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FTC Gets $3.6 Million Judgment Against Companies that Allegedly Debited Money from Consumers’ Bank Accounts Without Permission

At the request of the Federal Trade Commission, a federal court has entered a judgment of more than $3.6 million against a payment processor and its subsidiary that allegedly debited consumers’ bank accounts illegally on behalf of deceptive telemarketers. According to a 2007 complaint filed by the FTC and seven states, Your Money Access, LLC and its subsidiary, YMA Company, LLC, processed unauthorized debits on behalf of deceptive telemarketers and Internet-based schemes that were violating the FTC’s Telemarketing Sales Rule and state consumer protection laws. The companies played a critical role in these schemes by providing access to the banking system and the means to extract money from consumers’ bank accounts. The FTC alleged that in many instances the merchants either failed to deliver the promised products or services or sent consumers relatively worthless items.

A default judgment entered in October 2008 barred Your Money Access and YMA Company from payment processing for any client whose business practices are deceptive, unfair, or abusive within the meaning of the FTC Act, the Telemarketing Sales Rule, and state consumer protection laws.

The states joining the FTC’s complaint were Illinois, Iowa, Nevada, North Carolina, North Dakota, Ohio, and Vermont.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,800 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics.

FTC Approves Final Order Settling Charges that Coca-Colas Acquisition of its Largest North American Bottler Was Anticompetitive

Following a public comment period, the Federal Trade Commission has approved a final
Order settling charges that The Coca-Cola Company’s $12.3 billion acquisition of its largest North American bottler, which also distributes Dr Pepper brand carbonated soft drinks in specific geographic markets, would have been anticompetitive. The order requires Coca-Cola to limit access to the confidential competitive business information of rival Dr Pepper Snapple Group.

The Commission vote approving the final Order was 4-0-1, with Commissioner Edith Ramirez recused. The Order can be found on the FTC’s website and as a link to this press release. (FTC File No. 101-0107; the staff contact is Jill Frumin, Bureau of Competition, 202-326-2758; see press release dated September 27, 2010, at http://www.ftc.gov/opa/2010/09/coke.shtm.)

Copies of the documents mentioned in this release are available from the FTC’s website at http://www.ftc.gov and from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. Call toll-free: 1-877-FTC-HELP.

(FYI 47.2010.wpd)

At FTC’s Request, Judge Imposes Ban on Marketers of Detox Foot Pads

At the request of the Federal Trade Commission, a federal judge has banned marketers of Kinoki “Detox” Foot Pads – that would purportedly remove toxins from the body through a person’s feet – from selling a wide variety of products. The FTC charged that the marketers falsely claimed the pads could treat numerous illnesses and medical conditions. In a settlement announced today, the judge banned the marketers from promoting or selling any dietary supplement, food, drug, or medical device, and from assisting others in doing the same.

As part of its efforts to crack down on bogus health claims, the FTC last year charged the promoters of the foot pads with running deceptive ads on television and the Internet that touted the “ancient Japanese secret to perfect health” for treating wide-ranging medical conditions.

The defendants – Yehuda Levin and his company, Xacta 3000, Inc. – sold a two-week supply of Kinoki Foot Pads for $19.95, plus $9.95 for shipping and handling.

The defendants falsely claimed to have scientific proof that the foot pads removed toxic materials from the body, according to the FTC complaint. The defendants also advertised that when applied to the soles of consumers’ feet at night, the food pads could remove toxins, metabolic wastes, heavy metals, and chemicals from the body; treat headaches, depression, parasites, fatigue, insomnia, diabetes, arthritis, high blood pressure, cellulite, and a weakened immune system; and cause weight loss. In its complaint, filed in the U.S. District Court for the District of New Jersey on January 27, 2009, the FTC charged that these advertising claims were false or unsupported.

The defendants agreed to a judgment of $14.5 million, which represents the total revenues from the sale of Kinoki Foot Pads. The entire judgment is suspended based on the defendants’ inability to pay, but will become due if they are found to have misrepresented their financial condition.

The Commission vote authorizing the staff to file the agreed-upon settlement was 4-1, with Commissioner Rosch dissenting. A judge in the U.S. District Court for the District of New Jersey signed the stipulated final order on October 28, 2010.

NOTE: A stipulated final order is for settlement purposes only and does not constitute an admission by the defendants of a law violation. A stipulated final order requires approval by the court and has the force of law when signed by the judge.

(Xacta NR.wpd)
(FTC File No. X090021)

FTC Names Edward W. Felten as Agency’s Chief Technologist; Eileen Harrington as Executive Director

Federal Trade Commission Chairman Jon Leibowitz today announced the appointment of Edward W. Felten as the agency’s first Chief Technologist. In his new position, Dr. Felten will advise the agency on evolving technology and policy issues.

Dr. Felten is a professor of computer science and public affairs and founding director of the Center for Information Technology Policy at Princeton University. He has served as a consultant to federal agencies, including the FTC, and departments of Justice and Defense, and has testified before Congress on a range of technology, computer security, and privacy issues. He is a fellow of the Association of Computing Machinery and recipient of the Scientific American 50 Award. Felten holds a Ph.D. in computer science and engineering from the University of Washington.

Dr. Felten’s research has focused on areas including computer security and privacy, especially relating to consumer products; technology law and policy; Internet software; intellectual property policy; and using technology to improve government.

“Ed is extraordinarily respected in the technology community, and his background and knowledge make him an outstanding choice to serve as the agency’s first Chief Technologist,” Leibowitz said. “He’s going to add unparalleled expertise on high-technology markets and computer security. And he also will provide invaluable input into the recommendations we’ll be making soon for online privacy, as well as the enforcement actions we’ll soon bring to protect consumer privacy. We’re thrilled to have him on board.”

Dr. Felten currently is a part-time consultant for the FTC. He will start full time as Chief Technologist in January.

Chairman Leibowitz also announced that Eileen Harrington has been named the agency’s Executive Director. Harrington comes to the FTC from a 15-month stint as Chief Operating Officer at the U.S. Small Business Administration. Previously, she served for 25 years at the FTC, starting as a staff attorney and assuming a variety of senior management positions in the Bureau of Consumer Protection, including Associate Director for Marketing Practices, Deputy Director, and Acting Director. Harrington has a long list of accomplishments from her tenure at the FTC. Perhaps most notably, she received the prestigious Service to America Medal for leading the team that created the National Do Not Call Registry.

“This is a very happy homecoming,” said Leibowitz. “Eileen has made an invaluable contribution to the FTC in the past, and her strong management skills, enthusiasm, and creativity will once again be put to use for the betterment of the agency and for American consumers. We are delighted to have her back.”

FTC Approves Modified Intel Settlement Order

Following a public comment period, the Federal Trade Commission has approved a modified settlement order resolving charges that Intel Corp. illegally stifled competition in the market for computer chips. The FTC Order will open the door to renewed competition and prevent Intel from suppressing competition in the future.

After considering public comments, the FTC modified the proposed order to allow Intel to manufacture and sell a chip that it had in development before the proposed order was negotiated, but that would violate that order because it does not contain a required interface. The FTC modified the order to allow Intel to ship this product until June 2013. All future generations of this chip must fully comply with all specifications of the final Order.

The Commission vote approving the final Order was 4-0-1, with Commissioner William E. Kovacic recused. The Order can be found on the FTC’s website and as a link to this press release. The FTC also authorized the staff to send letters to members of the public who commented on the proposed order, issued in August 2010. (FTC Docket No. 9341; the staff contact is Richard Feinstein, Bureau of Competition, 202-326-3658; see press release dated August 4, 2010, at http://www.ftc.gov/opa/2010/08/intel.shtm. Copies of the public comments can be found at http://www.ftc.gov/os/comments/intelcorp/index.shtm.)

(FYI 46.2010.wpd)

FTC Fines Online Retailers for Failing to Post EnergyGuide Information for Appliances

Three online retailers have agreed to pay more than $400,000 in total penalties to settle Federal Trade Commission charges that they failed to post EnergyGuide information on their websites to inform consumers about the energy use of major home appliances they sell. The agency also notified two other online sellers that it will seek a total of $640,000 in fines from them.

According to the FTC, the online appliance retailers knowingly violated the FTC’s Appliance Labeling Rule, which requires them to provide EnergyGuide information for certain products such as refrigerators, freezers, dishwashers, air conditioners, water heaters, and washing machines. The information estimates the annual cost to operate the appliance.

“Companies selling appliances covered by the FTC’s rules, either online or in stores, have an obligation to provide EnergyGuide labels,” said David Vladeck, Director of the Bureau of Consumer Protection. “The information on the labels helps shoppers make smart buying decisions that take into account energy use.”

The civil penalty cases are the first the agency has brought against online retailers for Appliance Labeling Rule violations.

The FTC used its authority under the Energy Policy and Conservation Act (EPCA) to assess civil penalties for knowing violations of the Appliance Labeling Rule against five online retailers, which also operate brick-and-mortar stores in New York, New Jersey, Connecticut, Illinois, and California. Three of those companies have settled with the agency and agreed to pay the following amounts: P.C. Richard & Son, Inc., $180,000; Abt Electronics, Inc., $137,500; and Pinnacle Marketing Group, Corp., $100,000. Two other companies, Universal Computers and Electronics, Inc. and Universal Appliances, Kitchens, and Baths, Inc., have not agreed to settle the FTC charges.

Before the FTC may assess civil penalties under the EPCA, it must notify the non-settling companies of the proposed penalty amounts. The companies can then choose to pay the proposed penalty or be sued by the FTC in an administrative proceeding. The FTC has proposed penalties of $540,000 against Universal Computers and Electronics, Inc. and $100,000 against Universal Appliances, Kitchens, and Baths, Inc.

The administrative complaints and consent orders announced today were issued against: 1) P.C. Richard & Son, Inc and P.C. Richard & Son, LLC, doing businesses as (d/b/a) Pcrichard.com, based in Farmingdale, New York; and 2) Abt Electronics, Inc., d/b/a abt.com, based in Glenview, Illinois; and 3) Pinnacle Marketing Group, Corp., d/b/a homeeverything.com, based in Brooklyn, New York.

The notices of proposed civil penalties announced today were issued against: 1) Universal Computers and Electronics, Inc., d/b/a appliancebestbuys.com, based in Jamaica, New York; and 2) Universal Appliances, Kitchens, and Baths, Inc., d/b/a universal-akb.com, based in Studio City, California.

The Commission vote approving the three complaints and consent orders and two notices of proposed civil penalties was 5-0 in each case.

NOTE: The Commission authorizes the filing of a complaint when it has “reason to believe” that the law has or is being violated, and it appears to the Commission that a proceeding is in the public interest. A complaint is not a finding or ruling that the defendants have actually violated the law. 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.

NOTE: Before the Commission may issue an order assessing a civil penalty under the Energy Policy and Conservation Act or its Appliance Labeling Rule against any person, the Commission is required to provide such person with notice of the proposed penalty and the alleged violation. Such a notice is not a finding or ruling that the person has actually violated the law.

Copies of the documents mentioned in this release are available on the FTC’s website at www.ftc.gov. The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,800 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics.

(FTC File Nos. 102-3041, Home Everything; 102-3040, Appliance Best Buys; 102-3038, ABT Electronics; 102-3039, PC Richard; and 102-3042, Universal Appliances, Kitchens, and Baths)

Psst… Hey Buddy, Wanna Sell a Timeshare?

At the Federal Trade Commission’s request, a federal district court has put a stop to a deceptive telemarketing operation that allegedly scammed millions of dollars from property owners hoping to sell their timeshares. The FTC charged that the ring, operating out of South Florida, conned consumers by promising that they had buyers lined up and waiting. Only after making a hefty up-front payment did the consumers learn that there were no buyers, and that it was nearly impossible to get their money back from the defendants, many of whom have long criminal histories.

“When cash-strapped consumers are trying to sell their property, the last thing they need is to lose thousands of dollars to scam artists who promise a quick sale, but then provide no services at all,” said David Vladeck, Director of the FTC’s Bureau of Consumer Protection.

The case is part of an ongoing FTC effort to crack down on con artists who use fraud and deception to take advantage of consumers hit hard by the recent economic downturn. Many of the defrauded consumers needed to sell their timeshares to help pay their living expenses. According to the FTC, the number of complaints related to fraudulent timeshare resales has more than tripled over the past three years, as more consumers have attempted to sell their timeshares.

In this case, the defendants allegedly defrauded consumers nationwide out of millions of dollars before being shuttered by the court. They also are well known to the South Florida Better Business Bureau (BBB) which, together with the FTC and the Florida Attorney General’s Office, has received hundreds of complaints from consumers about their conduct. The BBB has given the firm, Timeshare Mega Media and Marketing Group, an F rating, the lowest rating it can give a business.

According to the FTC’s complaint, Timeshare Mega Media, two related companies, and six individuals used a telemarketing boiler room in Ft. Lauderdale, Florida. They told timeshare owners who were attempting to sell their units that a buyer was lined up and a deal had been negotiated on their behalf, but that before the sale could be completed, consumers would have to pay an up-front fee, usually $1,996, by credit card.

The FTC’s complaint charges that Timeshare Mega Media’s representatives typically claimed the fee was for sale-related costs, such as realtor fees, closing costs, title searches, or document processing. They also told consumers that this fee would be refunded at closing. In some cases, if a consumer owned an expensive timeshare, the fee could be more than $1,996, ranging up to 10 percent of the asking price. Consumers also were told that their timeshare sales would close quickly, often in as few as 30 days.

The FTC alleges that, after the consumers paid the fee, they were told to expect a contract from Timeshare Mega Media. What they received turned out to be a contract to market and advertise their timeshare, and not a sales contract. According to the FTC’s complaint, many consumers signed and returned the contract thinking it was a sales contract. Those who questioned its validity were given the run-around by the company and falsely told that a sales contract would follow. In fact, according to the agency, the company never had any timeshare buyers lined up. When consumers discovered this and demanded their money back, they found it nearly impossible to get a refund, or even get a call back.

The FTC’s complaint was filed against Timeshare Mega Media and Marketing Group, Inc., also doing business as (d/b/a) Timeshare Market Pro, Inc.; Timeshare Market Pro, Inc.; Tapia Consulting, Inc.; Joseph Crapella, also known as Joseph John Philbin; Pasquale Pappalardo; Lisa Tumminia Pappalardo; Pasqualino Agovino; Louis Tobias Duany; and Patricia A. Walker.

The Commission vote approving the complaint was 5-0. It was filed on October 19, 2010, in the U.S. District Court for the Southern District of Florida in Ft. Lauderdale. The court entered a temporary restraining order against the defendants on October 20, 2010.

In filing the complaint, the FTC is seeking to permanently stop the defendants’ allegedly illegal conduct and to provide money back to consumers who were harmed by their violations of the FTC Act and Telemarketing Sales Rule. The FTC would like to thank the Florida Attorney General’s Office and the Florida Department of Agriculture and Consumer Services for their assistance in this case.

Consumer Education

The FTC recently released a new publication on how to avoid pitfalls when selling a timeshare unit. Copies of the publication, “Selling a Timeshare Through a Reseller: Contract Caveats,” can be found on the agency’s website and as a link to this press release.

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.

Copies of the complaint can be found on the Commission’s website and as a link to this press release. The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,800 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics.

(FTC File No. 102-3168; Civ. No. 0:10-cv-62000-WJZ )
(Mega Media.final)

Appellate Court Upholds Order Requiring Promoters of Supreme Greens and Coral Calcium Dietary Supplements To Pay $48.2 Million for Deceptive Ads

A federal appeals court in Boston has upheld a decision in favor of the Federal Trade Commission that orders marketers of dietary supplements to pay $48.2 million for deceiving the public with phony health claims for their “Supreme Greens” and “Coral Calcium” dietary supplements. Infomercial pitchman Donald W. Barrett and his associates had touted the supplements as a cure for ailments ranging from cancer and Parkinson’s disease to heart disease and autoimmune diseases. Barrett, co-defendant Robert Maihos, and their two companies had appealed a lower court decision in favor of the FTC, which charged the defendants with deceptive advertising.

“Despite the volume of the Defendants’ arguments, we find no more substance in them than the district court found in their infomercials,” wrote U.S. Court of Appeals First Circuit Judge O. Rogeriee Thompson. The appellate court rejected all the marketers’ arguments for overturning the ruling and affirmed the lower court’s conclusion that evidence to support their health claims for the supplements was “woefully inadequate.” The appellate court concluded that the district court’s monetary remedy appropriately ordered “the Defendants to cure their customers in a way that their bogus supplements could not.”

In July 2008, the U.S. District Court for the District of Massachusetts found that Barrett and his associates deceptively claimed Supreme Greens and Coral Calcium could treat, cure, or prevent cancer, heart disease, diabetes, arthritis and a variety of other diseases.

The district court issued its final order in August 2009, requiring Barrett, Maihos, and their two companies – Direct Marketing Concepts, Inc. and ITV Direct, Inc. – to pay $48.2 million. The district court also barred them from making deceptive claims about Supreme Greens and Coral Calcium; misrepresenting that scientific research validated their claims; making any health, performance, or efficacy claims about any food, drug, dietary supplement, cosmetic, or device unless such claims are true, non-misleading and substantiated by competent and reliable scientific evidence; failing to disclose that promotional programming is, in fact, a paid advertisement; and billing consumers or charging their credit or debit cards on an ongoing basis without their consent.

Copies of the court’s decisions and final orders are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580.

(DMC Circuit NR.wpd)

FTC Approves Dow Chemical Company Application to Modify Contract with Arkema Inc.

For Your Information

October 29, 2010

Following a public comment period, the Federal Trade Commission has approved a request submitted by The Dow Chemical Company to modify a software licensing agreement with Arkema Inc. The modification licenses additional programs for Arkema to use in the latex polymers business divested under an FTC Order issued in April 2009 to resolve the Commission’s competitive concerns about Dow’s acquisition of Rohm & Haas Company, and adds software inadvertently omitted from the original license. The software license is one of the agreements between Dow and Arkema that effected the divestiture of Dow’s latex polymers business to Arkema in January 2010. The divestiture was required by the 2009 Order, under which Dow is must obtain FTC approval of any modification to a contract related to divestitures it required.

The Commission vote approving the application was 5-0. (FTC Docket No. C-4243; the staff contact is Roberta Baruch, Bureau of Competition, 202-326-2861; see press release dated January 23, 2009, at http://www.ftc.gov/opa/2009/01/dow.shtm.)

(FYI 45.2010.wpd)

Contact Information

MEDIA CONTACT:

Office of Public Affairs
202-326-2180

FTC Staff Report Recommends Expanding Coverage of Business Opportunity Rule and Streamlining Required Disclosures

The Federal Trade Commission has released a staff report recommending that coverage of the FTC’s Business Opportunity Rule be expanded to include work-at-home opportunities such as envelope stuffing, medical billing, and product assembly, many of which have not been covered before. FTC staff also recommends streamlining the disclosures required by the Business Opportunity Rule so that companies or individuals selling business opportunities make important disclosures to consumers on a simple, easy-to-read document. If adopted, the changes will make it less burdensome for legitimate sellers to comply with the Rule, while still protecting consumers from “widespread and persistent” business opportunity fraud. Public comments on the staff report will be accepted until January 18, 2011. To file a public comment electronically, please click here and follow the instructions.

The Rule that currently governs business opportunities is an interim rule that dates back to March 2007. Up until then, the FTC had a single rule – known as the Franchise Rule – that covered both franchises and certain business opportunities. Franchises typically are expensive, involve complex contractual relationships, and can include the right to use a trademark or other commercial symbol. In contrast, business opportunities often are less costly, and involve simpler purchase agreements.

In 2006, the FTC proposed creating a Business Opportunity Rule separate from the Franchise Rule. Since then, it has conducted a public workshop and collected public comments on both the workshop and the Revised Proposed Business Opportunity Rule. The staff report announced today summarizes the rulemaking record to date, analyzes the various alternatives, and sets forth the staff’s recommendations for the proposed final Business Opportunity Rule and disclosure form. The report and disclosure forms in English and Spanish are available on the FTC’s website and as a link to this press release.

The Commission vote approving issuance of the Federal Register notice was 5-0. (FTC File No. R511993; the staff contact is Kathleen Benway, Bureau of Consumer Protection, 202-326-2024.)

Copies of the documents mentioned in this release are available from the FTC’s Web site at http://www.ftc.gov and from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. Call toll-free: 1-877-FTC-HELP. The FTC’s Business Center website gives companies the tools they need to understand and comply with the law. The materials in the Business Center are not under copyright, so businesses can share them with employees, colleagues, and the general public. It offers practical guidance on advertising, credit, data security, and other need-to-know topics, as well as videos and a blog.

(FYI business opportunity rule staff report)

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