[Federal Register Volume 63, Number 163 (Monday, August 24, 1998)]
[Notices]
[Pages 45063-45064]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-22639]


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FEDERAL TRADE COMMISSION

[File No. 972-3308]


Kalvin P. Schmidt; Analysis to Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

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SUMMARY: The consent agreement in this matter settles alleged 
violations of federal law prohibiting unfair or deceptive acts or 
practices or unfair methods of competition. The attached Analysis to 
Aid Public Comment describes both the allegations in the draft 
complaint that accompanies the consent agreement and the terms of the 
consent order--embodied in the consent agreement--that would settle 
these allegations.

DATES: Comments must be received on or before October 23, 1998.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary, 
Room 159, 6th St. and Pa. Ave., N.W., Washington, D.C. 20580.

FOR FURTHER INFORMATION CONTACT: Tara Flynn, FTC/H-238, Washington, 
D.C. 20580. (202) 326-3710.

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 above-captioned 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. The following Analysis to Aid 
Public Comment describes the terms of the consent agreement, and the 
allegations in the complaint. An electronic copy of the full text of 
the consent agreement package can be obtained from the FTC Home Page 
(for July 14, 1998), on the World Wide Web, at ``http://www.ftc.gov/os/
actions97.htm.'' A paper copy can be obtained from the FTC Public 
Reference Room, Room H-130, Sixth Street and Pennsylvania Avenue, N.W., 
Washington, D.C. 20580, either in person or by calling (202) 326-3627. 
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)).

Analysis of Proposed Consent Order to Aid Public Comment

    The Federal Trade Commission has accepted, subject to final 
approval, an agreement containing a consent order from Kalvin P. 
Schmidt, individually, and doing business as DKS Enterprises, DS 
Productions, DES Enterprises, www.mkt-america.com, and www.mkt-usa.com. 
Schmidt promoted Mega$Nets and MegaResource, two high tech versions of 
traditional chain or pyramid marketing programs, on web sites he 
operated, and in unsolicited e-mail messages he created and sent via 
the Internet on his behalf and on the behalf of others. He also created 
and hosted web sites for participants in Mega$Nets and MegaResources 
programs.
    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.
    This matter concerns allegations about Schmidt's promotion and 
dissemination of two chain or pyramid marketing programs over the 
Internet. The Commission has issued a proposed draft complaint that 
sets forth the allegations to be resolved by the proposed 
administrative consent order. The draft complaint alleges that 
respondent Schmidt misrepresented that all or virtually all consumers 
who participate in the Mega$Nets and MegaResources program earn 
substantial amounts of money. The draft complaint also alleges that 
respondent Schmidt did not possess a reasonable basis that 
substantiated these earnings claims at the time he made those 
representations. In additions, the draft complaint alleges that 
respondent Schmidt, by creating and designing for others web sites 
promoting the Mega$Nets and MegaResources programs, hosting these web 
sites, and composing and sending unsolicited electronic mail messages 
to consumers directing them to these web sites, violated the law by 
providing the ``means and instrumentalities'' to others

[[Page 45064]]

to make unsubstantiated and false earnings claims.
    The proposed administrative consent order, published for comment 
with this notice, contains prohibitions designed to prevent respondent 
from engaging in similar acts and practices in the future. Section I of 
the proposed consent prohibits Mr. Schmidt from participating in or 
assisting in any manner or capacity whatsoever in any prohibited 
marketing program, as defined in the order. The definition of 
``prohibited marketing program'' is similar to the definition in the 
settlement of FTC v. Nia Cano, et al., Civil No. 97-7947-CAS (AJWx), 
and includes any pyramid sales scheme, ponzi scheme, and chain 
marketing scheme. Sections IIA of the proposed order requires the 
respondent to have substantiation when in connection with any marketing 
plan or program or sale of good or service, he makes representations 
regarding material facts, including the income, profits, or sales 
volume achieved by participants in any marketing program or purchasers 
of any good or service. Section IIB requires the respondent to make 
certain affirmative disclosures when, in connection with any marketing 
plan or program, he makes any representations regarding earnings, 
profits, or sales volume.
    Sections III, IV, V, and VI require the respondent to maintain 
copies of certain business records; to provide copies of the order to 
all of his current and future employees; to notify the Commission of 
any change in employment or corporate structure that might affect 
compliance with the order; and to file compliance reports with the 
Commission. Section VII is a ``sunset'' provision that terminates the 
order twenty years after it is issued or after a complaint is filed in 
federal district court.
    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.

    By direction of the Commission.
Donald S. Clark,
Secretary.
[FR Doc. 98-22639 Filed 8-21-98; 8:45 am]
BILLING CODE 6750-01-M