[Federal Register Volume 59, Number 3 (Wednesday, January 5, 1994)]
[Notices]
[Pages 577-580]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-157]


[[Page Unknown]]

[Federal Register: January 5, 1994]


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FEDERAL TRADE COMMISSION

[File No. 922 3262]

 

The Hairbow Company, 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 California-based corporations and 
officers, who purported to hairbows, 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 $1.9 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 Section 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 Section 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 RUSSELL J. OSBORN, a/k/a Russell J. Osborne and 
Russell J. Osbourne, individually, trading and doing business as THE 
HAIRBOW COMPANY, and as an officer of Rainbow Productions, Inc., and 
RAINBOW PRODUCTIONS, INC., a corporation.

    The Federal Trade Commission having initiated an investigation of 
Russell J. Osborn, a/k/a Russell J. Osborne and Russell J. Osbourne 
(hereafter ``Russell J. Osborn''), individually, trading and doing 
business as The Hairbow Company, and as an officer of Rainbow 
Productions, Inc., and Rainbow Productions, Inc., a 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 Russell Osborn, individually, 
trading and doing business as The Hairbow Company, and as an officer of 
Rainbow Productions, Inc., and Rainbow Productions, Inc., a 
corporation, and their attorney, and counsel for the Federal Trade 
Commission that:
    1. Respondent The Hairbow Company is an unincorporated association, 
with its principal office and place of business located at 19 Front 
Street, Danville, California 94526.
    Respondent Rainbow Productions, Inc., is a corporation, organized, 
existing, and doing business under and by virtue of the laws of the 
State of California, with its principal office and place of business 
located at 19 Front Street, Danville, California 94526.
    Respondent Russell Osborn is an individual, is the owner of The 
Hairbow Company, and is the owner and president of Rainbow Productions, 
Inc. Individually or in concert with others, he formulates, directs and 
controls the policies, acts and practices of The Hairbow Company and 
Rainbow Productions, Inc. His address is 19 Front Street, Danville, 
California 94526.
    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 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 Russell J. Osborn, individually, 
trading and doing business as The Hairbow Company, and as an officer of 
Rainbow Productions, Inc., and Rainbow Productions, Inc., a 
corporation, its successors and assigns, 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 respondent Russell J. Osborn shall pay to the FTC as 
consumer redress the sum of one million nine hundred thousand dollars 
($1,900,000); 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 Russell J. Osborn on September 22, 1992, and 
appended ``Statement of Assets and Liabilities'' executed by Russell J. 
Osborn on September 14, 1992; a ``Financial Statement of Corporate 
Defendant'' relating to Rainbow Productions, Inc. executed by Russell 
J. Osborn on September 22, 1992; and on the federal and California tax 
returns of Russell J. Osborn for 1990. 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 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 nine 
hundred thousand dollars ($1,900,000) to become immediately due and 
payable to the Federal Trade Commission, and interest computed at the 
rate prescribed in 28 U.S.C. Sec. 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, and 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 The Hairbow 
Company, Inc., Rainbow Productions, Inc., and Russell J. Osborne 
(``proposed respondents''). All of the proposed respondents are located 
in Danville, California.
    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.
    The Hairbow Company and Rainbow Productions disseminate advertising 
seeking individuals to assemble craft items at home. The Hairbow 
Company 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 The Hairbow 
Company's home assemblers, through performing such assembly work and 
submitting it to The Hairbow Company for compensation. The complaint 
further alleges that proposed respondents have misrepresented that 
there is a significant marketplace demand for the 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. Sec. 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 in corporate structure, the 
individual respondent to notify the Commission of his discontinuance 
his present business or employment and each new business or employment 
affiliation, and all proposed respondent 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 $1,900,000 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. 94-157 Filed 1-4-94; 8:45 am]
BILLING CODE 6750-01-M