[Federal Register Volume 59, Number 3 (Wednesday, January 5, 1994)]
[Notices]
[Pages 580-582]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-158]
[[Page Unknown]]
[Federal Register: January 5, 1994]
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FEDERAL TRADE COMMISSION
[File No. 922 3264]
Homespun Products, 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 California-based corporations and an
officer, who purported to market pillows and Christmas ornaments, 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 $1.04
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 HOMESPUN PRODUCTS, INC., a corporation, G & S
MARKETING, INC. a corporation, and GREGORY A. STRAW, individually
and as an officer of said corporations.
The Federal Trade Commission having initiated an investigation of
Homespun Products, Inc., a corporation, G & S Marketing, Inc., a
corporation, and Gregory A. Straw, individually and as an officer of
said corporations (``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 Homespun Products, Inc. by its
duly authorized officer, G & S Marketing, Inc., by its duly authorized
officer, and Gregory A. Straw, individually and as an officer of said
corporations, and their attorney, and counsel for the Federal Trade
Commission that:
1. Proposed respondent Homespun Products, 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 201 Benton Court, Suisun, California 94585.
Proposed respondent G & S Marketing, 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 or place of
business located at 201 Benton Court, Suisun, California 94585.
Proposed respondent Gregory A. Straw 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 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 Homespun Products, Inc., a
corporation, G & S Marketing, Inc., a corporation, their successors and
assigns, and their officers, and Gregory A. Straw, individually and as
an officer of Homespun Products, Inc. and G & S Marketing, Inc., 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, 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 respondents Homespun Products, Inc., G & S Marketing, Inc.
and Gregory A. Straw shall pay to the FTC as consumer redress the sum
of one million and forty thousand dollars ($1,040,000); 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 Corporate Defendant'' relating to Homespun Products, Inc., dated
February 12, 1993; a ``Financial Statement of Corporate Defendant''
relating to G & S Marketing, Inc., dated February 12, 1993; a
``Financial Statement of Debtor'' executed by Gregory A. Straw, dated
February 8, 1993; the federal income tax returns of Homespun Products,
Inc. for 1990, 1991 and 1992; the federal income tax returns for G & S
Marketing, Inc. for 1991 and 1992; and the federal income tax returns
for Gregory A. Straw and Susan M. Straw for 1991 and 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 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 and forty thousand dollars ($1,040,000) 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 respondents 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 corporations 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.
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 Homespun
Products, Inc., G & S Marketing, Inc., and Gregory A. Straw (``proposed
respondents''). All of the Proposed respondents are located in Suisun,
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.
Homespun Products and G & S Marketing disseminate advertising
seeking individuals to assemble craft items at home. Homespun Products
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 Homespun Products'
home assemblers, through performing such assembly work and submitting
it to Homespun Products 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 respondents
to notify the Commission of changes in 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 order
provisions.
The proposed order also requires proposed respondents to pay to the
Federal Trade Commission $1,040,000 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. 94-158 Filed 1-4-94; 8:45 am]
BILLING CODE 6750-01-M