[Federal Register Volume 59, Number 3 (Wednesday, January 5, 1994)] [Notices] [Pages 582-585] From the Federal Register Online via the Government Publishing Office [www.gpo.gov] [FR Doc No: 94-155] [[Page Unknown]] [Federal Register: January 5, 1994] ----------------------------------------------------------------------- FEDERAL TRADE COMMISSION [File No. 922 3266] New Mexico Custom Designs, Inc., et al; Proposed Consent Agreement With Analysis To Aid Public Comment AGENCY: Federal Trade Commission. ACTION: Proposed consent agreement. ----------------------------------------------------------------------- SUMMARY: In settlement of alleged violations of Federal law prohibiting unfair acts and practices and unfair methods of competition, this consent agreement, accepted subject to final Commission approval, would prohibit, among other things, the New Mexico-based corporation and its officer, who claimed to sell beaded earrings, from making any material misrepresentations regarding earnings or profits of participants in any work opportunity and from making misrepresentations about the marketplace demand for any product or service. In addition, the proposed settlement would require the respondents to pay $1.2 million to the Commission for consumer redress or disgorgement. DATES: Comments must be received on or before March 7, 1994. ADDRESSES: Comments should be directed to: FTC/Office of the Secretary, Room 159, 6th St. and Pa. Ave., NW., Washington, DC 20580. FOR FURTHER INFORMATION CONTACT: Jeffrey Klurfeld or Gerald Wright, San Francisco Regional Office, Federal Trade Commission, 901 Market St., suite 570, San Francisco, CA 94103. (415) 744-7920. SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Sec. 2.34 of the Commission's Rules of Practice (16 CFR 2.34), notice is hereby given that the following consent agreement containing a consent order to cease and desist, having been filed with an accepted, subject to final approval, by the Commission, has been placed on the public record for a period of sixty (60) days. Public comment is invited. Such comments or views will be considered by the Commission and will be available for inspection and copying at its principal office in accordance with Sec. 4.9(b)(6)(ii) of the Commission's Rules of Practice (16 CFR 4.9(b)(6)(ii)). Agreement Containing Consent Order To Cease and Desist In the Matter of New Mexico Custom Designs, Inc., a corporation, and Anthony L. Ingram, individually and as an officer of said corporation. The Federal Trade Commission having initiated an investigation of New Mexico Custom Designs, Inc., a corporation, and Anthony L. Ingram, individually and as an officer of said corporation (``proposed respondents'' or ``respondents''), and it now appearing that proposed respondents are willing to enter into an agreement containing an order to cease and desist from the acts and practices being investigated, It is hereby agreed by and between New Mexico Custom Designs, Inc. by its duly authorized officer, and Anthony L. Ingram, individually and as an officer of said corporation, and their attorney, and counsel for the Federal Trade Commission that: 1. Proposed respondent New Mexico Custom Designs, Inc., is a corporation organized, existing, and doing business under and by virtue of the laws of the State of New Mexico, with its principal office and place of business located at 8415 Washington Place, NE., suite D, Albuquerque, New Mexico 87113. Proposed respondent Anthony L. Ingram is an officer of said corporation. He formulates, directs and controls the policies, acts and practices of said corporation and his address is the same as that of the corporation. 2. Proposed respondents admit all the jurisdictional facts set forth in the draft complaint here attached. 3. Proposed respondents waive: a. Any further procedural steps; b. The requirement that the Commission's decision contain a statement of findings of fact and conclusions of law; c. All rights to seek judicial review or otherwise to challenge or contest the validity of the order entered pursuant to this agreement; and d. All claims under the Equal Access to Justice Act. 4. This agreement shall not become part of the public record of the proceeding unless and until it is accepted by the Commission. If this agreement is accepted by the Commission, it, together with the draft of complaint contemplated thereby, will be placed on the public record for a period of sixty (60) days and information in respect thereto publicly released. The Commission thereafter may either withdraw its acceptance of this agreement and so notify the proposed respondents, in which event it will take such action as it may consider appropriate, or issue and serve its complaint (in such form as the circumstances may require) and decision, in disposition of this proceeding. 5. This agreement is for settlement purposes only and does not constitute an admission by proposed respondents that the law has been violated as alleged in the draft of complaint, or that the facts alleged in the draft complaint, other than the jurisdictional facts, are true. 6. This agreement contemplates that, if it is accepted by the Commission, and if such acceptance is not subsequently withdrawn by the Commission pursuant to the provisions of Sec. 2.34 of the Commission's Rules, the Commission may, without further notice to proposed respondents, (1) issue its complaint corresponding in form and substance with the draft of complaint here attached and its decision containing the following order to cease and desist in disposition of the proceeding, and (2) make information public in respect thereto. When so entered, the order to cease and desist shall have the same force and effect and may be altered, modified or set aside in the same manner and within the same time provided by statute for other orders. The order shall become final upon service. Delivery by the U.S. Postal Service of the complaint and decision containing the agreed-to order to proposed respondents' address as stated in this agreement shall constitute service. Proposed respondents waive any right they may have to any other manner of service. The complaint may be used in construing the terms of the order, and no agreement, understanding, representation, or interpretation not contained in the order or the agreement may be used to vary or contradict the terms of the order. 7. Proposed respondents have read the proposed complaint and order contemplated hereby. They understand that once the order has been issued, they well be required to file one or more compliance reports showing that they have fully complied with the order. Proposed respondents further understand that they may be liable for civil penalties in the amount provided by law for each violation of the order after it becomes final. Order For purposes of this order, the following definitions shall apply: ``Work Opportunity'' means any offer to a person to earn income by producing goods or providing services, where (1) the offeree must pay to the offeror, or a person identified by the offeror, any amount of money, whether in the form of a registration, application or other fee, a payment for initial inventory or supplies, or in any other form, as a condition of participating; and (2) the offeror represents that the offeree will or could be compensated in any manner by the offeror or by a person identified by the offeror. ``Participant'' means any person who pays the offeror of a work opportunity, or a person identified by such offeror, any amount of money, whether in the form of a registration, application or other fee, a payment for initial inventory or supplies, or in any other form, as a condition of participating in a work opportunity. ``Net Earnings or Profits'' means the compensation paid to a participant in a work opportunity, less the costs to a participant of materials, supplies and shipping. I It is ordered that, Respondents New Mexico Custom Designs, Inc., a corporation, its successors and assigns, and its officers, and Anthony L. Ingram, individually and as an officer of New Mexico Custom Designs, Inc., a corporation, and respondents' agents, representatives and employees, directly or through any corporation, subsidiary, division or other device, in connection with the marketing, advertising, promotion, offering, or sale of any work opportunity, in or affecting commerce, as ``commerce'' is defined in the Federal Trade Commission Act, do forthwith cease and desist from: A. Making any material misrepresentation, including but not limited to: 1. Misrepresenting the past, present or potential future earnings or profits of participants in any work opportunity; or 2. Misrepresenting the marketplace demand for any product or service for which respondents are offering a work opportunity. B. Making any earnings-related or profit-related claim which uses the phrase ``up to'' or words of similar import or which states any dollar amount, unless the stated level of earnings or profits constitutes the net earnings or profits which can be achieved by an appreciable number of participants; and further, in any instances where consumers could not reasonably foresee the major factors or conditions affecting the ability to achieve the stated level of earnings or profits, cease and desist from failing to disclose clearly and prominently the class of consumers who can achieve the stated level. It is further ordered that, For three (3) years after the last date of dissemination of any representation covered by this Order, respondents, or their successors and assigns, shall maintain and upon request make available to the Federal Trade Commission for inspection and copying: A. Specimen copies of all materials disseminated which contain such representation; B. All materials that were relied upon as substantiation in disseminating such representation; C. The names, addresses and telephone numbers of all work opportunity participants who paid any money to respondents within the previous three years; and D. The names, addresses and telephone numbers of all work opportunity participants who earned any income or profits from respondents during the previous three years, and for each such participant: All written agreements between respondents and each participant during the previous three years; and the dates and amounts of all payments paid to each participant for work completed pursuant to the work opportunity during the previous three years. III It is further ordered: A. That respondent Anthony L. Ingram shall pay to the FTC as consumer redress the sum of one million two hundred thousand dollars ($1,200,000); provided however, that this liability will be suspended, subject to the provisions of subpart B below. B. That the Commission's acceptance of this Order is expressly premised upon the representations regarding the financial condition of the respective respondents made to the FTC in: A ``Financial Statement of Debtor'' executed by Anthony L. Ingram on October 20, 1992; a ``Financial Statement of Corporate Defendant'' relating to New Mexico Custom Designs, Inc. executed by Anthony L. Ingram, as president, on October 20, 1992; the Federal income tax returns of New Mexico Custom Designs, Inc., for 1989, 1990 and 1991; the federal income tax returns of Anthony L. Ingram for 1990 and 1991; accounting statements for 1990, 1991 and 1992, referred to in, and enclosed with, a letter from Gary Harrell, Esq., to the Federal Trade Commission, dated 22 march 1993; and a letter from Gary Harrell, Esq., to the Federal Trade Commission, dated 3 May 1993, After service upon respondents of an order to show cause, the FTC may reopen this proceeding to make a determination whether there are any material misrepresentations for omissions in said representations regarding the financial condition of the respective respondents. Respondents shall be given an opportunity to present evidence on this issue. If, upon consideration of respondents' evidence and other information before it, the FTC determines that there are any material misrepresentations or omissions in the financial statements and related documents, that determination shall cause the entire amount of monetary liability of one million two hundred thousand dollars ($1,200,000) to become immediately due and payable to the Federal Trade Commission, and interest computed at the rate prescribed in 28 U.S.C. 1961, as amended, shall immediately begin to accrue on the unpaid balance. Proceedings initiated under Part III are in addition to, and not in lieu of, any other civil or criminal remedies as may be provided by law, including any proceedings the Federal Trade Commission may initiate to enforce this Order. IV It is further ordered, That the corporate respondent shall notify the Commission at least thirty (30) days prior to any dissolution, assignment, or sale resulting in the emergence of a successor corporation, the creation or dissolution of subsidiaries, or any other change in the corporation that may affect compliance obligations arising out of the Order. V It is further ordered that, The individual respondent shall promptly notify the Commission of the discontinuance of his present business or employment and, for a period of five (5) years after the date of service of this order, shall promptly notify the Commission of each affiliation with a new business or employment. VI It is further ordered that, Respondents shall, within sixty (60) days after service of this Order on them, and on the first through the fifth anniversaries of the effective date of this order, file with the Commission a report in writing, setting forth in detail the manner and form in which it has complied with this Order. Analysis of Proposed Consent Order To Aid Public Comment The Federal Trade Commission has accepted, subject to final approval, an agreement to a proposed consent order from New Mexico Custom Designs, Inc. and Anthony L. Ingram (``proposed respondents''). Both of the proposed respondents are located in Albuquerque, New Mexico. The proposed consent order has been placed on the public record for sixty (60) days for reception of comments by interested persons. Comments received during this period will become part of the public record. After sixty (60) days, the Commission will again review the agreement and the comments received and will decide whether it should withdraw from the agreement and take other appropriate action, or make final the proposed order contained in the agreement. New Mexico Custom Designs, Inc. and Anthony L. Ingram disseminate advertising seeking individuals to assemble craft items at home. They sell instructional kits and craft materials, and/or charge registration fees, to individuals wanting to perform such assembly work. The complaint alleges that proposed respondents have misrepresented the weekly earnings that are regularly realized by New Mexico Custom Designs' home assemblers, through performing such assembly work and submitting it to New Mexico Custom Designs for compensation. The complaint further alleges that proposed respondents have misrepresented that there is a significant marketplace demand for the products they offer for assembly. The complaint alleges that these misrepresentations violate section 5(a)(1) of the Federal Trade Commission Act (15 U.S.C. 45(a)(1)). The proposed order requires proposed respondents to cease making any material misrepresentations, including specifically misrepresentations regarding past, present or future earnings or profits of participants in any work opportunity. The order further prohibits misrepresentations regarding the marketplace demand for any product or service for which proposed respondents are offering a work opportunity. The proposed order also prohibits proposed respondents from making any earnings-related or profit-related claims through using phrases such as ``up to,'' or through stating any dollar amount, unless the stated earnings or profit figures can be achieved by an appreciable number of participants. The latter prohibition also requires disclosure of the class of consumers who can achieve stated earnings or profit levels, where factors or conditions affecting earnings or profits are not reasonably foreseeable by prospective workers. The proposed order additionally requires proposed respondents to retain specified records relating to their advertising of work opportunities, the persons who paid money to participate in any work opportunity, and the earnings or profits of participants. Additionally, the proposed order requires the corporate respondent to notify the Commission of changes cn Corporate structure, the individual respondent to notify the Commission of his discontinuance of his present business or employment and each new business or employment affiliation, and all proposed respondents to file compliance reports with the Commission. Proposed respondents would be subject to civil penalties if they did not comply with any of the above other provisions. The proposed order also requires proposed respondents to pay to the Federal Trade Commission $1,200,000 for consumer redress or disgorgement. This liability is suspended, however, on the basis of financial disclosures made by proposed respondents to the FTC, with the proviso that the Commission can reopen the proceeding if it subsequently determines that there are material misrepresentations or omissions in the financial disclosures. The purpose of this analysis is to facilitate public comment on the proposed order. It is not intended to constitute an official interpretation of the agreement and proposed order or to modify in any way their terms. Benjamin I. Berman, Acting Secretary. [FR Doc. 94-155 Filed 1-4-94; 8:45 am] BILLING CODE 6750-01-M