[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]


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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.

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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