[Federal Register Volume 59, Number 3 (Wednesday, January 5, 1994)]
[Notices]
[Pages 587-590]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-156]


[[Page Unknown]]

[Federal Register: January 5, 1994]


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FEDERAL TRADE COMMISSION
[File No. 922 3265]

 

Sandcastle Creations; 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 Oregon-based respondents, who 
marketed potholders and mohair for use as doll's hair, from making any 
material misrepresentations regarding earnings or profits or 
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 $536,000 
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 and 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 William E. Taylor, and Susan L. Taylor, 
individually, and trading and doing business as Sandcastle 
Creations.

    The Federal Trade Commission having initiated an investigation of 
William E. Taylor and Susan L. Taylor, individually, and trading and 
doing business as Sandcastle Creations (``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 William E. Taylor and Susan L. 
Taylor, individually, and trading and doing business as Sandcastle 
Creations, and their attorney, and counsel for the Federal Trade 
Commission that:
    1. Proposed respondents William E. Taylor and Susan L. Taylor are 
individuals, trading and doing business as Sandcastle Creations, an 
unincorporated association, with its principal office and place of 
business located at 126 SE. 1st Street, Newport, Oregon 97365.
    Proposed respondent William E. Taylor is a co-owner of Sandcastle 
Creations. Individually or in concert with others, he formulates, 
directs and controls the policies, acts and practices of Sandcastle 
Creations and his address is the same as that of Sandcastle Creations.
    Proposed respondent Susan L. Taylor is a co-owner of Sandcastle 
Creations. Individually or in concert with others, she formulates, 
directs and controls the policies, acts and practices of Sandcastle 
Creations and her address is the same as that of Sandcastle Creations.
    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 an 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 will 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 William E. Taylor and Susan L. 
Taylor, individually and trading and doing business as Sandcastle 
Creations, an unincorporated association, 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.

II

    It is further ordered that, For three (3) years after the last date 
of dissemination of any representation covered by this Order, 
respondents 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 respondents shall jointly and severally pay to the FTC as 
consumer redress the sum of five hundred and thirty-six thousand 
dollars ($536,000); provided however, that this liability will be 
suspended, subject to the provisions of subparts B and D below, upon 
the payment of twenty-five thousand dollars ($25,000) no later than 
fifteen (15) days after the date of service of this Order. Such payment 
shall be made by cashier's check or certified check payable to the 
Federal Trade Commission and shall be delivered to the Federal Trade 
Commission, San Francisco Regional Office, 901 Market Street, suite 
570, San Francisco, CA 94103.
    B. That, in the event of respondents' default on the $25,000 
payment set forth in subpart A above, the amount of five hundred and 
thirty-six thousand dollars ($536,000), less the sum of any payments 
made pursuant to subpart A above, shall become immediately due and 
payable without any notice required to be given to the respondents, and 
interest computed at the rate prescribed under 28 U.S.C. 1961, as 
amended, shall immediately begin to accrue on the unpaid balance.
    C. That any funds paid by respondents pursuant to subparts A and B 
above shall be paid into a redress fund administered by the Federal 
Trade Commission and shall be used to provide direct redress to those 
purchasers of respondents' introductory kits (as described in the 
complaint) who have not previously been reimbursed by respondents for 
the cost of the kit through a refund or through the purchase of 
finished product. If the Federal Trade Commission determines, in its 
sole discretion, that the redress to purchasers (as defined above) is 
wholly or partially impracticable, any funds not so used shall be paid 
to the United States Treasury. Respondents shall be notified as to how 
the funds are disbursed, but shall have no right to contest the manner 
of distribution chosen by the Commission. No portion of the payment as 
herein described shall be deemed a payment of any fine, penalty, or 
punitive assessment.
    D. That the Commission's acceptance of this Order is expressly 
premised upon the financial statements and related documents previously 
provided by respondents to the FTC, signed and dated July 27, 1992. 
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 or omissions in said financial statements 
and related documents. 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 five hundred and thirty-six 
thousand dollars ($536,000), less the sum of any payments made under 
subpart A above, 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 individual respondents shall 
promptly notify the Commission of the discontinuance of their 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.

V

    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 William E. 
Taylor and Susan L. Taylor, who do business under the name Sandcastle 
Creations (``proposed respondents''). The proposed respondents are 
located in Newport, Oregon.
    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.
    Sandcastle Creations disseminates advertising seeking individuals 
to assemble craft items at home. It sells instructional kits and craft 
materials, and/or charges 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 Sandcastle 
Creations' home assemblers, through performing such assembly work and 
submitting it to Sandcastle Creations for Compensation. The complaint 
alleges that this misrepresentation violates 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 individual proposed 
respondents to notify the Commission of their discontinuance of their 
present business or employment and each new business or employment 
affiliation, and requires the 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 order 
provisions.
    The proposed order also requires proposed respondents to pay to the 
Federal Trade Commission $536,000 for consumer redress or disgorgement. 
This liability is suspended, however, on the basis of financial 
disclosures made by proposed respondents to the FTC, and the payment to 
the Federal Trade Commission of $25,000, 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. 94-156 Filed 1-4-94; 8:45 am]
BILLING CODE 6750-01-M