission issues 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 issuance of a complaint is not a finding or ruling that the respondent has violated the law. The case will be decided by the court.

NOTE: Consent decrees are for settlement purposes only and do not constitute an admission by the defendant of a law violation. They have the force of law when signed by the judge.

(Alyce, FTC File No. 9523302, Civil Action No. 98C 4403, July 20, 1998; Ilissa, FTC File No. 952394, Civil Action No. 98CIV.5129, July 20, 1998; Mori Lee, FTC File No. 9523292, Civil Action No. 98CIV.5130, July 20, 1998.)


On July 17, 1998, FTC staff filed a comment with the U.S. Environmental Protection Agency (EPA) about the scope of the "treated articles" exemption under EPA's registration rules related to the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA). The FTC staff noted that the recent proliferation of consumer products containing "antibacterial" or "antimicrobial" agents, accompanied by advertising and labeling claims about the efficacy of those agents may imply a public health benefit.

NOTE: The comment represents the views of staff members of the FTC's Bureau of Consumer Protection and not necessarily the views of the Commission or any individual Commissioner.

([FTC Files Staff Comment With EPA Over Ad, Label Claims], FTC File No. V980017, July 20, 1998.)


FTC voted to clarify the requirements of the Appliance Labeling Rule to permit manufacturers and others who distribute bulk cartons of incandescent light bulbs and compact fluorescent lamps not packaged for individual retail sale to make the rule's required labeling disclosures on the bulk shipping carton. Retailers must display these lamp products for sale in the bulk carton so that consumers can use the disclosures in selecting the light bulbs or compact fluorescent lamps they want.

([FTC Vote to Clarify Appliance Label Rule for Bulk Packages of Lamp Products], FTC File No. R611004, July 20, 1998.)

INTERNET MATERIALS: Materials relating to these FTC matters are available on the Internet at FTC's World Wide Web site at: 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.



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