ADS CLAIMING ADD-ON BRAKE SYSTEM IS AS EFFECTIVE AS FACTORY-INSTALLED ABS BRAKES ARE FALSE: FTC LAW JUDGE
An FTC Administrative Law Judge concluded that ads claiming an add-on braking system performed as effectively as factory-installed ABS brakes are false, and has barred the marketers from using the term ABS in marketing their brakes. Judge Lewis F. Parker also barred Brake Guard Products, Inc. and Ed F. Jones, its director, from misrepresenting the performance characteristics of the brakes, the availability of insurance discounts resulting from installation of the brakes and their compliance with certain government standards. The Judge also ordered the respondents to take steps to notify all distributors and purchasers that FTC found that the ad claims and promotional material that said Brake Guard was an anti-locking braking system with the safety and economy advantages of factory-installed ABS brakes are false and misleading.
Judge Parker's decision and order follows FTC charges against Brake Guard and Jones. In its 1995 complaint, FTC charged that Brake Guard made false and unsubstantiated ad claims that its Brake Guard Safety System, also known as Advanced Braking System or Brake Guard ABS, is an antilock braking system as effective as manufacturer-installed ABS brakes; complies with a performance standard established by the Society for Automotive Engineers; and will qualify a vehicle for automobile insurance discounts in a significant proportion of cases. Brake Guard sold the systems to dealers who charged consumers between $283 and $349 and the respondents sold between 400,000 and 500,000 of the systems between 1990 and 1996.
According to Judge Parker's decision,
"The Brake Guard device does not have the components necessary to operate as an ABS system, as that term is defined by the National Highway Transportation Safety Administration, understood by experts in the field, used in the industry, and understood by consumers. . . .Through nine separate deceptive claims, respondents have misrepresented the fundamental purpose and every relevant aspect of their product."
Judge Parker's order would bar defendants from representing that the current Brake Guard product:
- "is an antilock braking system;
- prevents or substantially reduces wheel lock-up, skidding, or loss of steering control in emergency stopping situations;
- will qualify a vehicle for an automobile insurance discount in a significant proportion of cases; complies with a performance standard pertaining to antilock braking systems set forth by the National Highway Traffic Safety Administration;
- reduces stopping distances by 20 to 30%; provides antilock braking system benefits that are at least equivalent to factory-installed ABS systems; or
- will stop a vehicle in a shorter distance than a vehicle that is not equipped with the product, in emergency stopping situations."
The order also requires respondents to have substantiation for any claims of enhanced safety from the use of their products; claims of insurance discounts as a result of installation of the brakes; and bars misrepresentations of endorsements. Finally, the order requires that Jones send a letter to all Brake Guard distributors notifying them that FTC has determined that the ad claims for Brake Guard are false and misleading and instructing them to stop using the promotional material. Also, Jones must follow up by sending consumers notification of the FTC findings.
NOTE: Judge Parker's order is subject to review by the full Commission either on the Commission's own motion or appeal by the respondents. If not appealed within 30 days, it becomes the Commission's decision and order and takes effect 60 days after it's served on respondents.
(Brake Guard Products, Inc., FTC Dkt, No. 9277, May 9, 1997;
materials relating to this FTC matter are available on the Internet at FTC's World Wide Web site at: http://www.ftc.gov.)
FTC SETTLEMENT INVOLVES ADS FOR DISCOUNT WALLPAPER AND BLINDS
FTC obtained a settlement of its charges against the principals of Worldwide Wallcoverings and Blinds, Inc. (i.e., Bruce Sears and Martha Kazak). In September 1996, FTC obtained a federal court order halting the operations of Worldwide. FTC had charged that Worldwide, which advertised discount wallpaper and blinds and promised delivery within two to three days, had defrauded thousands of consumers by, in many instances, simply pocketing their money and not shipping any merchandise at all. The agreement with the two individual defendants bars them from misrepresenting when they will deliver ordered items or any other fact material to a consumer's decision to purchase from them, and from violating the Mail or Telephone Order Merchandise Rule. It permanently bans Sears from the mail order industry.
According to FTC's complaint, Worldwide had advertised in national magazines, offering wall coverings and blinds at discounted rates and free shipping within two or three days. From 1995 until September 1996, when FTC obtained a court order temporarily halting the operation, Worldwide allegedly had failed to deliver the merchandise to most of its customers and had also failed to issue refunds. The Better Business Bureau of Chicago had received an unprecedented 1,500 consumer complaints about Worldwide in its last two years of operation. The Illinois Attorney General's Office received as many as 700 consumer complaints.
Thousands of consumers paid the company on average $250 each, with purchases ranging between $12 and $6,000 each for wall coverings and blinds, and either never received the items purchased or never received refunds, FTC alleged. A federal district court for the Northern District of Illinois issued the temporary restraining order, which stopped the challenged practices, appointed a receiver, and froze the defendants' assets. The court entered a preliminary injunction continuing the asset freeze and conduct restrictions. Worldwide Wallcoverings remains under the control of the receiver.
The proposed settlement with Sears and Kazak contains language that would permit FTC to reopen the consent order if the defendants misrepresented the assets in their financial statements. The settlement was filed in the U.S. District Court for the Northern District of Illinois, Eastern Division, in Chicago, on April 30, 1997. The settlement, which is subject to the court's approval, was signed by the judge on May 6, 1997.
NOTE: This stipulated final judgment and order for permanent injunction is for settlement purposes only and does not constitute an admission by the defendants of a law violation. The judgment has the force of law when signed by the judge.
(Worldwide Wallcoverings and Blinds, Inc., Civil Action No. 96C6138, FTC File No. X96 0096, May 7, 1997; materials relating to this FTC matter are available on the Internet at FTC's World Wide Web site at: http://www.ftc.gov.)
FTC SHUTS DOWN ALLEGED PYRAMID SCHEME ADVERTISED ON NET
Operators of an allegedly illegal pyramid scheme that advertised on the Internet and in newspapers that consumers could contribute to a charity and make huge monthly returns for themselves have agreed to settle FTC charges that they made false and misleading statements to sell membership in their alleged scheme. The settlement bars unsubstantiated income or profitability claims and misrepresentations in connection with the sale of any goods or services. Global Assistance Network for Charities (GANC) and its operators were targeted as part of "Operation Missed Fortune," a November 1996 law enforcement crackdown on "get-rich-quick" schemes by FTC and 25 states. GANC was one of more than 75 law enforcement actions against alleged self-employment scams, work-at-home schemes, and pre- packaged small businesses involving everything from vending machine frauds to sophisticated medical billing services.
According to FTC, the firms typically promised "proven" opportunities to "gain financial independence" and "be your own boss." FTC said they advertised that for an initial fee of $70 and a $50 monthly payment, consumers could contribute to worthy charities while earning thousands of dollars a month--risk free. They advertised that consumers would ultimately receive over $89,000 a month and promised that if this level of earnings was not realized, GANC would provide a refund, said FTC.
On November 5, 1996, FTC filed a complaint in Federal District Court in Arizona charging them with making false and misleading earnings representations. The court granted the Commission's motion for a temporary restraining order and an asset freeze, and on February 4, the court entered a default judgment against GANC. This settlement resolves the cases against the individual defendants, Eileen Belcar and Cedrick Robles. The settlement bars misrepresentations in the promotion, advertising, offering for sale or sale of any goods or services; including misrepresentations about income or profitability.
NOTE: This consent judgement is for settlement purposes only and does not constitute an admission by the defendant of a law violation. The United States District Court for the District of Arizona signed the parties' stipulated final judgment on April 24, 1997. Consent judgments have the force of law when signed by the judge.
(Global Assistance Network for Charities, et al., FTC File No. X97 0006, May 12, 1997; materials relating to this FTC matter are available on the Internet at FTC's World Wide Web site at: http://www.ftc.gov.)
FTC FINAL AGREEMENT INVOLVES IMITATION PEARL JEWELRY
The recently finalized consent agreement with Zale Corporation, settles charges that Zale deceptively advertised its "Ocean Treasures" line of imitation pearl jewelry as composed of cultured pearls. The consent order bars Zale from misrepresenting the composition or origin of any imitation, cultured or natural pearl product. It also requires Zale to include a word such as "artificial," "imitation," or "simulated" in close proximity to any representation that an imitation pearl product contains pearls; and to include a word such as "cultured" or "cultivated" in close proximity to any representation that a cultured pearl product contains pearls. Also, the order requires Zale, for three years, to make available to consumers in Zale's stores an information sheet describing the origin of imitation, cultured and natural pearls.
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.
(Zale Corporation, FTC Dkt. No. C-3738, May 2, 1997;
materials relating to this FTC matter are available on the Internet at FTC's World Wide Web site at: http://www.ftc.gov.)
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May 1997 Advertising Law News...
From: Advertising Compliance Service.
NOTE: Here is where you can find advertising law information based on news briefs that appeared in past issues of the Reference Service, Advertising Compliance Service during the month of May 1997.
