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 1999.
TELEMARKETERS SETTLE FTC CHARGES OVER SMALL BUSINESS ADS IN "COMMUNITY" PUBLICATIONS
Two telemarketers charged by FTC with deceptively convincing small businesses they owe money for unordered advertisements in publications purported to be affiliated with "civic" or "charitable" organizations agreed to settle the allegations. The charges were brought as part of "Operation Missed Giving," a sweeping nationwide campaign against allegedly fraudulent fund-raising coordinated by FTC, 40 states, and the American Association of Retired Persons (AARP). The joint initiative targeted telephone fund-raisers who misrepresented ties with police departments, fire fighters, veterans groups, and other community groups. Named as defendants by FTC in two separate complaints were T.E.M.M. Marketing, Inc., and Rodney L. Turner, Brian A. Edwards, and Michael D. Merryman, all officers of the company; and Tri-State Advertising Unlimited, Inc., company officer Jerome Anthony Wilkins, and Daryl Allen Bender. The settlements in these two cases permanently ban the individual defendants--except Bender--from selling ads in, or soliciting donations for, any publication. An order settling the allegations against Daryl Bender was filed with the court in April 1999.
FTC's 1998 complaints allege that the defendants misrepresented to small businesses that they had previously ordered or authorized the advertisements, that their booklets enjoyed a widespread distribution in the businesses' local communities, and that advertising proceeds would support a local, civic purpose. The complaints further allege that T.E.M.M. and Tri-State falsely claimed that payment for an advertisement constituted a donation. In both cases, according to the complaints, the small businesses often faced repeated billings for more ads--whether authorized or not--and aggressive collection tactics for unauthorized invoices, including threats that the bill would be turned over to a collection agency.
Each of the settlements permanently bars the individual defendants from engaging or participating--either directly or with others--in the advertising, offering for sale, sale or distribution of any advertising or publication. The defendants in the T.E.M.M. case also would be barred from engaging or participating in asking for or collecting donations to any publication, program or organization. The defendants in the Tri-State case similarly would be barred from soliciting donations.
The settlement with T.E.M.M. Marketing, and defendants Turner, Edwards, and Merryman requires the individuals to pay $67,500 in consumer redress. In the Tri-State settlement, defendant Wilkins must pay $530,000, the estimated amount of consumer injury.
Both settlements were filed in the U.S. District Court for the Northern District of Indiana, Fort Wayne Division, and were subject to the court's approval. The Commission vote to file the settlement in both matters was 4-0. In both cases, Commissioner Orson Swindle issued a separate statement dissenting from permanent bans on charitable fund-raising. He said the bans were overbroad since banning charitable fund-raising is not reasonably related to preventing violations that are the same or similar to the violations alleged in the complaints.
Commissioner Swindle also said that since charitable fund-raising is fully protected speech under the First Amendment, the public interest would have been better served if FTC had imposed less restrictive alternatives than permanent bans on non-misleading, fully protected speech.
In statements responding to Commissioner Swindle's dissent in each case, FTC Chairman Robert Pitofsky, joined by Commissioners Sheila F. Anthony and Mozelle W. Thompson, disagreed that the bans imposed on the defendants are overbroad. In their statements, the Commissioners wrote that strong relief was appropriate under the facts in both cases. Both Commissioners conceded that imposing bans may indeed bar truthful, non-deceptive speech but they felt that "significant fencing-in relief" was necessary.
NOTE: The stipulated final judgments are for settlement purposes only and do not constitute an admission by the defendants of a law violation. The judgments have the force of law when signed by the judge.
(Tri-State, FTC File No. X990003, Civil Action No. 1:98CV0302, July 16, 1999; T.E.M.M., FTC File No. X990002, Civil Action No. 1:98CV0300, July 16, 1999.)
FTC EXTENDS COMMENT PERIOD FOR GUIDES FOR JEWELRY, PRECIOUS METALS AND PEWTER INDUSTRIES
On June 8, 1999, FTC published a Federal Register Notice requesting public comments on proposed revisions to the Guides for the Jewelry, Precious Metals and Pewter Industries to provide for the disclosure of laser-drilling of diamonds to consumers. Comments were to be accepted until July 8, 1999. Response to a request from an industry group, the Commission has voted to extend the public comment period until August 31, 1999.
Comments about these proposed changes should be identified as:
"Guides for the Jewelry, Precious Metals and Pewter Industries -- 16 CFR Part 23 -- Comment" and should be directed to: Secretary, Federal Trade Commission, 600 Pennsylvania Avenue, NW, Room H-159, Washington, DC 20580. E-mail comments to: .
(FTC File No. G711001, July 13, 1999.)
FTC DEFERS TO CPSC
In a relatively rare occurrence, FTC has actually deferred to another federal agency. It referred a petition from the National Association of State Fire Marshals requesting that the agency initiate a trade regulation rule proceeding to require manufacturers and retailers of upholstered furniture containing polyurethane foam to affix flammability warning labels to such furniture, to the Consumer Product Safety Commission (CPSC). CPSC has direct authority under the Flammable Fabrics Act to issue flammability standards or require labeling for upholstered furniture, and FTC believes "CPSC is the most appropriate agency at this time to address the issues raised in the petition."
(FTC Release, July 13, 1999.)
INTERNET MATERIALS: Materials relating to these FTC matters are available on the Internet at FTC's World Wide Web site at: http://www.ftc.gov.
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