[Federal Register Volume 59, Number 54 (Monday, March 21, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-6537]


[[Page Unknown]]

[Federal Register: March 21, 1994]


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FEDERAL TRADE COMMISSION
[File No. 931 0085]

 

Community Associations Institute; 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, a Virginia-based association, whose 
members are managers of residential community associations, from 
interfering in any way with the truthful advertising and solicitation 
efforts of its members in the future, and would require it to remove 
any code of ethics provisions inconsistent with this prohibition.

DATES: Comments must be received on or before May 20, 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:
Michael McNeely, FTC/S-3308, Washington, DC 20580. (202) 326-2904.

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 
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 The Community Associations Institute, a 
corporation.

    The Federal Trade Commission having initiated an investigation of 
certain acts and practices of the Community Associations Institute, a 
corporation, and it now appearing that the Community Associations 
Institute, hereinafter sometimes referred to as ``CAI'' or ``proposed 
respondent,'' is willing to enter into an agreement containing an order 
to cease and desist from engaging in certain acts and practices being 
investigated, It is hereby agreed by and between CAI, by its duly 
authorized officer, and its attorney, and counsel for the Federal Trade 
Commission that:
    1. CAI is a corporation organized, existing and doing business 
under and by virtue of the laws of the District of Columbia, with its 
principal office and place of business located at 1630 Duke Street, 
Alexandria, Virginia 22314.
    2. CAI admits all the jurisdictional facts set forth in the draft 
of complaint here attached.
    3. CAI waives:
    (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) Any claim 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 proposed respondent, 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 the proceeding.
    5. This agreement is for settlement purposes only and does not 
constitute an admission by CAI that the law has been violated as 
alleged in the draft of complaint here attached.
    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 of Practice and Procedure, the Commission may, without further 
notice to proposed respondent, (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 respondent's address as stated in this 
agreement shall constitute service. Proposed respondent waives any 
right it may have to any other manner of service. The complaint 
attached hereto 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 respondent has read the draft complaint and order 
contemplated hereby. It understands that once the order has been 
issued, it will be required to file one or more compliance reports 
showing that it has fully complied with the order. Proposed respondent 
further understands that it may be liable for civil penalties in the 
amount provided by law for each violation of the order after the order 
becomes final.

Order

I

    It is ordered that, for purposes of this order, the terms 
``respondent'' or ``CAI'' mean the Community Associations Institute, 
its trustees, councils, committees, boards, divisions, officers, 
representatives, delegates, agents, employees successors, and assigns.

II

    It is further ordered that respondent, directly or indirectly, or 
through any person or any corporate or other device, in or in 
connection with its activities as a professional association in or 
affecting commerce, as ``commerce'' is defined in the Federal Trade 
Commission Act, forthwith cease and desist from:
    A. Prohibiting, restricting, regulating, impeding, declaring 
unethical, interfering with, or advising against truthful, non-
deceptive advertising and solicitation, including, but not limited to: 
general mailings to condominium or homeowner associations, solicitation 
targeting specific condominium or homeowner associations, telephone or 
personal solicitation designed to attract current clients of another 
manager, communicating with condominium or home owners, quoting prices 
for services before being asked to do so, and offering to provide free 
services; or
    B. Inducing, suggesting, urging, encouraging, or assisting any non-
governmental person or organization to take any action that if taken by 
respondent would violate this order;
    Provided that nothing contained herein shall prohibit respondent 
from formulating, adopting, disseminating to its component societies 
and to its members, and enforcing reasonable ethical guidelines 
governing the conduct of its members with respect to advertising, 
including unsubstantiated representations, that respondent reasonably 
believes would be false or deceptive within the meaning of section 5 of 
the Federal Trade Commission Act.

III

    It is further ordered that respondent shall:
    A. Within thirty (30) days after the date this order becomes final:
    1. Remove any current code of ethics provision that is inconsistent 
with the provisions of Part II of this order; and
    2. Revoke any interpretation or policy statement, including any 
report regarding ``Marketing Versus Unethical Solicitation'' that is 
inconsistent with the provisions of Part II of this order.
    B. Maintain Article XII, Section 12, of the CAI Bylaws as amended 
and adopted on June 21, 1993, and revoke, during its recertification 
process, the charter of any local chapter unless and until the chapter 
certifies that it will ensure compliance with and the integrity of said 
Bylaw provision.
    C. Cease and desist for a period of one (1) year from maintaining 
or continuing respondent's affiliation with any local chapter or other 
organization of homeowner association managers within one hundred and 
twenty (120) days after respondent learns or obtains information that 
would lead a reasonable person to conclude that said organization has 
engaged, after the date this order becomes final, in any act or 
practice that if engaged in by CAI would be prohibited by Paragraph II 
of this order; unless prior to the expiration of the 120 day period 
said organization informs respondent by verified written statement of 
an officer that the organization has ceased and will not resume such 
act or practice, and respondent has no grounds to believe otherwise.
    D. Within thirty (30) days after respondent takes any action 
pursuant to Part III.B or III.C above, notify the Federal Trade 
Commission of such action and provide all documentation related 
thereto.
    E. Within thirty (30) days after the date this order becomes final, 
distribute by United States mail an announcement in the form shown in 
Appendix A to this order (hereinafter ``Appendix A'') to each 
Professional Community Association Manager, each member of the CAI 
Association Management Specialist and Chief Executive Officers of 
Management Companies committees, and each local chapter, and use its 
best efforts to encourage each chapter to publish Appendix A in its 
newsletter.
    F. Within ninety (90) days after the date this order becomes final, 
publish in Community Management and Common Ground, or any successor 
publications: (1) This order, (2) the accompanying compliant, (3) 
Appendix A, and (4) any Code of Ethics provision, interpretation, 
policy statement, or other document that CAI revises pursuant to Part 
III.A above.
    G. Within one hundred and twenty (120) days after the date this 
order becomes final, and annually for five (5) years thereafter on the 
anniversary date of this order, file with the Secretary of the Federal 
Trade Commission a verified written report setting forth in detail the 
manner and form in which respondent has complied and is complying with 
this order.
    H. For a period of five (5) years after the date this order becomes 
final, maintain and make available to the Federal Trade Commission 
staff for inspection and copying, upon reasonable notice, records 
adequate to describe in detail any action taken in connection with the 
activities covered by this order.
    I. Notify the Federal Trade Commission at least thirty (30) days 
prior to any proposed changes in respondent, such as dissolution of 
reorganization resulting in the emergence of a successor corporation or 
association, or any other change in the corporation or association 
which may affect compliance obligations arising out of this order.

Appendix A

    Dear Member: This letter is to inform you that, without 
admitting liability or any wrongdoing, we have voluntarily entered 
into an agreement with the Federal Trade Commission that resulted in 
the entry of a consent order on [enter date]. Although the consent 
order required that CAI take specific actions with regard to CAI's 
ethics provisions and by-laws, CAI had already taken some of those 
actions before entry of the order. In June, 1993, CAI repealed the 
Professional Courtesy provision of the various CAI Codes of Ethics, 
and amended the by-laws to provide that all ethics provisions which 
relate to advertising or solicitation would be limited to 
prohibition of false or deceptive advertising by members, and that 
CAI would not otherwise limit or control advertising or soliciting 
practices.
    In accordance with the terms of the order, you are hereby 
notified that, among other requirements of the order, CAI may not 
prohibit or restrict its members from engaging in any advertising or 
solicitation that is truthful and nondeceptive, by any means, 
including through provisions in the Code of Professional Ethics for 
PCAMS, the AMS Code of Professional Ethics, and the CEO-MC Code of 
Ethics. In particular, CAI may not interfere if its members solicit 
or advertise truthfully and nondeceptively, including, but not 
limited to, engaging in any of the following activities:
    1. solicitation targeting specific condominium or homeowner 
associations;
    2. telephone or personal solicitation designed to attract 
clients of another manager;
    3. communicating with owners;
    4. quoting prices for services before being asked to do so;
    5. offering to provide free services; and
    6. sending general mailings to condominium or homeowner 
associations.

Similarly, the order bars local chapters from interfering with 
members' advertising and solicitation activities, including, but not 
limited to, the type listed above.
    The order contains a proviso permitting CAI and its chapters to 
adopt and enforce reasonable ethical guidelines prohibiting 
advertising, including unsubstantiated representations, that they 
reasonably believe would be false or deceptive within the meaning of 
Section 5 of the Federal Trade Commission Act.
    The order does not bar CAI from taking action against any member 
that a court or state regulatory agency has found engaged in 
tortious interference with contract.
    For more specific information, members should refer to the FTC 
Order itself. CAI will provide any member with a copy of the order 
and accompanying complaint upon request.

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Counsel
Community Associations Institute

Analysis of Proposed Consent Order T Aid Public Comment

    The Federal Trade Commission has accepted, subject to final 
approval, an agreement to a proposed consent order from the Community 
Associations Institute (``CAI'').
    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 or make final the agreement's proposed 
order.

Description of Complaint

    A complaint prepared for issuance by the Commission along with the 
proposed order alleges that CAI members, particularly ``Professional 
Community Association Manager'' (``PCAM'') members, of CAI agreed to 
restrict truthful, nondeceptive solicitation. More specifically, the 
complaint alleges that CAI adopted and maintained Section B.4 of its 
Code of Professional Ethics for PCAMS, which requires PCAMS to ``(1) 
exhibit professional courtesy by not interfering with contractual 
relationships between other professional managers and their clients and 
(2) give notice to other professional managers of any contracts with 
their clients to the extent that such notice is useful and does not 
interfere with the ability to compete fully.'' The complaint further 
alleges that CAI circulated interpretations that declared that certain 
truthful, nondeceptive solicitation violated this Code of Professional 
Ethics provision. It also alleges that CAI and some of its local 
chapters enforced this provision to discourage truthful, nondeceptive 
solicitation and otherwise suppressed such solicitations.
    The complaint alleges that CAI's agreement to restrict solicitation 
injured consumers by depriving them of truthful information pertinent 
to the availability of a professional residential community association 
manager and of the benefits of competition among professional 
residential community association managers.

Description of the Proposed Consent Order

    The proposed order would prohibit CAI from restricting truthful, 
non-deceptive advertising and solicitation, including, but not limited 
to, general mailings to condominium or homeowner associations, 
solicitations targeting specific condominium or homeowner associations, 
telephone or personal solicitation designed to attract current clients 
of another manager, communicating with condominium or homeowners, 
quoting prices for services before being asked to do so, and offering 
to provide free services. It would further prohibit CAI from inducing 
or encouraging any non-governmental person to take an action that 
violates the order.
    The proposed order would permit CAI to enforce reasonable ethical 
guidelines governing the conduct of its members with respect to 
advertising and solicitation, including unsubstantiated 
representations, that respondent reasonably believes would be false or 
deceptive within the meaning of Section 5 of the Federal Trade 
Commission Act.
    The proposed order further requires CAI, as part of its annual 
chapter review program, to deny recertification to any local chapter 
that does not certify that it will comply with the order. Under the 
order, CAI must cease and desist for one year from maintaining or 
continuing its affiliation with any chapter or other organization after 
CAI leans of any order violation.
    The proposed order would require CAI to make all of its codes of 
ethics consistent with the order and revoke any interpretations that 
conflict with the order. It would also require CAI to distribute the 
order to its local chapters, PCAMs, and other committee members; 
publish the order and related documents in certain CAI publications; 
file compliance reports; retain certain documents; and notify the 
Commission of certain changes in its corporate structure.
    The purpose of this analysis is to facilitate public comment on the 
proposed order, and it is not intended to constitute an official 
interpretation of the agreement and proposed order or to modify in any 
way their terms.
    The proposed consent order has been entered into for settlement 
purposes only and does not constitute an admission by CAI that the law 
has been violated as alleged in the complaint.
Donald S. Clark,
Secretary.
[FR Doc. 94-6537 Filed 3-18-94; 8:45 am]
BILLING CODE 6750-01-M