[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