Court Bars Georgia Defendants from Selling Bogus Business Opportunities

At the request of the Federal Trade Commission, Judge Charles A. Pannell, Jr. of the U.S. District Court for the Northern District of Georgia, Atlanta Division, has issued an order finding that several Georgia-based defendants violated the FTC Act and the Commission’s Franchise Rule and Business Opportunity Rule by pitching fraudulent ink cartridge business opportunities to consumers. The court order entered against Holiday Enterprises, Inc., and its principals Richard J. Morrell and Richard J. Cascario, permanently bars them from similar violations in the future and requires them to pay $8.98 million for consumer redress. The order also requires a relief defendant in the case to pay $250,000 for financially benefitting from the scheme.

The Commission’s Complaint

In its original complaint, filed in December 2006 as part of “Project Fal$e Hope$,” the FTC charged that Holiday Ink, Inc. sold ink cartridge display racks by misrepresenting that purchasers would earn a substantial income, misrepresenting the locations available for the racks, and using shills to reinforce those false claims. The FTC also charged that the defendants did not provide complete and accurate disclosure documents, did not provide an earnings claim disclosure, and did not have a reasonable basis for their earnings claims. Consumers invested a minimum of $7,950 for three racks, and up to $55,950 for 20 racks, to take part in the business opportunity.

The Summary Judgment

The summary judgment against the defendants, granted by the court and filed on February 5, 2008, states that the Commission provided ample proof that Holiday Ink, et al., violated the FTC Act by “routinely and knowingly” making material misrepresentations to consumers in connection with their sale of business opportunities. These misrepresentations included the assertion that consumers could earn substantial income by buying one of the defendant’s business opportunities and that buyers would receive ink cartridge display racks and cartridges through which they could derive “substantial income and guaranteed profits.”

The court found the defendants had no substantiation for such claims, and also misrepresented that they would provide buyers with “high-traffic, high-volume” locations in which to place their display racks and that they had “references” who were successful and profitable distributors. In fact, the “references” were nothing more than employees of the defendant or unsuccessful distributors. The court also found that the defendants violated the FTC’s Franchise Rule in a variety of ways, including failing to make required disclosures about the company and its principals, failing to disclose information on litigation in which they have been involved since 2001, and failing to provide potential buyers with the names of previous buyers of their business opportunity. The court also found defendants Morrell and Cascario individually liable for their knowing participation in the deceptive acts of the corporate defendant, and relief defendant NMC Properties, Inc., liable for its ill-gotten gains.

Through the summary judgment, the court permanently barred defendant Morrell from promoting, advertising, marketing, offering to sell, or selling any franchise, business opportunity, or business venture. The judgment permanently barred both individual defendants from making, or assisting others in making any statement or representation of material fact in connection with the sale of any venture, franchise, business opportunity, or other product or service. The court also barred the defendants from violating the Franchise Rule and the Business Opportunity Rule in the future and from distributing their customer information. In addition, it entered an $8.98 million monetary judgment against them, along with a separate $250,000 judgement against relief defendant NMC properties.

Finally, to prohibit the individual defendants from suing consumers who filed complaints against them, the court barred them from filing any lawsuit, arbitration or other action – and from enforcing any judgment or award obtained before or after the order is entered – against any of their customers or franchisees.

Copies of the court order for summary judgment and related documents can be found as a link to this press release on the FTC’s Web site. The FTC works for the consumer 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, click: http://www.ftc.gov/ftc/complaint.shtm or call 1-877-382-4357. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to more than 1,600 civil and criminal law enforcement agencies in the U.S. and abroad. For free information on a variety of consumer topics, click http://ftc.gov/bcp/consumer.shtm.

FTC Charges Three Internet Payday Lenders with Not Disclosing Required APR Information in Ads

Three payday lenders have agreed to settle Federal Trade Commission charges that their Internet advertising stated the cost of loans without disclosing annual percentage rate information that federal law requires. This information helps consumers compare the costs of these payday loans to other payday loans and to alternative forms of short-term credit. The settlements require that the lenders must disclose the annual percentage rate in similar loan ads in the future.

According to the FTC’s complaints, American Cash Market, Inc. and Anderson Payday Loans, both based in California, and CashPro d/b/a MakePaydayToday.com, based in Nevada, stated loan costs on their Web sites – a $20 fee for a $100 loan, for example – but failed to disclose the annual percentage rate (APR). For a typical 14-day pay period, consumers who obtain payday loans from American Cash Market would pay an APR of 460 percent; loans from CashPro would have a 520 percent APR, and loans from Anderson Payday Loans would have an APR ranging from 521 percent to 782 percent. APR disclosure helps consumers comparison shop so they can make informed decisions in securing credit. The FTC stresses the importance of APR disclosures in its consumer education publication, “Payday Loans Equal Very Costly Cash: Consumers Urged to Consider the Alternatives ,” available at http://www.ftc.gov/bcp/edu/pubs/consumer/alerts/alt060.shtm.

In typical payday loan transactions, consumers receive cash in exchange for their personal checks or authorization to debit their bank accounts, and lenders and consumers agree that consumers’ checks will not be cashed or their accounts debited until a designated future date. Payday loans have high fees and short repayment periods, which translate to high annual rates, and they often are due on the borrower’s next payday.

The proposed consent orders would prohibit these lenders from advertising certain credit offers without providing consumers with key disclosures, such as the APR, as required by the Truth in Lending Act and Regulation Z.

The Commission vote to accept the administrative complaints and consent orders was 5-0.

The FTC will publish an announcement regarding the agreement in the Federal Register shortly. The agreement will be subject to public comment for 30 days, until March 31, 2008, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, Room H-159, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC requests that any comment filed in paper form near the end of
the public comment period be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions.

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. These complaints are not a finding or ruling that the respondents have actually violated the law. The consent agreements are for settlement purposes only and do not constitute admissions by the respondents of a law violation.

Copies of the complaints, consent orders, and analyses to aid public comment are available from the FTC’s Web site at http://www.ftc.gov and the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC works for the consumer 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, click http://www.ftc.gov/ftc/complaint.shtm or call 1-877-382-4357. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to more than 1,600 civil and criminal law enforcement agencies in the U.S. and abroad. For free information on a variety of consumer topics, click http://ftc.gov/bcp/consumer.shtm.

Marketers of 7 Day Miracle Cleanse Program Banned From Infomercials

The marketers of the 7 Day Miracle Cleanse Program, a purported herbal colon-cleansing program, have agreed to settle Federal Trade Commission charges that they falsely claimed that their program would cure cancer and other serious diseases. Among other things, the settlements broadly ban them from involvement in future infomercials for any product, service, or program, except for infomercials for informational publications, and from advertising health-related products in the future in any medium.

According to the FTC’s complaint, one of the defendants, Paris DeAguero, appeared as “the Health Man” in nationally televised infomercials, claiming that his program cured him within weeks of skin and breast cancer without the need for surgery or other treatments. Advertising for the program allegedly claimed that it also effectively prevented, treated, and cured many other diseases, including AIDS, Alzheimer’s disease, diabetes, high blood pressure, and arthritis, and that it safely caused rapid and substantial weight loss. The defendants allegedly also claimed that their product, Parasine 2, was “clinically proven” to eliminate parasites and worms, including tapeworms. The FTC alleged that their claims were false or unsupported by reliable scientific studies, in violation of the FTC Act.

Under two stipulated final orders, 7 Day Marketing, Inc., DeAguero, Dieter Ammann, and Laura DeAguero, are banned from any involvement in infomercials for any product, program, or service, and, regardless of the advertising medium, from representing that any product, program, or service can cure, treat, or prevent any disease or provide health benefits. The orders exempt representations made in books, newsletters, or other informational publications. In addition, the defendants are barred from misrepresenting any test or study concerning any product, program, or service. They also are prohibited from transferring, selling, or renting personal information collected from customers who purchased the program or its individual products, and they must destroy this information upon the conclusion of certain pending lawsuits.

One of the orders contains a monetary judgment of $14,455,123, which is suspended based on the defendants’ inability to pay. A separate settlement with Dieter Ammann also includes a monetary judgment of $14,455,123, which is suspended upon payment of $70,000, and also is based on his inability to pay. Under both orders, the full judgment will be imposed if the defendants are found to have misrepresented their financial condition.

This case came to the attention of the FTC as a referral from the Electronic Retailing Self-Regulation Program (ERSP), a partnership between the Better Business Bureau and the Electronic Retailing Association, after the defendants failed to respond to the ERSP’s inquiry regarding their infomercial.

The Commission vote to authorize the staff to file the complaint and stipulated final orders was 5-0. The documents were filed in U.S. District Court for the Central District of California.

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 complaint is not a finding or ruling that the defendant has actually violated the law. These stipulated final orders are for settlement purposes only and do not constitute an admission by the defendant of a law violation. A stipulated final order requires approval by the court and has the force of law when signed by the judge.

Copies of the documents mentioned in this news 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, D.C. 20580. The FTC works for the consumer 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, click http://www.ftc.gov/ftc/complaint.shtm or call 1-877-382-4357. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to more than 1,600 civil and criminal law enforcement agencies in the U.S. and abroad. For free information on a variety of consumer topics, click http://ftc.gov/bcp/consumer.shtm.

FTC Approves Final Consent Order in Matter of Herbs Nutrition Corp., et al.

For Your Information

Commission approval of final consent order: Following a public comment period, the Commission has approved the issuance of a final consent order in the matter of Herbs Nutrition Corporation, et al. The vote approving issuance of the final consent order was 5-0. (FTC Docket No. D09325; the staff contact is Gregory Ashe, Bureau of Consumer Protection, 202-326-3719; see press release dated January 17, 2008.)

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.

Contact Information

MEDIA CONTACT:
Office of Public Affairs
202-326-2180

BlueHippo Defendants Will Pay up to $5 Million to Settle FTC Charges

Two companies that offer to finance the sale of personal computers to consumers with poor credit ratings have agreed to pay up to $5 million for consumer redress to settle Federal Trade Commission charges that they violated federal laws.

According to the FTC’s complaint, BlueHippo Funding, LLC and BlueHippo Capital, LLC offered to extend credit to consumers to finance purchases of personal computers and other consumer electronics with down payments of $99 to $124 and a year of weekly or bi-weekly payments ranging from $36 to $88. In nationwide television and radio commercials, and on their Web site, the defendants touted the ability of consumers with “less than perfect credit, bad credit, no credit” to finance the purchase of a computer. Many consumers who ordered products paid hundreds of dollars and received nothing in return, the complaint alleges.

According to the complaint, the defendants required consumers to agree to a series of automatic, periodic debits from their bank accounts to purchase their products, promising that they would deliver the product once the consumer made 13 weekly, or seven bi-weekly, payments. In many instances, the defendants debited consumers’ accounts without first disclosing that consumers could not get a refund even if they cancelled before delivery of the product, and regardless of the reason for cancellation.

Consumers who ordered products by calling a toll-free number were told that they would receive a “shipping verification form” with sale terms and shipping information, and that they had to sign and return the form to ensure product delivery, the complaint alleges. The form contained terms that were not disclosed previously, including disclosures regarding finance terms. The defendants often failed to provide the forms and revolving account agreements before they debited accounts, so the finance terms and refund policy were not disclosed before consumers started making non-refundable payments.

According to the complaint, many consumers did not receive the merchandise they ordered or refunds. The FTC alleges that the defendants failed to clearly and conspicuously disclose their policy of not providing refunds before debiting accounts, in violation of the FTC Act, and consumers had no opportunity to make a timely and informed decision about whether or not to risk the potential loss of advance payments. The defendants also allegedly failed to deliver the products after consumers made 13 weeks of payments, as promised during the sales call, also in violation of the FTC Act.

The defendants also are charged with violating the FTC’s Mail Order Rule by failing to ship merchandise in a timely manner or give consumers the right to cancel and receive a refund. They allegedly violated the Truth in Lending Act (TILA) and Regulation Z by failing to make certain written disclosures before a transaction is made under an open-end consumer credit plan, and they allegedly violated the Electronic Fund Transfer Act (EFTA) and Regulation E by conditioning the extension of credit to consumers on repayment by preauthorized electronic debits.

Under the proposed stipulated final order, the defendants are barred from misrepresentations in the marketing of consumer electronics or any product requiring four or more periodic payments before shipment. They also are barred from misrepresenting refunds, cancellations, exchanges, or repurchases of products without disclosing clearly and conspicuously, before receiving payment, the terms and conditions, and any policy of not refunding all payments when a consumer cancels the contract before product delivery. In addition, they are permanently prohibited from violating the Mail Order Rule, the TILA and Regulation Z, and from conditioning the extension of credit on mandatory preauthorized transfers in violation of the EFTA and Regulation E.

The settlement includes a monetary judgment of at least $3.5 million and up to $5 million. This money will be used to provide redress to consumers who entered into contracts with the defendants before March 2006, made payments, and did not receive the ordered products, refunds, or other restitution. If valid consumer claims exceed $3.5 million, the defendants will be required to pay up to an additional $1.5 million to pay those claims. The settlement also requires the defendants to stop collecting money from purchasers who are entitled to redress, to stop furnishing derogatory information about such purchasers to credit reporting agencies, and to notify any agency to which they have provided such information that the person’s account is in good standing. The settlement contains monitoring and record keeping provisions to ensure their compliance.

The Commission vote authorizing staff to file the complaint and stipulated final order for permanent injunction was 5-0. The documents were filed in the U.S. District Court for the Southern District of New York.

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

Copies of the complaint and stipulated final order are available from the FTC’s Web site at http://www.ftc.gov and the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC works for the consumer 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, click http://www.ftc.gov/ftc/complaint.shtm or call 1-877-382-4357. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to more than 1,600 civil and criminal law enforcement agencies in the U.S. and abroad. For free information on a variety of consumer topics, click http://www.ftc.gov/bcp/consumer.shtm.

FTC Announces Workshop on Green Guides and Packaging

The Federal Trade Commission today announced the second in a series of public workshops being held as part of the agency’s regulatory review of the “Guides for the Use of Environmental Marketing Claims,” commonly known as the Green Guides. The workshop, which is free and open to the public, will be held in Washington, DC, on April 30, 2008, to examine developments in green packaging claims and the consumer perception of such claims. The Commission’s first Green Guides workshop, held in January, examined issues including the marketing of carbon offsets and renewable energy certificates.

Since the Green Guides were last revised in 1998, there has been a significant increase in the use of environmental claims in product marketing, including “green” claims concerning product packaging. Sellers and marketers frequently use terms addressed in the Green Guides, such as “recyclable,”“recycled content,” “biodegradable,” “degradable,” “compostable,” or “refillable,” to claim that their packaging is green. Sellers and marketers also are now using green claims that are not currently addressed in the Green Guides, including terms such as “sustainable” and “renewable.” When such claims are used to sell products, consumer perception and substantiation issues may arise. Also, in recent years, there has been an increase in the use of environmental seals and third-party certification programs purporting to verify the positive environmental impact of product packaging. Consumers may have varying interpretations of such seals and programs.

The “Green Guides and Packaging” workshop will provide a forum for the discussion of topics such as: 1) trends in packaging and the resulting environmental packaging claims; 2) packaging terms currently covered by the Green Guides and whether the perception of these terms has changed over the past decade; 3) new green packaging terms not currently addressed in the Green Guides; 4) claims based on third-party certification and consumer perception of such claims; 5) the impact of scientific and technological changes, including the use of new packaging materials and their impact on the environment; 6) the current state of substantiation for green packaging claims; and 7) the need for new or updated FTC guidance in these areas.

Logistics

The “Green Guides and Packaging” workshop will be held from 9 a.m. until 5 p.m. at the FTC’s satellite building conference center, located at 601 New Jersey Avenue, N.W., Washington, DC. A government-issued photo ID is required for entry. Pre-registration is not required. Members of the public and press who cannot attend can view a live Webcast of the workshop on the FTC’s Web site.

Reasonable accommodations for people with disabilities are available upon request. Requests for such accommodations should be submitted via e-mail to [email protected] or by calling Marcy Baskin at 202-326-2285. Such requests should include a detailed description of the accommodations needed and a way to contact you if we need more information. Please provide advance notice.

For more information on the April workshop, including the Federal Register notice, how to file comments, directions to the conference center, and other relevant information, please visit: http://www.ftc.gov/bcp/workshops/packaging/index.shtml. Comments to inform discussion at the workshop must be received by April 11, 2008. All comments in response to the Federal Register Notice must be submitted no later than May 19, 2008. The Commission vote approving issuance of the Federal Register notice announcing the workshop and soliciting electronic and written comments was 5-0.

The FTC’s Green Guides Review

The Green Guides outline general principles for all environmental marketing claims and provide specific guidance about certain green claims. In a Federal Register notice issued in November 2007, the Commission solicited comments relating to its regulatory review of the Green Guides, including responses to standard questions about costs, benefits, and effectiveness of the Green Guides, and on specific topics, including “sustainable” and “renewable” claims.

As part of the Green Guides review, the FTC is holding a series of workshops on a number of green marketing topics. The first workshop on January 8, 2008, addressed the marketing of carbon offsets and renewable energy certificates. While the review of the Green Guides was scheduled to begin in 2009, because of the current increase in green advertising claims, the Commission began the review a year early to ensure they reflect today’s marketplace.

The FTC works for the consumer 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, click: http://www.ftc.gov/ftc/complaint.shtm or call 1-877-382-4357. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to more than 1,600 civil and criminal law enforcement agencies in the U.S. and abroad. For free information on a variety of consumer topics, click http://www.ftc.gov/bcp/consumer.shtm.

Commission Approves Federal Register Notice Seeking Comments on Amplifier Rule Review

For Your Information

Commission approval of Federal Register notice: The Commission has approved the publication of a Federal Register notice seeking comments as part of the regulatory review of the FTC’s Trade Regulation Relating to Power Output Claims for Amplifiers Utilized in Home Entertainment Products, commonly known as the Amplifier Rule. As detailed in the notice, which will be published soon and is available now on the FTC’s Web site and as a link to this press release, the Amplifier Rule helps consumers compare the power outputs of competing amplifiers used in home entertainment products by prescribing a standardized testing protocol and disclosure format for power output claims. Along with seeking general comments on the Rule as part of the Commission’s systematic review of its regulatory guides, the FTC is seeking comments on whether the Rule should be modified to address the methodology for rating the power outputs of “home theater” multichannel amplifiers.

The Commission vote approving publication of the notice was 5-0. Public comments are being accepted through May 12, 2008. (FTC File No. P974222; the staff contact is Jock K. Chung, Bureau of Consumer Protection, 202-326-2984.)

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.

Contact Information

MEDIA CONTACT:
Office of Public Affairs
202-326-2180

Commission Extends Public Comment Period in Matter of Negotiated Data Solutions, LLC; FTC Approves Federal Register Notice Seeking Comments on Platinum Section of Jewelry Guides

Commission extension of public comment period: By a vote of 5-0, the Commission has approved the extension of the public comment period related to the recent consent order in the matter of Negotiated Data Solutions, LLC. As a result of this vote, the comment period, which was originally set to end on February 22, 2008, has been extended until April 24, 2008. Instructions on submitting comments can be found in the Federal Register notice, which is attached to this press release on the FTC’s Web site and will be published shortly. (FTC File No. 051-0094; the staff contact is Kent E. Cox, Bureau of Competition, 202-326-2058; see press release dated January 23, 2008.)

Commission approval of Federal Register notice: The Commission has approved the issuance of a Federal Register notice seeking comments on a proposed amendment to the platinum section for the Guides for the Jewelry, Precious Metals, and Pewter Industries, 16 CFR Part 23 (Jewelry Guides) to address new platinum alloys, and, specifically, whether the Guides should address platinum-plated, platinum-filled, and similar products.

The current platinum section of the Guides gives examples of how marketers can use the term “platinum” non-deceptively to describe products containing platinum, or platinum alloyed with certain platinum-like precious metals (i.e., platinum group metals). In June 2005, the FTC published a Federal Register notice seeking comments on whether and how the Commission should amend the Guides to address certain new alloys of platinum that contain less than 850, but more than 500, parts per thousand pure platinum, and no other platinum group metals, known as platinum-base metal alloys.

The proposed amendment provides guidance on how to non-deceptively mark or describe platinum-base metal alloy products. The proposed guidance provides that marketers may use the term “platinum” or any abbreviation to describe such products provided they disclose that the product contains platinum and other non-platinum group metals and the product’s full composition, by name and not abbreviation, and the percentage of each metal.

The proposal further provides that marketers disclose that the platinum base-metal alloy product may not have the same attributes as products containing at least 850 parts per thousand pure platinum, or at least 500 parts per thousand pure platinum and at least 950 parts per thousand platinum group metals (i.e., traditional platinum products). The proposed amendment states further that if marketers possess competent and reliable evidence that their platinum base-metal alloy does have the same attributes as traditional platinum products, marketers may omit this last disclosure. The Commission is accepting comments on the proposed amendment until May 25, 2008.

The vote approving the issuance of the Federal Register notice was 5-0. The notice will be published soon and is available now on the FTC’s Web site as a link to this press release. (FTC File No. G711001; the staff contact is Robin Rosen Spector, Bureau of Consumer Protection, 202-326-3740; see related press release dated June 29, 2005.)

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.

FTC Submits Testimony to Alaska House of Representatives Regarding Bill That Would Amend States Certificate of Need Laws

At the request of Governor Sarah Palin and the Alaska Department of Health and Social Services, the Federal Trade Commission has submitted written testimony to the Standing Committee on Health, Education, and Social Services of the state’s House of Representatives concerning health care competition, Alaska’s certificate of need (CON) laws, and House Bill 337 (H.B. 337), which would modify or repeal certain aspects of the state’s CON requirements.

According to the testimony, Alaska’s current CON law – which H.B. 337 seeks to modify – is among the most stringent of such laws in the United States. Accordingly, it creates a barrier to entry for a very broad range of health care service providers, including small health care entities that may be ill-equipped to overcome it. The Commission believes that “both the breadth of Alaska’s CON law and its low threshold are of special concern, as they may work to the detriment of Alaska health care consumers.” If adequate evidence develops to support more narrow policy priorities, the testimony states, “Alaska should consider regulations narrowly tailored to meet those priorities, while minimizing the general costs to Alaska health care consumers.”

Alaska House Bill 337

Alaska H.B. 337 seeks to modify the state’s current CON law, which requires a CON for any type of health care facility construction or improvement of $1 million or more, adjusted, or the for establishment of a nursing home facility independent of that cost threshold. Accordingly, the current law places significant regulatory burdens on the development or improvement of a very broad class of health care facilities. The Commission testimony further states that Alaska’s CON threshold itself may be of a special burden to the state’s health care spending, as such low thresholds have been seen to increase costs, relative to higher thresholds. H.B. 337 would modify or repeal many of the state’s statutory CON requirements.

The Commission Testimony

The FTC’s testimony makes three main points: First, excessive barriers to entry in health
care markets – regulatory or otherwise – can tend to suppress competition on qualitative aspects of health care as well as price. Policymakers should consider the extent to which regulations drafted to address cost containment may have an impact on entry and competition, which should be counted among the costs and benefits of any such regulations. That is a particular problem with CON laws, which do not generally contain costs.

Second, when new firms threaten to enter a market, incumbent firms may seek to deter or prevent that new competition. Overbroad and over-restrictive CON laws are not just barriers to entry because of the administrative costs they impose directly, but because they may offer incumbent providers additional opportunities to slow or halt the entry of competitors, independent of market demand of additional services.

Third, Alaska’s current CON law is among the most stringent CON regimes in the country, and creates barriers to entry for a broad range of health care service providers that may be unable to overcome it.

The Commission vote approving the submission of the testimony with the Alaska House of Representatives was 5-0. They were formally submitted on February 14, 2008.

Copies of the testimony can be found as a link to this press release on the FTC’s Web site. The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to [email protected], or write to the Office of Policy and Coordination, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580. To learn more about the Bureau of Competition, read “Competition Counts” at http://www.ftc.gov/competitioncounts.

Court Finds Payment Processor in Contempt, Issues Warrant for His Arrest

At the request of the Federal Trade Commission, Judge James S. Moody, Jr. of the U.S. District Court for the Middle District of Florida, Tampa Division, has issued an order dated January 30, 2008, finding defendant Ira N. Rubin in contempt for multiple violations of a temporary restraining order (TRO) and preliminary injunction order (PI), stopping his cross-border payment-processing scheme.

The TRO and PI, entered December 13, 2006, and January 11, 2007, respectively, froze Rubin’s personal assets and the assets of the corporate entities he managed (collectively known as Global Marketing Group) and prohibit Rubin from engaging in payment processing activities. On January 15, 2008, the court ordered Rubin to appear personally and show cause why he should not be held in contempt for violating the TRO and PI by continuing to engage in payment processing, misappropriating over $500,000 in receivership assets, concealing $95,000 in credit card charges from the Commission, lying on his sworn financial statement, and hiding 13 boxes of corporate records. When Rubin failed to appear for the hearing, the judge entered the January 30, 2008 order finding Rubin in contempt and issued a warrant for Rubin’s arrest.

Case History

According to the FTC’s amended complaint against the Global Marketing Group defendants, since at least January 2003, the defendants provided substantial support and assistance to at least nine Canadian telemarketing firms that sell non-existent credit cards to U.S. consumers. In return for an advance fee of several hundred dollars, which Rubin debited from consumers’ bank accounts on behalf of the telemarketers, consumers expected to receive an unsecured credit card but instead either received nothing or a worthless “benefits package.” The complaint alleged that the defendants debit funds from consumers’ bank accounts, deduct their processing fees from the gross proceeds, and forward the balance of the proceeds from the deceptive scheme to the telemarketers. The complaint also alleged that in addition to payment processing the defendants provided other services to fraudulent telemarketers, including customer service, order fulfillment, and list brokering.

The Commission filed its original complaint on December 11, 2006, alleging violations of the FTC Act and the Telemarketing Sales Rule, and naming Rubin of Tampa, Florida, as well as the following corporate entities under his control: Global Marketing Group Inc., Global Business Solutions LLC, Globalpay Inc., Globalpay LLC, Globalpay BV, Synergy Consulting Services LLC, and First Processing Corporation. Rubin’s wife, Phoelicia Daniels, who allegedly has received funds and other property derived unlawfully from consumers’ payments, was named as a relief defendant. An amended complaint filed by the Commission on March 19, 2007, named Rubin’s attorney, Kevin D. Astl, and eighteen additional corporate entities owned or controlled by Rubin and Astl.

Copies of the Commission’s memorandum of points and authorities in support of its motion for order to show cause, the order granting the Commission’s motion, and the order finding Rubin in contempt, can be found as a link to this press release on the FTC’s Web site. The FTC works for the consumer 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, click: http://www.ftc.gov/ftc/complaint.shtm or call 1-877-382-4357. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to more than 1,600 civil and criminal law enforcement agencies in the U.S. and abroad. For free information on a variety of consumer topics, click http://www.ftc.gov/bcp/consumer.shtm.