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Annual Report of the Federal Trade Commission - FY 1997

http://www.ftc.gov/os/ar97/index.html

Annual Report of the
Federal Trade Commission
For Fiscal Year Ended September 30, 1997

Prepared by
Bureau of Competition
Patricia Foster, Claudia Higgins, Joyce Shelton
Bureau of Consumer Protection
Darlene Cossette, Clovia Hutchins, Ruth Sacks, Toby Savell, Donna Woods
Bureau of Economics
Janice Johnson, Paul Pautler, Mae Schwarz
Office of the Executive Director
Marie Barrett, Erika Beard, Keith Golden, Barri Hutchins
Office of the Secretary
Richard Donohue

FEDERAL TRADE COMMISSION - 1997
ROBERT PITOFSKY, Chairman
MARY L. AZCUENAGA, Commissioner
JANET D. STEIGER, Commissioner
ROSCOE B. STAREK, III, Commissioner
CHRISTINE A. VARNEY, Commissioner
DONALD S. CLARK, Secretary

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COMMISSIONERS

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COMMISSIONERS
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Robert Pitofsky, Chairman
Robert Pitofsky was sworn in as 54th Chairman of the Federal Trade Commission on April
12, 1995. At the time he was nominated by President Clinton to chair the Commission,
Chairman Pitofsky was a Professor of Law at the Georgetown University Law Center and
Of Counsel to the Washington, D.C. law firm of Arnold & Porter. He also has held
positions at the Federal Trade Commission as a Commissioner (1978-1981) and as Director
of the Bureau of Consumer Protection (1970-1973).
Chairman Pitofsky chaired the Defense Science Board Task Force on Antitrust Aspects of
Defense Industry Downsizing in 1994. He has been a member of the Council of the
Administrative Conference, the Board of Governors of the D.C. Bar Association, and the
Council of the Antitrust Section of the American Bar Association. In addition, he has been
Dean of the Georgetown University Law Center, a professor at New York University
School of Law, and Visiting Professor of Law at Harvard Law School.
Chairman Pitofsky's publications include legal casebooks on both trade regulation and
antitrust law. He received a B.A. degree from New York University and an L.L.B. from the
Columbia School of Law.
Mary L. Azcuenaga, Commissioner
Mary L. Azcuenaga was sworn in as a member of the Federal Trade Commission on
November 27, 1984. She was appointed by President Reagan for a term expiring September
26, 1991, and she was reappointed by President Bush for a second term, expiring
September 26, 1998.
Before her appointment, Commissioner Azcuenaga spent more than 11 years on the legal
staff of the Commission. She has a varied litigation background, including both federal
court and administrative litigation. She has substantial expertise in the field of antitrust, a
background in the field of consumer protection and administrative law, and experience in
administration and management.
Immediately before assuming her present position, Commissioner Azcuenaga served as
Assistant General Counsel for Legal Counsel of the Federal Trade Commission. Earlier,
she served as Assistant to the General Counsel, as Assistant Director of the San Francisco
Regional Office, as Assistant to the Executive Director, and as a litigation attorney in the
Office of the General Counsel.
Commissioner Azcuenaga is a graduate of Stanford University and the University of
Chicago School of Law. She is a member of the bars of the District of Columbia and the
State of California.
Janet D. Steiger, Commissioner

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COMMISSIONERS

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Janet D. Steiger was sworn in as a member of the Federal Trade Commission on August
11, 1989, and served until September 28, 1997. She was nominated by President Bush.
Commissioner Steiger served as Chairman of the Commission from August 1989 until
April 1995.
Commissioner Steiger was Chairman of the Postal Rate Commission, by appointment of
President Reagan, from March 1982 to August 1989. She also chaired the Congressionally
mandated three-year Commission to Assess Veterans' Education Policy (1987-1989), which
reported to the 100th Congress. A Republican, she was nominated by President Carter and
confirmed by the Senate as a Postal Rate Commissioner in 1980. In 1985, the Federally
Employed Women of Washington awarded her the Outstanding Woman in Government
Award for 1984.
A member of Phi Beta Kappa, Commissioner Steiger received her B.A. from Lawrence
University and did postgraduate study at the University of Reading in England and at the
University of Wisconsin-Madison. She was a Fulbright Scholar, a Woodrow Wilson
Scholar, and a member of the Lawrence Board of Trustees (1986-1989). Lawrence awarded
her an honorary doctor of laws degree in 1992.
Roscoe B. Starek, III, Commissioner
Roscoe B. Starek, III, was sworn in as a member of the Federal Trade Commission on
November 19, 1990, and served until December 18, 1997. From January 1989 until he was
sworn in by President Bush, Commissioner Starek was Deputy Assistant to the President
and Deputy Director of Presidential Personnel at the White House. Immediately prior to
joining the White House staff, Commissioner Starek worked on the Bush transition team.
He served for seven years at the Department of State, most recently as Deputy Assistant
Secretary for Policy and Counterterrorism.
From 1972 to 1982, Commissioner Starek worked on Capitol Hill and on the Ford White
House staff. From 1976 to 1982, he worked as Counsel for three Committees of the U.S.
House of Representatives. In 1975, Commissioner Starek was appointed as Assistant
General Counsel to the Presidential Clemency Board. In 1974, Commissioner Starek was a
Counsel to the Impeachment Inquiry. During 1972 and 1973, he served on the staff of U.S.
Senator Charles Percy of Illinois.
Commissioner Starek graduated with an A.B. in political science from Syracuse University.
He received a Juris Doctor degree from the Washington College of Law at American
University. He is a member of the bar in Illinois and in the District of Columbia.
Christine A. Varney, Commissioner
Christine Varney was nominated by President Clinton and sworn in as a Commissioner of
the Federal Trade Commission on October 14, 1994. She served until August 5, 1997.
Commissioner Varney formerly served as President Clinton's Cabinet Secretary, the
primary point of contact between the President and the 20 members of his Cabinet. Prior to
joining the Clinton Administration, Commissioner Varney practiced law with the
Washington, D.C., firm of Hogan & Hartson. Her representations included serving as Chief
Counsel for the Clinton Campaign, General Counsel to the 1992 Presidential Inaugural
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COMMISSIONERS

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Committee, and General Counsel to the Democratic National Committee.
Commissioner Varney is a graduate of the State University of New York in Albany and
earned a Master's in Public Administration from the Maxwell School at Syracuse
University. She earned a Juris Doctorate from the Georgetown University Law Center,
where she was a Law Fellow. She also attended Trinity College in Dublin, Ireland.
Commissioner Varney is a member of the District of Columbia Bar, the New York State
Bar, the American Bar Association, and the National Lawyers' Council. She is also a
committeewoman on the ABA Standing Committee on Election Law.

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Competition Mission

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Competition Mission
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The Competition Mission is based upon the fundamental premise of the antitrust laws that
competition produces the best products and services at the lowest prices, spurs efficiency
and innovation, and strengthens the U.S. economy. Unreasonable restraints on competition
harm everyone, from consumers to businesses to workers. It is the Commission's job under
its Competition Mission to ensure that markets function competitively by eliminating
unreasonable competitive restraints, preventing anticompetitive mergers and acquisitions,
and encouraging governmental reliance on market solutions. In mergers and acquisitions
alone, the Commission has saved consumers approximately $24 billion in each of the last
two fiscal years.
Mission Focus
Given the Commission's flat resources in the midst of a growing economy and the
unprecedented levels of mergers and acquisitions, the challenges to accomplishing this
Mission are formidable. During fiscal year 1997, the Competition Mission focused its
limited resources on bringing enforcement actions that make a positive difference in
consumers' lives, minimizing the burden Commission actions place on business, and
continuing to refine the agency's enforcement policies to account for dynamic changes in
both the economy and antitrust analysis.
[Chart 1]
Making a Difference in Consumers' Lives.--The Competition Mission has focused its
enforcement actions in markets and industries that matter most to consumers. In fiscal year
1997, more than 70% of the Mission's resources, measured by staff hours devoted to large
cases, were at work in six key areas of the economy: health care, pharmaceuticals,
information and technology, energy, consumer goods and services, and defense (where the
consumer as taxpayer is the beneficiary). The agency's enforcement actions against proposed
mergers in these key industries have made a difference. The Commission's actions:
Blocked the planned merger of Staples and Office Depot, the Nation's two largest
office supply superstores. It is estimated that consumers nationwide would have paid
$1.1 billion more for office supplies over a five-year period if the merger had
proceeded.
Prevented the merger of the only national medical equipment rental companies in the
United States, Mediq and Universal Hospital Services. Because the combined firm
would have had the monopoly power to raise prices above competitive levels, the
Commission filed a preliminary injunction action in federal court and the parties
abandoned the transaction.
Required Ciba-Geigy and Sandoz to provide necessary intellectual property rights to
medical researchers to continue potentially life-saving gene therapy development, an
action that ensured critical medical research would not be impeded by the merger of
Ciba-Geigy and Sandoz.
Protected American consumers' tax dollars by preventing anticompetitive

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Chart01

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Chart02

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Consumer Protection Mission

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Consumer Protection Mission
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The goal of the Consumer Protection Mission is to prevent fraud, deception, and unfair
business practices in the marketplace. The Mission is accomplished by identifying practices
that cause the greatest consumer injury, stopping these practices through law enforcement,
and preventing consumer injury through education.
In fiscal year 1997, three primary strategies were used to address current issues of concern
to consumers: (1) protecting consumers from fraud, deception, and unfair practices in three
traditional law enforcement areas - health, safety, and financial well-being, (2) evaluating
the impact on consumers of globalization and new technologies and adapting consumer
protection principles to these frontier areas, and (3) using creative approaches such as
education and regulatory reform that are effective in protecting consumers and are not
unduly burdensome for businesses. By targeting resources to priority areas, working with
law enforcement and industry partners, and coordinating law enforcement actions with
education, the Commission was able to increase its effectiveness.
Consumer and Business Education
The Commission puts a high priority on consumer education - the first line of defense
against fraud and deception. With each major enforcement initiative, the Commission
launches an educational campaign, using both traditional and new media to reach as many
consumers as possible. In fiscal year 1997, the Office of Consumer and Business Education
produced 99 new and revised consumer and business publications: 88 for consumers, 10 for
businesses, and 1 for nonprofit organizations. A record 5.5 million print copies of
Commission publications were distributed in response to requests from the public. To
complement its online FTC ConsumerLine (www.ftc.gov), the Commission developed the
online FTC BusinessLine (www.ftc.gov) to disseminate business information. An additional
609,000 copies of publications were accessed through these two Web sites. The Office
continued to produce new information products, including postcards and FTC Briefs - a
collection of tips that address specific consumer issues.

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Economic Analysis

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Economic Analysis
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The Bureau of Economics provides economic support to the Commission's antitrust and
consumer protection activities, advises the Commission and other government entities about
the impact on consumers and competition of various regulatory reform initiatives, and
analyzes economic phenomena in the Nation's industrial economy as they relate to antitrust
and consumer protection.
The primary mission of the Commission is to enforce the antitrust and consumer protection
laws. In fiscal year 1997, the Bureau continued to provide guidance and support to those
activities.
In the antitrust area, economists offered advice on the economic merits of potential antitrust
actions. Situations in which the marketplace performed reasonably well were distinguished
from situations in which the market might be improved by Commission action. When
enforcement actions were initiated, economists worked to integrate economic analysis into
the proceeding, to provide expert testimony, and to devise remedies that would improve
market competition.
In the consumer protection area, economists assessed the benefits and costs of alternative
policy approaches. Potential consumer protection actions were evaluated not only for their
immediate impact, but also for their longer-run effects on price, product variety, and overall
consumer welfare.
Although the Commission is primarily an enforcement agency, it is also charged with
analyzing data and publishing information about the Nation's industries, markets, and
business firms. Much of this work is undertaken by the Bureau of Economics. In fiscal year
1997, economists conducted studies on selected topics in antitrust and consumer protection.
The Bureau of Economics also coordinated the Commission's Consumer and Competition
Advocacy Program, which the agency uses to provide advice to federal, state, and other
regulatory entities concerning the actual or potential economic impacts of existing and
proposed trade regulations.
Antitrust
In the antitrust area, economists participated in all investigations of alleged antitrust
violations and in the presentation of cases in support of complaints. Economists also advised
the Commission on all proposed antitrust actions and provided economic expertise for
matters in litigation. These activities consumed the bulk of the Bureau's resources assigned
to directly support the Commission's antitrust responsibilities.
The Bureau also maintains a small research program in support of the Commission's
antitrust activities. Ongoing antitrust-related studies included (1) a study of the price and
output effects of brand ownership consolidation and vertical integration in local markets for
carbonated soft drink bottling, (2) a descriptive study of the pharmaceutical industry, (3) an

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Management and Administration

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Management and Administration
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Budget and Finance
The Division of Budget and Finance managed the Commission's financial services. Its
ongoing activities included maintaining a general ledger accounting system; ensuring that
effective financial policies and procedures were developed and maintained to support
mission operations and to take full advantage of available technologies; issuing accurate and
timely financial reports to program offices, the Department of the Treasury, and the Office
of Management and Budget; and providing oversight of services received from the
Administrative Service Center. The Division also carried out Commission-wide
management programs for audit follow-up and reviewed and reported on internal controls.
The Division planned and carried out the fiscal year 1997 budget, supported the fiscal year
1998 budget request through Congress, and developed the fiscal year 1999 budget request.
Personnel
In fiscal year 1997, the Division of Personnel coordinated an array of human resources
management activities that included recruitment, position classifications, performance
management, benefits, employee relations, labor relations, and training. During the course of
the year, the Division worked with the various Bureaus and Offices to fill the positions
vacated by employees taking advantage of the "early out" retirement authority. The Division
continued its work with the agency's Partnership Council by facilitating training sessions
with the Secretarial Forum. The Division also was active in assisting managers to improve
the performance of their workforce by arranging a variety of coaching/mentoring services.
The Division also continued to make enhancements to report formats generated by the
Department of the Interior Payroll Personnel System, to make them more user-friendly for
Commission staff. Planning was started during the later part of fiscal year 1997 for a
conversion to an updated version of the system.
Procurement and General Services
In addition to providing the day-to-day administrative support to the Commission, the
Division of Procurement and General Services completed several significant initiatives
during fiscal year 1997. These accomplishments included major contract awards for the
following:
Personal computers,
Services of experts,
Administrative support services for Federal Trade Commission advisors working with
the Ukrainian Government.
The Division submitted reports to the Federal Procurement Data Center and the Small
Business Administration describing goals and accomplishments in the procurement area for
the year. The Division also administered the Commission's credit card purchase program.

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APPENDIX

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APPENDIX
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This appendix includes summaries of the Commission's law enforcement, rulemaking,
education, and advocacy activities for fiscal year 1997.
Law Enforcement
Commission law enforcement actions may be triggered by letters from consumers or
businesses, Congressional inquiries, referrals from federal/state/local officials, or public
information on consumer, business, or economic subjects.
If the Commission believes a violation of the law occurred, it may obtain voluntary
compliance by entering into a Part 2 administrative consent order with a company or
individual respondent. A company or individual signing a consent order need not admit a
violation of the law, but must agree to stop the injurious practices.
If voluntary compliance is not reached, the Commission may issue an Part 3 administrative
complaint. This results in a formal proceeding, much like a court trial, held before an
Administrative Law Judge (ALJ), at which evidence is submitted, testimony is heard, and
witnesses are examined and cross-examined. If a respondent decides to settle the charges
against it, it may enter into a Part 3 consent order and end the proceeding. If the proceeding
continues to completion, the ALJ issues an initial decision and the case moves to the
Commission for final disposition. If the Commission ultimately finds a law violation, it may
issue a cease-and-desist order or other appropriate relief. These final orders issued by the
Commission may be appealed by respondents to a U.S. Court of Appeals (and, ultimately, to
the U.S. Supreme Court).
In cases involving ongoing consumer fraud, the Commission may file a complaint in federal
district court. The court can then order the defendants to immediately stop the practices cited
in the complaint, and freeze their assets before further consumer injury occurs. In these
cases, the Commission seeks consumer redress, or refunds for consumers who have been
injured, and/or a permanent injunction barring the practices in the future.
In addition, when a company or individual violates a Commission Trade Regulation Rule, a
statute enforced by the Commission, or a prior Commission order, a complaint may be filed
in federal district court seeking civil penalties and an injunction against future violations.
Rulemaking
The Commission also issues Trade Regulation Rules and industry guides. The Commission
may begin a rulemaking proceeding if it finds evidence of unfair or deceptive practices in an
entire industry. Throughout the proceeding, the public has opportunities to attend hearings
and file written comments, which the Commission considers along with the entire
rulemaking record - the hearing testimony, staff reports, and the presiding officer's report before making a decision on the proposed rule. A Commission rule may be challenged in
any of the U.S. Courts of Appeals. When issued, the rules have the force of law. The

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03/15/99 18:22:38

Competition Mission - Part 2 Consent Orders Issued

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Competition Mission

Part 2 Consent Orders Issued
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Title
Number Action Date Type of Matter
Product/Service
American Cyanamid Company C3739 5/12/97 Vertical Price Fixing Agricultural Chemicals
American Home Products
C3740 5/16/97 Horizontal Merger Canine and Feline Vaccines
Corporation
Autodesk, Inc.

C3756

6/18/97

Horizontal Merger

Baxter International Inc.

C3726

3/24/97

Horizontal Merger

Computer-Aided Design Software
Engines
Blood Plasma Products

Boeing Company, The
C3723
Cadence Design Systems, Inc. C3761

3/05/97
8/11/97

Horizontal Merger
Horizontal Merger

Defense and Space Vehicles
"Routing" Software for Integrated Circuits

Ciba-Geigy Limited

3/28/97

Horizontal Merger

Research and Development in Gene
Therapy Treatments,

C3728

Class Rings, Inc.
Cooperative Computing, Inc.

C3701
C3757

12/20/96 Horizontal Merger
6/20/97 Horizontal Merger

Corn Herbicides, Flea-Control Products
Commemorative Class Rings
Electronic Automotive Parts Catalogs

CVS Corporation
Dwight's EnergyData, Inc.

C3762
C3759

8/13/97
7/28/97

Drug Stores
Gas and Oil Production Data

Fresenius AG
General Mills, Inc.

C3689
C3742

10/15/96 Horizontal Merger
5/16/97 Horizontal Merger

Hemodialysis Concentrate
Ready-to-Eat Cereals

Hale Products, Inc.
J.C. Penney Company, Inc.

C3694
C3721

11/25/96 Exclusive Dealing
2/28/97 Horizontal Merger

Fire Truck Pumps
Drug Stores

6/04/97
1/13/97

Diesel Engine Pistons
Physician Services

Natural Gas Transportation
Inpatient Hospital Services

Horizontal Merger
Horizontal Merger

C3722
Mahle GmbH
Montana Associated
Physicians, Inc.
NGC Corporation

C3746
C3704
C3697

Horizontal Merger
Horizontal
Restraints
12/12/96 Horizontal Merger

Phillips Petroleum Company
Tenet Healthcare Corporation

C3728
C3743

3/28/97
5/20/97

Time Warner Inc.
Waterous Company, Inc.

C3709
C3693

2/03/97 Horizontal Merger
11/22/96 Exclusive Dealing

Cable Television
Fire Truck Pumps

Wesley-Jessen Corporation

C3700

1/03/97

Contact Lenses

Horizontal Merger
Horizontal Merger

Horizontal Merger

Natural Gas Fractionation

American Cyanamid Company
American Cyanamid agreed to settle allegations that it had fixed the resale prices of its agricultural
chemical products, violating the federal antitrust laws. According to the complaint issued with the
consent order, American Cyanamid allegedly entered into agreements with its retail dealers offering
substantial rebates if the dealers sold its chemicals at or above specific prices. The consent order
prohibits American Cyanamid from entering into agreements that control prices and from conditioning
the payment of rebates or other incentives on the resale prices its dealers charge for its products.

American Home Products Corporation
American Home Products agreed to settle charges that its $463 million acquisition of the animal
health business of Solvay, S.A., would create a monopoly in the market for canine Lyme disease

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Part 3 Administrative Complaints

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Competition Mission

Part 3 Administrative Complaints
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Title
Automatic Data Processing, Inc.
Blodgett Memorial Medical Center

Number Action Date Type of Matter
Product/Service
D9282 11/13/96 Horizontal Merger Automotive Salvage Yard
Information Systems
D9283 11/18/96 Horizontal Merger Inpatient Hospital Services

Butterworth Health Corporation
Mesa County Physicians Independent
Practice Association, Inc.

D9284

5/12/97

Horizontal
Restraints

Physician Services

Automatic Data Processing, Inc.
The Commission issued an administrative complaint alleging that the 1995 acquisition by Automatic
Data Processing (ADP) of AutoInfo, Inc., assets created a monopoly that raised prices and reduced
the quality of service in information management for the automobile salvage yard industry. The
complaint alleged that through the acquisition, ADP intended to acquire monopoly power and raise
prices by making ADP the sole auto parts inventory exchange. Under the terms of a consent
agreement accepted for public comment, ADP will be required to divest the AutoInfo assets within
150 days to a Commission-approved acquirer.

Blodgett Memorial Medical Center; Butterworth Health Corporation
The Commission issued an administrative complaint that challenged the proposed merger of
Butterworth and Blodgett hospitals in Grand Rapids, Michigan. The complaint charged that the
merger would substantially reduce competition for acute-care inpatient hospital services in the Grand
Rapids area. The Commission ended its litigation after the federal district court's decision to deny the
Commission's motion for a preliminary injunction was upheld by the U.S. Court of Appeals for the
Sixth Circuit. The case was dismissed under the agency's 1995 policy to determine on a case-by-case
basis whether to pursue administrative litigation in merger cases after a federal court has declined to
bar the companies from merging pending the outcome of an administrative trial (see Blodgett
Memorial Medical Center, page 52).

Mesa County Physicians Independent Practice Association, Inc.
The Commission issued an administrative complaint alleging that the Mesa County Physicians
Independent Practice Association, Inc., conspired to fix the prices for physician services and
encouraged its member physicians not to deal with certain health insurance companies or other
third-party payers.

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Initial Decision

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Competition Mission

Initial Decision
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Title
Toys "R" Us

Number
D9278

Action Date
9/30/97

Type of Matter
Horizontal Restraints, Vertical
Restraints

Product/Service
Toys

Toys "R" Us
An Administrative Law Judge issued an initial decision that would prohibit Toys "R" Us from
entering into agreements with toy manufacturers that result in restrictions on sales to warehouse clubs.
The Judge found that Toys "R" Us enforced agreements with toy manufacturers that sought to
increase the costs of warehouse clubs. Toys "R" Us threatened to stop buying products that were sold
to warehouse clubs, which resulted in major toy makers' halting the sale of certain products to clubs.
The Judge found that these actions reduced competition and led to higher toy prices. The Judge's order
would prohibit the toy chain from entering into any agreement with a supplier to restrict sales to any
toy discounter, from facilitating agreements among suppliers that would limit sales to any retailer, and
for five years, from refusing to or announcing it will refuse to purchase from a supplier because the
supplier sells to a toy discounter. The initial decision is currently on appeal to the Commission.

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Final Orders

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Competition Mission

Final Orders
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Title
Blodgett Memorial Medical Center

Number Action Date Type of Matter
D9283 9/26/97 Horizontal Merger

Butterworth Health Corporation
International Association of
Conference Interpreters

D9270

3/14/97

Product/Service
Inpatient Hospital Services

Horizontal Restraints Language Interpretation and
Translation

Blodgett Memorial Medical Center; Butterworth Health Corporation
The Commission ended its administrative challenge of the proposed merger of Butterworth and
Blodgett, two acute-care inpatient hospitals in the Grand Rapids, Michigan, area, with a final order
concluding that further litigation in the case was not in the public interest. The administrative
complaint (see page 48) was dismissed under a 1995 policy statement in which the Commission
determines on a case-by-case basis whether to pursue administrative litigation in merger cases, after a
federal district court declined to bar the companies from merging pending the outcome of an
administrative trial. The hospitals merged in 1997.

International Association of Conference Interpreters
The Commission's decision and order prohibits the International Association of Conference
Interpreters and its U.S. affiliate members from entering into agreements that fix or suggest fees for
the provision of interpretation, translation, or language services performed within the United States.
The final order requires the Association to amend its rules and bylaws to conform to the
Commission's order and further requires the elimination of Association rules regarding, among other
things, fees, travel expenses, pro bono work, and commissions.

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Injunctions

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Competition Mission

Injunctions
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Title
Mediq Incorporated

Number Action Date
Type of Matter
971 0066
7/29/97 Horizontal Merger

Product/Service
Medical Equipment Rentals

Universal Hospital Services, Inc.
Staples, Inc.

971 0008

Office Supplies

6/30/97

Horizontal Merger

Office Depot, Inc.

Mediq Incorporated; Universal Hospital Services, Inc.
Mediq abandoned its proposed $100 million acquisition of Universal after the Commission filed a
complaint and motion for a preliminary injunction to block the merger of the Nation's two largest
firms engaged in the rental to hospitals of movable medical equipment, such as respiratory, infusion,
and monitoring devices. The complaint, filed in the U.S. District Court for the District of Columbia,
alleged that the merger would create a monopoly that would raise the rental prices of movable
medical equipment rental in many major metropolitan areas across the Nation.

Staples, Inc.; Office Depot, Inc.
Staples abandoned plans to acquire Office Depot after the Commission won a preliminary injunction
against the merger in the U.S. District Court for the District of Columbia. The complaint alleged that
the merger of two of the three largest office supply superstores in the country would have allowed the
combined firm to control prices for the sale of office supplies in over 40 major metropolitan areas
throughout the United States. The Commission argued that the merger would violate federal antitrust
laws by substantially reducing competition in the sale of office supplies by superstores in various
local markets throughout the country where each firm directly competes against the other.

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03/15/99 18:27:34

Civil Penalty Actions

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Competition Mission

Civil Penalty Actions
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Title
Figgie International Inc.
Mahle GmbH
Red Apple Companies, Inc.
Schnuck Markets, Inc.

Number Action Date
Type of Matter
Product/Service
941 0027 2/14/97 Premerger Notification Consumer and Industrial Products
961 0085 6/23/97 Premerger Notification Diesel Engine Pistons
D9266
C3585

2/23/97
7/28/97

Order Violation
Order Violation

Grocery Stores
Grocery Stores

Figgie International Inc.; Harry E. Figgie, Jr.
Figgie International and its former chairman and chief executive officer, Harry E. Figgie, Jr., agreed
to pay a $150,000 civil penalty to settle allegations that they failed to notify federal antitrust
enforcement agencies before Mr. Figgie acquired restricted voting stock in Figgie International. The
complaint alleged that Mr. Figgie failed to comply with the reporting provisions and waiting period
requirements under the Hart-Scott-Rodino Act. The complaint further alleged that Mr. Figgie was
required to file notification before he increased his holdings to over 15% of the outstanding voting
securities of Figgie International.

Mahle GmbH; Metal Leve, S.A.
Mahle, a German corporation, agreed to pay a record $5.6 million civil penalty to settle allegations
that it failed to notify the two federal antitrust agencies of its acquisition of a controlling interest in
Metal Leve, a Brazilian competitor engaged in the manufacture of diesel engine parts, including
pistons. According to the complaint filed in the U.S. District Court for the District of Columbia by the
Commission, Mahle acquired 50.1% of the voting securities of Metal Leve for approximately
$40 million, without first filing notification with the Commission and the Department of Justice and
observing the required waiting period, in violation of the Hart-Scott-Rodino Act. A separate consent
order with Mahle settled allegations that the acquisition could create a monopoly in the market for
articulated pistons. (See Mahle GmbH, page 45.)

Red Apple Companies, Inc.; Sloan's Supermarkets, Inc.; Supermarket Acquisition
Corporation; John Catsimatidis
Red Apple, its chairman John Catsimatidis, and two affiliated supermarket operators, Sloan's and
Supermarket Acquisition, agreed to pay a $600,000 civil penalty for failure to divest five Manhattan
supermarkets, as required by order of the Commission, by March 1996. The complaint and consent
judgment were filed in the U.S. District Court for the Southern District of New York. The civil
penalty was paid to the Department of the Treasury.

Schnuck Markets, Inc.
Schnuck Markets agreed to pay a $3 million civil penalty to settle allegations that the supermarket
chain allowed numerous stores, designated for divestiture under a 1995 Commission consent order, to
deteriorate before being sold. Under terms of the proposed settlement, Schnuck will be required to
divest two closed supermarkets in the St. Louis area within six months to a Commission-approved
acquirer. The complaint and proposed stipulations were filed in U.S. District Court for the Eastern
District of Missouri.

< Back | Table of Contents | Next >

1 of 1

03/15/99 18:28:12

Order Modifications

http://www.ftc.gov/os/ar97/bcmods.htm

Competition Mission

Order Modifications
< Back | Table of Contents | Next >

Title
Columbia/HCA Healthcare
Corporation
Commemorative Brands, Inc.

Number Action Date
Type of Matter
C3619 7/14/97 Horizontal Merger

Product/Service
Inpatient Hospital Services

C3701

7/21/97

Commemorative Rings

Compagnie de Saint-Gobain

C3673

11/19/96 Horizontal Merger

Del Monte Foods Company

C3569

10/31/96 Horizontal Merger

Refractories and Hot Surface
Igniters
Canned Fruit

Geon Company, The
HealthSouth Corporation

D9159
C3570

12/12/96 Horizontal Merger
10/01/96 Horizontal Merger

Chemicals
Rehabilitation Hospital Facilities

(Home Oxygen and Medical
Equipment Company)

C3530

10/01/96 Single-Firm Violation In-Home Oxygen

John E. Sailer, M.D.
Oerlikon-Burhle Holding AG

C3555

9/09/97

Onkyo U.S.A. Corporation

C3092

10/24/96 Distributional
Restraints

Horizontal Merger

Turbomolecular Pumps, Compact
Disc Metallizers
Audio Components

Penn Traffic Company, The
C3577
Schwegmann Giant Super Markets, C3584
Inc.

1/10/97
2/24/97

Horizontal Merger
Horizontal Merger

Supermarkets
Supermarkets

Stop & Shop Companies, Inc., The

6/20/97

Horizontal Merger

Supermarkets

C3649

company name shown in parentheses is for identification of the case only.

Order Modifications
Columbia/HCA Healthcare Corporation
The Commission granted the petition of Columbia/HCA to modify a 1995 consent order that settled
antitrust concerns stemming from the acquisition of Healthtrust, Inc. - The Hospital Company. The
consent order was modified ending Columbia/HCA's obligation to divest a commercial lease for
office space, which Columbia had mistakenly represented to the Commission was part of its Pioneer
Valley Hospital assets in West Valley City, Utah.

Commemorative Brands, Inc. (formerly Class Rings, Inc.); Castle Harlan Partners II,
L.P.
The Commission granted the petition of Commemorative Brands to set aside a provision barring it
from employing any person employed during 1996 by Gold Lance, Inc., or Town & Country
Corporation, competitors in the market for the manufacture and distribution of commemorative class
rings purchased by high school and college students. The 1997 consent order settled allegations that
the proposed merger of Class Rings, Town & Country, and Castle Harlan would have increased the
likelihood of coordinated interaction and led to higher prices in the market; however, the market
conditions for that order changed after the order was made final. Gold Lance, formerly owned by
Town & Country, was sold to Jostens, Inc. Keeping the order provision would have had the
unintended effect of precluding Commemorative Brands from competing against Gold Lance's new
owner for experienced, skilled employees.

1 of 3

03/15/99 18:28:58

Staff Advisory Opinions

http://www.ftc.gov/os/ar97/bcadops.htm

Competition Mission

Staff Advisory Opinions
< Back | Table of Contents | Next >

Business Health Companies, Inc.
Commission staff advised Business Health that a planned survey of hospital prices in Texas appeared
to fall within the safety zone for exchanges of price and cost information outlined in the 1996
Healthcare Guidelines issued by the Commission and the Department of Justice. Business Health was
retained by the Central Texas Healthcare Coalition to collect and analyze data on average charges and
patient outcomes of the two major Waco hospitals and three other Texas hospitals.

Direct Marketing Association
The Commission staff advised the Direct Marketing Association that it could require its members to
(1) honor requests from consumers that direct marketers (direct mail marketers or telemarketers) not
contact them, (2) disclose to consumers how their members sell or otherwise transfer personal
information about those consumers to others, and (3) honor consumers' requests that the members not
sell or transfer their personal information.

First Look, LLC
Commission staff advised First Look that the staff would not recommend a challenge on antitrust
grounds to a proposed network of optical firms that First Look organized. The network would respond
to requests for proposals for employer contracts for optical and vision care services for individuals
living in an area larger than that served by any one provider.

Foundation for the Accreditation of Hematopoietic Cell Therapy
Commission staff advised the Foundation for the Accreditation of Hematopoietic Cell Therapy that
the staff would not recommend a challenge to a proposal to establish a program of standards,
inspection, and voluntary accreditation of entities involved in medical or laboratory practice related to
hematopoietic progenitor cell therapy. Hematopoietic progenitor cell therapy refers generally to the
infusion into a patient of blood-forming stem cells for the treatment of leukemia, certain other
cancers, and other blood disorders. The Foundation developed standards for facilities and individuals
performing such therapy or providing support services for the procedures and will implement an
accreditation program incorporating on-site inspections.

Henry County Memorial Hospital
Commission staff advised Henry County Memorial Hospital that the hospital's purchase of drugs for
resale to patients in a physician hospital organization (PHO) would not qualify as "own use" under the
Non-Profit Institutions Act. The Act exempts from the Robinson-Patman Act "purchases of their
supplies for their own use by . . . hospitals, and charitable institutions not operated for profit."

Mobile Health Resources, LLC
Commission staff advised Mobile Health Resources that the staff would not recommend a challenge
to a proposal to establish a network of seven ambulance companies that would provide medically
related transportation services in Michigan to health care plans, health maintenance organizations, and
other large purchasers. The network proposed to enter into contracts involving significant economic
and functional integration among participating providers in the network.

New Jersey Pharmacists Association
Commission staff advised the New Jersey Pharmacists Association that the staff would not
recommend a challenge on antitrust grounds to a proposed pharmacist network offering health
education and monitoring services to diabetes and asthma patients. These services would be marketed
to insurance companies, health maintenance organizations, managed care organizations, pharmacy

1 of 2

03/15/99 18:30:02

Part 2 Consent Orders Issued

http://www.ftc.gov/os/ar97/bcppart2.htm

Consumer Protection Mission

Part 2 Consent Orders Issued
< Back | Table of Contents | Next >

Title

1 of 11

Number

1554 Corporation
2943174 Canada, Inc.

C3733
C3748

Action
Date
4/14/97
6/16/97

AAF-McQuay, Inc.

C3703

1/06/97

Filtration Manufacturing, Inc.
Abbott Laboratories, Inc.

C3702
C3745

1/06/97
5/30/97

Abflex, U.S.A., Inc.

C3771

9/18/97

Kent & Spiegel Direct, Inc.

C3769

9/18/97

Administrative Company, The C3731

4/14/97

Pre-Paid Legal Services, Inc.
Aldi Inc.

C3729
C3764

4/04/97
9/05/97

Amerifit, Inc.

C3747

6/16/97

Apple Computer, Inc.

C3763

8/18/97

BodyWell, Inc.

C3754

6/16/97

Bruno's, Inc.
Budget Marketing, Inc.
California SunCare, Inc.

Type of Matter

Product/Service

Unsubstantiated Earnings Claims
Unsubstantiated Health and
Weight-Loss Benefit Claims

Work-at-Home Course
Weight-Loss Patch

Unsubstantiated Health Benefits
and Performance Claims

Home Furnace Filters

Unsubstantiated Health Benefit
Claims

Dietary Supplement

Unsubstantiated Weight-Loss
Claims

Abdominal Exerciser

Unsubstantiated Statements and
Benefits of Legal Services

Living Trusts

Fair Credit Reporting Act

Employment Applications

Unsubstantiated Health and
Weight-Loss Benefit Claims
Misrepresented Performance

Dietary Supplements
Personal Computers
Shoe Insoles

C3760
C3698

Unsubstantiated Weight-Loss
Claims; Mail or Telephone Order
Merchandise Rule
7/29/97 Fair Credit Reporting Act
12/13/96 Electronic Funds Transfer Act

C3715

2/11/97

Tanning Products

Computer Business Services, C3705
Inc.
C3727
Jeanette L. Douglass

1/21/97

Unsubstantiated Health Benefit
Claims
Misrepresented Earnings Claims

Comtrad Industries, Inc.

C3719

2/25/97

Conopco, Inc.

C3706

1/23/97

Thermo-Electric Food
Cooler/Warmer
Margarine

Dean Distributors, Inc.

C3755

6/16/97

Unsubstantiated Safety and
Effectiveness Claims
Unsubstantiated Health Benefit
Claims
Multi-Level Marketing Distribution

Efficient Labs, Inc.

C3768

9/12/97

Dietary Supplement

General Motors Corporation

C3710

2/06/97

Unsubstantiated Health Benefit
Claims
Inadequate Disclosure of Terms

Employment Applications
Magazine Subscription
Telemarketing

Work-at-Home Business
Opportunity

3/24/97

Weight-Loss Diet
Programs

Automobile Credit Sales

03/15/99 18:31:18

Part 3 Administrative Complaint

http://www.ftc.gov/os/ar97/bcppart3admin.htm

Consumer Protection Mission

Part 3 Administrative Complaint
< Back | Table of Contents | Next >

Title
R.J. Reynolds Tobacco
Company

Number Action Date
Type of Matter
D9285 5/28/97 Advertising Campaign Involving Cartoon
Character

Product/Service
Cigarettes

R.J. Reynolds Tobacco Company
In an administrative complaint, the Commission alleged that the advertising campaign for Camel
cigarettes featuring the cartoon character Joe Camel violated federal law. The purpose of the
campaign, according to the Commission, was to reposition the Camel brand to make it attractive to
younger smokers. The campaign allegedly induced many underage consumers to begin or to continue
smoking cigarettes and as a result caused significant injury to their health and safety. The agency
sought an order that would bar R.J. Reynolds from using the Joe Camel campaign and would require
the company to conduct a public education campaign discouraging young people from smoking. In
July 1997, R.J. Reynolds announced the termination of its Joe Camel advertising campaign.

< Back | Table of Contents | Next >

1 of 1

03/15/99 18:32:04

Part 3 Consent Orders Issued

http://www.ftc.gov/os/ar97/bcppart3consent.htm

Consumer Protection Mission

Part 3 Consent Orders Issued
< Back | Table of Contents | Next >

Title1
Exxon Corporation

Number Action Date

Type of Matter

D9281

9/12/97

New Balance Athletic
Shoe, Inc.
(RustEvader
Corporation)

D9268

12/02/96 Country-of-Origin Labeling

D9274

10/30/96 False and Unsubstantiated Efficacy Automobile Electronic
and Performance Claims
Corrosion-Control Device

Unsubstantiated Performance
Claims

Product/Service
Gasoline
Athletic Footwear

David F. McCready
1A company name shown in parentheses is for identification of the case only. The company is not a respondent in the item shown in the
table.

Exxon Corporation
The Commission approved a consent order with Exxon, the largest oil company in the United States,
that triggered the launch of a massive consumer education and advertising campaign informing
consumers that regular gasoline, not the more expensive high octane, is the right fuel for most cars.
Exxon is running television advertisements in 18 major metropolitan markets and distributing
consumer information brochures at its service stations nationwide. The order settled allegations that
the company made unsubstantiated and misleading advertising claims about the ability of its
high-octane gasoline to clean engines and reduce automobile maintenance costs. The order also
prohibits Exxon from making similar claims without adequate scientific evidence to back them up.

New Balance Athletic Shoe, Inc.
New Balance settled allegations that it misrepresented that all of its athletic footwear is made in the
United States when a substantial amount is made wholly abroad. In addition, New Balance allegedly
misrepresented the quantity of footwear it exports to Japan annually. The consent order prohibits the
company from such misrepresentations in the future.
(RustEvader Corporation)

David F. McCready
The Commission finalized a consent order with David McCready, former president of RustEvader and
inventor of a purported electronic corrosion-control device for motor vehicles, settling allegations that
he made false claims about the effectiveness of the device, used a deceptive demonstration, and
illegally conditioned warranty coverage on inspections by an authorized RustEvader dealer. The order
requires McCready to pay $200,000 for redress to consumers. It bars him from using the names "Rust
Evader" or "Rust Buster" for this or similar devices, from misrepresenting performance or test results,
and from conditioning warranty coverage on the purchase of certain brand-named or trade-named
products or services. The order also requires him to have substantiation to back up performance or
efficacy claims about any product for use in motor vehicles. (Also see RustEvader Corporation, page
89.)

< Back | Table of Contents | Next >

1 of 1

03/15/99 18:33:17

Initial Decisions

http://www.ftc.gov/os/ar97/bcpid.htm

Consumer Protection Mission

Initial Decisions
< Back | Table of Contents | Next >

Title
Automotive Breakthrough
Sciences, Inc.
Brake Guard Products, Inc.

Number Action Date
Type of Matter
D9275 3/03/97 False and Unsubstantiated
Performance Claims
D9277 5/02/97 False and Unsubstantiated
Performance Claims

Product/Service
Automotive Braking
System
Automotive Braking
System

Automotive Breakthrough Sciences, Inc.; ABS Tech Sciences, Inc.; ichard Schops
In an initial decision, an Administrative Law Judge found that the add-on vehicle braking system
marketed by Automotive Breakthrough and ABS Tech Sciences does not function like a
factory-installed antilock braking system (ABS), as claimed. The order prohibits the respondents, who
include the CEO of Automotive Breakthrough, from using the initials or term "ABS" in the name of
their product and from representing that the product is an ABS system or that it prevents wheel
lockup, skidding, or loss of steering control in emergency situations. The order requires the
respondents to notify distributors and purchasers of the system that the Commission has found that the
respondents' claims are false. It also requires the respondents to have substantiation for future claims
about any braking system they offer.

Brake Guard Products, Inc.; Ed F. Jones
An Administrative Law Judge found that advertisements for the Brake Guard add-on braking system
were false in claiming that it performed as effectively as factory-installed antilock braking systems
(ABS) and barred the respondents from using the term "ABS" in marketing their brakes. The order
prohibits Brake Guard and Ed Jones, its director, from misrepresenting their braking system's
performance characteristics, eligibility for insurance discounts, and compliance with government
standards. The respondents were also ordered to notify all distributors and purchasers that the
Commission has found that the ads and promotional materials stating that Brake Guard was an
antilocking braking system with the safety and economy advantages of factory-installed ABS brakes
are false and misleading.

< Back | Table of Contents | Next >

1 of 1

03/15/99 18:33:54

Final Orders

http://www.ftc.gov/os/ar97/bcpfinal.htm

Consumer Protection Mission

Final Orders
< Back | Table of Contents | Next >

Title
Number Action Date
Type of Matter
Product/Service
BST Enterprises, Inc. D9276 5/30/97 Misrepresented and Unsubstantiated
Automotive Braking System
Performance Claims
RustEvader
D9274 11/01/96 False and Unsubstantiated Efficacy and Automotive Rust- Control
Corporation
Performance Claims
Product

BST Enterprises, Inc.; Michael Woodruff
The Commission issued an order making final an initial decision by an Administrative Law Judge in
regard to BST and corporation officer Michael Woodruff. According to the Judge, advertisements
claiming that BST's add-on vehicle braking system is an antilock braking system (ABS) that protects
against wheel lockup were deceptive and misleading. The decision upheld the Commission's
complaint against BST that the add-on devices promoted as genuine ABS are, in fact, substantially
different in design and operation from true factory-installed ABS and do not prevent or substantially
reduce wheel lockup and skidding. The order bars BST and its president from using the term "ABS"
in connection with their retrofitted brakes and from making false or unsubstantiated claims about the
performance, benefits, or safety of the brakes.

RustEvader Corporation (a/k/a Rust Evader Corporation, d/b/a Rec Technologies)
The Commission issued an order making final an initial decision by an Administrative Law Judge in
regard to RustEvader. The initial decision prohibited RustEvader from using the names "Rust Evader"
or "Rust Buster" for a purported electronic corrosion-control device for automobiles that the Judge
said is not effective in substantially reducing corrosion, despite the company's advertising campaign
to the contrary. The Commission alleged that RustEvader made false claims about this product and
about a demonstration and studies regarding its efficacy. The final order prohibits RustEvader from
using the two brand names; misrepresenting the performance, efficacy, or attributes of any automotive
product; and conditioning warranty coverage on the purchase of certain brand-named or trade-named
products or services. The former president of the company is also required to pay consumer redress
(see RustEvader Corporation, page 87).

< Back | Table of Contents | Next >

1 of 1

03/15/99 18:34:37

Permanent Injunctions

http://www.ftc.gov/os/ar97/bcpinjunc.htm

Consumer Protection Mission

Permanent Injunctions
< Back | Table of Contents | Next >

Title1
Ad-Com International, Inc.

Number Action Date
X960041

Type of Matter

10/01/96 Franchise Rule,

Product/Service
900-Number Business
Venture

900-Number Rule
Alliance Communications, Inc.

X960124

11/06/96 Investment Fraud

Mobile Radio and Paging
License Services

Carousel of Toys USA, Inc.

X970070

9/29/97

Display Rack Business
Opportunity
Office Supplies

Commercial Electrical Supply, Inc. X960097

Franchise Rule

11/22/96 Telemarketing Sales Rule

(Dean Thomas Corporation, Inc.,
The)

Deceptive Billing

Advertisements in
Charitable Publications

Raymond Celie
X970045

9/16/97

Delta Distributors Company, Inc.

X970045
X950102

9/16/97
11/17/96 Franchise Rule

(Direct Link, Inc.)

X960065

11/07/96 Job Placement Fraud

Pay Telephone Business
Opportunity
Employment Services

(Fortuna Alliance, LLC)

X960059

2/24/97

Internet Pyramid Scheme

Monique Delgado
(Genesis One Corporation, d/b/a
Bureau One)

X960038

11/19/96 Franchise Rule

900-Number Business
Venture

Georgia International Export Co., X970008
Inc., Andrew Gilmore
X970008
L&S Manufacturing, Inc.
X970008
Steven Axelrod
X970008
Arnold Filner
X970008
Wayne Gregory

8/06/97

Franchise Rule

Vending Machine Business
Opportunity

Ideal Concepts, Inc.
(Ideal Credit Referral Services
Ltd.)

2/10/97
4/24/97

Telemarketing Fraud
Telemarketing Sales Rule;
Advance-Fee Loan Fraud

Prize Promotion
Consumer Finance Loans

Job Placement Fraud

Employment Services

Randy B. Lonis

Suzanne Bannister
Investment Fraud

Rose Kistorian

X960002
X960063

8/06/97
8/06/97
8/06/97
8/06/97

David Wayne Panella
(Intelinet Data Services)
Patrick Donaghy

1 of 8

X960067

10/21/96

03/15/99 18:35:31

Civil Penalty Actions

http://www.ftc.gov/os/ar97/bcppenalty.htm

Consumer Protection Mission

Civil Penalty Actions
< Back | Table of Contents | Next >

Number Action Date

Type of Matter

Product/Service

Title1
Budget Marketing, Inc.

X890010

3/17/97

Electronic Funds Transfer Magazine Subscriptions
Act

Cabot Hosiery Mills, Inc.

X970035

3/31/97

Hawthorne Communications, Inc. X970024

1/28/97

Textile Fiber Products
Identification Act
Order Violation

Health Wave, Inc.

X950097

12/20/96 Franchise Rule

International Masters Publishers
Inc.
J.C. Penney Company, Inc.

X970055

6/10/97

X960110

10/08/96 Equal Credit Opportunity
Act

Retail Consumer Credit

Lifestyle Fascination, Inc.
Marketing Masters, Inc.

X970025
X970020

3/27/97 Order Violation
11/07/96 Funeral Rule

Catalog Products
Funeral Goods and Services

Mattel, Inc.

X970016

1/21/97

Toys

(Megatrend Telecommunications, X940016
Inc.)

9/04/97

Mail or Telephone Order
Merchandise Rule
Franchise Rule

Equal Credit Opportunity
Act

Consumer Loans

Order Violation

Socks
Home-Based Business
Opportunity
Vending Machine Business
Opportunity
Mail Order Informational Cards

Cordless Telephones

Alan D. Wittstein
Money Tree, Inc., The

X970026

2/14/97

National Marketing, Inc.

X950089

10/01/96 Franchise Rule

Nu Skin International, Inc.

X970073

8/11/97

O'Neill, Incorporated
T.C.A., Inc.

X960100
X950082

Wetsuits
Debt Collection

Tower Loan of Mississippi, Inc.

X970022

10/10/96 Order Violation
4/17/97 Fair Debt Collection
Practices Act
2/20/97 Order Violation

United Compucred Collections,
Inc.
Venus Enterprises, Inc.

X970053

4/16/97

Order Violation

Debt Collection

X970080

8/25/97

Care Labeling Rule

Women's Clothing

WestPoint-Stevens, Inc.

X970086

6/04/97

Textile Fiber Products
Identification Act

Sheets and Towels

Order Violation

Display Rack Business
Opportunity
Skin Care Products and
Nutritional Supplements

Consumer Loan and Finance
Services

1A company name shown in parentheses is for identification of the case only. The company is not a defendant in the item shown in the
table.

Budget Marketing, Inc (BMI).; Dale Branson (d/b/a Leisure Day Marketing); Charles
P. Donly (d/b/a Budget Renewal Service); Charles A. Eagle; Roy Golden (d/b/a
American Marketing Service); Dennis H. Gougion; John Harrison; Steven Johnson;
Dave Keown (d/b/a Publishers Marketing); Dale T. Lenard (d/b/a Mega-Magazine

1 of 5

03/15/99 18:36:13

Consumer Redress Actions

http://www.ftc.gov/os/ar97/bcpredress.htm

Consumer Protection Mission

Consumer Redress Actions
< Back | Table of Contents | Next >

American Business Supplies, Inc.
American Exchange Group, Inc.

Action
Type of Matter
Date
X960074 11/13/96 Telemarketing Sales Rule
X960080 3/13/97 Telemarketing Sales Rule

Todd Bishop

X960080

American Fortune 900, Inc.

X960011 11/18/96 Investment Fraud

Amstar Finance Corporation

X960055

Bell Connections, Inc.
Best Marketing, Inc.
Bureau 2000 International, Inc.

X960030 12/10/96 Investment Fraud
X960077 2/28/97 Prize-Promotion Fraud
X960042 10/01/96 Franchise Rule

Paging License Services
Specialty Merchandise
900-Number Business
Venture

Career Assistance Planning, Inc.

X960089

9/18/97

Scholarship Fraud

Scholarship Search
Services and Finance

Becky Burch Settles
Career Information Services, Inc.

X960089
X960058

2/24/97
3/20/97

Job Placement Fraud;

Employment Services

Title1,2

Number

Product/Service
Office Supplies
Magazine Subscription
Prize Promotion

3/19/97

3/04/97

Advance-Fee Loan Fraud

900-Number Telephone
Lines
Consumer Finance

900-Number Rule
Careers, Inc.
Christopher Ebere Nwaigwe

X960072 10/25/96 Job Placement Fraud
X960091 4/14/97 Scholarship Fraud

Udoka Maduka
David L. Amkraut

X960091
X970033

Diversified Marketing Service
Corporation
Empress Corporation

X960025 10/18/96 Telemarketing Sales Rule

4/14/97
1/21/97

Employment Services
Scholarship Search
Services and Finance

Immigration Services Fraud Green Card Lottery
Magazine Subscription
Sales
Magazine Subscription
Prize Promotion

X960008

2/15/97

Telemarketing Fraud

Falcon Crest Communications, Inc. X960016

7/01/97

Investment Fraud

Mobile Radio and Paging
Licensing Services

Republic Communications Corp.

2/07/97

Magazine Subscription
Prize Promotion
Internet Pyramid Scheme

Joseph Caridi

X960016

7/01/97

Joel H. Cohen

X960016

7/01/97

Jordan S. Drew

X960016

7/01/97

Gary Paperman

X960016

7/01/97

X960016
Family Publishers Clearing Center

1 of 17

X960090

7/16/97

Telemarketing Sales Rule

Fortuna Alliance, LLC

X960059

2/24/97

Investment Fraud

Genesis One Corporation, d/b/a
Bureau One

X960038 11/19/96 Franchise Rule

900-Number Business
Venture

03/15/99 18:37:59

Civil Contempt Actions

http://www.ftc.gov/os/ar97/bcpciv.htm

Consumer Protection Mission

Civil Contempt Actions
< Back | Table of Contents | Next >

Title
Clear Your Credit, Inc.
Digital Interactive
Associates, Inc.

Number Action Date
Type of Matter
X960101 3/25/97 Telemarketing Sales Rule; Fair
Credit Reporting Act
X950039 9/26/97 Telemarketing Fraud

Product/Service
Credit Repair
Interactive Video and Data
Service

Clear Your Credit, Inc.; Keith Berggren
The Commission obtained an agreement with Keith Berggren and the credit repair company through
which he did business, settling civil contempt of court charges for violating a 1996 consent order. The
Commission alleged that Berggren and the company continued to misrepresent that they could remove
negative information about bankruptcies and automobile repossessions from consumers' credit reports,
although the 1996 order included a permanent injunction against such deceptive credit repair claims.
The current order permanently bars the defendants from doing any business in connection with credit
improvement services. Berggren is also required to notify clients that they do not have to pay any
amounts still owed on contracts entered into after April 12, 1996.

Digital Interactive Associates, Inc.; Terry K. Vickery
The court granted the Commission's motion for civil contempt against two defendants in this
high-tech investment fraud case involving the telemarketing of interests in general partnerships. The
court found that the defendants had failed to send a disclosure document to prospective investors and
to advise them of the death of a managing partner, in violation of a preliminary injunction obtained by
the Commission. The court required the defendants to offer refunds, totaling up to $3.5 million, to
approximately 340 investors. The court also found that the defendants had discarded documents in
violation of the preliminary injunction. The ruling is on appeal to the Tenth Circuit Court of Appeals.

< Back | Table of Contents | Next >

1 of 1

03/15/99 18:38:42

Criminal Contempt Actions

http://www.ftc.gov/os/ar97/bcpcrim.htm

Consumer Protection Mission

Criminal Contempt Actions
< Back | Table of Contents | Next >

Title1
(Meridian Capital
Management, Inc.)

Number Action Date

Type of Matter

Product/Service

X950060

4/09/97

Telemarketing Fraud

Investment Scheme
"Recovery Room"

Jeffrey A. Jordan
(Metropolitan Communications X940024
Corp.)

9/08/97

Investment Fraud

Specialized Mobile Radio
Licenses

3/12/97

Misrepresented Training and
Potential Earnings

"Permanent Makeup"
Workshops

Joan Orth
(Perma-Derm Academy)

X900025

Ronald Dante, d/b/a
1A company name shown in parentheses is for identification of the case only. The company is not a defendant in the item shown in the
table.

(Meridian Capital Management, Inc.)

Jeffrey A. Jordan
A U.S. district court ordered Jeffrey Jordan to show cause why he should not be held in criminal
contempt pursuant to a petition charging him with violating a court-ordered asset freeze. The order
stemmed from a 1995 case in which the Commission alleged that Jordan was part of a fraudulent
telemarketing "recovery room," together with Meridian Capital Management, Inc., Advisory
Consultants, Inc., and other individuals. The court temporarily halted the allegedly deceptive business
practices and froze the defendants' assets to preserve them for consumer redress or disgorgement and
subsequently entered a default judgment against Jordan. The Commission alleged that Jordan
disobeyed the asset freeze provisions of the preliminary injunction by cashing certain checks and
selling personal property without holding and accounting for the checks or property. Jordan was
formally charged with the violations and entered a plea of not guilty. (Also see Meridian Capital
Management, Inc., pages 98 and 128.)
(Metropolitan Communications Corp.)

Joan Orth
Joan Orth, a defendant in a massive plan to sell Federal Communications Commission (FCC)
specialized mobile radio licenses as a "low-risk, high-return" investment, pled guilty in July 1997 to
violating a court-ordered asset freeze. The freeze was imposed as part of a settlement of allegations
that the FCC license sales and services were based on false and misleading claims. The Commission
alleged that Orth had transferred funds from her bank accounts and made other transfers in violation
of the temporary restraining order and preliminary injunction. (Also see Metropolitan
Communications Corp., page 128).
(Perma-Derm Academy; American Dermalogy Association)

Ronald Dante, d/b/a
Ronald Dante was ordered by a U.S. district court to show cause why he should not be held in
criminal contempt pursuant to a petition charging him with violating a permanent injunction. The
order stemmed from a 1990 case in which the Commission alleged that Dante, doing business under
two company names, misrepresented the training he provided at his "permanent makeup" workshops,
the value of the certificates awarded, and the potential earnings of trainees. In 1991, an order was
issued permanently barring Dante from making such misrepresentations and requiring him to make
certain disclosures in advertising permanent makeup classes. According to the Commission, Dante
violated the order by failing to make the required disclosures in connection with classes offered by

1 of 2

03/15/99 18:39:11

Consumer and Business Education

http://www.ftc.gov/os/ar97/bcpconed.htm

Consumer Protection Mission

Consumer and Business Education
< Back | Table of Contents | Next >

Publications and Other Products
The Office of Consumer and Business Education produced 99 new and revised publications:
88 for consumers, 10 for businesses, and 1 for nonprofit organizations. During fiscal year
1997, the Office distributed more than 5.5 million print copies of Commission publications
in response to requests from the public, including brochures sent to consumers with mailings
of redress checks as a result of settlements of cases. To complement its online FTC
ConsumerLine, the Office developed the FTC BusinessLine to disseminate business
information. An additional 609,000 publications were accessed through these two Web sites.
The Office continued to produce new information products including postcards and "FTC
Briefs" - topic-specific consumer tips. Its Partnership for Consumer Education has grown to
include the Metropolitan Atlanta Regional Transit Authority, Atlanta Gas Light, and others.
The Partnership provides consumer education campaigns against fraud, both telemarketing
and non-telemarketing fraud.
Outreach
To reach new audiences, the Office is working with the Commission's regional offices to
translate selected consumer publications into Spanish and other languages, as needed. It also
developed or repackaged materials for special audiences. For example, Getting Back in the
Black - produced with the Chicago regional office, the Consumer Credit Counseling Service
of Greater Chicago, and the Better Business Bureau - is designed to help indebted
consumers become solvent. The Office also worked with the Washington, D.C., Fraud Task
Force to produce and distribute a Consumer Alert - Thinking About a Home Improvement?
Don't Get Nailed - to warn D.C. residents about unscrupulous home improvement
contractors. The Alert was distributed through the local Meals-On-Wheels program and
more than 550 District churches and senior centers.
During the three-day national Public Service Recognition Week event on the Mall with 60
other federal agencies, Office staff met the public and distributed more than 10,000
consumer brochures. In another outreach effort, the Office teamed up with the American
Society of Travel Agents to distribute consumer education materials during the three-day
D.C. Travel Fest.
The Office also continued its education effort to combat scholarship scams. Since 1996,
nearly one million flyers, bookmarks, and posters have been distributed to counselors,
students, parents, and college bookstores throughout the country. The project's specialized
Web site has received tens of thousands of hits. In June 1997, two million bookmarks were
printed and distributed through the 3,000 member stores of the National Association of
College Stores. In addition, the College Board is distributing 40,000 bookmarks to the
nation's high school guidance counselors. The Office also worked with public school
systems and military family service centers across the country to disseminate consumer
education materials.

1 of 4

03/15/99 18:39:51

Rulemaking Activities

http://www.ftc.gov/os/ar97/rulemaking.htm

Rulemaking Activities
< Back | Table of Contents | Next >

Competition Mission
Merger Guidelines
The Commission and the Department of Justice revised their joint 1992 Horizontal
Merger Guidelines to clarify how they analyze efficiency claims in mergers under
review and what merging firms must do to demonstrate claimed efficiencies. The
revisions, drafted by an interagency task force, explain how efficiencies may affect the
analysis of whether a proposed merger may lessen competition substantially in a
relevant market. The agency will analyze, according to the revisions, the extent to
which efficiencies enhance the merged firm's capacity to behave competitively and
whether those efficiencies are likely to result in lower prices, improved quality, and
enhanced service or new products. The revisions define more precisely which
efficiencies are attributable to a proposed merger and which could be achieved in other
ways, clarify what parties must do to demonstrate claimed efficiencies, and explain
how efficiencies are factored into the analysis of the competitive effects of a merger.
Consumer Protection Mission
Care Labeling Rule
The Commission modified its Trade Regulation Rule Concerning the Care Labeling of
Textile Wearing Apparel and Certain Piece Goods to permit clothing manufacturers to
use symbols rather than written care instructions, beginning on July 1, 1997. The
specified care symbols, developed by the American Society for Testing and Materials,
appear on permanent labels inside garments to indicate a method for properly cleaning
them. For the first 18 months the new symbols are in use, manufacturers must include
written information explaining the symbols on hangtags or elsewhere with the
garments. Allowing manufacturers to use symbols to comply with labeling
requirements harmonizes U.S. clothing labeling regulations with those of Canada and
Mexico, so that companies can use the same labels on garments offered for sale in any
or all of the countries that are parties to the North American Free Trade Agreement.
Environmental Marketing Guides
The Commission updated its "green guides" on environmental claims in marketing, to
reflect changing consumer perceptions and the emergence of new claims since 1992
when the first guides were issued. Additional guidance is now provided on the use of
environmental seal-of-approval logos and the chasing arrows symbol, as well as
marketing claims such as "environmentally preferable," "nontoxic," and "chlorine
free." The Environmental Marketing Guidelines retain the section on general
advertising principles and continue to address specific categories of environmental
benefit claims, such as "degradable," "recycled content," and "ozone friendly." The
revised guides were effective as of October 1996.
Games of Chance Rule
The Commission repealed its Trade Regulation Rule on Games of Chance in the Food

1 of 3

03/15/99 18:40:22

Economic Reports and Working Papers

http://www.ftc.gov/os/ar97/apndxecon.htm

Economic Analysis

Economic Reports and Working Papers
< Back | Table of Contents >

Economic Reports
Economic Reports are major, published reports, usually containing original research and
entailing a substantial commitment of resources, concerning an issue of current policy
interest or of long-term impact on Federal Trade Commission antitrust or consumer
protection missions.
Information and Advertising Policy: A Study of Fat and Cholesterol Consumption in the
United States, 1977-1990, Pauline Ippolito and Alan Mathios, October 1996.
This study examines changes in Americans' consumption of fat, saturated fat, and cholesterol during a
period when federal policy governing diet and health claims changed. The study finds that dietary
improvements occurred more rapidly in the years after 1985, when policies were relaxed and
health-related claims became more explicit and more frequent in advertising and labeling. The study
includes a variety of detailed data on differences in consumer knowledge and sources of dietary fats
over the period.

Economic Working Papers
Economic Working Papers are preliminary, unpublished work products of the Commission,
resulting from original research by Bureau of Economics staff, either in connection with
ongoing agency activities or as independent analyses.
Market Structure and the Flow of Information in Repeated Auctions (WP #213),
Charles J. Thomas, December 1996.
Do Nonprofit Hospitals Exercise Market Power? (WP #214), John Simpson and
Richard Shin (U.S. Department of Justice), December 1996.
Discriminatory Dealing with Downstream Competitors: Evidence from the Cellular
Industry (WP #215), David Reiffen, Laurence Schumann, and Michael R. Ward,
September 1997.
Advocacy Filings
Agency/State

Matter Number Authorization Date
Subject/Issue
FEDERAL GOVERNMENT
Congress of the United States
V970005
9/22/97
Tobacco Industry Settlement
Federal Communications Commission
V970001
4/16/97
Telecommunications Licensing

1 of 3

California

STATES
V970003
4/07/97

Environmental Marketing Guides

Illinois
New Mexico

V960010
V970004

12/02/96
8/22/97

Collision Damage Waivers in Car Rentals
Optometrists' Business Operations

Virginia

V960015

1/03/97

Real Estate Closings

03/15/99 18:41:14

Economic Reports and Working Papers

http://www.ftc.gov/os/ar97/apndxecon.htm

Economic Analysis

Economic Reports and Working Papers
< Back | Table of Contents >

1 of 3

California

STATES
V970003
4/07/97

Environmental Marketing Guides

Illinois
New Mexico

V960010
V970004

12/02/96
8/22/97

Collision Damage Waivers in Car Rentals
Optometrists' Business Operations

Virginia

V960015

1/03/97

Real Estate Closings

03/15/99 18:42:10

Index of Cases Listed in the Appendix

http://www.ftc.gov/os/ar97/caselist.htm

Index of Cases Listed in the Appendix

Respondent/Defendant
1554 Corporation
2943174 Canada, Inc.
9013-0980 Quebec Inc.
AAF International
AAF-McQuay, Inc.
Abbott Laboratories, Inc.
Abflex, U.S.A., Inc.
ABS Tech Sciences, Inc.
Ad-Com International, Inc.
Administrative Company, The
Advanced Health Care System
Aldi Inc.
Allen, Horace R.
Allen, Michael
Alliance Communications, Inc.
American Business Supplies, Inc.
American Cyanamid Company
American Dermalogy Association
American Enterprise List, Inc.
American Exchange Group, Inc.
American Fortune 900, Inc.
American Home Products Corporation
American Honda Motor Co., Inc.
American Isuzu Motors, Inc.
American Marketing Service
American Publishers Exchange, Inc.
American Readers Service, Inc.
Amerifit, Inc.
Amkraut, David L.
Amna Medical Products Corporation
Amstar Finance Corporation
Amstar Investment Corporation
Ancelowitz, Joel
Apex Marketing Group
Apple Computer, Inc.
ASC
Atlantic Service Corp.
Autodesk, Inc.
Automated Guest Directories, Inc.
Automatic Data Processing, Inc.
Automotive Breakthrough Sciences, Inc.
Axelrod, Steven
Azari, Deborah L.
Azari, Raphael Ralph
B.F. Goodrich Company, The
Baazov, Joshua
Baazov, Ofer

1 of 11

03/15/99 18:42:59

Index of Cases Listed in the Appendix

http://www.ftc.gov/os/ar97/caselist.htm

Bannister, Suzanne
Bass, Alex
Baxter International Inc.
Bayne, Charles Bernard
Belcar, Eileen
Bell Connections, Inc.
Berggren, Keith
Berman, Michael
Best Marketing, Inc.
Best, David D.
Bie, Victoria
Billings Physician Hospital Alliance, Inc.
Bishop, Todd
Blair, Thomas Alan
Blammy, John
Blayz, Jeffrey
Blodgett Memorial Medical Center
Body Gold
BodyWell U.S.A.
BodyWell, Inc.
Boeing Company, The
Boynton, Herbert H.
Brake Guard Products, Inc.
Branson, Dale
Brantmyer, Russell
Brodzinski, Kelie
Brown, Wendell
Bruno's, Inc.
BST Enterprises, Inc.
Buchan, Mark
Budget Marketing of Virginia
Budget Marketing, Inc.
Budget Renewal Service
Bureau 2000 International, Inc.
Bureau One
Busler, Betty
Butterworth Health Corporation
C.A.P.
Cabot Hosiery Mills, Inc.
Cadence Design Systems, Inc.
CAF Phone Systems
California SunCare, Inc.
Cambridge Direct Sales
Caparoni, Kenneth
Carborundum Company, The
Career Assistance Planning, Inc.
Career Information Services, Inc.
Careers, Inc.
Caridi, Joseph
Carousel of Toys USA, Inc.
Carr, Krystee
Castle Harlan Partners II, L.P.
Catalano, Anthony
Catsimatidis, John
Celie, Raymond
Channels, Walter D.
Chierico, Michael
Chierico, Teri
Chiron Corporation

2 of 11

03/15/99 18:42:59

Index of Cases Listed in the Appendix

http://www.ftc.gov/os/ar97/caselist.htm

Christal, Donald J.
Ciba-Geigy Corporation
Ciba-Geigy Limited
CIS Associates, Inc.
Class Rings, Inc.
Clausen, Brandon R.
Clear Your Credit, Inc.
Close, James Martin
Cohen, Joel H.
Colburn, John
College Assistance Planning
College Assistance Program
Collegiate Communications Group, Inc.
Colorado Dawn
Columbia/HCA Healthcare Corporation
Commemorative Brands, Inc.
Commercial Electrical Supply, Inc.
Compagnie de Saint-Gobain
Compu-Kleen, Inc.
Computer Business Services, Inc.
Comtrad Industries, Inc.
Conopco, Inc.
Consolidated Financial Services
Consumer Law Center, The
Cooke, Scott
Cooper, Howard K.
Cooperative Computing, Inc.
Corey, Robert
Corrales, Lorraine
Cramer, Sanford
Creative Business Consultants, Inc.
Creative Technologies International
Crema, Eliana
Crown Credit Services
Cutright, Brian W.
CVS Corporation
Dante, Ronald
Davenport, Peggy Ann
Dayer, Donald Lee
DB&L, Inc.
Dean Distributors, Inc.
Dean Thomas Corporation, Inc., The
Deerfield Corporation
Del Monte Foods Company
Delgado, Augustine
Delgado, Monique
Delta Distributors Company, Inc.
Dempsey, William R.
Detroit Automobile Dealers Association
Digital Interactive Associates, Inc.
Dill, Philip Edward
Dimacale, Daniel R.
Dimacale, Denise L.
Direct Link, Inc.
Direct Sales International
Direct Telemarketing Inc.
Discount Filing Services
Diversified Marketing Service Corporation
Donaghy, Patrick

3 of 11

03/15/99 18:42:59

Index of Cases Listed in the Appendix

http://www.ftc.gov/os/ar97/caselist.htm

Donly, Charles P.
Douglass, Andrew L.
Douglass, Jeannette L.
Douglass, Matthew R.
Douglass, Peter B.
Drew, Jordan
Du Passage, Gerard
DuBoise, Marc
Dwight's EnergyData, Inc.
Eagle, Charles A.
Effective Health, Inc.
Efficient Labs, Inc.
Elahie, Kave
Elite Credit Referral Services Ltd.
Ellis, Gabrielle
Ellis, Mark Thomas
Empress Corporation
Exxon Corporation
Falcon Crest Communications, Inc.
Family Publishers Clearing Center
Faulkner, Daniel T.
Febre, Robert J.
Felton, Amy
Figgie International Inc.
Figgie, Harry E., Jr.
Filner, Arnold
Filtration Manufacturing, Inc.
Firouzgar, Parviz
Forde, Cindy W.
Fortuna Alliance, LLC
Fox, Ann
Fox, Stephen C.
Freeman, Marc
Freeman, Nancy
Fresenius AG
Fresenius USA, Inc.
Friedland, Frank
Frontera, Thomas F.
Fulton, Charles
Fulton, Jennifer
Gagliano, Jeff
Gandee, William S.
Gansky, David A.
Garganese, Michael
Gateway Service Center
Gelb, Steven F.
General Mills, Inc.
General Motors Corporation
Genesis Marketing and Administration, Inc.
Genesis One Corporation 95,
Geon Company, The
Geoquest International Holdings, Inc.
Georgetown Publishing House Limited Partnership, Inc .
Georgetown Publishing House, Inc.
Georgia International Export Co., Inc.
Gerber Products Company
Gilmore, Andrew
Glendale Associates

4 of 11

03/15/99 18:42:59

Index of Cases Listed in the Appendix

http://www.ftc.gov/os/ar97/caselist.htm

Global Assistance Network for Charities
Gold Leaf Publishing & Distributing Company, Inc.
Golden, Roy
Gougion, Dennis H.
Grant, Donald R.
Grant, Lisa Warnock
Grant, Richard Devon
Gregory, Wayne
Grey Advertising, Inc.
Guildwood Direct Limited
Guimond, Mark F.
Hale Products, Inc.
Harding, Steven
Harrison, John
Hatto, Gerald E.
Havil, Rick
Hawthorne Communications, Inc.
Hayes, Joseph
Hayes, Thelma
Health Wave, Inc.
HealthSouth Corporation
HealthSouth Rehabilitation Corporation
Heisterkamp, David A.
Herb Gordon Auto World
Herb Gordon Auto World, Inc.
Herb Gordon Dodge
Herb Gordon Mercedes Benz
Herb Gordon Nissan
Herb Gordon Oldsmobile
Herb Gordon Used Cars
Herb Gordon Volvo
Hexter, Edward H.
Hingorani, Balram
Holcomb, Clark M.
Holleger, Donna
Hollywood Pop
Home Oxygen and Medical Equipment Company
Howard, Katherine M.
Hugh, Donald Patrick
Huling Bros. Chevrolet, Inc.
Huling Bros. Chrysler/Plymouth, Inc.
Huling Buick, Inc.
Hunt, Wayne B.
Hyde Athletic Industries, Inc.
Icon Health and Fitness, Inc.
Ideal Concepts, Inc.
Ideal Credit Referral Services Ltd.
IHF Capital, Inc.
IHF Holdings, Inc.
Incentive International
Incentives International
Industrial Chemical Corporation
Infinity Multimedia, Inc.
Insulate Industries, Inc.
Intelinet Data Services
Interactive Medical Technologies, Ltd.
Intermed Laboratories

5 of 11

03/15/99 18:43:00

Index of Cases Listed in the Appendix

http://www.ftc.gov/os/ar97/caselist.htm

International Association of Conference Interpreters 5
International Champions, Inc.
International Masters Publishers Inc.
Interstate Office Systems, Inc.
InVisions International Corporation
J.C. Penney Company, Inc.
J.D. Raffone Associates, Inc.
J.P. Meyers Company, Inc.
Jackler, Sheldon
Johnson, Steven
Johnson, Thomas P.
Jojola, Ray
Jones, Ed F.
Jordan, Jeffrey A.
Justus, Jimmie
Karon, Thomas W.
Katz, Philip
Katz, Sheldon
Kazak, Martha
KCD Holdings, Inc.
KCD Incorporated
Kelly, William S.
Kent & Spiegel Direct, Inc.
Kent, Marsha
Keown, Dave
Key Concept
Khubani, Ajit
Kilichowski, William
Kistorian, Rose
Kistorian, Vartouhi
Kossmeyer, Carl F.
Kovaleva, Adel
Kroll, Issie
Kuykendall, C.H.
Kuykendall, H.G., Jr.
Kuykendall, H.G., Sr.
L&S Manufacturing, Inc.
LaFrance, Gerald E.
Law Center, The
Law Offices of David L. Amkraut
Lawrence, Stephen
Lederman, Hal Z.
Lee, John F.
Lee, Robert C.K.
Leeka Products
Leisure Day Marketing
Lenard, Dale T.
Levinas, Daniel
Levy, David Chaim
Levy, Donna M.
Life Fitness
Life Fitness Companies L.P., The
Lifestyle Fascination, Inc.
Linc II, Inc.
Livingston, Mark
Lonis, Randy B.

6 of 11

03/15/99 18:43:00

Index of Cases Listed in the Appendix

http://www.ftc.gov/os/ar97/caselist.htm

Lubell, Daniel B.
Lucas, Matthew G.
Lustgarten, Kevin
M.E.K. International
Maduka, Udoka
Magazine Club Billing Service, Inc.
Mahle GmbH
Maige, Christopher
Malibu Media, Inc.
Mammoth Holding Corporation
Mancino, Nicholas S.
Mann, Michael
Mann, Russell
Manti, Jim
Marketing Masters, Inc.
Marketing Response Group and Laser Company, Inc.
Marketing Response Group, Inc.
Markowitz, Fred
Marquette, Inc.
Martin, Vance R.
Mattel, Inc.
Mauney Hosiery Mills, Inc.
Maynard, Robert J., Jr.
Mazda Motor of America, Inc.
McCready, David F.
McGovern, Donald
McGowan, Michael P.
McIntyre, Michael P.
Medibase
Medical Recovery Service, Inc.
Mediq Incorporated
Mega-Magazine Service
Megatrend Telecommunications, Inc.
Mellinger Company, The
Mellinger, Brainerd L., III
Mendoza, Markos
Mentor Network, Inc.
Mercantile Messaging, LLC
Meridian Capital Management, Inc.
Mesa County Physicians Independent Practice Association, Inc.
Metal Leve, S.A.
Metro Data, Inc.
Metropolitan Communications Corp.
Micom Corporation
Mitsubishi Motor Sales of America, Inc.
Money Tree, Inc., The
Montana Associated Physicians, Inc.
Monteiro, Rogerio
Morge, Michael
Morris, Donald E.
Morris, Karl
Mortgage Service Associates, Inc.
Mostashari, Ali
MSA Nationwide Field Services, Inc.
Multinet Marketing, LLC
Murphy, Robin L.
National Art Publishers and Distributors, Inc.
National Business Distributors Company, Inc.

7 of 11

03/15/99 18:43:00

Index of Cases Listed in the Appendix

http://www.ftc.gov/os/ar97/caselist.htm

National Credit Foundation, Inc.
National Invention Services, Inc.
National Marketing Service, Inc.
National Marketing, Inc.
Nationwide Office Products, Inc.
Nationwide Syndications, Inc.
Natural Innovations, Inc.
NCF Corporation
Neighborhood Periodical Corporation (NPC) of the Midwest, Inc.
Neiswonger, Richard C.
Nelson, Kenneth E.
New Balance Athletic Shoe, Inc.
New Consolidated Consultants Inc.
NGC Corporation
Norge, Michael
Norman, Alex
Novartis AG
Nu Skin International, Inc.
Nutrition
Nwaigwe, Christopher Ebere
Oasis Southwest, Inc.
Oerlikon-Buhrle Holding AG
Office Depot, Inc. 3
Omega Promotions, Inc.
On Line Communications, Inc.
Onkyo U.S.A. Corporation
Orth, Joan 128,
Oscherowitz, Steven
O'Hearn, Allan
O'Neill, Incorporated
Palm Harbor Holdings, Inc.
Panella, David Wayne
Pantron I Corporation
Pantron III Corporation
Pantron NV
Paperman, Gary
Pappas, Effie
Pase Corporation
Pegasus Industries
Pelzer, William, Jr.
Penn Traffic Company, The
Pepper, Ronald Jay
Perma-Derm Academy
Pete-Nik Holdings, Inc.
Phaseout of America, Inc.
Phillips Petroleum Company
Phillips, Lisa
Phillips, William
Pieri, John A.
Pizzeria Uno Corporation
Planet Ice Cream, Inc.
Poertner, Rainer
Popcorn Flavors International Inc.
Popcorn Supply Company, Inc.
Popp, Patricia Esme
Porcelli, Peter J., Jr.
Portalatin, Michael A.
Porter, Oliver

8 of 11

03/15/99 18:43:00

Index of Cases Listed in the Appendix

http://www.ftc.gov/os/ar97/caselist.htm

Pre-Need Family Services of Berks County, Inc.
Pre-Need Family Services of Delaware Valley, Inc.
Pre-Need Family Services of Lancaster County
Pre-Need Funeral Associates of Lehigh Valley, Inc.
Pre-Paid Legal Services, Inc.
Precision Communications Administration, Inc.
Premier Products, Inc.
Prime Time Marketing
Prime Time Publishing
Prochnow, Richard 72,
Products & Patents, Ltd.
Progressive Media, Inc.
Progressive Mortgage Corporation
Publishers Award Bureau
Publishers Marketing
Publishers Service
Quality Marketing Associates, Inc.
R.J. Reynolds Tobacco Company
Raffone, Joseph D.
Raffone, Vita L.
Randall, Richard
RBR Productions, Inc.
Rec Technologies
Red Apple Companies, Inc.
Regency Services, Inc.
Remote Assembly Corporation
Republic Communications Corporation
Retail Sales & Marketing
Revco D.S., Inc.
Reyes-Reyes, Blas
Richards, Bonnie L.
Robles, Cedrick
Rosenberg, Richard
Royal Imperial Ltd., Inc.
Runner, Patrice
Rust Evader Corporation
RustEvader Corporation
Ryder, Dave
S.J.A. Society, Inc.
S&K Group, Inc.
Saccurato, Dennis J.
Sage Seminars, Inc.
Sailer, John E., M.D.
Saint-Gobain/Norton Industrial Ceramics Corporation
Sander, Michael
Sandoz Corporation
Sandoz Ltd.
Satpathy, Bibekanand
Savell, Gary L.
Schering-Plough Healthcare Products, Inc.
Schnuck Markets, Inc.
Schops, Richard
Schwegmann Giant Super Markets, Inc.
Sears, Bruce
Second Pantron
Selene Systems, Inc.
Service Bureau International, Inc.

9 of 11

03/15/99 18:43:00

Index of Cases Listed in the Appendix

http://www.ftc.gov/os/ar97/caselist.htm

Settles, Becky Burch
Shapiro, Joseph
Shapiro, Kossmeyer & Flom PC
Shell, William E., M.D.
Silver State Western Publishing, Inc.
Sloan's Supermarkets, Inc.
Smith, David Lee
Smith, Englhieberth (Bert)
Smith, Maria Tilotta
Softdesk, Inc.
SoftSearch Holdings, Inc.
Sparta Chem, Inc.
Spence, Michael C.
Spence, Steven
Spiegel, Peter
SplitFire, Inc.
Staples, Inc.
Star Financial Services
Stemple, William J., Sr.
Stineman, Arthur B.
Stone, Cassandra
Stop & Shop Companies, Inc., The
Stratified Advertising and Marketing, Inc.
Strauss, Erwin Allen
Student Aid Incorporated
Student Assistance Services, Inc.
Supermarket Acquisition Corporation
Sutton Group of Palm Beach, Inc.
Sutton, John Jeff
Swenson, Lawrence Ken, Jr.
Syncronys Softcorp
Szabo, William
T.C.A., Inc.
T.V. Products, Inc.
T.V.P. Corporation
Tagiev, Raimma
Taylor, Daniel G.
Tele-Communications, Inc.
Telebrands Corporation
Telecommunications Protection Agency, Inc.
Tenet Healthcare Corporation
Thadow, Inc.
Thornton Communications, Inc.
Thornton, Thomas E.
Thrift Drug, Inc.
Time Warner Inc.
Titan Management Corporation
Tower Cleaning Systems, Inc.
Tower Loan of Mississippi, Inc.
Town & Country Corporation
Toys "R" Us
Turner Broadcasting System, Inc.
Two-Way Systems, Inc.
United Compucred Collections, Inc.
United Research Center, Inc.
Universal Client Services Inc.
Universal Credit Corporation
Universal Hospital Services, Inc.

10 of 11

03/15/99 18:43:00

Index of Cases Listed in the Appendix

http://www.ftc.gov/os/ar97/caselist.htm

Universal Merchants, Inc.
Uno Restaurant Corporation
Uno Restaurants, Inc.
USA Channel Systems, Inc.
USA Credit Services
Valenty, Benjamin
Van Den Bergh Foods Company
Van Der Hoeven, Martin
Venus Enterprises, Inc.
Vickery, Terry K.
Viggiano, Joseph M.
Wamsley, Garry E.
Warner Lists
Warnock, Michael
Waterous Company, Inc.
Weiss, Michael
Welch, Libby Gustine
Wentz, Joseph A.
Wesley-Jessen Corporation
WestPoint-Stevens, Inc.
Williams, Cindy
Windward Marketing, Ltd.
Wittstein, Alan D.
Woodruff, Michael
Woodward, Paul
World Class Network, Inc.
World Media T.V., Inc.
Worldwide Marketing and Distribution Company, Inc.
Worldwide Wallcoverings and Blinds, Inc.
Zale Corporation

11 of 11

03/15/99 18:43:00

Economic Reports and Working Papers

http://www.ftc.gov/os/ar97/apndxecon.htm

Federal Government
Congress of the United States: Tobacco Industry Settlement
According to a Commission staff report, cigarette manufacturers could realize substantial profits by
increasing the price of cigarettes significantly above the level needed to satisfy their payments under
the proposed settlement between the tobacco industry and 40 state Attorneys General. The report
states that profits could rise substantially, in part, because of an antitrust exemption that is much
broader than necessary to achieve the legitimate public health goals of the settlement. The public
sector will also gain financially from the proposed settlement, but the payments made by the
companies most likely will be considerably less than the $368.5 billion in the agreement, the staff
suggested. The report, "Competition and the Financial Impact of the Proposed Tobacco Industry
Settlement," is an analysis of the potential economic impact of the proposed settlement and was
prepared in response to a request from the House of Representatives Task Force on Tobacco and
Health.

Federal Communications Commission: Telecommunications Licensing
Federal Trade Commission staff filed comments with the Federal Communications Commission
(FCC) supporting its efforts to provide important information to potential purchasers of FCC
telecommunications licenses. The Commission agreed that the license application form should be
modified to include clear and conspicuous disclosures about several items: FCC regulations
prohibiting speculating and trafficking in wireless telecommunications licenses, construction
requirements for the licenses, and the potential for fraud in the licensing process. The Commission
also supported the FCC requirement that application preparers identify themselves on the application
and certify that they have provided the applicants with information about pertinent FCC regulations.
The Commission suggested in addition that entities coordinating the frequencies for paging license
applications be required to disclose to applicants the number of preexisting co-channeled licenses for
the frequency and that bidders at auctions be required to disclose the ultimate intended owners of the
licenses and certify that they have provided these persons with information about FCC regulatory
requirements. The Commission said that providing consumer applicants with information about the
licenses, the application process, and FCC regulations would help to reduce investment fraud in that
area in the future.

States
California: Environmental Marketing Guides
Commission staff responded to a member of the California Assembly who asked about the
effectiveness of the Commission's Environmental Marketing Guidelines. Staff stated that the guides
have been effective in helping to reduce confusion about environmental claims in advertising and in
preventing the false or misleading use of terms such as "recyclable," "degradable," and
"environmentally friendly," and that the number of deceptive claims had declined since the guides
were issued in 1992. Several states, including California, have repealed or modified their laws to
make them consistent with the Commission's guides, and the Commission has cooperated with state
Attorneys General in bringing law enforcement cases against firms engaged in allegedly deceptive
environmental advertising. The comments were solicited in connection with the California Assembly's
consideration of a proposed environmental labeling bill.

Illinois: Collision Damage Waivers in Car Rentals
Commission staff filed comments with the Illinois State Legislature regarding Illinois House Bill
3285, "The Renters' Financial Responsibility and Protection Act." The proposed bill would repeal the
current ban preventing car rental firms in Illinois from offering a "collision damage waiver" (CDW)
option and would impose disclosure requirements on car rental firms and a cap on CDW charges,
among other things. The Commission expressed the view that allowing CDW to be offered could
benefit consumers by giving them an additional way to cover the risk of unintentional loss, that giving
consumers enough information to make informed choices is better than eliminating a choice
altogether, and that requiring some disclosures is preferable to prohibiting CDW altogether.

2 of 3

03/15/99 18:42:10

Economic Reports and Working Papers

http://www.ftc.gov/os/ar97/apndxecon.htm

New Mexico: Optometrists' Business Operations
Commission staff testified at a hearing of the New Mexico Board of Optometry that the Board's
proposal to restrict the business arrangements between optometrists and complementary businesses
(such as stores that sell eyeglasses) could increase costs and restrict consumers' access to eye care,
while offering no countervailing benefits. The proposed rules would prevent optometrists from
entering into leases or any other kinds of business arrangements that contain certain prohibited
features, such as maintaining particular office hours or sharing support services or personnel.
According to Commission staff, such restrictions discourage potentially efficient and procompetitive
ways of providing services and may inhibit the development of large-scale practices and volume
purchase discounts.

Virginia: Real Estate Closings
Joint comments of the Commission and the Department of Justice were submitted to the Supreme
Court of Virginia in opposition to an Advisory Opinion issued by the Virginia State Bar, Standing
Committee on Unauthorized Practice of Law. The Opinion addressed the issue of non-lawyers
conducting real estate closings in Virginia. The question was whether a non-lawyer (who may or may
not be licensed as a title agent in Virginia and may or may not be employed by a title and escrow
company) may conduct a closing of the sale of real estate or a loan secured by real estate. The
Commission and the Department of Justice expressed the view that the proposed Opinion would
prevent anyone other than a lawyer from conducting closings for real estate purchases and would thus
deprive consumers of the choice to use a lay settlement service, which would increase real estate
closing costs.

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3 of 3

03/15/99 18:42:10

Economic Reports and Working Papers

http://www.ftc.gov/os/ar97/apndxecon.htm

2 of 3

03/15/99 18:41:14

Economic Reports and Working Papers

http://www.ftc.gov/os/ar97/apndxecon.htm

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3 of 3

03/15/99 18:41:15

Rulemaking Activities

http://www.ftc.gov/os/ar97/rulemaking.htm

Retailing and Gasoline Industries because the concerns that prompted adoption of the
rule in 1966 appear to have disappeared. The Rule had addressed abuses in games of
chance used by grocery stores and gas stations and had required various disclosures
and prescribed certain procedures for operating the games. The Rule also became
outdated because it covered only a limited sector of retail businesses that now use
games of chance in their promotions. The Commission determined that the costs of the
Rule now outweigh its benefits and that any future abuses can be prosecuted on a
case-by-case basis.
Jewelry Guides
The Commission revised its guide for the marketing of jewelry made wholly or in part
of platinum, a precious metal more costly than gold. The guide provides for different
markings on articles made of platinum, depending on the relative fineness or parts per
thousand of pure platinum versus platinum-group metals (iridium, palladium,
ruthenium, rhodium, and osmium). The revised guide adopts the international standard
for platinum jewelry but continues to permit some markings not currently included in
the international standard on products marketed in the United States. Other sections of
the Guides for Jewelry, Precious Metals, and Pewter Industries, which assist the
industry and consumers by helping marketers avoid deceptive or misleading
representations about such products, were revised in 1996.
Leather Guides
As part of its efforts to streamline and update regulations, the Commission issued
Guides for Select Leather and Imitation Leather Products, which combine relevant
portions of three older guides for shoes, luggage, and handbags, and provisions from a
now-rescinded rule on the marketing of leather belts. The Commission also worked to
harmonize the new guides with a European Union Directive concerning footwear. The
new guidelines warn manufacturers and retailers against misrepresenting the
composition of such products or misusing terms such as "waterproof" and
"scratchproof." Products that are imitation leather should include a disclosure to that
effect. The new guides became effective in December 1996.
Mirror Guides
The Commission rescinded the Guides for the Mirror Industry, which have been made
obsolete by the adoption of industry standards and the technological advances in the
manufacture of mirror glass. The Guides, issued in 1962 and revised in 1972, were
intended to help the industry avoid deceptive claims in advertising or promotional
materials, concerning such things as the quality or composition of mirrors or mirror
glass.
Used Oil Rule
The Commission repealed the Trade Regulation Rule on Deceptive Advertising and
Labeling of Previously Used Lubricating Oil, stating that the Rule's requirements for
engine oils had been preempted by the new Recycled Oil Rule, which the agency
promulgated in October 1995 as required by the Energy Policy and Conservation Act.
The Recycled Oil Rule permits manufacturers and sellers to represent that recycled oil
is substantially equivalent to new engine oil, so long as the determination of
equivalency is based on test procedures prescribed by the Commission.

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03/15/99 18:40:22

Rulemaking Activities

http://www.ftc.gov/os/ar97/rulemaking.htm

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3 of 3

03/15/99 18:40:22

Consumer and Business Education

http://www.ftc.gov/os/ar97/bcpconed.htm

Cooperative Projects
The Office continued its work on consumer.gov - a Web page with links to federal consumer
information - with the Consumer Product Safety Commission, the Food and Drug
Administration, the National Highway Traffic Safety Administration, the Securities and
Exchange Commission, and the U.S. Office of Consumer Affairs.
The Office continues to develop public/private sector partnerships to advance its education
efforts whenever possible. During fiscal year 1997, the Office designed, developed, and
marketed multi-pronged communications efforts including print, broadcast, and specialty
Web sites for the following projects:
Project Missed Fortune - with the North American Securities Administrators
Association (NASAA) - to alert consumers to fraudulent get-rich-quick schemes.
Operation False Alarm - with the Seattle Regional Office, the National Association of
Attorneys General (NAAG), secretaries of state, and other state charities regulators to attack badge-related fund-raising fraud. In addition to regular distribution to
national media and more than 6,500 consumer opinion leaders, a targeted mailing list
was compiled of more than 2,000 consumer and business media and nonprofit outlets
with a combined circulation of more than 210 million readers.
Project Price Check - with several private-sector organizations - to tell consumers how
they can avoid pricing errors in stores using electronic scanners and to provide tips for
business to help them better implement good pricing practices.
Who Cares? Sources of Information About Health Care Products and Services - with
NAAG - to provide information to consumers on how to avoid deceptive claims and
whom to contact about alternative medicines or prescription drugs, complaints about
nursing care facilities, and much more. The Office released a radio public service
announcement in English and Spanish that was distributed to an estimated 2,200
stations across the country.
Operation Trip Up - with the American Society of Travel Agents - to warn consumers
about travel-related scams. The U.S. Tour Operators Association and the National
Tour Association cooperated in the promotion and distribution of these materials.
Project Waistline - a long-term public education program to alert consumers to
misleading and deceptive weight-loss claims and to steer them to accurate information
about healthy weight loss.
Disaster Response and Consumer Protection: Action Items - with NAAG and the
National Association of Consumer Agency Administrators - to help law enforcement
officials prepare for or respond to disaster-related consumer protection problems. The
information kit includes a 10-step guide to disaster response and other materials.
Internet Pyramid Surf Day - with the Interactive Services Association through Project
OPEN (the Online Public Education Network) - to tell consumers how to avoid
potential scams when surfing the net for investment and business opportunities.

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Consumer and Business Education

http://www.ftc.gov/os/ar97/bcpconed.htm

Project CLEAN - with clothing and laundry appliance manufacturers, retailers,
detergent and bleach companies, and other industry members - to educate consumers
about the new, voluntary clothing care symbols.
Project Workout - a public education campaign with the American College of Sports
Medicine, American Council on Exercise, American Orthopaedic Society of Sports
Medicine, and Shape Up America! to educate consumers about fitness and shopping
wisely for exercise equipment.
Measuring Up: Good Packaging Practices for Dairy Products - with the National
Institute of Standards and Technology - a business brochure that highlights findings of
a federal/state study on "short-filling" of milk, other dairy products, and juice.
Field of Schemes - with NASAA - to increase public awareness of fraudulent
investment opportunities.
Project Trade Name Games - with Walt Disney and Warner Bros. - to alert consumers
to fraudulent display racks scams involving licensed products from well-known
companies and organizations.
Project Mousetrap - with the U.S. Patent and Trademark Office, inventors
associations, and other public and private sector groups - to tell consumers about the
invention marketing and patenting process and to alert them to the fact that fraudulent
invention promotion companies promise returns, but never deliver.
Costly Coupon Scams - with the Coupon Information Center (CIC) - a brochure
giving tips to consumers tempted to buy into a coupon clipping venture. As part of
Internet Coupon Surf Day, the Commission and CIC identified 31 Internet ads for
potentially fraudulent coupon-related schemes and warned promoters, by e-mail, of
the consequences of running such schemes.
The Low-Down on High Octane Gasoline - a Commission brochure informing
consumers that regular gasoline, not high octane, is the right fuel for most cars. Exxon
Corporation, as part of a consent agreement with the Commission regarding
unsubstantiated advertising claims, launched a massive consumer education and
advertising campaign that includes 15-second television ads and the distribution of its
own consumer publication at Exxon service stations nationwide.
Fair Credit Reporting Act, as amended - a long-term education campaign to alert
consumers, employers, insurers, and other businesspeople about major changes to the
FCRA.
Project Mail Box - with the U.S. Postal Inspection Service, NAAG, 25 state Attorneys
General and local law enforcement officials, and the American Association of Retired
Persons - announced 190 law enforcement actions against fraudulent direct-mail
schemes.
The Alliance for Investor Education -- a public/private consortium to alert consumers
to bogus investment opportunities.

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Consumer and Business Education

http://www.ftc.gov/os/ar97/bcpconed.htm

The Leasing Education Project Team - a public/private effort coordinated by the
Federal Reserve Board to educate consumers about vehicle leasing.
Additional Education Efforts
Additional education efforts include: Ready, Set...Credit, with the American Express
Company; Buying Time: The Facts About Pre-Paid Phone Cards, with American Express
and the Better Business Bureau of Metropolitan New York; Federal Job Scams, with the
U.S. Office of Personnel Management; Advertisements Offering Debt Relief May Be
Offering Bankruptcy, with the American Financial Services Association; Look Before You
Lease; Magazine Subscription Scams; International Telephone Number Scams; Knee-Deep
in Debt; and Toll-free Telephone Number Scams.
The Office also continues to work with the Consumer Literacy Consortium, the Federal
Consumer Information Center, the Alliance Against Fraud in Telemarketing, the
International Credit Association, the National Coalition for Consumer Education, the Fair
Lending Task Force, and the JumpStart Coalition for Personal Financial Literacy.

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4 of 4

03/15/99 18:39:51

Criminal Contempt Actions

http://www.ftc.gov/os/ar97/bcpcrim.htm

Permanetics Institute, a company he owned and operated under an assumed name, and further violated
the order by making misrepresentations about potential earnings in connection with paralegal courses
offered by the American Professional Institute, a subsidiary of Permanetics. Dante was formally
charged with the violations and entered a plea of not guilty.

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2 of 2

03/15/99 18:39:11

Consumer Redress Actions

http://www.ftc.gov/os/ar97/bcpredress.htm

X960038 2/21/97
Ali Mostashari
Glendale Associates (Patricia Esme X960084 10/10/96 Telemarketing Sales Rule;
Popp, d/b/a)
Advance-Fee Loan Fraud
Global Assistance Network for
X970006 2/04/97 Pyramid Scheme
Charities
Gold Leaf Publishing & Distributing X960044 10/01/96 Franchise Rule
Company, Inc. (William Szabo,
d/b/a)
(Ideal Concepts, Inc.)
X960002 6/25/97 Telemarketing Fraud

Consumer Finance
Charity Contributions
900-Number Business
Venture
Prize Promotion

Michael Garganese
Ideal Credit Referral Services Ltd.

X960063

4/24/97

Incentive International, 9013-0980
Quebec, Inc., d/b/a

X960099

2/11/97

Infinity Multimedia, Inc.

X960073

1/15/97

Insulate Industries, Inc.

X950038 10/18/96 Home Improvement Fraud

Intelinet Data Services
(Law Center, The)

X960067

Walter D. Channels

X960069 12/12/96

James Martin Coose
(Linc II, Inc.)

X960069 12/12/96
X960083 3/12/97 Job Placement Fraud

8/06/97

Telemarketing Sales Rule; Consumer Finance
Advance-Fee Loan Fraud
Cross-Border Telemarketing Prize Promotion
Fraud
Franchise Rule

Job Placement Fraud
Telemarketing Sales Rule

Display Rack Business
Opportunity
Windows
Employment Services
Credit Repair

Employment Services

Betty Busler
Marquette, Inc. Monte Bolt

X950076

1/28/97

Franchise Rule

Medical Recovery Service, Inc.

X950076
X970012

2/24/97
2/28/97

Business Opportunity Fraud Medical Billing Consultant

Shapiro, Kossmeyer & Flom PC
Mentor Network, Inc., The

X970012
X970015

2/28/97
3/20/97

Pyramid Scheme

Charity Contributions

Mercantile Messaging, LLC (Daniel X970013
B. Lubell, d/b/a)
(Meridian Capital Management,
Inc.)

5/27/97

Telemarketing Sales Rule

Pay-Per-Call Travel
Information
Investment Scheme
"Recovery Room"

Jeffrey A. Jordan, Markos Mendoza X950060

2/04/97

Russell Mann

Telemarketing Fraud

Billing Software Business
Opportunity

X950060 10/10/96

(Metropolitan Communications
Corp.)

Investment Fraud

Specialized Mobile Radio
Licenses

Telemarketing Sales Rule
Investment Fraud

Office Supplies
Mobile Radio and Paging
License Services

Sheldon Jackler
X940024

9/08/97

X940024

9/08/97

X960076
X960024

4/10/97
3/12/97

Joan Orth
Michael P. McGowan
Micom Corporation

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Consumer Redress Actions

http://www.ftc.gov/os/ar97/bcpredress.htm

(Multinet Marketing, LLC)

X960081 11/04/96 Telemarketing Sales Rule

Magazine Subscription
Prize Promotion

American Readers Service, Inc.
National Art Publishers and
Distributors, Inc.

X940042

6/26/97

Telemarketing Fraud

Movie Posters and
Collectibles

National Business Distributors
Company, Inc. Deborah L. Azari,
Raphael Ralph Azari
Oasis Southwest, Inc.

X960087

1/22/97

Telemarketing Sales Rule

Office Supplies

Omega Promotions Inc.

X960118

(On Line Communications, Inc.)

X960022 11/02/96 Telemarketing and
Investment Fraud

Paging License Services

Robert Corey
Pantron I Corporation

X890012

2/13/97

Infomercials

Baldness Cure

Pase Corporation

X940059

2/06/97

Precision Communications
Administration, Inc.

X970004

2/25/97

Business Opportunity Fraud Work-at-Home
Opportunity
Business Opportunity Fraud Pay-Per-Call Business
Ventures

Progressive Media, Inc.

X970011

7/24/97

Collegiate Communications Group, X970011
Inc.

7/24/97

(Publishers Award Bureau)

X960087 11/12/96
X960079 6/06/97 Telemarketing Sales Rule

X960098

Marc DuBoise, Gerald E.LaFrance,
Kenneth E. Nelson
Retail Sales & Marketing (Joseph
X970003
Hayes and Thelma Hayes, d/b/a)

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4/04/97

Job Placement Fraud

Prize Promotion - "Say No
to Drugs" Materials
Employment Services

Telemarketing Fraud

Student Employment and
Financial Aid

3/12/97

Telemarketing Sales Rule

Magazine Subscription
Prize Promotion

8/18/97

Franchise Rule

Directory Board
Advertising Business
Opportunity

8/25/97

Telemarketing Sales Rule;
Fair Debt Collection
Practices Act

Magazine Subscriptions

S.J.A. Society, Inc.

X970061

Sage Seminars, Inc.
Silver State Western Publishing,
Inc., d/b/a Prime Time Marketing

X950065 10/29/96 Franchise Rule
X960053 12/04/96 Telemarketing Sales Rule

Motivational Seminars
Prize Promotion - "Say No
to Drugs" Materials

Sparta Chem, Inc.
Student Aid Incorporated

X960071 11/05/96 Telemarketing Sales Rule
X960115 8/07/97 Scholarship Fraud

Office Supplies
Scholarship Search
Services and Finance

Student Assistance Services, Inc.

X960120

Thadow, Inc.

X950018 12/05/96 Telemarketing Fraud

Scholarship Search
Services and Finance
Telefunding Scheme
"Recovery Room"

Thornton Communications, Inc.
Tower Cleaning Systems, Inc.

X970083 8/14/97 Telemarketing Fraud
X960122 10/02/96 Franchise Rule

Universal Credit Corporation
(Gabrielle Ellis and Mark Thomas
Ellis, d/b/a)

X960048 12/16/96 Telemarketing Sales Rule

Advance-Fee Credit Cards
Commercial Janitorial
Cleaning Franchises
Credit Repair

USA Channel Systems, Inc.

X960017 12/05/96 Investment Fraud

Paging License Services

Rick Havil

X960017 12/06/96

6/23/97

Scholarship Fraud

03/15/99 18:38:00

Consumer Redress Actions

http://www.ftc.gov/os/ar97/bcpredress.htm

USA Credit Services
Windward Marketing, Ltd.

X960068
X960026

Genisis Marketing and
Administration, Inc.

X960026 10/16/96

World Class Network, Inc.

X970031

Worldwide Marketing and
Distribution Company, Inc.
Worldwide Wallcoverings and
Blinds, Inc.

3/18/97
3/05/97

Telemarketing Sales Rule
Telemarketing Fraud

Credit Repair
Magazine Subscription
Prize Promotion

5/06/97

Multi-Level Marketing Fraud Travel Agent Credential
Mill
X950056 10/23/96 Franchise Rule
Vending Machine
Business Opportunity
X960096 6/24/97 Mail/ Telephone Order
Wallpaper and Window
Merchandise Rule
Coverings
X960096 5/06/97

Martha Kazak, Bruce Sears
1A company name shown in parentheses is for identification of the case only. The company is not a defendant in the item shown in the
table.
2Redress or disgorgement funds were also obtained from the following:
2943174 Canada, Inc. (see page 68)
Amerifit, Inc. (see page 71)
BodyWell, Inc. (see page 71)
Computer Business Services, Inc. (see page 73)
Guildwood Direct Limited (see page 76)
Interactive Medical Technologies, Ltd. (see page 77)
KCD Holdings, Inc. (see page 78)
Money Tree, Inc., The (see page 79)
Nationwide Syndications, Inc. (see page 80)
Pre-Paid Legal Services, Inc. (see page 70)
RustEvader Corporation (see page 87)
Tower Loan of Mississippi, Inc. (see page 109)

The consumer redress amounts included in the following case descriptions are those ordered
by the court. They may be higher than the amounts actually collected and returned to
consumers.
American Business Supplies, Inc.; Creative Business Consultants, Inc.; Interstate
Office Systems, Inc.; Nationwide Office Products, Inc.; Michael Chierico; Teri
Chierico
A "boiler room" telemarketing operation selling office supplies under four company names will pay
$1 million for consumer redress to settle allegations that its business practices violated federal laws.
The Commission alleged that the operation used deceptive tactics to induce thousands of consumers
to order merchandise, charged them inflated prices, and pressured them to collect bills. The order also
requires Michael and Teri Chierico, who ran the operation, to post a $100,000 performance bond
before engaging in telemarketing again and prohibits them from using misrepresentations in future
telemarketing.

American Exchange Group, Inc.; Todd Bishop; William S. Kelly
American Exchange and William Kelly, one of its principals, are required to pay $52,000 for
consumer redress to settle allegations that they violated the Telemarketing Sales Rule. A default
judgment was also entered against Todd Bishop, which requires him to pay more than $173,000 into
the consumer redress fund. The Commission alleged that the defendants ran a fraudulent
prize-promotion telemarketing scheme in which they promised consumers large awards if they
purchased magazine subscriptions and other items, but the awards were not received or were worth
significantly less than represented. The orders prohibit all three defendants from future
misrepresentations and violations of the Rule, and the order with Kelly and American Exchange also
bans them from engaging in prize-promotion telemarketing and recovery services.

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Consumer Redress Actions

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American Fortune 900, Inc.
American Fortune settled allegations that it falsely represented that investments in its 900-number
venture were low risk and would produce substantial profits. In fact, the Commission alleged, the
company depleted a substantial portion of investors' capital in paying sales commissions and other
expenses and misrepresented the number of operational 900-number lines in which it had a financial
interest. The order imposes a judgment of $2,544,000 against the firm, to be used for consumer
redress, although it is unclear how much of this amount can be collected. The order also prohibits the
firm from making false claims in marketing any investment or telephone information service in the
future.

Amstar Finance Corporation; Amstar Investment Corporation; Bibekanand Satpathy
Two loan companies and their owner agreed to settle allegations that few, if any, of their customers
received promised business loans and other financing for which they paid upfront fees averaging
$3,000. The order includes a $300,000 judgment for consumer redress, but suspends that judgment
based on the defendants' sworn financial statements. The consent order requires Bibekanand Satpathy
to post a $500,000 performance bond before marketing loan or credit services in the future and bars all
defendants from making false representations regarding such services.

Bell Connections, Inc.; Michael Berman (d/b/a Discount Filing Services); Donald Lee
Dayer; Jimmie Justus; Erwin Allen Strauss
A settlement with Bell Connections and four individual defendants resulted in a consumer redress
fund totaling nearly $200,000. The Commission alleged that the defendants misrepresented the value
and investment potential of paging licenses available through the Federal Communications
Commission (FCC), to induce consumers to pay substantial fees for Bell Connections' services in
preparing license applications. The order requires each of the individual defendants to post a $275,000
bond before selling similar or related services for FCC licenses or any investment and prohibits them
from making false claims about any investments and telemarketed products or services. Judgments of
approximately $1,378,000 had been entered against the defendants, but the total amount could not be
collected.

Best Marketing, Inc.; Edward H. Hexter (a/k/a David D. Best)
Best Marketing and its president agreed to settle allegations that they misrepresented the value of
prizes they awarded to induce small business owners to buy advertising specialty products through
their telemarketing operation. The order requires Edward Hexter to pay $125,000 to the U.S.
Treasury. In addition, the defendants are prohibited from making misrepresentations in prize
promotions, and Hexter is required to post a $500,000 bond before engaging in future telemarketing
activities.

Bureau 2000 International, Inc.; Malibu Media, Inc.; Krystee Carr; Dave Ryder
The Commission reached a settlement with two companies and their corporate officers, under which
they are required to pay $25,000 into a consumer redress fund. The defendants, who sold business
opportunities consisting of 900-number lines offering entertainment programs, were alleged to have
violated the Franchise Rule by failing to give investors important information about the venture they
offered. The order requires the defendants to give potential purchasers of any future franchise or
business opportunity the information and documentation mandated by the Rule and prohibits them
from making false earnings claims and other misrepresentations.

Career Assistance Planning, Inc. (d/b/a College Assistance Planning, College
Assistance Program, and C.A.P.); David Chaim Levy; Donna M. Levy (a/k/a Donna
Holleger); Becky Burch Settles
A federal district court judge upheld Commission allegations against David and Donna Levy, who
allegedly ran a scholarship search service scam that defrauded consumers of over $6 million. The
court found that the Levys orchestrated the fraudulent practices used by Career Assistance Planning,
inducing tens of thousands of students and their parents to pay for services the company failed to
provide. The court observed that the company had received over 2,500 consumer complaints, many
from consumers who did not receive scholarships or the refunds of fees that the defendants promised.

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Consumer Redress Actions

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The judge ordered the Levys to pay over $6 million in consumer redress and to post a $6 million
performance bond before engaging in any telemarketing activity in the future. In a separate settlement,
Becky Settles agreed to pay just over $13,000 for consumer redress for her role in the fraudulent
scholarship search service. The order requires Settles, for 10 years, to post a $75,000 bond before
participating in any telemarketing activity and prohibits her from making false representations about
any future scholarship search service she markets.

Career Information Services, Inc.; CIS Associates, Inc.; William Phillips; David Lee
Smith
Two related employment services and their senior officers agreed to settle allegations that they
defrauded consumers seeking federal and postal jobs. According to the Commission, the defendants
advertised what appeared to be specific and available jobs, but consumers who called the 800 number
in the ads were directed to call a 900 number and were not told about the charge for placing that call.
The Commission alleged that the pay-per-call service then instructed the caller to write for an
information package, which turned out to have little or no information about particular job openings.
The settlement requires monetary redress of nearly $2.6 million. In addition, each defendant is
required to post a $1 million bond before marketing career advisory or pay-per-call services in the
future. The order would also prohibit the defendants from violating the 900-Number Rule's cost
disclosure requirements and from making deceptive statements about the availability and nature of
federal and postal employment.

Careers, Inc.; Daniel T. Faulkner; Nicholas S. Mancino
An agreement with Careers and two of its officers requires them to pay $350,000 into a fund for
consumer redress to settle allegations that they deceptively marketed employment services for airline
jobs. According to the Commission, the defendants placed advertisements in newspapers nationwide
and charged upfront fees for their services, but few, if any, consumers received the type of job
placement assistance promised. The order prohibits the defendants from claiming that they are
affiliated with airlines and from making other false statements. In addition, the two individuals are
required to post a $250,000 performance bond before getting involved in an employment services
business in the future.

Christopher Ebere Nwaigwe (a/k/a Christopher Maige, Michael Morge, and Michael
Norge); Udoka Maduka (a/k/a Michael Mann)
Two individuals agreed to settle allegations that they promoted a fraudulent college scholarship search
service. The Commission alleged that the defendants solicited students nationwide, under such names
as "National Science Program" and "National Law Scholarship Program," but that consumers got little
or nothing for their "processing fee." In separate orders, each defendant agreed to forfeit consumer
funds seized by the Commission, which will be used for consumer redress. In addition, the
settlements impose a $10,000 judgment against Christopher Nwaigwe and a $9,000 judgment against
Udoka Maduka. Nwaigwe is required to post a $300,000 bond and Maduka a $50,000 bond before
engaging in a scholarship service business in the future.

David L. Amkraut (d/b/a Law Offices of David L. Amkraut)
David Amkraut, an immigration attorney, settled allegations that he misled tens of thousands of
people worldwide who wanted to obtain visas through the State Department's "green card" lottery.
Winners of the lottery, created to encourage ethnic diversity, can apply for immigrant visas, which are
used to enter the United States. The immigrant visas are then exchanged for permanent residence
visas, commonly referred to as "green cards." According to the Commission, Amkraut misrepresented
the nature of the lottery and his ability to increase an individual's chances of winning. In addition, the
Commission alleged, he jeopardized his customers' lottery entries by violating State Department rules
and he withheld information packages from lottery winners to try to pressure them into paying him
additional fees to process the green card application. The consent order prohibits Amkraut from
misrepresenting his ability to increase an individual's chances of becoming a winner in the lottery or
misrepresenting any other fact material to a consumer's decision to purchase his services and from
failing to comply with State Department rules and procedures. The order also requires Amkraut to
disclose the nature of the lottery, procedures, and fees and to return information packages to winners
in a timely manner. In addition, Amkraut agreed to provide consumer redress "in kind" by assisting
past customers to enter the lottery free of charge. The actual cost of redress depends on the number of

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customers who avail themselves of the offer, but is expected to total over $250,000.

Diversified Marketing Service Corporation; Magazine Club Billing Service, Inc.;
National Marketing Service, Inc.; Neighborhood Periodical Corporation (NPC) of the
Midwest, Inc.; C.H. Kuykendall; H.G. Kuykendall, Jr.; H.G. Kuykendall, Sr.
Diversified Marketing, its affiliated corporations, and its officials settled allegations that they made a
variety of misrepresentations and debited consumers' bank accounts without authorization as part of a
magazine telemarketing scheme. The Commission alleged that the defendants misrepresented the cost
of magazine subscription packages and the reason for obtaining checking account numbers and
refused to cancel subscriptions. The order requires the defendants to pay $1.5 million in consumer
redress and prohibits them from making the alleged misrepresentations and from charging consumer's
credit cards or debiting their checking accounts without approval.

Empress Corporation (d/b/a American Publishers Exchange, Inc.); Scott Cooke
Empress, a telemarketing company, and its president agreed to settle allegations that they induced
consumers to purchase magazine subscriptions by misrepresenting that consumers would receive
prizes worth as much as or more than the cost of the subscriptions. The Commission settlement,
together with a companion settlement filed by the State of Nevada, requires the defendants to pay
approximately $277,000, of which $93,000 will go toward consumer redress. Funds will also go to
consumer protection enforcement in Nevada and to the National Tape Library in San Diego, a
valuable law enforcement resource that is a repository for telemarketing pitches. In addition, the order
prohibits the defendants from misrepresentations in connection with prize promotions like those in
this case.

Falcon Crest Communications, Inc.; Republic Communications Corporation; Joseph
Caridi; Joel H. Cohen; Jordan S. Drew; Gary Paperman
In six separate settlements, two related companies and four individuals agreed to settle allegations in
connection with the sale and management of wireless communications licenses issued by the Federal
Communications Commission (FCC). Falcon Crest and Republic allegedly touted themselves as
experienced brokers for FCC licenses but delivered few, if any, offers to buy or lease the licenses. The
orders require consumer redress as follows: Falcon Crest, $3,100; Republic, $38,544; Joseph Caridi,
$350,000; Joel Cohen, $30,000; Jordan Drew, $350,000; Gary Paperman, $30,000. The order with
Republic bars it from misrepresenting facts about wireless communications licenses or investment
offerings in the future. The orders with Falcon Crest and four of its principals prohibit them from
misrepresenting investments or any telemarketed product or service. In addition, Caridi and Drew are
barred from any telemarketing for five years, and Cohen and Paperman must obtain $500,000 bonds
before engaging in the telemarketing of any investments in the future.

Family Publishers Clearing Center; Warner Lists (American Enterprise List, Inc.,
d/b/a); Kenneth Caparoni; Philip Katz; Sheldon Katz; Michael Weiss
Two companies and their principals agreed to settle allegations that they misrepresented the nature
and value of prizes they offered to induce consumers to purchase magazine subscriptions and failed to
make other disclosures required by the Telemarketing Sales Rule. According to the Commission,
Family Publishers solicited consumers for magazine subscriptions by offering purportedly valuable
prizes, and Warner Lists provided customer lists and other services. As part of the settlement, the four
individuals paid consumer redress totaling over $120,000. The defendants are prohibited from
providing lists, prizes, prize certificates, or any other substantial assistance or support to any seller or
telemarketer engaged in deceptive practices. The defendants are also required to post a performance
bond of $500,000 before engaging in similar telemarketing activities or providing lists to
telemarketing businesses, and they are prohibited from violating the Rule in the future.

Fortuna Alliance, LLC; Augustine Delgado; Donald R. Grant; Libby Gustine Welch
The Commission reached a settlement with Fortuna and its officers under which the defendants could
pay more than $5 million for consumer redress. The Commission alleged that the defendants
promoted an investment program on the Internet that was actually an illegal pyramid scheme. They
allegedly induced thousands of consumers around the world to join the pyramid scheme, promising

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thousands of dollars in "profits" as other people "enrolled" in the program. Under the settlement,
every Fortuna member is entitled to a full refund of membership fees. The money for the refunds
comes from funds frozen in the United States and from $2.8 million transferred from Antigua, West
Indies. The order also permanently bars the defendants from participating in any chain or pyramid
program and from making deceptive earnings claims in connection with any marketing or investment
program they offer. (Also see Fortuna Alliance, LLC, page 94.)

Genesis One Corporation (d/b/a Bureau One); Ali Mostashari (a/k/a Alex Bass)
The Commission reached a settlement with Genesis One and entered a default judgment against Ali
Mostashari in connection with allegations that they made false earnings claims and other
misrepresentations in marketing pay-per-call 900-number business ventures. The Commission also
alleged that the defendants violated the Franchise Rule by failing to give investors required
pre-purchase information. The settlement with Genesis One, which is under receivership, includes a
$5 million judgment for consumer redress. It is uncertain how much of this amount will be collected,
but the receiver now holds $400,000 in funds that will be distributed. The default judgment against
Ali Mostashari includes $6.1 million for redress. Both orders bar the defendants from misrepresenting
income and other information concerning any franchise or business opportunity and from violating the
Rule. (Also see Genesis One Corporation, page 95.)

Glendale Associates; Crown Credit Services; Star Financial Services (Patricia Esme
Popp, d/b/a all three businesses)
Patricia Popp, doing business under three company names, agreed to pay $10,000 for consumer
redress to settle allegations that she falsely promised "guaranteed" loans to consumers and that she
charged an advance fee for her services, a violation of the Telemarketing Sales Rule. The order
prohibits Popp from violating the Rule and from misrepresenting any credit offer or service in the
future and requires her to post a $250,000 bond before engaging in any telemarketing effort or offering
any credit services.

Global Assistance Network for Charities; Eileen Belcar; Cedrick Robles
Operators of a pyramid plan that advertised on the Internet and in newspapers agreed to settle
allegations that they made false and misleading statements to sell membership in the scheme,
claiming that consumers could contribute to a charity and earn thousands of dollars a month. The
order bars Eileen Belcar and Cedrick Robles from selling or offering for sale membership in any
multilevel marketing, investment, or charitable donation program or plan, and from making
unsubstantiated income or profitability claims and misrepresentations. The defendants are also
required to pay full consumer redress of $4,900, an amount that reflects the fact that the Commission
stopped the scheme in its very early stages.

Gold Leaf Publishing & Distributing Company, Inc. (William Szabo, d/b/a)
William Szabo, doing business as Gold Leaf, is required to pay over $28,000 for consumer redress to
settle allegations in connection with the sale of pay-per-call 900-number business ventures. The
Commission alleged that Szabo made false earnings claims and failed to give investors required
pre-purchase information, in violation of the Franchise Rule. Szabo is prohibited from violating the
Rule in the future.
(Ideal Concepts, Inc.)

Michael Garganese
The former owner of Ideal Concepts agreed to settle allegations that the company's telemarketers
promised consumers, primarily senior citizens, valuable prizes or awards that were never delivered or,
if delivered, were worth a fraction of their claimed value. The prizes were offered as an inducement
for consumers to purchase a variety of products costing from $400 to over $1,000. The settlement
requires Michael Garganese to pay $15,000 in consumer redress and permanently bans him from any
future telemarketing activities, including sales of any goods or services and charitable solicitations.
(Also see Ideal Concepts, Inc., page 95.)

Ideal Credit Referral Services Ltd.; CAF Phone Systems; Direct Telemarketing Inc.;

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Elite Credit Referral Services Ltd.; New Consolidated Consultants Inc.; Universal
Client Services Inc.; Cindy W. Forde (a/k/a Cindy Williams); Donald Patrick Hugh;
Karl Morris; Englhieberth (Bert) Smith; Maria Tilotta Smith
Ideal Credit, five related companies, and five individuals are required to pay over $1.8 million in
consumer redress to settle allegations that they violated the Telemarketing Sales Rule by marketing
advance-fee loans. According to the Commission, the defendants, operating out of Canada, ran a
"boiler room" operation that offered loans to consumers for advance fees of $200 to $540. The
defendants allegedly misrepresented that they could obtain or arrange loans for consumers, that
consumers' loan applications had been approved, and that consumers would receive the requested
loans regardless of their creditworthiness. In addition to paying redress, the defendants are prohibited
from making false or misleading statements in the marketing of any good or service, from violating
the Telemarketing Sales Rule, and from providing assistance or support to any seller or telemarketer
engaged in practices that violate the Rule or federal law. (Also see Ideal Credit Referral Services Ltd.,
page 96.)

Incentive International (9013-0980 Quebec Inc., d/b/a Incentive International,
Incentives International, and Pegasus Industries); Joshua Baazov; Ofer Baazov
The Commission alleged that this Canadian firm and two principals engaged in cross-border
telemarketing fraud, calling senior citizens in the United States and telling them they had won
valuable prizes if they purchased certain merchandise. In fact, the Commission said, consumers
received premiums worth a fraction of the money they spent on purchases. The order requires the
defendants to pay almost $777,000 for consumer redress. It also prohibits them from misrepresenting
facts about prize promotions in the future and from violating the Telemarketing Sales Rule.

Infinity Multimedia, Inc.; Quality Marketing Associates, Inc.; Joseph A. Wentz
The Commission negotiated a settlement with Infinity Multimedia, Quality Marketing, and Joseph
Wentz, marketers of CD-ROM display rack businesses, that requires them to turn over $340,000 for a
consumer redress fund. The settlement stems from allegations that the defendants made false earnings
claims and used a variety of other deceptive practices in selling their pre-packaged businesses. The
order also dissolves the two corporate defendants and bars Wentz from participating in any way in the
marketing of any business venture in the future.

Insulate Industries, Inc.; Garry E. Wamsley
Insulate Industries and its vice-president/co-owner agreed to settle allegations that they
misrepresented the thermal performance, or energy efficiency ratings, of windows the company
manufactured and sold in the Pacific Northwest. The Commission alleged that sample windows
submitted for testing were different from production windows and had been modified to improve the
test results. The agreement does not provide for a monetary settlement, but requires the company to
provide 1,000 code-compliant windows to government-funded projects and structures in Oregon and
Washington. The order also requires the defendants to have competent and reliable scientific evidence
for any claims about the thermal performance of production windows and requires test samples to be
representative of production windows.

Intelinet Data Services (Stratified Advertising and Marketing, Inc., d/b/a)
A company that telemarketed job search services was ordered to pay over $2.3 million in redress to
settle Commission allegations that its operation was fraudulent. Stratified, doing business as Intelinet,
allegedly misrepresented the availability of government jobs in consumers' chosen fields and locations
and misrepresented the ease of obtaining a refund of the advance fees it charged, if a consumer failed
to find a job. In addition to requiring redress, the order bars the company from making false
representations about positions or jobs available, bars it from misrepresenting the conditions for
refunds, and requires it to clearly disclose to consumers all conditions of obtaining a refund. Three
individual defendants settled under separate orders (see Intelinet Data Services, page 96).
(The Law Center; The Consumer Law Center)

Walter D. Channels; James Martin Coose
The Commission negotiated settlements with Walter Channels and James Coose, who did business
together as The Law Center and The Consumer Law Center, to settle allegations that they ran a

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fraudulent credit repair telemarketing operation. The defendants allegedly violated the credit repair
provision of the Telemarketing Sales Rule by charging upfront fees and claiming that they could force
credit bureaus to remove negative or bad credit information. The two orders require each defendant to
pay $2,500 for consumer redress and bar them from future violations of the Rule. The orders also
require them to notify prospective clients of their rights under the Fair Credit Reporting Act.
(Linc II, Inc.)

Betty Busler
The president-owner of Linc II agreed to turn over $8,000 in frozen funds as part of a settlement of
allegations that she engaged in a fraudulent job search service. The Commission alleged that Betty
Busler falsely claimed that she had access to a nationwide "hidden" job market and could obtain
interviews for clients for an upfront fee, but did not provide clients with jobs or even job interviews in
many cases. The settlement also requires her to post a $200,000 bond before engaging in future job
placement services and prohibits her from misrepresenting such services. (Also see Linc II, Inc., page
97.)

Marquette, Inc.; Monte Bolt; Russell Brantmyer; Amy Felton; Lawrence Ken
Swenson, Jr.
The Commission reached a settlement with Marquette and three of its officers, and a federal district
court entered a default judgment against another officer, in connection with allegations that they made
numerous misrepresentations in their sale of business opportunities involving medical billing
software. The Commission alleged that the defendants misrepresented the amount of assistance they
provided and the amount of earnings that could be expected and that they used false references. The
defendants also allegedly violated the Franchise Rule by failing to give potential investors complete
and accurate information about the business opportunity and documentation to support claimed
earnings. The settlement with Marquette, Russell Brantmyer, Amy Felton, and Lawrence Swenson
requires them to pay almost $147,000 in consumer redress. The default judgment against Monte Bolt
includes $3,253,500 for redress. The orders also require the defendants to refrain from future
misrepresentations about franchises or business ventures and prohibit them from violating the Rule.

Medical Recovery Service, Inc.; S&K Group, Inc.; Shapiro, Kossmeyer & Flom PC;
Marc Freeman; Nancy Freeman; Carl F. Kossmeyer; Richard C. Neiswonger
In two settlements, a group of firms and individuals agreed to pay a total of $1 million in consumer
redress to settle allegations that they used false earnings claims and phony references in selling
business consultant training programs. One order requires the defendant accounting firm, Shapiro,
Kossmeyer & Flom, to pay $10,000; the second requires redress as follows: Richard Neiswonger,
$425,000; S&K and Carl Kossmeyer, $265,000; Nancy Freeman and Marc Freeman, $300,000. All
defendants are also subject to broad injunctive provisions.

The Mentor Network, Inc.; Parviz Firouzgar
The Mentor Network and Parviz Firouzgar are required to pay $75,000 for consumer redress as part of
a settlement of allegations that they operated a fraudulent pyramid scheme promoted on the Internet,
nominally involving the sponsorship of needy children in foreign countries, in which earnings
depended on the recruitment of new participants. The order prohibits the defendants from engaging in
any chain or pyramid program and from making misrepresentations about material facts in any
marketing or investment program. It requires that payments to participants in any multi-level
marketing program operated by the defendants come primarily from sales of goods or services and not
from recruiting additional participants in the program.

Mercantile Messaging, LLC, and DB&L, Inc. (Daniel B. Lubell, d/b/a)
Daniel Lubell, doing business as Mercantile Messaging and DB&L, agreed to pay a total of $111,000
in consumer redress to settle allegations that he ran a fraudulent scheme to get consumers to place
lengthy and expensive telephone calls - unknowingly - to Guyana or the Caribbean, for which the
defendants received a per-minute payment from the foreign telephone company. The Commission
alleged that Lubell's practices in soliciting consumers to call for information about free or discount
travel and accommodations, or vacation sweepstakes, violated the Telemarketing Sales Rule. The
settlement, in addition to requiring the redress payment, prohibits similar violations in the future.

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(Meridian Capital Management, Inc.)

Jeffrey A. Jordan; Russell Mann; Markos Mendoza
Three individuals settled allegations stemming from their roles in an allegedly deceptive scheme in
which telemarketers called victims of previous telemarketing fraud - often involving investments in
wireless telecommunications licenses - and falsely represented that, for a fee, they could recover the
money the consumers had previously lost. The order with Russell Mann requires him to pay $50,000
for consumer redress and prohibits him from misrepresenting any material aspect of any future
telemarketing or recovery room service. In addition, he is required to post a $200,000 performance
bond before participating in any future telemarketing activities. Jeffrey Jordan and Markos Mendoza
are required to pay $1.6 million in consumer redress. (Also see Meridian Capital Management, Inc.,
pages 98 and 141.)
(Metropolitan Communications Corp.)

Sheldon Jackler; Joan Orth
Two defendants in a massive plan to sell Federal Communications Commission (FCC) specialized
mobile radio licenses as "low-risk, high-return" investments agreed to settle allegations that the
scheme was fraudulent. One settlement requires Sheldon Jackler to pay $1.6 million in redress to
victims of the scam, permanently bars him from selling application preparation services for licenses
or permits issued by any agency of the U.S. Government or any investment involving such licenses,
prohibits misrepresentations about FCC licenses and investments generally, and requires a bond for
any future telemarketing. A second settlement permanently bars Joan Orth from telemarketing
investments and from misrepresenting FCC licenses and other investments generally and requires her
to pay $20,000 for consumer redress. (Also see Metropolitan Communications Corp., page 142.)

Michael P. McGowan (d/b/a Amna Medical Products Corporation and Industrial
Chemical Corporation)
Michael McGowan, a telemarketer doing business under a number of aliases and corporate names,
agreed to settle allegations that his practices violated federal laws. McGowan allegedly bilked
businesses and not-for-profits by sending them unordered office supplies, billing them, and then
harassing and threatening them for payment. The order bars McGowan from any telemarketing
business in the future and from using any aliases in business dealings. In addition, $11,800 in frozen
assets will be divided between the Commission and the U.S. Postal Inspection Service, which brought
a parallel suit. A suspended judgment of $317,000, the amount of consumer losses, has also been
ordered, which is collectable for consumer redress if the defendant has misrepresented his assets.

Micom Corporation; Joseph M. Viggiano
A federal district court order bars Micom and company principal Joseph Viggiano from offering any
investment that involves a license or permit issued by the federal government and any application
filing service in connection with a government-issued permit or license. The order also includes a $1.6
million judgment for consumer redress and a ban on misrepresentations regarding any investment or
telemarketed offering. The order settles allegations that the defendants used false and misleading
promises in their operation to sell consumers application preparation and filing services for paging
licenses issued by the Federal Communications Commission. The order also requires Viggiano to post
a $500,000 performance bond before engaging in telemarketing in the future.
(Multinet Marketing, LLC)

American Readers Service, Inc.
American Readers agreed to pay as much as $127,000 for consumer redress to settle allegations that it
facilitated a deceptive prize-promotion scheme in which a group of telemarketers defrauded
consumers of over $1 million. The Commission alleged that American Readers assisted the
telemarketers by sponsoring the promotion, sending confirmation letters and prizes, taking customer
service calls, and billing consumers' credit cards. The order prohibits American Readers from giving
future assistance to deceptive telemarketers and from other violations of the Telemarketing Sales
Rules.

National Art Publishers and Distributors, Inc.; Benjamin Valenty
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Benjamin Valenty, a telemarketer who touted movie paraphernalia as an excellent investment, settled
allegations that he violated federal law, including a 1994 order barring him from telemarketing
investments. The earlier order followed allegations that Valenty and his firm, National Art, ran a
deceptive scheme to sell vintage movie posters at inflated prices. Since the 1994 ban, Valenty has
been part-owner of International Art Galleries, doing business as International Art Publishers.
International Art has allegedly marketed movie collectibles, misrepresenting them as excellent
investments. The current order permanently bans Valenty from telemarketing and requires him to pay
$150,000 in consumer redress.

National Business Distributors Company, Inc.; Deborah L. Azari; Raphael Ralph
Azari
National Business and its owners agreed to two orders to settle allegations that they used a variety of
deceptive practices in their telemarketing operation to get orders for business supplies. They allegedly
claimed that unordered merchandise had been ordered, charged inflated prices, added unauthorized
fees, and charged "restocking" and shipping costs when consumers returned unordered goods. One
order prohibits the defendants from making false statements or misrepresentations and from making
unfounded threats about ruining consumer credit or taking legal action. The order also requires the
Azaris to pay $200,000 for consumer redress and to relinquish rights to company assets, to secure a
bond of $200,000 each before participating in any telemarketing business in the future, and to comply
with the Telemarketing Sales Rule. Under the second order, the defendants are required to pay $10
million in refunds to consumers.

Oasis Southwest, Inc.; Michael A. Portalatin
A settlement with Oasis and one of its principals requires them to pay $30,000 in consumer redress to
settle allegations that they ran a fraudulent telemarketing prize promotion, primarily targeting senior
citizens. The defendants allegedly told consumers that if they purchased "Say No to Drugs" items,
they would receive a prize worth more than the amount they paid. In fact, according to the
Commission, the prizes consumers received, if any, were not worth more than they paid. In addition,
the defendants allegedly failed to disclose that no purchase was necessary to win a prize, in violation
of the Telemarketing Sales Rule. The order prohibits the defendants from involvement in any
telephone prize promotion or recovery room service and from future violations of the Rule. A separate
settlement was made with another officer of the company (see Oasis Southwest, Inc., page 100).

Omega Promotions, Inc.
An allegedly bogus employment service is banned from ever again engaging in another telemarketing
operation or the activities of a job placement agency, under an agreement resolving allegations that it
pitched openings for such positions as cruise ship tour guides, electronic specialists, and chemical
engineers. The defendant allegedly promised to arrange interviews and induced consumers to divulge
their checking account numbers, then debited the accounts without providing any services. The order
calls for payment of $236,835 for consumer redress, although it is unclear how much of that amount
can be collected. The three principals pled guilty to criminal charges brought by the Department of
Justice and were sentenced to prison terms (see Omega Promotions, Inc., page 101).
(On Line Communications, Inc.)

Robert Corey (a/k/a Michael Allen)
The Commission reached a settlement with Robert Corey, a hidden principal in On Line
Communications, a company that allegedly made false claims to investors about the nature and value
of the Federal Communications Commission paging licenses it could obtain for them. Corey is
required to disgorge a total of $362,500 from funds that he allegedly diverted to a Bahamian bank, of
which $337,780 will be used for consumer redress. In addition, he is prohibited from making a variety
of false claims about any investment offering and is required to obtain a $300,000 performance bond
before engaging in any type of telemarketing in the future. This case marks the first time the U.S.
Government obtained an asset freeze issued by a foreign court and returned the frozen funds to
American telemarketing fraud victims.

Pantron I Corporation (a/k/a Pantron III Corporation; Pantron NV, and Second
Pantron); Hal Z. Lederman

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The Commission agreed to a final settlement that brings to a close its pending lawsuit against Pantron
I, a now-defunct company, and owner Hal Lederman. The order settles allegations first filed by the
Commission in 1988, that advertising claims created and disseminated by the defendants in an
infomercial for Helsinki Formula falsely represented that the product was effective in stopping hair
loss and promoting hair regrowth. The injunction resulting from the 1988 suit was modified by an
appeals court in 1994, and the court issued an order that the defendants pay monetary relief. The
judgment against Lederman is for $27 million; however, the Commission will receive a pro rata share
of the proceeds of Lederman's Chapter 7 bankruptcy. In addition to requiring the redress payment, the
order prohibits the defendants from making claims about the effectiveness of any baldness product
unless such claims would be permitted in labeling by the U.S. Food and Drug Administration. In
addition, the defendants must have reliable scientific evidence for any claims about the performance,
benefits, safety, or efficacy of any food, drug, device, or cosmetic, and they are prohibited from
misleading endorsements and demonstrations in infomercials.

Pase Corporation; Robert J. Febre
A federal district court ordered Pase and its president to pay more than $16 million as redress to
consumers who invested in allegedly fraudulent work-at-home business opportunities and programs
that purported to offer grants, loans, and credit cards. The Commission alleged that, after consumers
paid upfront fees, they found that the defendants were selling books that contained general
information about jobs, money-making opportunities, entities that offered grants, or tax havens, and
were soliciting consumers' assistance in selling products for Pase. The order prohibits the defendants
from misrepresenting work opportunities and opportunities to obtain products and services and
requires them to disclose any facts material to consumers' decisions to purchase products and
services.

Precision Communications Administration, Inc.; Jeffrey Blayz (a/k/a John Blammy,
John Colburn, Jeff Gagliano, and John Jeff Sutton)
Precision Communications and its principal settled Commission allegations that they made false
earnings and assistance claims in offering their pay-per-call business ventures to consumers.
According to the Commission, few if any purchasers of the business ventures achieved the specific
level of earnings promised by the defendants, and the defendants did not provide promised services,
such as sending monthly checks and weekly call count reports. The settlement calls for the defendants
to pay approximately $45,000 in consumer redress.

Progressive Media, Inc.; Collegiate Communications Group, Inc.; Mark Buchan;
Matthew G. Lucas; Kevin Lustgarten
Two companies and their principal officers agreed to pay an estimated $293,000 into a redress pool
from which partial refunds may be made to students who paid fees to obtain either high-paying
summer jobs or scholarships and other financial aid. The Commission alleged that the defendants
misrepresented that the employment and financial aid directories they sold through telemarketing
were actually "programs" that guaranteed students jobs or free financial aid. The Commission also
alleged that the defendants' money-back guarantees turned out to be false. The two consent orders
prohibit the defendants from making any false or misleading representations in connection with the
future marketing of any employment or financial aid product or service and from misrepresenting any
money-back guarantee.
(Publishers Award Bureau)

Marc DuBoise; Gerald E. LaFrance; Kenneth E. Nelson
Three individuals who operated through Publishers Award Bureau agreed to pay a total of $130,000 in
consumer redress as part of a settlement of allegations that they ran a fraudulent prize-promotion
program. The defendants allegedly sent solicitations to consumers telling them that they were
"guaranteed to win" seemingly valuable prizes, but when consumers called to claim the prizes, they
were told they had to pay several hundred dollars for magazine subscriptions to be eligible. The
defendants agreed to an injunction against making future misrepresentations and against future
violations of the Telemarketing Sales Rule. The order with Marc DuBoise and Gerald LaFrance
requires them to post a $200,000 performance bond before becoming involved in prize promotions
again and to pay $65,000 each in redress. The order with Kenneth Nelson requires him to pay $1,000

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in redress. The company assets of Publishers Award Bureau have been given to a permanent receiver.

Retail Sales & Marketing (Joseph Hayes and Thelma Hayes, d/b/a); Automated Guest
Directories, Inc.
A federal district court issued an order banning Joseph and Thelma Hayes, who did business under the
name Retail Sales & Marketing, and Automated Guest Directories from marketing or helping others
to market any business venture in the future. The default order was issued after the defendants failed
to respond to Commission allegations that they used deceptive claims in marketing their business
opportunity, which involved the sale of advertising on directory boards placed in hotel lobbies. The
Hayeses, who offered their business opportunities for $30,000, allegedly made false earnings claims
and false representations about the location assistance that would be provided to purchasers of the
business opportunities. The judgment against the Hayeses and Automated Guest Directories includes
a $465,000 judgment for consumer redress, but it is unclear how much can be collected. (Also see
Retail Sales & Marketing, page 101).

S.J.A. Society, Inc. (d/b/a Apex Marketing Group, ASC, Atlantic Service Corp., and
Publishers Service); Thomas Alan Blair; Thomas P. Johnson
A telemarketing company and two principals are required to pay $88,000 in consumer redress to settle
allegations that they used fraud and deception in their magazine marketing business, in violation of
federal laws. The Commission alleged that the defendants told consumers they would receive
"prepaid" magazines and sometimes promised prizes or cash during the sales pitch. In fact, the
Commission said, S.J.A. billed consumers more than the full cost of the regular magazine
subscriptions offered by the publishers and harassed and threatened consumers who tried to cancel
orders. The consent order, among other things, bars future misrepresentations about the cost of
magazines and the awarding of prizes, provides for accurate disclosures of charges and a 30-day
cancellation period, and bars future violations of the Telemarketing Sales Rule and the Fair Debt
Collection Practices Act.

Sage Seminars, Inc.; Peggy Ann Davenport; William R. Dempsey
Sage Seminars, a franchisor of opportunities to produce motivational seminars, agreed to settle
allegations that it overstated potential earnings and failed to provide required documentation to
prospective investors, in violation of the Franchise Rule, and misrepresented that it provided
marketing support and assistance in recruiting seminar participants. Under the terms of the order, the
two owners/officers of the company are banned from selling or marketing any franchise or similar
business venture in the future and from offering employment opportunities for which they charge
money. The defendants are also required to pay more than $950,000 for consumer redress to franchise
purchasers.

Silver State Western Publishing, Inc. (d/b/a Prime Time Marketing and Prime Time
Publishing); John A. Pieri
Silver State, doing business as Prime Time, and its president agreed to pay $65,000 for consumer
redress to settle allegations that they engaged in a deceptive telemarketing prize-promotion scheme.
The Commission alleged that the defendants enticed consumers into purchasing "Say No to Drugs"
materials or magazines through promises of valuable prizes, which turned out to be worth much less
than what consumers paid Prime Time. Under the terms of the order, the defendants are banned from
engaging in any telephone premium promotion, prize promotion, or recovery service, and are
prohibited from future violations of the Telemarketing Sales Rule.

Sparta Chem, Inc.; Compu-Kleen, Inc.; Dennis J. Saccurato
Two companies and their owner agreed to settle allegations that they used a variety of deceptive
practices in their telemarketing operation to get orders for business supplies. The Commission alleged
that the defendants claimed that unordered merchandise had been ordered, charged inflated prices,
added unauthorized fees, and charged "restocking" and shipping costs when consumers returned
unordered goods. The order requires the defendants to pay $305,000 for consumer redress. It also
requires Dennis Saccurato to secure a $100,000 performance bond before engaging in any future
telemarketing and bars the defendants from the business practices cited, including violations of the
Telemarketing Sales Rule.

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Student Aid Incorporated; Adel Kovaleva; Raimma Tagiev
Two officers of Student Aid agreed to pay $7,500 to settle allegations in connection with the college
scholarship search service they ran. According to the Commission, the respondents charged an upfront
fee for "guaranteed" scholarship or grant money, but consumers almost never obtained the promised
money and could not receive refunds of their fees without meeting onerous conditions. The consent
order bars the respondents from misrepresenting any similar service they offer in the future, requires
them to disclose all terms and conditions of any refund policy, and prohibits them from withdrawing
money from consumers' accounts without authorization, among other prohibited conduct.

Student Assistance Services, Inc.; Fred Markowitz; Donald McGovern
The Commission negotiated an agreement with Student Assistance and two individuals, who ran an
alleged scholarship search service scam. According to the Commission, the defendants solicited high
school and college students and charged an upfront fee for their services, but provided nothing at all
or a list of sources for financial aid that students had to apply to on their own. In addition, the
defendants allegedly misrepresented their refund policy. The settlement requires the payment of
approximately $340,000 into a refund pool for consumer redress, bans the defendants from ever
selling scholarship-related services again, requires each individual defendant to post a $75,000 bond
before engaging in any telemarketing activity, and prohibits them from violating the Telemarketing
Sales Rule in the future.

Thadow, Inc.; Alex Norman
Thadow and its president agreed to pay $130,000 for consumer redress as part of a settlement of
allegations arising from their roles in an allegedly fraudulent "telefunding" scheme. The Commission
alleged that the defendants telephoned elderly consumers to whom previous telemarketers had
promised valuable prizes, told them that the prizes would be delivered in return for a purportedly
tax-deductible charitable donation, and falsely claimed that the value of the prize greatly exceeded the
amount of the donation. The order prohibits the defendants from engaging in future misrepresentations
in connection with soliciting charitable donations or payments in return for prizes or awards and any
other misrepresentations regarding any material aspect of any future telemarketing or telefunding
activity.

Thornton Communications, Inc.; Thomas E. Thornton
Thornton Communications and its owner are required to pay $8,000 in consumer redress to settle
Commission allegations that they ran a fraudulent advance-fee credit card mill. According to the
Commission, the defendants offered unsecured credit card accounts and charged a $100 processing
fee, but few consumers, if any, received the promised card. In addition to requiring the redress
payment, the settlement bars future misrepresentations and violations of the Telemarketing Sales
Rule.

Tower Cleaning Systems, Inc.; David A. Gansky
Tower Cleaning, which has commercial janitorial franchisees in 11 states, agreed to pay $50,000 for
consumer redress to settle allegations that it made inflated earnings claims to potential franchisees,
did not provide critical information, and refused in numerous instances to refund fees or deposits. The
order prohibits the company and its president from misrepresenting the sales volume or income of
franchisees and from violating the Franchise Rule in connection with future efforts to market
commercial janitorial services or any other franchises.

Universal Credit Corporation (Gabrielle Ellis and Mark Thomas Ellis, d/b/a)
Gabrielle and Mark Ellis are required to pay $50,000 for consumer redress as part of a settlement of
allegations in connection with their credit repair business. The Commission alleged that the Ellises,
doing business under the name Universal Credit, misrepresented their ability to remove negative
information from credit reports and debited consumers' checking accounts without authorization. The
order also requires the Ellises to post a $250,000 performance bond before engaging in any
telemarketing activities in the future, permanently bans them from performing credit repair services or
selling credit repair products, and prohibits them from violating the Telemarketing Sales Rule.

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USA Channel Systems, Inc.; Two-Way Systems, Inc.; Charles Bernard Bayne; Rick
Havil
The Commission negotiated settlements with two individuals and two firms that they ran as a single
business enterprise, resolving allegations that the defendants understated the risks and overstated the
potential profits to investors in paging licenses issued by the Federal Communications Commission
(FCC). The settlement with Rick Havil requires him to pay $65,000 for consumer redress. The
settlement with Charles Bayne and the two corporate defendants imposes a $50,000 judgment against
Bayne and a $50,000 judgment against the two companies. Both orders prohibit the defendants from
making a variety of false claims in connection with FCC licenses or any telemarketed product or
service and require Havil and Bayne each to post a $250,000 performance bond before engaging in
telemarketing again.

USA Credit Services; Steven Spence
USA Credit and its president agreed to settle Commission allegations that claims about their "credit
repair" capability were false. According to the Commission, Steven Spence claimed he could remove
negative information from consumers' credit reports, even if the information was accurate; in addition,
he sought payment for services before they were rendered, a violation of the Telemarketing Sales
Rule. The settlement requires Spence to pay $265,395 in consumer redress, bars him from deceptive
practices, and requires him to provide customers with information on their rights and remedies under
the Fair Credit Reporting Act.

Windward Marketing, Ltd.; Genesis Marketing and Administration, Inc.; Philip
Edward Dill; Ronald Jay Pepper
The Commission reached settlements with two companies and their owners in connection with
allegations about their roles in a magazine subscription scheme involving a group of telemarketers.
According to the Commission, Genesis telephoned consumers and used a variety of deceptive claims,
including promising valuable prizes, to get information about consumers' bank accounts. Windward
then allegedly made deceptive "verification" calls and used the information to process unauthorized
debits of consumers' bank accounts. In both settlements, the corporate defendants are required to
relinquish their rights to frozen assets that are to be used for consumer redress, the full amount of
which is $13 million. The order with Genesis and Philip Dill requires them to relinquish
approximately $60,000 for consumer redress, and the second order requires Windward and Ronald
Pepper to relinquish $25,000. The orders prohibit the defendants from debiting consumers' checking
accounts without advance written approval and permanently ban Dill, Pepper, and Windward from
any future telemarketing activities.

World Class Network, Inc.; Howard K. Cooper; Daniel R. Dimacale; Denise L.
Dimacale; Robert C.K. Lee
World Class Network, a multilevel marketer of travel agency credentials and a work-at-home travel
agency business opportunity, and four company officers agreed to pay more than $3 million into a
consumer redress fund to provide refunds for the more than 51,000 consumers who purchased the
defendants' travel tutorial kit. The Commission alleged that the defendants misrepresented the
discounts and earnings available through the tutorial kit. The settlement bars the defendants from
operating any type of pyramid or multilevel marketing scheme for travel-related business
opportunities in the future, requires them to provide a full refund policy and "cooling off" period in
connection with sales of any travel tutorials, and bars misrepresentations of earnings claims and travel
benefits. The order requires redress as follows: World Class Network, $800,000; Howard Cooper,
$50,000; Daniel and Denise Dimacale, $1,702,000; Robert Lee, $450,000.

Worldwide Marketing and Distribution Company, Inc. (d/b/a Hollywood Pop);
Mammoth Holding Corporation; Planet Ice Cream, Inc.; Popcorn Flavors
International Inc.; Popcorn Supply Company, Inc.; Remote Assembly Corporation;
Royal Imperial Ltd., Inc.; Sutton Group of Palm Beach, Inc.; Titan Management
Corporation; Frank Friedland; Steven F. Gelb
Nine corporations and two individuals agreed to pay approximately $1.4 million for consumer redress
to settle allegations of business opportunity fraud. The Commission alleged that Frank Friedland,

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Steven Gelb, and two other individual defendants, through a web of corporations, made numerous
misrepresentations in marketing their business opportunities involving popcorn vending machines.
They also allegedly failed to give potential investors pre-sale disclosures about their business
opportunities and documentation to support claimed earnings, as required by the Franchise Rule. The
order permanently removes Friedland and Gelb as officers of the defendant corporations; it requires
Friedland to pay $45,500 for redress and Gelb to pay $64,000, which will be added to other assets in
control of the court-appointed receiver. The order also prohibits the defendants from future violations
of the Rule and from making false statements or misrepresentations in the sale of any telemarketed
product, service, or investment opportunity.

Worldwide Wallcoverings and Blinds, Inc.; Martha Kazak; Bruce Sears
The Commission obtained a final judgment against Worldwide and a settlement with its principals in
connection with allegations that the company, which advertised discount wallpaper and blinds in
national magazines, defrauded thousands of consumers by, in many instances, simply pocketing their
money and not shipping any merchandise at all. Both settlements prohibit the defendants from
misrepresenting any fact material to a consumer's decision to purchase from them, and from violating
the Mail or Telephone Order Merchandise Rule. The agreement with the two individuals permanently
bans Bruce Sears from the mail order industry and requires him to pay the proceeds of the sale of his
boat as consumer redress. It requires Martha Kazak to pay $3,000 for consumer redress. The judgment
against Worldwide requires the company to pay more than $447,600 for consumer redress, although it
is unlikely that there will be any funds available to pay the judgment

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Civil Penalty Actions

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Service, Colorado Dawn, and Key Concept); Richard Prochnow (d/b/a Direct Sales
International); William J. Stemple, Sr. (d/b/a Budget Marketing of Virginia)
Budget Marketing, a national telemarketer of magazine subscriptions, and 11 of its dealers agreed to
pay a $395,000 civil penalty in connection with a consent order settling allegations that they debited
consumers' bank accounts electronically without written authorization, in violation of the Electronic
Funds Transfer Act. The consent order bars the respondents from violating the Act and from other
illegal practices in the future. (Also see Budget Marketing, Inc., page 72.)

Cabot Hosiery Mills, Inc.
Cabot agreed to settle allegations that the company violated the Textile Fiber Products Identification
Act when it sold a mislabeled line of socks to a national retailer, The Gap. According to the
Commission, labels on the Granite Ragg socks indicated that the socks contained more cotton and
Lycra spandex fiber and less polyester, acrylic, and nylon fibers than they actually did. In addition,
the company allegedly furnished false guaranties that its socks were not misbranded under the Act.
The consent order prohibits the company from violating the Act in the future and requires it to pay a
$10,000 civil penalty.

Hawthorne Communications, Inc.
Hawthorne, an advertising agency, is required to pay a $25,000 civil penalty for violating a 1994
Commission order requiring it to have substantiation for advertising claims, including those made by
endorsers. Hawthorne allegedly violated the 1994 order in an infomercial it produced that contained
unsubstantiated high earnings claims in connection with the Mellinger Plan, a course in starting and
operating a work-at-home import/mail order business. In addition to paying the civil penalty,
Hawthorne is barred from producing or distributing infomercials that contain deceptive earnings
claims or testimonials. The Mellinger Plan's promoter agreed to settle allegations stemming from the
same infomercial (see 1554 Corporation, page 68).

Health Wave, Inc.; Mark Livingston
Health Wave and its president agreed to pay a $10,000 civil penalty to settle allegations stemming
from their sale of business opportunities involving snack food vending machines. The Commission
alleged that the defendants failed to give potential investors complete and accurate information about
the business opportunity they sold and failed to substantiate earnings claims, in violation of the
Franchise Rule. The consent order prohibits the defendants from misrepresenting material aspects of
any franchise or business venture they offer and requires them to comply with all aspects of the Rule.

International Masters Publishers Inc.
International Masters Publishers, a mail order company that sells informational cards on a variety of
topics (recipes, home repairs, gardening, etc.), agreed to pay a $60,000 civil penalty to settle
allegations that it violated the debt collection provisions of a previous Commission order. The 1987
order settled allegations that the company did not honor membership cancellation requests or
promptly credit the accounts of consumers who returned the cards but, instead, sent dunning letters.
The current order prohibits the company from violating any provision of the 1987 order, including
misrepresenting the terms of its sales plan and engaging in debt collection practices using threats of
adverse consequences that are unlikely to occur.

J.C. Penney Company, Inc.
J.C. Penney, one of the largest retail stores in the country, agreed to pay a $225,000 civil penalty to
settle allegations that it violated consumers' rights to receive written notice of the reasons for a denial
of credit, as required by the Equal Credit Opportunity Act. The Commission alleged that when the
store denied credit applications, it either failed to explain the reasons or gave the wrong reasons.
Under the consent order, J.C. Penney is required to give consumers who were denied credit in the past
a written statement of the correct reasons for denial and to comply with federal laws requiring such
explanation in the future.

Lifestyle Fascination, Inc.
Lifestyle, a company that markets a number of products through its catalog, agreed to pay a $60,000

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civil penalty for allegedly violating a 1994 Commission order by making unsubstantiated claims about
the performance or efficacy of certain products: a pest control device, a pain reliever, and an antenna
substitute. The consent decree to settle these allegations prohibits Lifestyle from future violations of
the 1994 order and requires the company to give copies of the 1994 order and consent decree to its
officers, agents, representatives, employees, and distributors.

Marketing Masters, Inc. (a/k/a Pre-Need Family Services of Lancaster County);
Pre-Need Family Services of Berks County, Inc.; Pre-Need Family Services of
Delaware Valley, Inc.; Pre-Need Funeral Associates of Lehigh Valley, Inc.; David A.
Heisterkamp; Donald E. Morris
Marketing Masters, its subsidiaries, and two officers agreed to pay a $12,000 civil penalty to settle
allegations that they violated the Funeral Rule. These companies are nontraditional funeral providers:
they sell funeral goods and services but do not operate funeral homes. The Commission alleged that
the defendants did not provide a general price list to consumers during sales presentations and failed
to make the required disclosure on their price list for outer burial containers. In addition to paying the
civil penalty, the defendants agreed to comply with the Rule in the future.

Mattel, Inc.
Mattel, a toy manufacturer and marketer, agreed to pay more than $146,000 in civil penalties to settle
allegations that it violated the Mail or Telephone Order Merchandise Rule. The Commission alleged
that the company failed to make timely deliveries or issue prompt refunds in the sale of its Barbie
collectible dolls, which it advertises by direct mail and in magazines and other publications. The
consent order prohibits Mattel from violating the Rule in the future.
(Megatrend Telecommunications, Inc.)

Alan D. Wittstein
The former president of Megatrend agreed to settle allegations stemming from his role in marketing
TableMate System franchises for cordless telephones designed to be used in restaurants and similar
locations. The Commission alleged that the defendants misrepresented the ease with which the buyers
could place the product and the amount of assistance the defendants would provide to the buyers. In
addition, the defendants allegedly violated the Franchise Rule by failing to provide prospective buyers
with the required basic disclosure and earnings claims documents and making unsubstantiated
earnings claims. Under the settlement, Alan Wittstein agreed not to violate any provisions of the Rule
in the future and to pay a civil penalty of $10,000.

The Money Tree, Inc.; Vance R. Martin
The Commission announced a settlement agreement with Money Tree and its president in connection
with their business of making short-term installment loans, most of them to low-income consumers.
Under the consent order, Money Tree and Vance Martin will pay $75,000 in civil penalties to settle
allegations that they discriminated against elderly consumers and consumers who receive public
assistance, in violation of the Equal Credit Opportunity Act. The order bars them from the alleged
practices and requires them to comply with the provisions of the Act in the future. In a separate
agreement, Money Tree and Martin are required to offer consumer refunds (see The Money Tree, Inc.,
page 79).

National Marketing, Inc.; Paul Woodward
National Marketing and officer Paul Woodward agreed to pay a $15,000 civil penalty to settle
allegations that they failed to give potential investors pre-sale disclosures about the business
opportunity they sold and documentation to support claimed earnings, as required by the Franchise
Rule. The defendants sold bulk candy using display racks placed in retail stores. The consent order
prohibits the defendants from misrepresenting material aspects of any business venture they offer and
requires them to comply with the Rule in the future.

Nu Skin International, Inc.
Nu Skin, the firm behind an international multilevel marketing system with thousands of distributors

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selling skin care products and nutritional supplements, agreed to pay a $1.5 million civil penalty to
settle allegations over claims for fat loss, muscle maintenance, and other benefits that it made for
supplements containing chromium picolinate and L-carnitine. The Commission alleged that Nu Skin
could not produce adequate substantiation for the claims and therefore violated a 1994 order requiring
the firm to have competent and reliable scientific evidence to support benefits claims for any product
it sells.

O'Neill, Incorporated
O'Neill, the largest seller of wetsuits in the United States, agreed to pay a $10,000 civil penalty to
settle allegations that it failed to accurately list the fiber content of its garments in violation of federal
law and a 1992 Commission order. The previous order had settled allegations that O'Neill violated the
Textile Fiber Products Identification Act by mislabeling certain wetsuits. Since that time, the
company has allegedly sold thousands of mislabeled wetsuits. In addition to paying the civil penalty,
O'Neill is permanently barred from future violations of the 1992 order, which requires compliance
with the Textile Act.

T.C.A., Inc.; Stephen Lawrence; Effie Pappas
Two principal officials of a collection agency, T.C.A., paid $25,000 in civil penalties to settle
allegations that they violated the Fair Debt Collection Practices Act when they or their collectors used
abusive and deceptive practices in attempting to collect debts from consumers. The settlement
originally imposed a $100,000 judgment, but $75,000 was suspended if the remaining $25,000 was
paid by a certain date. In addition to requiring the civil penalties, the consent order permanently
enjoins the defendants from engaging in further violations of the Act.

Tower Loan of Mississippi, Inc.
Tower Loan, a consumer loan and finance company, agreed to pay close to $380,000 to settle
allegations that it violated a 1992 Commission order, which had settled earlier allegations that the
company did not include the costs of credit-related insurance when making loan disclosures to
consumers. The Commission alleged that Tower Loan failed to make full redress payments to its
customers as required by the earlier order and that it incorrectly described how it calculated redress in
a report to the Commission. The current consent decree requires Tower Loan to pay almost $280,000
to make full consumer redress and to pay a civil penalty of $100,000.

United Compucred Collections, Inc.; Arthur B. Stineman
United Compucred and its president are permanently banned from sending out "attorney" letters under
a consent order settling allegations that they violated the terms of two previous Commission orders.
The previous orders were issued against the debt collection agency in 1976 and 1980 for allegedly
making deceptive threats of legal action and misleading references to attorneys in debt collection
letters sent to consumers. The current order prohibits the defendants from violating any provisions of
the two previous orders and from violating the Fair Debt Collection Practices Act. It requires the
company and Arthur Stineman to pay civil penalties of $55,000 and $5,000, respectively.

Venus Enterprises, Inc.; Balram Hingorani
Venus Enterprises, an importer of women's clothes, and company president Balram
Hingorani agreed to pay a $4,000 civil penalty to settle allegations that the company
mislabeled the care instructions on various garments made of rayon. The clothes
shrank significantly when consumers hand-washed them as instructed, the
Commission said. The consent order prohibits the defendants from violating the Care
Labeling Rule in the future.
WestPoint-Stevens, Inc.
WestPoint-Stevens, one of the biggest textile manufacturers in the United States, agreed to settle
allegations that it violated the Textile Fiber Products Identification Act by misbranding the sheets and
towels it manufactures and sells. The company allegedly indicated that its sheets and towels were
made entirely of Pima cotton (a premium cotton) when, in fact, the products contained only 6% to
50% Pima cotton. In addition, according to the Commission, the company furnished a false guarantee

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that its textile products were not misbranded under the Textile Act. The company is required to pay a
$360,000 civil penalty, the largest civil penalty even obtained in a Textile Act case, and is prohibited
from future violations of the Act.

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Permanent Injunctions

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Thomas F. Frontera

X960067

4/18/97

Robin L. Murphy
International Champions, Inc.

X960067
X950086

4/18/97
3/11/97

InVisions International
Corporation

X970027

J.P. Meyers Company, Inc.

X960045

11/07/96 Misrepresented and
Deceptive Claims in
Infomercials
10/01/96 Franchise Rule

(Linc II, Inc.)

X960083

12/25/96 Job Placement Fraud

Majors Medical Supply, Inc.

X970007

9/29/97

Franchise Rule

Marketing Response Group, Inc.

X960036

1/15/97

Direct Mail Fraud

Mauney Hosiery Mills, Inc.

X970036

4/09/97

(Meridian Capital Management,
Inc.)

Franchise Rule

Video Game Business
Opportunity
Toupees

900-Number Business
Venture
Employment Services

Joel Ancelowitz

Richard Randall
(Metro Data, Inc.)

Medical Equipment
Business Opportunity
Direct Mail Promotions for
Telemarketers
Socks

X950060

Textile Fiber Products
Identification Act
11/21/96 Telemarketing Fraud

X960112

12/11/96 Job Placement Fraud

Employment Services

1/02/97

Property Inspection Service
Franchises
Credit Repair

Investment Scheme
"Recovery Room"

Katherine M. Howard
Mortgage Service Associates, Inc. X950049
(National Credit Foundation, Inc.)

Fair Credit Reporting Act

NCF Corp., Hal Z. Lederman

X970005

10/20/96

Brian W. Cutright

X970005

2/14/97

Mark F. Guimond

X970005

10/18/96

Robert J. Maynard, Jr.
National Invention Services, Inc.

X970005
X970063

4/10/97
8/15/97

Patent Fraud

Invention Promotion
Services

(Oasis Southwest, Inc.)

X960079

6/06/97

Telemarketing Sales Rule

Prize Promotion - "Say No
to Drugs" Materials

Job Placement Fraud

Employment Services

Franchise Rule

Directory Board Advertising
Business Opportunity

Ray Jojola
(Omega Promotions, Inc.)

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Regency Services, Inc.

X960118

4/14/97

Lisa Warnock Grant

X960118

4/04/97

Richard Devon Grant

X960118

4/04/97

Michael Warnock
(Retail Sales & Marketing)

X960118

4/04/97

Ann Fox

X970003

8/08/97

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Permanent Injunctions

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Allan O'Hearn
Telecommunications Protection
Agency, Inc.

X970003
X960085

7/22/97
12/03/96 Telemarketing Sales Rule

Prize-Promotion "Recovery
Room"

1A company name shown in parentheses is for identification of the case only. The company is not a defendant in the item shown in the
table.

Ad-Com International, Inc.; Anthony Catalano; Lorraine Corrales
The Commission reached a settlement with Ad-Com and its officers in connection with their sale of
business opportunities consisting of 900-number lines that offer entertainment programs. The
defendants allegedly violated the Franchise Rule, which requires franchisors to give potential buyers
important information about the business venture offered. They also allegedly violated the
900-Number Rule by using "collect callback," whereby a caller telephones a toll-free 800-number and
receives in return a collect call with the entertainment program. The order prohibits the defendants
from misrepresenting the sales, income, or profits of franchisees; requires them to comply with the
Franchise Rule; and bars them from violating the 900-Number Rule.

Alliance Communications, Inc.; Oliver Porter
Alliance and its president settled allegations in connection with their application preparation services
for specialized mobile radio and paging licenses issued by the Federal Communications Commission
(FCC). The defendants allegedly misrepresented that consumers would receive FCC licenses through
their services and misrepresented the investment value of the licenses. The order permanently bars the
defendants from the marketing of application preparation services and from falsely representing the
profit or risk of any investment in the future.

Carousel of Toys USA, Inc.; Kelie Brodzinski
Carousel of Toys is out of business, and the company director has agreed not to front for any
fraudulent franchisor in the future, following the resolution of allegations against them. The
Commission alleged that the defendants used deceptive and false claims to sell their business
opportunity, which consisted of display racks featuring Disney and other trade-named toys and
products to be placed in retail locations. The settlement prohibits the defendants from misrepresenting
the income or profits of any franchise or business opportunity they sell; failing to disclose all the costs
and fees dealers must pay in order to begin operating the business, including an itemized list of
inventory, and the dealer cost and a suggested retail price for each item; violating the Franchise Rule;
and assisting anyone who misrepresents a franchise or business opportunity or violates the Rule.

Commercial Electrical Supply, Inc.; Michael C. Spence
Commercial Electrical and its owner agreed to settle allegations that they used a variety of deceptive
practices in their telemarketing operation to get orders for business supplies. The Commission alleged
that the company misrepresented its products, sent merchandise that was unordered, charged inflated
prices, and added unauthorized fees. The order prohibits the defendants from the business practices
cited, requires them to comply with the Telemarketing Sales Rule, and requires Michael Spence to
obtain a $100,000 performance bond before engaging in future telemarketing.
(Dean Thomas Corporation, Inc.,The)

Raymond Celie; Randy B. Lonis
Two former managers of a publishing company agreed to settle allegations that they misrepresented
how and where their publications were distributed and attempted to collect money for unordered
advertising. The Commission alleged that the defendants misrepresented that the advertising proceeds
would support a local civic purpose and that businesses had previously authorized advertising and
were obligated to pay for it. Under separate but identical settlements, Raymond Celie and Randy
Lonis are prohibited from making false or misleading representations in connection with the sale of
any advertisement, publication, or program in the future. Each is required to post a $500,000 bond
before entering the business of selling advertisements.

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Delta Distributors Company, Inc.; Steven Harding
The Commission reached a settlement with Delta Distributors and its president, settling allegations in
connection with their sale of business opportunities involving countertop pay telephones. The
defendants allegedly made unsubstantiated earnings claims and failed to provide critical pre-purchase
information to potential buyers, in violation of the Franchise Rule. The order permanently bars the
defendants from future violations of the Rule.
(Direct Link, Inc.)

Suzanne Bannister
A federal district court has permanently barred Suzanne Bannister from misrepresenting that the
services of her employment firm will lead to jobs in specific fields or geographic areas. In addition,
she must post a $50,000 performance bond before marketing employment-related services for the next
10 years. The order follows Commission allegations that the defendant charged consumers upfront
fees for access to "guaranteed" jobs, but few, if any, of her clients obtained jobs in their chosen fields
or geographic areas.
(Fortuna Alliance, LLC)

Monique Delgado
The Commission reached a settlement with Monique Delgado in connection with her role in an
allegedly illegal pyramid scheme on the Internet. The Commission alleged that Fortuna and its
officers induced thousands of consumers around the world to join the pyramid scheme, promising
thousands of dollars in "profits" as other people "enrolled" in the program. The order permanently bars
Delgado from participating in any chain or pyramid program and from making deceptive claims in
connection with any marketing or investment program she offers. (Also see Fortuna Alliance, LLC,
page 122.)
(Genesis One Corporation, d/b/a Bureau One)

Rose Kistorian (a/k/a Vartouhi Kistorian)
The Commission reached a settlement with Rose Kistorian, president of Genesis One, in connection
with allegations that she made false earnings claims and other misrepresentations in marketing
900-number business ventures. The defendant also allegedly violated the Franchise Rule by failing to
give investors required pre-purchase information. The order bars Kistorian from misrepresenting
income and other information concerning any franchise or business opportunity and from violating the
Rule in the future. (Also see Genesis One Corporation, page 122.)

Georgia International Export Co., Inc. (d/b/a Creative Technologies International);
L&S Manufacturing, Inc.; Steven Axelrod; Arnold Filner; Andrew Gilmore; Wayne
Gregory
The defendants in a lawsuit that alleged that they deceptively sold business opportunities for vending
machines agreed to settle the allegations under orders that would bar them permanently from selling
franchises and business opportunities. The Commission alleged that the defendants misrepresented the
earnings potential of the vending machines, which dispensed single-use disposable cameras; used
phony references; misrepresented the ability of locating firms to find profitable sites for the machines;
and falsely stated that Creative Technologies was in partnership with Eastman Kodak Company. The
five settlements ban the defendants from franchise or business opportunity sales for life.

Ideal Concepts, Inc.
Ideal Concepts is banned from future telemarketing under an agreement settling allegations that the
company's telemarketers promised consumers, primarily senior citizens, valuable prizes or awards
that were never delivered or, if delivered, were worth a fraction of their claimed value. The prizes
were offered as an inducement for consumers to purchase a variety of products costing from $400 to
over $1,000. A separate settlement requires the company president to pay consumer redress (see Ideal
Concepts, Inc., page 123.)
(Ideal Credit Referral Services Ltd.)

David Wayne Panella (d/b/a Consolidated Financial Services or Gateway Service

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Center)
David Panella, a loan broker, agreed to settle allegations in connection with his role in a scheme that
charged consumers advance fees for loans they never received. According to the Commission, Panella
operated a U.S.-based "turn-down" room, sending out denial letters to loan applicants who had
answered ads and paid an upfront fee. The other six corporate and seven individual defendants in the
case were based in Canada, but targeted U.S. consumers. The settlement bars Panella from knowingly
providing assistance or support to any telemarketers employing unfair or deceptive practices to sell
credit-related services and from violating the Telemarketing Sales Rule. A number of the defendants
in this case were required to pay consumer redress (see Ideal Credit Referral Services Ltd., page 124).
(Intelinet Data Services)

Patrick Donaghy; Thomas F. Frontera; Robin L. Murphy
In separate settlements, three officers of a firm that marketed job search services agreed to settle
allegations that they participated in a fraudulent telemarketing scheme. Stratified Advertising and
Marketing, Inc., doing business as Intelinet, allegedly misrepresented the availability of government
jobs in consumers' chosen fields and locations, and misrepresented the ease of obtaining a refund of
the advance fees it charged, if a consumer failed to find a job. The three orders prohibit the defendants
from making such misrepresentations in the future and from engaging in any telemarketing activities
for 10 years unless each first posts a $100,000 performance bond. (Also see Intelinet Data Services,
page 125.)

International Champions, Inc.; Wayne B. Hunt
The Commission reached a settlement with International Champions and its president, settling
allegations in connection with their sale of business opportunities involving countertop video games.
The defendants allegedly made unsubstantiated earnings claims and failed to provide critical
pre-purchase information to potential buyers, in violation of the Franchise Rule. The order
permanently bars the defendants from future violations of the Rule.

InVisions International Corporation; Stephen C. Fox
InVisions and its president agreed to settle allegations that the company was selling nothing but
toupees when advertising its painless, nonsurgical "procedure" or "process" as a maintenance-free,
permanent solution to hair loss. The Commission also alleged that the company misrepresented
consumer endorsements used in its infomercials and misled consumers as to its refund policy. The
order prohibits the defendants from claiming that the InVisions Process is not a hairpiece, wig, or
toupee, and from misrepresenting endorsements, testimonials, or refund policies.

J.P. Meyers Company, Inc.; Joseph Shapiro
The Commission reached a settlement with J.P. Meyers and its corporate officer in connection with
their sale of business opportunities consisting of 900-number lines that offer entertainment programs.
The defendants were alleged to have violated the Franchise Rule, which requires franchisors to give
potential buyers important information about the business venture offered. The order prohibits the
defendants from misrepresenting the sales, income, or profits of franchisees in the future and requires
them to comply with the Rule.
(Linc II, Inc.)

Joel Ancelowitz (a/k/a Jim Manti)
Joel Ancelowitz, a telemarketer who sold employment services for Linc II, agreed to settle allegations
regarding his role in an allegedly fraudulent job search service. According to the Commission, the
company claimed that it had access to specific jobs and charged consumers upfront fees for its
services, but did not provide clients with jobs or even job interviews in many cases. The order bars
Ancelowitz from engaging in telemarketing in any form or in the activities of a job placement agency
and from assisting others in either of these activities. (Also see Linc II, Inc., page 126.)

Majors Medical Supply, Inc.; Joanne Phillips; Stuart Phillips
Majors Medical and its two corporate officers agreed to settle Commission allegations that they made
false claims about the income franchisees could make and the startup costs of investing in their

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medical equipment business ventures. The franchises involved the sale and rental of durable medical
equipment such as wheel chairs. The settlement provides for the liquidation of corporate assets;
requires the individual defendants, for five years, to post a $1 million bond each before involving
themselves in the sale of any franchise or business opportunity; and prohibits them from
misrepresenting the likely income, profits, or sales of any product or service they offer in the future.

Marketing Response Group, Inc.; Marketing Response Group and Laser Company,
Inc.; Palm Harbor Holdings, Inc.; Pete-Nik Holdings, Inc.; Service Bureau
International, Inc.; William S. Kilichowski; Peter J. Porcelli, Jr.
Marketing Response, a mailing house, and related defendants agreed to settle allegations that they
assisted fraudulent telemarketers by sending out mail promotions that falsely promised quick land
sales, guaranteed awards, and free vacations. The order bars the two individuals and the five
companies they operate from sending out misleading promotional materials and requires them to
monitor the business activities of future telemarketing clients for deception. It also bars the defendants
from violating, or assisting others in violating, the Telemarketing Sales Rule.

Mauney Hosiery Mills, Inc.
Mauney agreed to settle allegations that the company violated the Textile Fiber Products
Identification Act when it sold a mislabeled line of socks to a national retailer, The Gap. According to
the Commission, labels on the Granite Ragg socks indicated that the socks contained more cotton,
nylon, polyester, acrylic, and Lycra spandex fiber than they actually did. In addition, the company
allegedly furnished false guaranties that its socks were not misbranded under the Act. The consent
order prohibits the company from violating the Act in the future.
(Meridian Capital Management, Inc.)

Richard Randall
Richard Randall settled allegations stemming from his role in an allegedly deceptive scheme in which
telemarketers called victims of previous telemarketing fraud - often involving investments in wireless
telecommunications licenses - and falsely represented that, for a fee, they could recover the money the
consumers had previously lost. The order bars Randall from misrepresenting any material aspect of
future telemarketing or recovery room services and from violating the Telemarketing Sales Rule. He
is required to post a $200,000 performance bond before participating in future telemarketing activities.
(Also see Meridian Capital Management, Inc., pages 128 and 141.)
(Metro Data, Inc.)

Katherine M. Howard (a/k/a Cassandra Stone)
Katherine Howard settled allegations stemming from her position as a sales representative for Metro
Data, a telemarketing operation that ran an allegedly fraudulent employment service. According to the
Commission, contrary to what the company told consumers, it had no relationships with prospective
employers, it cashed checks and charged accounts immediately, it refused to cancel memberships, and
it denied requests for refunds. The order permanently bars Howard from the job placement business.

Mortgage Service Associates, Inc.; J.D. Raffone Associates, Inc.; MSA Nationwide
Field Services, Inc.; Joseph D. Raffone; Vita L. Raffone
Two individuals and the companies through which they did business agreed to settle allegations that
they made false claims in selling franchises for property inspection services. The Commission alleged
that the defendants violated the Franchise Rule by misrepresenting earnings and by not providing
required disclosure documents to potential franchisees. The order prohibits such misrepresentations in
the future, requires all of the defendants to comply with the Rule, and requires each of the individuals
to post a $300,000 performance bond before becoming involved, over the next three years, in a
business that sells franchises or business opportunities.
(National Credit Foundation, Inc.)

NCF Corporation; Brian W. Cutright; Mark F. Guimond; Hal Z. Lederman; Robert
J. Maynard, Jr.
In four agreements, one corporate defendant and four individuals settled allegations in connection

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with their roles in a now-defunct credit repair business. According to the Commission, National
Credit misrepresented its ability to improve consumers' credit histories by permanently removing
negative but accurate information from credit reports. Company officers Brian Cutright and Robert
Maynard also allegedly misrepresented the company's purpose in obtaining consumers' bank account
numbers and debited the accounts without authorization. The Commission alleged that Maynard,
NCF, and NCF owner Hal Lederman produced and disseminated an infomercial about National
Credit's services that misrepresented that the program was an independent television program and not
a paid advertisement. The four orders prohibit NCF and Lederman, Cutright, Guimond, and Maynard
from making the misrepresentations alleged in the complaint, including misrepresenting any right or
remedy under the Fair Credit Reporting Act. In addition, Lederman and Maynard are permanently
banned from engaging in any business or activity relating to credit repair services.

National Invention Services, Inc.,; John F. Lee
National Invention Services and its president/CEO were required by court order to disclose that none
of the nearly 1,000 clients who signed up for their invention promotion services has made more
money from their inventions that they paid the firm to patent and promote them. The disclosure
requirement is included in preliminary orders issued by a federal district court following Commission
allegations that the defendants deceptively marketed their services. Phase 1 of the services included a
research report and preliminary patent search, and phase 2 included patent and promotion services that
cost inventors thousands of dollars. The preliminary orders also prohibit the defendants from falsely
representing any material aspect of their research, patent, marketing, or invention promotion services.
The orders were in effect pending the outcome of a trial on the Commission allegations.
(Oasis Southwest, Inc.)

Ray Jojola
Ray Jojola, one of the principals of Oasis, agreed to settle allegations concerning his role in a
fraudulent prize-promotion scheme primarily targeting senior citizens. According to the Commission,
the company allegedly promised consumers valuable prizes if they purchased "Say No to Drugs"
items, but the prizes consumers received, if any, were not worth more than they paid. In addition, the
company allegedly failed to disclose that no purchase was necessary to win a prize, in violation of the
Telemarketing Sales Rule. The order permanently bans Jojola from engaging in any telephone prize
promotion or recovery room service and prohibits him from future violations of the Rule. A separate
settlement was made with the company and another of its officers (see Oasis Southwest, Inc., page
130).
(Omega Promotions, Inc.)

Regency Services, Inc.; Lisa Warnock Grant (a/k/a Lisa Phillips); Richard Devon
Grant; Michael Warnock
A settlement agreement bans three individuals who allegedly ran a bogus employment services
scheme from ever again engaging in telemarketing or the activities of a job placement agency. The
settlement resolves allegations that the defendants, who owned and operated Regency Services and
Omega Promotions, ran telemarketing operations pitching openings for such positions as cruise ship
tour guides, electronic specialists, and chemical engineers. They allegedly promised to arrange
interviews and induced consumers to divulge their checking account numbers, then debited the
accounts without providing any services. The three defendants pled guilty to criminal charges brought
by the Department of Justice and were sentenced to prison terms. An order against Omega Promotions
calls for payment of consumer redress (see Omega Promotions, Inc., page 130).
(Retail Sales & Marketing)

Ann Fox; Allan O'Hearn
Two defendants agreed to settle allegations concerning their roles in marketing a business opportunity
that involved the sale of advertising on directory boards placed in hotel lobbies. The Commission
alleged that the defendants made false earnings claims and false representations about the location
assistance that would be provided to purchasers of the business opportunities. Under the two
settlements, Ann Fox and Allan O'Hearn are prohibited from engaging in similar deceptive practices
and from violating the Franchise Rule in the future. (Also see Retail Sales & Marketing, page 133).

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Telecommunications Protection Agency, Inc.; Charles Fulton; Jennifer Fulton
A telemarketing "recovery room" operation and its principals agreed to settle allegations that they
falsely claimed they would recover a substantial portion of the money that consumers had previously
lost to fraudulent telemarketers. According to the Commission, Telecommunications Protection
charged an upfront fee for its services but, in most if not all instances, did not recover any money for
its customers. The order prohibits the defendants from making misrepresentations about their recovery
services and from future violations of the Telemarketing Sales Rule. As a result of the Commission's
action, the company ceased all business operations.

< Back | Table of Contents | Next >

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and Fees;
American Honda Motor Co.,
Inc.

C3711

2/06/97

American Isuzu Motors, Inc.

C3712

2/06/97

C3714

2/06/97

and Leasing

Consumer Leasing Act;
Truth-in-Lending Act

Mazda Motor of America, Inc.
Mitsubishi Motor Sales of
America, Inc

C3713
Georgetown Publishing House C3692
Limited Partnership, Inc.
Gerber Products Company
C3744

2/06/97
11/19/96 Misrepresented Advertisement as
Independent Book Review
5/27/97 Unsubstantiated Endorsement
Claims

Grey Advertising, Inc.

C3690
C3691

10/30/96 Misrepresented Performance
10/30/96 Misrepresented Nutrition Claims

Advertising for Hasbro
Advertising for Dannon

Guildwood Direct Limited

C3753

6/16/97

Shoe Insoles

Herb Gordon Auto World, Inc.

C3734

4/15/97

Huling Bros. Chevrolet, Inc.
Hyde Athletic Industries, Inc.

C3732
C3695

4/14/97 Truth-in-Lending Act
12/04/96 Country-of-Origin Labeling

Automobile Sales
Athletic Footwear

Icon Health and Fitness, Inc.

C3765

9/09/97

Treadmill

Interactive Medical
Technologies, Ltd.

C3749

6/16/97

Unsubstantiated Weight-Loss
Benefit Claims
Unsubstantiated Weight-Loss
Benefit Claims

C3750

6/16/97

C3751

6/16/97

C3752

6/16/97

Unsubstantiated Weight-Loss
Benefit and Safety Claims

Weight-Loss Product

Leeka Products (Eliana Crema C3767
and Rogerio Monteiro, d/b/a)
Life Fitness
C3766

9/12/97

Weight-Loss Products,
Hair-Loss Treatment
Exercise Equipment

M.E.K. International (Kave
Elahie, d/b/a)

C3770

9/19/97

Unsubstantiated Benefit,
Performance, and Efficacy Claims
Unsubstantiated Weight-Loss
Benefit Claims
Unsubstantiated Weight-Loss
Benefit and Efficacy Claims

Money Tree, Inc., The

C3735

4/28/97

Truth-In-Lending Act;

Consumer Loans

Fair Credit Reporting Act
Unsubstantiated Product Claims

Night Driving Glasses

Unsubstantiated Weight-Loss
Claims
Truth-in-Lending Act; Consumer
Leasing Act

Book Publishing
Baby Food

Automobile Sales and
Leasing

Weight-Loss Product

William Pelzer, Jr.
William E. Shell, M.D.
KCD Holdings, Inc.

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Nationwide Syndications, Inc.

C3736

4/28/97

Natural Innovations, Inc.

C3718

2/25/97

World Media T.V., Inc.
Nutrition 21

C3717
C3758

2/25/97
7/11/97

Phaseout of America, Inc.

C3716

Premier Products, Inc.

C3720

Weight-Loss Products

Unsubstantiated Health and Medical Pain Relief Device
Benefit Claims
Unsubstantiated Health and
Weight-Loss Claims

Chromium Picolinate

2/12/97

Unsubstantiated Performance and
Benefit Claims

Stop-Smoking Device

2/26/97

Unsubstantiated Safety and
Effectiveness Claims

Food-Thawing Tray

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Progressive Mortgage
Corporation
RBR Productions, Inc.

C3724

3/10/97

C3696

12/10/96 Unsubstantiated Human Safety and Beauty Salon Products
Environmental Benefit Claims

Schering-Plough Healthcare
Products, Inc.
SplitFire, Inc.

C3741

5/16/97

Syncronys Softcorp

C3688

Telebrands Corporation

C3699

C3737

Truth-in-Lending Act

Mortgage Lending

Unsubstantiated Effectiveness
Claims
4/28/97 Unsubstantiated Performance
Claims
10/07/96 Misrepresented Performance

Sunblock

12/13/96 Unsubstantiated Performance
Claims

Hearing Aid,

Spark Plugs
Computer Software

TV Antenna
Chromium Picolinate
Dietary Supplement

Universal Merchants, Inc.

C3707

1/23/97

Unsubstantiated Health and
Weight-Loss Benefit Claims

Uno Restaurant Corporation

C3730

4/04/97

Pizza

Victoria Bie

C3708

1/22/97

Misrepresented Health and
Nutritional Claims
Unsubstantiated Health and
Weight-Loss Benefit Claims

Zale Corporation

C3738

4/28/97

Deceptive Advertising;

Imitation Pearl Jewelry

Chromium Picolinate
Dietary Supplement

Misrepresented Composition or
Origin Labeling

1554 Corporation (d/b/a The Mellinger Company); Brainerd L. Mellinger III
A consent order with 1554 Corporation and its president settled allegations that an infomercial and
other advertising for the Mellinger World Trade Mail Order Plan, a course in starting and operating a
work-at-home import/mail order business, included unsubstantiated earnings claims. The order bars
the respondents from making unsubstantiated claims about the performance, benefits, efficacy, or
success rate of any such product or service; it also bars them from using testimonials or endorsements,
unless they either substantiate that the experience is typical or qualify the representation. In a separate
order, the advertising agency involved is required to pay a civil penalty (see Hawthorne
Communications, Inc., page 105).

2943174 Canada, Inc. (d/b/a United Research Center, Inc.); Patrice Runner
The Commission approved a consent order with a Canadian company and its president settling
allegations in connection with their marketing of Svelt-PATCH, a skin patch that purportedly melts
away body fat. The order requires the respondents to have scientific substantiation for claims that any
product or program controls appetite, increases metabolism, reduces body fat, causes weight loss,
reduces cholesterol, or provides any weight-related benefit. It also requires them to pay $375,000 in
consumer redress.

AAF-McQuay, Inc. (d/b/a AAF International); Filtration Manufacturing, Inc.; Horace
R. Allen; Brandon R. Clausen; Gary L. Savell
Two companies that manufacture and market replacement filters for home forced-air furnaces agreed
to settle allegations that they made misleading claims regarding allergy relief, airborne particle
removal, and cost savings when their filters are used in place of standard forced-air system filters. The
two consent orders, one with AAF-McQuay and the other with Filtration Manufacturing and three
company officers, require the respondents to have substantiation for all claims they make about the
performance, health benefits, and efficacy of any air-cleaning product in the future.

Abbott Laboratories, Inc.
Abbott agreed to settle allegations that it made false and unsubstantiated claims in an extensive
national advertising campaign promoting a nutritional beverage, Ensure, for healthy, active adults.
The Commission alleged that Abbott represented without adequate substantiation that many doctors

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recommend Ensure as a meal supplement and meal replacement for healthy adults, including those in
their thirties and forties. The consent order prohibits Abbott from making any claim about the extent
to which doctors or other professionals recommend any food or dietary or nutritional supplement, or
about any other recommendation, approval, or endorsement of such products, unless Abbott possesses
competent and reliable scientific evidence to substantiate the claim.

Abflex, U.S.A., Inc.; Kent & Spiegel Direct, Inc.; Marsha Kent; Peter Spiegel; Martin
Van Der Hoeven
The Commission approved two consent orders in connection with the marketing of an abdominal
exerciser, one order with Abflex and company officer Martin Van Der Hoeven, and the other with
Kent & Spiegel and its principals. The orders settled allegations that respondents' infomercials and
other advertising for the exerciser contained unsubstantiated claims for weight loss and spot
reduction. The orders require the respondents to have competent and reliable evidence for a variety of
claims regarding the benefits, efficacy, or performance of any exercise equipment in the future. Any
testimonials used in their ads must represent the typical experience of consumers or be accompanied
by a disclaimer.

The Administrative Company; Pre-Paid Legal Services, Inc.; Michael P. McIntyre
Two consent orders, one with Administrative and its corporate officer Michael McIntyre, and one
with Pre-Paid, settled allegations that the respondents made numerous false statements, in general,
about the benefits and appropriateness of living trusts and, in particular, about the more than 3,000
living trusts they sold in conjunction with memberships in the American Association for Senior
Citizens (AASC). Both orders bar the respondents from making false claims about the features and
benefits of living trusts and require them to clearly disclose facts about the appropriateness of living
trusts and the availability of other options for transferring assets. Administrative and McIntyre are
also barred from making false, misleading, or unsubstantiated statements about any legal service they
offer. Pre-Paid is required to monitor clients who sell living trusts and for whom it provides legal
services to ensure they are in compliance with the settlement. In addition, Pre-Paid must offer up to
$130,000 in refunds to certain past purchasers of AASC trusts.

Aldi Inc.
The Commission approved a consent order with Aldi, settling allegations that this regional grocery
chain violated the Fair Credit Reporting Act (FCRA) by failing to tell job applicants who were denied
employment (1) when information in the applicant's credit records played a role in the denial and (2)
the name and address of the firm that provided the credit history information. The order prohibits Aldi
from violating the FCRA in the future and requires the chain to give the information required by the
FCRA to consumers denied employment after January 1, 1994, as appropriate.

Amerifit, Inc.
A consent order with Amerifit settled allegations in connection with the marketing of diet
supplements sold under the trade names "Fat Burners" and "Fast Burners." The order requires the
company to pay $100,000 for disgorgement and to have scientific substantiation for any claim that a
food, drug, or dietary supplement will cause weight loss or reduce body fat. The order also requires
that material bearing the name "Fat Burners Diet, Exercise and Supplement System" clearly disclose
that "the dietary supplement in this system is for nutritional use only and does not contribute to weight
loss or loss of body fat."

Apple Computer, Inc.
Apple agreed to offer PowerPC Upgrade Kits at less than half the original price to certain consumers
who had purchased certain Performa or Macintosh computers and to give rebates to others who had
already purchased the upgrade kits, as part of a settlement of allegations that the company
misrepresented that the upgrade kit was available at the time of computer purchase or would be
available within a reasonable time thereafter, when it actually was not available for more than a year
and cost almost as much as a new PowerPC computer. The consent order also prohibits Apple from
misrepresenting the availability of any microprocessor upgrade product and from representing that
computer hardware is currently able to be upgraded unless the upgrade is then available in reasonable
quantities.

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BodyWell, Inc. (d/b/a BodyWell U.S.A.); Gerard Du Passage
A consent order with BodyWell and company officer Gerard Du Passage resolved allegations in
connection with the marketing of Slimming Soles, shoe insoles that purportedly cause weight loss by
stimulating certain areas of the feet. The order prohibits use of the name "Slimming Soles" without
scientific substantiation that the product actually causes weight loss, requires the respondents to have
scientific substantiation for weight-loss claims for any other products, and requires that testimonials
represent the typical experience of consumers or disclose the fact that results are not typical. The
respondents are also prohibited from violating the Mail or Telephone Order Merchandise Rule and are
required to pay $100,000 in redress.

Bruno's, Inc.
The Commission approved a consent order with Bruno's, settling allegations that this regional grocery
chain violated the Fair Credit Reporting Act (FCRA) by failing to tell job applicants who were denied
employment (1) when information in the applicant's credit records played a role in the denial and (2)
the name and address of the firm that provided the credit history information. The order requires
Bruno's to comply with the provisions of the FCRA in the future.

Budget Marketing, Inc.; Dale Branson (d/b/a Leisure Day Marketing); Charles P.
Donly (d/b/a Budget Renewal Service); Charles A. Eagle; Roy Golden (d/b/a American
Marketing Service); Dennis H. Gougion; John Harrison; Steven Johnson; Dave Keown
(d/b/a Publishers Marketing); Dale T. Lenard (d/b/a Mega-Magazine Service,
Colorado Dawn, and Key Concept); Richard Prochnow (d/b/a Direct Sales
International); William J. Stemple, Sr. (d/b/a Budget Marketing of Virginia)
Budget Marketing (BMI), a national telemarketer of magazine subscriptions, and 11 of its dealers
agreed to settle allegations that their sales and collection practices were deceptive and violated federal
laws. The Commission alleged that the respondents misrepresented the costs and conditions of
subscription agreements and illegally deducted charges electronically from consumers' bank accounts
without authorization. The consent order bars the respondents from violating the Electronic Funds
Transfer Act and from carrying out other illegal practices in the future. (Also see Budget Marketing,
Inc., page 104.)

California SunCare, Inc.; Donald J. Christal
The Commission accepted a consent order with California SunCare and its president, settling
allegations that they made false and unsubstantiated claims that moderate exposure to ultraviolet
radiation of the sun or in indoor tanning salons provides health benefits and that users of the
company's tanning products can obtain these benefits while avoiding the dangers of overexposure and
burning. The order bars the respondents from misrepresenting the effects of exposure to ultraviolet
radiation and requires them to have scientific substantiation for any claims about the health benefits of
ultraviolet exposure and about the performance, safety, benefits, or efficacy of any tanning product or
service. The order also requires the company to place a prominent cautionary statement in future
advertising and labeling for their tanning products.

Computer Business Services, Inc.; Andrew L. Douglass; Jeannette L. Douglass;
Matthew R. Douglass; Peter B. Douglass
Two agreements with Computer Business Services and its principals settled allegations that the firm
made false and misleading advertising claims overstating the potential earnings and profits of its
home-based computer business opportunity. The consent order with the company and three principals,
Andrew Douglass, Matthew Douglass, and Peter Douglass, requires them to pay $5 million in
consumer redress. It also bars them from misrepresenting the earnings or success rate of investors and
prohibits them from using misleading testimonials or endorsements. A separate consent order with
officer Jeannette Douglass contains similar provisions, but no consumer redress requirement.

Comtrad Industries, Inc.
The Commission approved a consent order with Comtrad, settling allegations that the firm made false
and unsubstantiated safety and effectiveness claims for a portable electronic food cooler that doubles

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as a food warmer. The order prohibits Comtrad from misrepresenting the ability of any food storage
product to cool or warm foods or maintain proper cold storage temperatures and requires the company
to have substantiation for claims about the safety or efficacy of such products and to disclose their
potential food safety risks.

Conopco, Inc. (d/b/a Van Den Bergh Foods Company)
A consent order with Conopco, a subsidiary of Unilever United States, Inc., settled allegations that a
national advertising campaign for Promise margarine included unsubstantiated claims. The consent
order requires the company to have adequate scientific substantiation for claims that any margarine or
spread reduces the risk of heart disease or contributes to any health-related condition. The order also
bars Conopco from misrepresenting the amount of fat, saturated fat, cholesterol, or calories in any
spread or margarine and requires it to follow U.S. Food and Drug Administration labeling regulations
for such claims.

Dean Distributors, Inc. (d/b/a Advanced Health Care System, Cambridge Direct Sales,
and Medibase)
The Commission approved a consent order with three companies in connection with the marketing of
low-calorie and very-low-calorie diet programs, including the Food for Life Weight Management
System and the Cambridge Diet, through a multilevel distribution system. The order requires the
respondents to have substantiation for weight-loss and weight-maintenance claims. It also requires
that advertisements state that weight loss may be temporary and clearly disclose the need for
physician monitoring to minimize potential health risks.

Efficient Labs, Inc.; Blas Reyes-Reyes
A consent order with Efficient Labs and a company officer settled allegations that their
Spanish-language advertisements for Venoflash, a dietary supplement composed of vitamins and plant
derivatives, included unsubstantiated claims. The order requires the respondents to have scientific
substantiation to back up future representations regarding the health benefits, performance, safety, or
efficacy of any food, drug, cosmetic, or dietary supplement promoted or used to treat conditions or
illnesses related to the circulatory system.

General Motors Corporation; American Honda Motor Co., Inc.; American Isuzu
Motors, Inc.; Mazda Motor of America, Inc.; Mitsubishi Motor Sales of America, Inc.
Five major automobile manufacturers agreed to provide consumers with clear, readable, and
understandable cost information in their car leasing and financing advertisements, settling allegations
that the companies' advertising inadequately disclosed significant lease terms and fees. Television
commercials cited by the Commission allegedly contained critical cost disclosures in small, often
scrolling print that appeared on the screen for only a few seconds. The five final consent orders bar
the companies from misrepresenting the total amount due at the inception of a car lease and require
their advertisements to disclose clearly and conspicuously that the deal is a lease, the total amount due
at lease inception, and other payments required and charges imposed. The orders with General Motors
and Mitsubishi also bar these companies from misrepresenting terms for car loans and require them to
disclose clearly and conspicuously the amount of any balloon payment, the correct annual percentage
rate, and other important credit terms.

Georgetown Publishing House Limited Partnership, Inc.; Georgetown Publishing
House, Inc.; Daniel Levinas
The Commission approved a consent order with Georgetown Publishing House Limited, its general
partner, and its president, settling allegations that they used deceptive advertising tactics to promote
the sale of a book. The respondents allegedly misled consumers by sending them what appeared to be
an independent book review torn from a magazine, with an attached handwritten personalized
message, but which was actually an advertisement prepared and sent by the respondents. The order
prohibits the respondents from misrepresenting that a paid advertisement is an independent review or
article and from misrepresenting that a product has been independently reviewed or evaluated.

Gerber Products Company

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A consent order with Gerber settled allegations that the company made false and unsubstantiated
"doctor recommended" claims for Gerber baby food. The order bars the company from making any
claims about the extent to which doctors or other health, nutrition, child care, or medical professionals
recommend, approve of, or endorse baby or toddler food, without competent and reliable scientific
substantiation, and from misinterpreting the results or existence of any survey, test, or research.

Grey Advertising, Inc.
The Commission approved two consent orders with Grey, settling allegations over the role the agency
played in advertising a paint-sprayer toy marketed by Hasbro, Inc., and a line of frozen yogurt
marketed by The Dannon Company. The order in connection with the Hasbro toy resolves allegations
that a TV commercial employed a hidden motorized air compressor to misrepresent how easily
children could operate the sprayer. The order prohibits Grey from using deceptive demonstrations or
otherwise misrepresenting the performance of any toy. The second order resolves allegations that a
commercial falsely implied that some of the flavors in the Pure Indulgence line of yogurt were low in
fat and calories. This order prohibits Grey from misrepresenting the fat, saturated fat, cholesterol, or
calories in frozen yogurt, frozen sorbet, and ice cream.

Guildwood Direct Limited (d/b/a Intermed Laboratories)
A consent order with Guildwood resolved allegations in connection with the marketing of Slimming
Insoles, shoe insoles that purportedly cause weight loss by stimulating certain areas of the feet. The
order prohibits use of the name "Slimming Insoles" without scientific substantiation that the product
actually causes weight loss, requires the respondents to have scientific substantiation for weight-loss
claims for any other products, and requires that testimonials represent the typical experience of
consumers or disclose the fact that the results are not typical. In addition, Guildwood is required to
pay $7,500 in consumer redress.

Herb Gordon Auto World, Inc. (d/b/a Herb Gordon Auto World, Herb Gordon Dodge,
Herb Gordon Mercedes-Benz, Herb Gordon Nissan, Herb Gordon Oldsmobile, Herb
Gordon Volvo, and Herb Gordon Used Cars)
A consent order with Herb Gordon settled allegations that the company and seven of its dealerships
violated federal laws by misrepresenting, hiding, or failing to disclose terms in advertising automobile
financing plans. According to the Commission, car sales advertisements touted low monthly payments
and misrepresented or failed to disclose later higher payments, and lease advertising failed to disclose
all required costs and terms. The consent order prohibits the respondents from misrepresenting or
obscuring important cost information and from advertising financing or leasing terms that are not
actually available to consumers. The order requires the respondents to comply with federal laws
mandating accurate, clear, and conspicuous disclosure of rates, payments, and other terms in financed
automobile purchases and leases.

Huling Bros. Chevrolet, Inc.; Huling Bros. Chrysler/Plymouth, Inc.; Huling Buick,
Inc.
The Huling Bros. car dealerships agreed to settle allegations that they misrepresented, hid, or failed to
disclose the terms of their advertised automobile deals, in violation of federal laws. The Commission
alleged that their advertising for financed car purchases understated the true annual percentage rate
(APR) or failed to state the APR at all and included conflicting payment amounts and terms or rebates
that were not actually available to consumers. The consent order bars the respondents from
misrepresenting any payments, rebates, or other terms of financed car deals. It also requires Huling
Bros. to calculate the APR in accordance with regulations and to clearly include in their advertising
all disclosures required by law.

Hyde Athletic Industries, Inc.
Hyde agreed to a consent order settling allegations that the shoe company misrepresented that all of
its athletic footwear is made in the United States, when a substantial amount is made wholly abroad.
The order prohibits the company from making such misrepresentations, but provides that Hyde would
not be in violation of the order if it makes truthful statements about domestic production of footwear,
accompanied by certain disclosures.

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Part 2 Consent Orders Issued

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Icon Health and Fitness, Inc.; IHF Capital, Inc.; IHF Holdings, Inc.
A consent order with Icon, which bills itself as the world's largest manufacturer of home fitness
equipment, and two related companies settled allegations that they made unsubstantiated claims about
the weight-loss benefits of the Proform Cross Walk Treadmill. The order requires the respondents to
have substantiation for future claims about the weight-loss, calorie-burning, or fat-burning benefits of
any exercise equipment. The order also requires that testimonials in advertising either represent the
typical experience of users or disclose that the results are not typical.

Interactive Medical Technologies, Ltd.; Effective Health, Inc.; William Pelzer, Jr.;
William E. Shell, M.D.
The Commission approved three separate consent orders with Interactive Medical and Effective
Health, William Pelzer, and William Shell, M.D., settling allegations in connection with both the
marketing of Lipitrol, a purported weight-loss product, and the assistance provided to KCD Holdings,
Inc., in marketing SeQuester, a similar product (see below). Both Lipitrol and SeQuester are
over-the-counter cellulose-bile products that purportedly aid in weight loss and fat and cholesterol
reduction. The order with Interactive Medical and Effective Health requires scientific substantiation
for claims and prohibits misrepresentations regarding the benefits or safety of any product or program.
All three orders bar the respondents from assisting entities that make false, misleading, or
unsubstantiated claims for any weight-loss, fat-reduction, or cholesterol-reduction product or program,
and require them to monitor the business practices of certain parties to whom they provide assistance.
The two companies must pay $35,000 in redress, and Shell must pay $20,000 in redress and post a
performance bond before he is involved in marketing any weight-loss, fat-reduction, or
cholesterol-reduction product or program in the future.

KCD Holdings, Inc.; Deerfield Corporation; KCD Incorporated; Gerald E. Hatto;
Clark M. Holcomb; Bonnie L. Richards
The Commission approved a consent order with three related companies and three company officers,
settling allegations in connection with the marketing of SeQuester, an over-the-counter cellulose-bile
product that purportedly aids weight loss and fat and cholesterol reduction. The order requires the
respondents to have scientific substantiation for claims regarding the benefits or safety of any product
or program, including claims that it provides any weight-loss benefit or reduces the risk of certain
health problems. The order also requires KCD Holdings, KCD Incorporated, and Bonnie Richards to
pay $150,000 in consumer redress.

Leeka Products (Eliana Crema and Rogerio Monteiro, d/b/a)
Two individuals doing business as Leeka settled allegations that their Spanish-language
advertisements for three products (a weight-loss nutritional supplement, a product to improve the
results of exercise, and a product to prevent or retard hair loss) contained unsubstantiated claims. The
consent order requires the respondents to have scientific evidence to support any claims they make
about the benefits, efficacy, or performance of any food, drug, cosmetic, or dietary supplement. The
order also prohibits them from using product names that represent that a product prevents or retards
hair loss unless they can substantiate that it does. Finally, the order prohibits the respondents from
misrepresenting the existence or conclusions of any test, study, or research.

Life Fitness; The Life Fitness Companies L.P.
A consent order with Life Fitness, which markets a variety of exercise equipment, settled allegations
that the company made unsubstantiated claims about the weight-loss benefits of its Lifecycle
stationary exercise cycle. The order requires Life Fitness and its general partner, The Life Fitness
Companies, to have substantiation for future claims about the weight-loss, calorie-burning, or
fat-burning benefits of any exercise equipment. It also prohibits them from misrepresenting the result
of any test or study relating to these types of benefits.

M.E.K. International (Kave Elahie, d/b/a)
A consent order with Kave Elahie, doing business as M.E.K., settled allegations that the company's
Spanish-language advertisements included unsubstantiated claims that NutraTrim cream reduces or
eliminates cellulite and fat and that NutraTrim chromium picolinate tablets cause weight loss, reduce

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cholesterol, reduce body fat and cellulite, reduce appetite, and increase metabolism. The order
requires the respondents to have competent and reliable scientific evidence for similar claims, as well
as any other claims about the performance, benefits, efficacy, or safety of any food, drug, or dietary
supplement. The order also prohibits the company from misrepresenting the existence or results of
any test or study and requires that testimonials represent the typical experience of consumers or be
accompanied by a disclaimer.

The Money Tree, Inc.; Vance R. Martin
A consent order with Money Tree and its president settled allegations in connection with their
business of making short-term installment loans, most of them to low-income consumers. According
to the Commission, the respondents required consumers applying for loans to purchase insurance
and/or an auto club membership. The costs of these extras were included in the amount financed
instead of in the finance charge and annual percentage rate, causing consumers to pay interest on the
premiums and fees for these extras, in violation of the Truth-in-Lending Act. In addition, the
respondents allegedly violated the Fair Credit Reporting Act (FCRA) by failing to disclose the names
of the credit bureaus that supplied credit reports when consumers' credit applications were denied.
The consent order requires Money Tree to offer its customers the chance to cancel the insurance they
purchased and to obtain refunds or credits. The order bars the respondents from misrepresenting the
purchase of insurance and other extras and requires them to disclose in the future that such insurance
is optional. The order also bars the respondents from violating the FCRA regarding disclosures to
consumers when credit reports play a role in the denial of credit. In a separate agreement, the
respondents are required to pay a civil penalty (see The Money Tree, Inc., page 107).

Nationwide Syndications, Inc.; Thomas W. Karon
Nationwide and its company president agreed to settle allegations that claims that their NightSafe
Glasses improve night vision and make night driving safer were false and not supported by reliable
evidence. The consent order prohibits the company from making such claims and bars them from
using the name "NightSafe" or any other name that would imply that such a product makes night
driving safer. The order requires the respondents to have competent and reliable scientific evidence to
substantiate claims about the efficacy, performance, benefits, or safety of such products. In addition,
the respondents are required to pay $125,000 in consumer redress and to provide the Commission with
names and addresses of consumers who purchased the glasses so that they can be notified that
wearing the glasses at night may in fact be unsafe.

Natural Innovations, Inc.; World Media T.V., Inc.; William S. Gandee
The Commission approved two consent orders, one with Natural Innovations and its president and one
with World Media, settling allegations stemming from the advertising and sale of a purported pain
relief device, the Stimulator, which emits a weak electric spark when activated. The orders require the
respondents to have scientific substantiation to support any pain relief or other health or medical
benefit claims for any device and either to substantiate the claim that testimonials represent the
typical experience of users or to accompany such endorsements with a prominent disclaimer.

Nutrition 21; Selene Systems, Inc.; Herbert H. Boynton
A consent order with Nutrition 21, Selene Systems, and Herbert Boynton settled allegations that
advertising claims for their weight-loss and health care products containing chromium picolinate were
unsubstantiated. Nutrition 21 is the sole U.S. supplier for chromium picolinate and sells it to the
public through distributors. The order requires competent and reliable scientific evidence to support
the challenged claims and any representation about the benefits, performance, efficacy, or safety of
any food, dietary supplement, or drug the respondents advertise or sell, and prohibits
misrepresentation of the results of any test, study, or research. The order also requires the company to
send its past, current, and future distributors a notice of the Commission's allegations and a request
not to use sales materials that make the challenged claims.

Phaseout of America, Inc.; Products & Patents, Ltd.
An agreement with Phaseout and Products & Patents settled allegations that they made false or
unsubstantiated claims for PhaseOut, a purported stop-smoking device that also was said to make
cigarettes less harmful by puncturing holes in the filters. The consent order requires the companies to

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Part 2 Consent Orders Issued

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contact past purchasers of the device, notify them of the Commission's action, and advise them that
the device has not been proven to reduce the risks of smoking or make cigarettes safer. The order bars
the companies from misrepresenting any test or study and requires them to have scientific
substantiation for any claim that an endorsement reflects the typical experience of users.

Premier Products, Inc.; T.V. Products, Inc.; T.V.P. Corporation; Issie Kroll; Michael
Sander
A consent order with three companies and two company officers settled allegations that they made
false and unsubstantiated claims about the safety and effectiveness of Miracle Thaw, a tray that
purportedly thaws frozen food quickly and safely. The order prohibits the respondents from
misrepresenting how long it takes any product to thaw food, the process by which it does so, and the
existence or results of any study. The order also bars the respondents from misrepresenting the risk of
bacteria buildup on foods with such a product and requires them to have substantiation for claims
about product safety or efficacy.

Progressive Mortgage Corporation; Sanford Cramer
Progressive Mortgage and its president settled allegations stemming from their mortgage lending
services. According to the Commission, the respondents provided false and misleading information
about payment schedules and the cost of credit to mortgage applicants. The consent order bars the
respondents from misrepresentations in the future and requires them to provide full and accurate
disclosure of finance charges, annual percentage rates, and other terms and conditions of financing, in
compliance with the Truth-in-Lending Act.

RBR Productions, Inc.; Richard Rosenberg
The Commission reached an agreement with RBR Productions, a supplier of beauty salon products,
and corporate officer Richard Rosenberg, settling allegations that they overstated the human safety
and environmental benefits of two disinfectants and one aerosol fingernail-glue drying spray. The
consent order prohibits the respondents from making the allegedly false claims and requires them to
have competent and reliable evidence to back up similar claims.

Schering-Plough Healthcare Products, Inc.
Schering-Plough agreed to settle allegations that advertisements for its Coppertone Kids 6-Hour
Waterproof Sunblock were deceptive in claiming that one application would provide six hours of
protection from the sun for children engaged in sustained vigorous activity in and out of the water.
According to the Commission, that claim was unsubstantiated because the company did not test the
product under those conditions. The consent order prohibits Schering-Plough from making certain
claims about the effectiveness of its sunscreen protection for children without scientific substantiation
and requires it to produce and distribute consumer education brochures about the importance of
sunscreens and their proper application.

SplitFire, Inc.
A consent order with SplitFire settled allegations that the company made false and unsubstantiated
claims for the fuel economy, efficiency, and improved performance of its spark plugs. The order
prohibits SplitFire from making such claims without competent and reliable scientific evidence. It
also bars misrepresentations about any test or study and requires the company to have substantiation
for claims made in endorsements or testimonials and to disclose what typical consumers experience or
indicate the limited applicability of the endorser's experience.

Syncronys Softcorp; Wendell Brown; Rainer Poertner; Daniel G. Taylor
The Commission approved a consent order with Syncronys Softcorp and three of its officers, settling
allegations that they made misrepresentations and/or unsubstantiated claims regarding the ability of
two computer software programs they manufactured, SoftRAM and SoftRAM95, to improve the
performance of personal computers using Windows programs. The order prohibits the respondents
from making a variety of misrepresentations about the capabilities of these or similar software
products and requires them to have appropriate substantiation for any claims they make about any
product intended to improve computer performance.

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Telebrands Corporation; Ajit Khubani
The consent order with Telebrands, a mail and telephone order company, and its owner settled
allegations that they made false and unsubstantiated performance claims in advertising two products,
a hearing aid and a television antenna. The order prohibits the respondents from making false claims
about the ability of the hearing aid to amplify sound and the ability of the antenna to improve
television reception and requires them to have substantiation for any claims about the performance
and effectiveness of these or similar products.

Universal Merchants, Inc.; Steven Oscherowitz
The Commission approved a consent order with Universal Merchants and its president Steven
Oscherowitz, settling allegations that the respondents made unsubstantiated claims about the weight
loss and health benefits of chromium picolinate, a popular dietary supplement. The order requires
them to have competent and reliable scientific substantiation for any claims they make about the
performance, benefits, or safety of chromium picolinate or any food, dietary supplement, or drug, and
bars them from misrepresenting any test or study.

Uno Restaurant Corporation; Pizzeria Uno Corporation; Uno Restaurants, Inc.
Uno Restaurant Corporation and two subsidiaries agreed to settle allegations that they falsely
advertised their Thinzettas line of thin-crust pizzas as low fat. The consent order bars the respondents
from misrepresenting the existence or amount of fat or any other nutrient or substance in any pizza or
other "baked crust" food product.

Victoria Bie, d/b/a Body Gold
The Commission approved a consent order with Victoria Bie, doing business as Body Gold, settling
allegations that the respondent made unsubstantiated claims about the weight loss and health benefits
of chromium picolinate, a popular dietary supplement. The order requires her to have competent and
reliable scientific substantiation for any claims she makes about the performance, benefits, or safety
of chromium picolinate or any food, dietary supplement, or drug, and bars her from misrepresenting
any test or study.

Zale Corporation
Zale, the nation's largest jewelry retailer, agreed to settle allegations that it deceptively advertised its
Ocean Treasures line of imitation pearl jewelry, creating the impression that the jewelry was
composed of cultured pearls. The consent order prohibits Zale from misrepresenting the composition
or origin of any imitation, cultured, or natural pearl product. The order requires Zale to disclose
clearly and prominently the nature of the pearl jewelry it sells and to make available consumer
information in its stores about the definition and origin of natural, cultured, and imitation pearls.

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Staff Advisory Opinions

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benefits managers, and other third-party payers in an attempt to reduce payers' costs .

North Mississippi Health Services
Commission staff advised North Mississippi that the sale of discounted pharmaceuticals to retired or
former employees of the hospital would not be entitled to the exemption from the Robinson-Patman
Act provided by the Non-Profit Institutions Act. North Mississippi's Medical Center pharmacy
provides pharmaceuticals at discounted prices to employees, students, medical staff, and their
dependents. Commission staff advised that the provision of pharmaceuticals to persons who no longer
have a direct relationship with the Medical Center would not constitute purchases for the Medical
Center's "own use" under the Act.

North Ottawa Community Hospital
Commission staff advised North Ottawa that its plan to sell pharmaceuticals to Hospice of North
Ottawa County would be exempt from the Robinson-Patman Act under the Non-Profit Institutions Act
so long as it did not realize a profit from the sale. North Ottawa could receive from Hospice the price
it paid for the drugs plus reimbursement for any costs it incurs as a direct result of providing the drugs
to Hospice patients. North Ottawa could charge a monthly per-patient fee for the drugs if the fee
accurately reflects its direct expenses in servicing Hospice patients.

Ohio Ambulance Network, Inc.
Commission staff advised the Ohio Ambulance Network that the staff would not recommend a
challenge to a proposal to create a network of licensed ambulance and ambulette service providers to
offer scheduled, non-emergency service throughout northeast and south-central Ohio. The network
members will provide services in accordance with the terms of participating agreements and contracts
entered into individually by each network member with purchasers; an independent contractor will act
as "messenger," conveying contract offers between potential purchasers and each member provider.
The network will administer contracts by coordinating scheduling and dispatch, centralizing billing
and payment, and facilitating communication between a purchaser and participating providers.
Members will be free to join other networks or to contract with purchasers independently.

Southwest Florida Oral Surgery Associates
Commission staff advised that the staff would not recommend a challenge to Southwest's proposal to
form a cooperative for the purpose of jointly marketing oral surgery services to employers, managed
care plans, and other payers. The cooperative, composed of three oral and maxillofacial surgery
practices, will use a "messenger" to solicit payer and managed care contracts and to transmit contract
offers to members for individual acceptance or rejection. The cooperative will engage in group
purchasing, joint marketing, and the sharing of medical information systems. Each practice will
continue to operate individually and to provide its own claims processing and other administrative
functions. Members will have the ability to join in other networks and to market their practices
independently of the cooperative.

Yellowstone Physicians, LLC
Commission staff advised Yellowstone Physicians, a proposed multispecialty physician network joint
venture in Montana, that the staff would not recommend a challenge to the formation and operation of
the for-profit company to be owned by its members, who will also be the health care providers for the
network. The network plans to enter into managed care provider contracts on behalf of its members,
whereby participating physicians will share risk through either the use of capitated rates or contracts
with substantial risk withholds.

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Order Modifications

http://www.ftc.gov/os/ar97/bcmods.htm

Compagnie de Saint-Gobain; The Carborundum Company; Saint-Gobain/Norton
Industrial Ceramics Corporation
The Commission granted a petition of Compagnie de Saint-Gobain, and its U.S. subsidiary,
Saint-Gobain/Norton, to modify a 1996 consent order settling allegations stemming from Compagnie
de Saint-Gobain's acquisition of Carborundum. The modified order allows knowledgeable managers
and officers of Carborundum to serve on the boards or management committees of the separately held
businesses.

Del Monte Foods Company
The Commission granted in part a petition from Del Monte to modify a 1995 consent order by ending
the company's obligation to obtain Commission approval before making certain acquisitions or
entering into certain marketing agreements. Consistent with the Commission's policy, announced in
June 1995, to reduce the burden on companies while still protecting consumers, in place of prior
approval, the Commission substituted a prior notice requirement for certain acquisitions. The consent
order settled allegations that supply agreements between Del Monte and Pacific Coast Producers
eliminated Pacific Coast as a substantial and direct competitor to Del Monte in the canned fruit
business.

The Geon Company (successor to B.F. Goodrich)
The Commission granted a petition from Geon to modify a 1989 consent order against The B.F.
Goodrich Company and deleted the requirement that Goodrich and its successors obtain Commission
approval before acquiring certain vinyl chloride monomer (VCM) assets. The order had settled an
administrative complaint that alleged that Goodrich's acquisition of the VCM business of Diamond
Shamrock Chemical Company could lessen competition in the production of polyvinyl chloride and
vinyl chloride monomer materials used to make plastics. The Commission's modification was
consistent with its policy, announced in June 1995, to reduce the burden on companies while still
protecting consumers.

HealthSouth Corporation
(successor to HealthSouth Rehabilitation Corporation)
The Commission granted the petition of HealthSouth, ending its obligation to obtain Commission
approval before merging any of its rehabilitation hospital facilities with competing facilities in three
areas of South Carolina and Tennessee. The order had required prior notification of such acquisitions.
The 1995 order settled antitrust concerns stemming from the merger of HealthSouth Rehabilitation
and ReLife, Inc., two rehabilitation hospital facilities. The Commission's modification was consistent
with its policy, announced in June 1995, to reduce the burden on companies while still protecting
consumers.

(Home Oxygen and Medical Equipment Company)
John E. Sailer, M.D.
The Commission granted the petition of John E. Sailer, M.D., to reopen and modify a 1994 consent
order accepted with 11 pulmonologists and their Home Oxygen and Medical Equipment joint venture.
The order was modified by relieving Sailer, who has now retired, of all obligations under the consent
order. The Commission had alleged that the joint venture would create a barrier to others who might
provide oxygen to patients' homes, thus reducing competition and risking higher consumer prices.

Oerlikon-Buhrle Holding AG
The Commission granted a petition from Oerlikon-Buhrle to modify a 1995 consent order to replace a
requirement that the firm obtain prior Commission approval until February 2005 before acquiring
certain assets used in the manufacture and distribution of turbomolecular pumps or compact disc
metallizers. A provision requiring Oerlikon to give the Commission prior notice was substituted for
the prior approval provision. The Commission's modification was consistent with its policy,
announced in June 1995, to reduce the burden on companies while still protecting consumers.

Onkyo U.S.A. Corporation
The Commission granted in part and denied in part a petition from Onkyo to modify a 1982 consent

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order. The modified consent order permits the company to implement price-restrictive cooperative
advertising programs and to unilaterally terminate a dealer for failing to adhere to previously
announced resale prices. The Commission denied Onkyo's request to end the firm's obligation to
furnish copies of the order to certain employees and to terminate the order in the year 2002 rather than
20 years after a 1995 consent judgment was entered for allegedly violating the consent order.

The Penn Traffic Company
The Commission granted the petition of Penn Traffic and modified a consent order ending the firm's
obligation to divest one of its two supermarkets in Mount Carmel, Pennsylvania. The divestiture was
one of three required under a 1995 consent order that had settled antitrust concerns stemming from the
acquisition of 45 retail grocery stores in Pennsylvania and New York from Acme Markets, Inc. The
Commission found that new supermarket entrants into the area eliminated the need for the divestiture.

Schwegmann Giant Super Markets, Inc.
The Commission granted a petition of Schwegmann to reopen and modify a 1995 consent order that
had settled allegations stemming from the acquisition of supermarkets in New Orleans, Louisiana.
The order was modified by replacing the provision requiring that Schwegmann receive prior
Commission approval before acquiring retail grocery stores in the New Orleans metropolitan area
with a provision requiring prior Commission notice before such transactions. The Commission's
modification was consistent with its policy, announced in June 1995, to reduce the burden on
companies while still protecting consumers.

The Stop & Shop Companies, Inc.
The Commission granted a petition from Stop & Shop and deleted divestiture requirements for two
Purity Supreme supermarkets in Massachusetts. Stop & Shop presented evidence that changed
conditions, including the entry of new supermarkets in Brookline and Roslindale, rendered the two
Purity Supreme stores unsalable. The 1996 consent order had settled allegations that Stop & Shop's
merger with Purity Supreme, Inc., would substantially reduce competition and lead to higher prices in
several markets in Massachusetts.

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Competition Mission - Part 2 Consent Orders Issued

http://www.ftc.gov/os/ar97/bcpart2.htm

vaccines, canine coronavirus vaccines, and feline leukemia vaccines. The consent order, designed to
preserve competition, requires American Home Products to divest Solvay's U.S. and Canadian rights
to the three vaccines to Schering-Plough Corporation. To ensure that there is no break in the supply of
Solvay's vaccines, the order requires American Home Products to manufacture and supply the
vaccines to Schering-Plough until Schering-Plough obtains all necessary government certifications
and approvals to manufacture and sell the vaccines.

Autodesk, Inc.; Softdesk, Inc.
Autodesk agreed to settle allegations that its acquisition of Softdesk would substantially lessen
competition in the development and sale of computer-aided design (CAD) software engines. Autodesk
develops and markets AutoCAD, a design engine for use in Windows-based personal computers. Prior
to the acquisition, Softdesk sold its developmental-stage CAD engine, IntelliCADD, to Boomerang
Technology, Inc. The consent order prohibits Autodesk or Softdesk from reacquiring IntelliCADD
without prior Commission notice for 10 years. The order also requires that neither Autodesk nor
Softdesk interfere with Boomerang's ability to recruit or hire Softdesk employees who worked on the
development of IntelliCADD.

Baxter International Inc.
Baxter International agreed to settle antitrust concerns stemming from its proposed acquisition of
Immuno International AG. According to the complaint issued with the consent order, the acquisition
would create the world's largest manufacturer of human plasma products used to treat hemophilia and
to control bleeding in surgical applications. The consent order requires Baxter to divest its Autoplex
blood plasma product and to license Immuno's fibrin sealant to Commission-approved buyers.

The Boeing Company
Boeing agreed to settle allegations that its $3.025 billion acquisition of Rockwell International
Corporation's aerospace and defense business would reduce competition in two markets:
high-altitude-endurance unmanned air vehicles (UAVs) and space launch vehicles. In the first market,
according to the complaint issued with the consent order, the acquisition would make Boeing a
member of both teams competing to develop UAVs for the Department of Defense. Under terms of
the consent order, Teledyne Ryan, the prime contractor of one team, could replace Boeing on that
team, with no significant cost or risk to Teledyne Ryan, thereby protecting competition in the UAVs
market. In the second market, Boeing would be positioned as both a competitor in the space launch
vehicle business and a provider of propulsion systems for other competitors. To remedy the possibility
that as a competitor and supplier, Boeing would have inappropriate access to competitively sensitive
information, the consent order establishes two information firewalls: (1) preventing the flow of
competitively sensitive information between Boeing's team and a division of Rockwell that currently
provides wings to the other team, and (2) prohibiting Boeing from disclosing nonpublic information
from any space launch vehicle manufacturer to its own launch vehicle division.

Cadence Design Systems, Inc.
Cadence agreed to settle allegations that its acquisition of Cooper & Chyan Technology, Inc., would
substantially reduce competition for "routing" software used to automate the design of integrated
circuits or microchips. According to the complaint accompanying the consent order, the merger would
reduce Cadence's incentives to permit competing suppliers of routing tools to obtain access to its
software infrastructure for layout environments, resulting in less innovation, higher prices, and
reduced services. To ensure that independent software developers of commercial routing tools
continue to compete with Cooper & Chyan's technology, the consent order requires Cadence to allow
these developers to participate in Cadence's software interface programs.

Ciba-Geigy Limited; Ciba-Geigy Corporation; Chiron Corporation; Novartis AG;
Sandoz Corporation; Sandoz Ltd.
Ciba-Geigy agreed to settle allegations that its $63 billion merger with Sandoz Corporation raised
antitrust concerns in three markets affected by the proposed acquisition of Sandoz Ltd.: research and
development in gene therapy products that are being targeted for life-threatening conditions such as
hemophilia and cancer, corn herbicides, and flea-control products. In the gene therapy market, the
order requires the licensing of certain intellectual properties to Rhone-Poulenc Rorer and other firms

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to permit continued competition in research, development, and commercialization for a broad range of
future medical treatments. In addition, in one of the largest divestitures ever required under a consent
order, Sandoz agreed to divest its U.S. and Canadian corn herbicide business to BASF
Aktiengesellschaft within 10 days. The consent order also requires the divestiture of Sandoz's
flea-control business to Central Garden and Pet Supply of Lafayette, California, within 30 days.

Class Rings, Inc.; Castle Harlan Partners II, L.P.; Town & Country Corporation
Three manufacturers of school class rings agreed to settle allegations that their proposed merger
would have increased the likelihood of coordinated interaction and led to higher prices for
commemorative rings. The consent order, designed to restore competition, prevents Class Rings from
acquiring Town & Country's Gold Lance, Inc., division, which will remain as an independent
competitor, and prohibits Town & Country from acquiring any interest in Castle Harlan or Class
Rings. In addition, for 10 years, the order requires the three companies to obtain Commission
approval before acquiring certain assets from one another.

Cooperative Computing, Inc.
Cooperative Computing agreed to settle concerns that its proposed acquisition of Triad Systems
Corporation would substantially reduce competition in the development and sale of electronic parts
catalogs used in the automotive parts aftermarket. The consent order requires Cooperative Computing
to divest its electronic parts catalog and related assets to MacDonald Computer Services or another
Commission-approved buyer.

CVS Corporation; Revco D.S., Inc.
CVS agreed to settle allegations that its acquisition of Revco would substantially reduce competition
for the retail sale of pharmacy services to health insurance companies and other third-party payers in
Virginia and in the Binghamton, New York, metropolitan area. The consent order requires CVS to
divest 114 Revco stores in Virginia and 6 pharmacies in Binghamton. Under terms of the order, CVS
agreed to divest the Revco stores in Virginia to Eckerd Corporation, a subsidiary of J.C. Penney
Company, and the pharmacies in Binghamton to Medicine Shoppe International, Inc.

Dwight's EnergyData, Inc.; Geoquest International Holdings, Inc.; SoftSearch
Holdings, Inc.
Dwight's EnergyData (a subsidiary of SoftSearch) agreed to license its gas and oil production data to
a Commission-approved buyer to settle allegations that its acquisition of Petroleum Information
Corporation (a subsidiary of Geoquest) could create a monopoly in the collection and sale of well
history data to the oil and gas industry. The consent order also requires the two firms to notify the
Commission before acquiring any interest in a provider of well history or production data.

Fresenius AG; Fresenius USA, Inc.
Fresenius AG and its U.S. subsidiary, Fresenius USA, agreed to settle allegations that their proposed
acquisition of National Medical Care, Inc., would substantially reduce competition by combining two
significant producers of a hemodialysis concentrate used in the treatment of patients with chronic
kidney failure. The consent order requires Fresenius to divest a production facility in Lewisberry,
Pennsylvania, to Di-Chem, Inc., or to another Commission-approved acquirer.

General Mills, Inc.
General Mills agreed to settle allegations that its acquisition of the branded ready-to-eat cereal and
snack mix businesses of Ralcorp Holdings, Inc., would restrict the entry of new private-label products
similar to the branded cereals. Under terms of the consent order, Ralcorp retains its private-label
cereal business, composed of cereals identical to the Chex-brand cereals, as well as the right to
transfer those private-label cereals to any other firm without the authorization or approval of General
Mills. The consent order also prohibits General Mills from delaying production of the private-label
Chex rival cereals.

Hale Products, Inc.
Hale agreed to settle allegations that it and Waterous Company, Inc. (see page 47) separately entered

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Competition Mission - Part 2 Consent Orders Issued

http://www.ftc.gov/os/ar97/bcpart2.htm

into exclusive dealing agreements requiring their respective customers to purchase fire-truck-mounted
fire pumps. Together, Hale and Waterous account for about 90% or more of the market for
truck-mounted fire pumps. According to the complaint issued with the consent order, these practices
reduced competition between the two firms and made it more difficult for other firms to enter the
market for truck-mounted fire pumps. The consent order prohibits Hale from engaging in any conduct
that restrains fire truck manufacturers from purchasing mounted fire pumps from any other company.

J.C. Penney Company, Inc.; Thrift Drug, Inc.
J.C. Penney agreed to settle allegations that its acquisitions of Eckerd Corporation and 190 Rite Aid
drug stores would substantially reduce drug store competition and raise prices for pharmacy services
to health insurance companies and other third-party payers in certain areas of North Carolina and
South Carolina. The consent order requires J.C. Penney to divest 34 Thrift drug stores in the Charlotte
and Raleigh-Durham areas of North Carolina, all 110 Rite Aid drug stores in North Carolina, and all
17 Rite Aid drug stores in the Charleston, South Carolina, area to a Commission-approved buyer. The
Commission approved divestiture of the stores to New Kerr Drug, Inc., in May 1997.

Mahle GmbH; Metal Leve, S.A.
Mahle, a German piston manufacturer, agreed to settle allegations that its acquisition of Metal Leve
would create a monopoly in the manufacture and sale of articulated pistons used in truck engines for
big highway rigs and in locomotive engines. The consent order requires Mahle to divest Metal Leve's
two piston plants in South Carolina and a research and development center in Ann Arbor, Michigan.
A consent judgment filed in the U.S. District Court for the District of Columbia requires Mahle to pay
a record $5.6 million civil penalty for failing to notify the two federal antitrust agencies before
consummating the acquisition. (See Mahle GmbH, page 54.)

Montana Associated Physicians, Inc.; Billings Physician Hospital Alliance, Inc.
Montana Associated Physicians and Billings Physician Hospital Alliance agreed to settle allegations
that they engaged in agreements with member physicians to control the prices they would accept from
health insurance companies and other third-party payers and engaged in a boycott to block the entry of
a managed care plan. According to the complaint issued with the consent order, the physicians' acts
reduced consumer choices for health care and increased the fees physicians charged for their services.
The consent order prohibits the two organizations from entering into any agreements with physicians
to refuse to deal with third-party payers and to fix or control the fees charged for any physician's
services.

NGC Corporation
NGC agreed to settle allegations that its acquisition of certain natural gas transportation and
processing assets of Chevron Corporation would substantially lessen competition by leaving only two
companies operating four natural gas liquids fractionation plants in Mont Belvieu, Texas, and
increasing the likelihood that NGC could unilaterally raise prices or engage in coordinated interaction.
The consent order requires NGC to divest its 80% interest in the Mont Belvieu I natural gas liquids
fractionation facility in Texas. The Commission approved NGC's sale of the assets to Koch
Hydrocarbon Company, a division of Koch Industries, Inc.

Phillips Petroleum Company
Phillips agreed to divest 160 miles of its natural gas pipeline system in the Anadarko Basin area of
Oklahoma to KN Gas Gathering, Inc., under a consent order settling antitrust concerns stemming
from its acquisition of certain ANR Pipeline Company gas gathering assets.

Tenet Healthcare Corporation
Tenet agreed to settle allegations that its proposed acquisition of OrNda Healthcorp would reduce
competition for inpatient hospital care in San Luis Obispo County, California. According to the
complaint issued with the consent order, the acquisition would substantially lessen competition in the
area for inpatient acute hospital services. The consent order requires Tenet to divest OrNda's French
Hospital Medical Center and related assets in the county within six months to a
Commission-approved acquirer.

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Competition Mission - Part 2 Consent Orders Issued

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Time Warner Inc.; Tele-Communications, Inc.; Turner Broadcasting System, Inc.
Time Warner agreed to restructure its proposal to acquire Turner Broadcasting to settle antitrust
concerns that the merger would reduce competition in cable television programming and allow Time
Warner to unilaterally raise prices. The consent order, among other things, requires
Tele-Communications to either divest its interest in Time Warner or accept a limited nonvoting
interest, requires the three companies to cancel long-term carriage agreements, reduces Time Warner's
enhanced opportunities for bundling Time Warner and Turner programming, bars Time Warner from
discriminating in price against rival cable systems, and requires Time Warner's cable interests to carry
a rival television station to Turner's Cable News Network.

Waterous Company, Inc.
Waterous agreed to settle allegations that it and Hale Products, Inc. (see page 44) separately entered
into exclusive dealing agreements requiring their respective customers to purchase fire-truck-mounted
fire pumps. Together, Waterous and Hale account for about 90% or more of the market for
truck-mounted fire pumps. According to the complaint issued with the consent order, these practices
reduced competition between the two firms and made it more difficult for other firms to enter the
market for truck-mounted fire pumps. The consent order prohibits Waterous from engaging in any
conduct that restrains fire truck manufacturers from purchasing mounted fire pumps from any other
company.

Wesley-Jessen Corporation
Wesley-Jessen agreed to settle allegations that its acquisition of Pilkington Barnes Hind International,
Inc., would create a monopoly in the market for opaque contact lenses used to change eye color for
cosmetic reasons. The consent order requires Wesley-Jessen to divest the Pilkington Barnes Hind
opaque lens business to a Commission-approved acquirer. On March 18, 1997, the Commission
approved divestiture of the business to The Cooper Companies, Inc.

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APPENDIX

http://www.ftc.gov/os/ar97/appendix.htm

Commission continually reviews its rules and guides, and amends or repeals them as needed.
Education
The Commission is committed to educating consumers and businesses about their rights and
responsibilities under Federal Trade Commission regulations and to encourage informed
consumer choice and competitive business practices in the marketplace. For each major
consumer protection law enforcement or rulemaking initiative, an education campaign is
launched. A campaign may consist of printed materials - which are also made available on
the Commission Web site - specialized Internet pages, and/or public service announcements.
The Commission views the consumer and business education effort as a cost-effective way
to help minimize consumer injury and obtain compliance with the law.
Advocacy
The Commission presents comments, upon request, to other agencies and entities concerning
the effects of regulation on competition and consumers. At the request of lawmakers or
agency officials, the Commission often provides comments or testimony to assist
legislatures' consideration of pending bills or to assist agency rulemaking proceedings.
These submissions advocate policies that will enhance both competition and consumer
choice.

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Management and Administration

http://www.ftc.gov/os/ar97/manage.htm

Procurement and General Services completed a number of projects. These included
reopening the Top of the Trade cafeteria with a renovated and refurbished kitchen, replacing
the key card security system in the Headquarters satellite building with one compatible with
the system in the main building, overseeing the cleanup and restoration of the satellite
building after several floors were flooded by a water pipe rupture, and renovating the Public
Reference and Records Processing areas to establish a new Consumer Resource Center. The
Division also coordinated with the General Services Administration in the relocation of the
Cleveland and Los Angeles regional offices.
Information and Technology Management
Information and Technology Management (ITM) is designed to provide improved
information and technology services to its customers - the Commission, agency staff, and
the public. The overall mission of ITM is to support and improve the productivity and
effectiveness of the Commission's Consumer Protection and Competition Missions through
the effective use of information resources. To ensure that its program is providing the
services and systems that are most important to its customers, ITM implemented a Board of
Directors, which is made up of several senior managers within the Commission, including
the Executive Director, Directors of the Bureaus of Competition and Consumer Protection,
Deputy Director of the Bureau of Economics, and, as a representative of the regional offices,
the Director of the Seattle Regional Office. The Executive Director chairs the Board and
also represents the interests of all support organizations throughout the Commission. The
Board meets regularly and provides advice and direction to the program, as well as
reviewing and approving ITM budget proposals.
ITM efforts for fiscal year 1997 were organized around three basic types of services: (1)
providing reliable base systems and services, (2) providing responsive customer support, and
(3) continuing the development of products and services begun in previous years.
Providing Reliable Base Systems and Services
Commission staff has come to rely heavily upon many of the systems for which ITM is
responsible, including the Local Area Network (LAN), telephone and phonemail systems,
the central computing facility, communications with regional offices, facsimile services,
personal computers (pc's) on the desktops, local printers, and others. Those systems and
services have greatly increased the productivity of the entire agency. However, because the
agency relies on those systems, any interruption of service or weaknesses in their operation
are dramatically felt by individual staff and the agency as a whole.
In fiscal year 1997, ITM installed new telephone and phonemail systems in the Dallas and
Atlanta regional offices; upgraded, and therefore improved performance of, the e-mail
servers; connected the Commission's e-mail system to the system at the Department of
Justice's Antitrust Division; and updated ITM's Disaster Recovery Plan to include new
equipment and processes. ITM purchased and installed more than 250 new Pentium-class
pc's on desktops and 40 new laptop computers throughout the agency. ITM also purchased
and installed a new video teleconferencing bridge, which resulted in a reduction in operating
expenses.
In addition to providing those technological systems, ITM was responsible for providing
direct support to Commission staff and the public through training services; maintaining an
extensive library collection and providing various types of library services; providing
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support for investigations and litigation; establishing records management policies and
procedures for both paper and electronic records; processing, storing, and retrieving the
official records of the agency; providing information and documents to the public, both
records that have previously been made public and records that are requested under the
Freedom of Information Act; and producing many important publications, including the
Commission's Annual Report, Operating and Administrative Manuals, and FTC Decisions.
During the year, responsibility for providing public materials through the Public Reference
Unit was transferred to the Consumer Response Center in the Bureau of Consumer
Protection. Staff from throughout ITM worked closely with the Competition and Economics
staff on the Staples matter, providing expert technological advice and assistance to the
investigatory and litigatory staff.
Providing Responsive Customer Support
Some of the systems and services that are available through ITM can provide vital support to
both Commission staff and the public. However, one of the primary themes of ITM's Board
of Directors and individual customers was the need to improve the ease of use, quality, and
responsiveness of the core systems and to improve the responsiveness and customer
orientation of support services. The systems and services that fall into this category include
those provided through the HelpDesk, including pc installation and repair, telephone "trees"
used throughout the Commission, and others.
Specifically in fiscal year 1997, ITM began an experiment providing HelpDesk support in
the evenings after regular business hours and on weekends to assist Commission staff who
work during those hours. ITM staff also conducted special "Litigation Support Expos" for
both headquarters and regional office staff, in which presentations and demonstrations
explained how available technology can assist in conducting law enforcement investigations
and litigations. ITM directly supported the Consumer Response Center by developing
special desktop pc's, rewiring the Center's office space, and training and supporting the staff
in using their new equipment and systems.
Continuing the Development of Products and Services Begun in Previous Years
In fiscal year 1997, ITM continued to work on several important initiatives designed to
provide new or better systems and services. The initiatives begun in previous years that
continued in 1997 include:
MIS Replacement.--A new system, the Matter Management System, or MMS, is replacing
the Management Information System (MIS) as a tool for assisting in managing the agency's
investigations, litigations, rulemaking proceedings, and projects. An intensive analysis of
what the Commission needs from such a system was conducted in fiscal year 1995 and was
followed by an exhaustive evaluation of commercial, off-the-shelf software packages that
would meet those needs. In fiscal year 1996, ITM began to make initial modifications to the
selected package and replace the existing MIS with the customized software. The first phase
of the new system was implemented in fiscal year 1997. The MMS provides improved
operation of the functionality of the existing MIS.
LANDOC.--LANDOC is the Commission's automated document research system. In fiscal
year 1997, the LANDOC Steering Committee identified a list of system and process changes
needed and established priorities for implementation. ITM also provided several

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demonstrations of the system to other government agencies that are considering purchasing
the underlying commercial software. The collection of documents in LANDOC available to
Commission staff and the public was expanded to include over 32,000 documents.
Internet.--In fiscal year 1997, ITM redesigned the Commission's Internet site (www.ftc.gov),
and the new site received universal praise as a model of government information
dissemination. ITM also added a feature to provide sound to users of the Internet site, in
support of a Bureau of Consumer Protection/American Association of Retired Persons
project.
Correspondence Control and Consumer Complaint System
.--ITM worked closely with the
Consumer Protection Mission in fiscal year 1997 to design, develop, and implement the
replacement for the Commission's consumer correspondence system, which was created in
1984. The new system, the Consumer Information System, uses current technology and
provides considerably enhanced functionality as well as improved ease of operation.

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Economic Analysis

http://www.ftc.gov/os/ar97/econ.htm

examination of the effects of Commission divestiture orders, (4) a study of the effects of the
entry of branded generic drugs on the pricing and output of branded drugs, and (5) an
examination of the price and output effects of previous hospital mergers.
Consumer Protection
In the consumer protection area, economists provided important assistance to law
enforcement activities. Also, economists routinely provided day-to-day guidance on
individual matters, provided litigation support services, and made policy recommendations
directly to the Commission.
In addition to the Bureau's direct support for individual consumer protection case matters,
staff economists worked on consumer protection topics of interest to the Commission.
During fiscal year 1997, the Bureau released one study: Information and Advertising Policy:
A Study of Fat and Cholesterol Consumption in the United States, 1977-1990, which
examines the effects of various types of information on the dietary choices of the public. The
Bureau also continued studies on (1) the effects on consumer perception of various nutrient
disclosures and cautionary disclosures in ads for food products that make health or nutrition
claims and (2) the rent-to-own industry.
Consumer and Competition Advocacy
The interests of consumers are not always well represented in some legislative and
regulatory forums. Consequently, laws or regulations are sometimes promulgated that harm
consumers by restricting entry, limiting competition, chilling innovation, raising prices, or
reducing the quality of goods and services. The goal of the Commission's advocacy activities
is to limit such harm to consumers by informing appropriate governmental and
self-regulatory bodies about the potential effects on consumers, both positive and negative,
of proposed legislation, rules, or industry guides or codes. The advocacy program in the
Bureau of Economics is the central source of planning, coordination, review, and
information for the staff's work in this area. During fiscal year 1997, the Commission staff
submitted six comments to the Federal Communications Commission and various state
agencies, covering subject areas such as telecommunications licensing, collision damage
waivers in car rentals, optometrists' business operations, and real estate closings. Staff also
submitted a report in response to requests from a Congressional Task Force that addressed
the Tobacco Industry Settlement.

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Consumer Protection Mission

http://www.ftc.gov/os/ar97/conpro.htm

A unique initiative of
the Commission is
the Partnership for
Consumer
Education, a national
coalition of over 90
businesses, trade
associations,
consumer groups,
and government
agencies. Originally
conceived to combat
telemarketing fraud,
the Partnership now
participates in all
types of educational campaigns. From January 1996, when the partnership was launched,
through September 1997, this group disseminated over 100 million educational messages.
In fiscal year 1997, the Commission led a multi-agency initiative to develop consumer.gov,
the first Internet site to provide one-stop access to federal consumer information resources,
offering information by subject rather than by federal agency. Charter partners in the site
include the Consumer Product Safety Commission, the Food and Drug Administration, the
National Highway Traffic Safety Administration, the Securities and Exchange Commission,
and the U.S. Office of Consumer Affairs. As the host agency, the Commission maintains the
site and provides all technical support.
Federal-State Coordination
The Commission works hand-in-hand with other federal agencies, states, and local
authorities in a variety of coordinated law enforcement efforts and task forces, including
individual cases involving fraud and deceptive advertising, efforts to boost industry
compliance with rules and regulations, and consumer and law enforcement training
programs. By sharing information and resources, these joint efforts are able to more
effectively target issues that have a direct impact on consumers. In fiscal year 1997, the
Commission led 13 major joint law enforcement efforts resulting in 60 Commission actions
and 444 state and federal actions. For every case the Commission brought, its state and
federal partners leveraged seven more.
Programs Under the Consumer Protection Mission
The Consumer Protection Mission is advanced by five law enforcement programs Advertising Practices, Credit Practices, Enforcement, Marketing Practices, and Service
Industry Practices - the Office of Consumer and Business Education, and the Commission's
10 regional offices. Regional staff are responsible for a wide variety of significant consumer
protection cases in the various programs and are important contacts for state Attorneys
General and other state and local consumer protection officials.
Advertising Practices Program
The Advertising Practices Program strives to ensure that advertising is truthful and
non-deceptive and is not done in a legally unfair manner, to protect consumers in a way that

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maximizes the amount of information available for decision-making. The Commission's
market-based national advertising standards foster these goals.
Health and safety claims in advertising are of particular concern because of the significant
potential for consumer injury if the claims prove to be deceptive and because they usually
involve claims that consumers cannot readily evaluate based on their own experience. In
addition, this area often involves rapid, new scientific and technological developments.
Thus, advertisers are faced with the challenge of conveying complex scientific or technical
information in a manner that is truthful and non-deceptive.
This program monitors health-related claims for dietary supplements, food, and
over-the-counter drugs (especially "switch" drugs, those that previously were available only
by prescription). Moreover, an increasing number of new methods of advertising and
promoting prescription drugs are being monitored.
The Commission has important responsibilities for administering the Federal Cigarette
Labeling and Advertising Act and for administering and enforcing the Comprehensive
Smokeless Tobacco Health Education Act. In fiscal year 1997, public comment was
requested on proposed revisions to the testing method used to determine the tar, nicotine,
and carbon monoxide ratings of cigarettes.
As the marketing opportunities on the Internet grow, so do the opportunities for fraud and
deception. The Commission works with industry, consumer groups, and the states to identify
and address consumer protection issues in this rapidly growing market, including the
collection of personally identifiable information from children online. In fiscal year 1997,
program staff issued a letter outlining several principles that it believes should generally
apply to the collection of this type of information and stating that it would monitor online
sites that collect information from children and initiate enforcement actions as appropriate.
The Advertising Practices Program puts a special emphasis on all types of children's
advertising issues. This includes reviewing advertising directed to children for deception,
maintaining a close liaison with industry self-regulatory efforts, exploring new children's
marketing issues on the Internet, and reviewing questions about inappropriate placement and
content of advertising for adult products on programming for underage audiences.
To encourage cable networks and print media to develop advertising screening programs,
Commission staff work with members of these media, gathering information about
individual media screening programs, and exploring and encouraging interest in a
self-regulatory program. In fiscal year 1997, as part of "Operation Waistline," a law
enforcement and consumer education effort designed to stop misleading weight-loss claims,
letters were sent to 80 publications that disseminated weight-loss advertisements, urging
them to improve their screening. A media screening tip sheet on weight-loss fraud was also
sent to these publications. During the fiscal year, a regional media screening conference was
held, and staff met with major magazine publishers to discuss a Partnership Program.
The Commission coordinates closely with other federal agencies with parallel or overlapping
authority in the advertising area. For example, it maintains a close working relationship with
the Environmental Protection Agency (EPA) in monitoring environmental and pesticide
advertising and ensuring that marketers do not make deceptive claims concerning their
participation in the Federal Acquisition, Recycling, and Waste Prevention Program. The

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Consumer Protection Mission

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Commission also works closely with the Food and Drug Administration (FDA) on drug,
cosmetic, and medical devices issues, and on monitoring health fraud activities. In addition,
the Commission consults with and obtains expert assistance from the Consumer Product
Safety Commission (CPSC), the National Highway Traffic Safety Administration
(NHTSA), and other agencies.
Some activities, such as consumer education projects, are coordinated with
non-governmental organizations. In fiscal year 1997, in connection with "Project Workout,"
a law enforcement effort involving advertising by manufacturers of exercise equipment,
consumer education material was issued nationwide in conjunction with three consumer and
professional organizations, as well as the President's Council on Physical Fitness.
Credit Practices Program
The Credit Practices Program identifies and deals with problems that have resulted from the
proliferation of credit. It enforces several federal credit statutes that affect more than 113
million consumers who hold over 900 million credit cards and many millions more who
obtain credit through loans. With files on approximately 200 million Americans, the major
credit bureaus have a responsibility to ensure the accuracy and privacy of this personal and
sensitive information. One of the major types of complaints received by the Commission,
however, is that many of these credit histories contain errors. A major goal of this program
is to ensure that these credit histories are accurate and remain correct.
At the same time, personal credit histories are being distributed constantly both among those
who have legitimate reasons for seeing them as well as among those who may not be entitled
to them. The value of the information in these histories makes it likely that their rate of
dissemination will increase. The Credit Practices Program works to ensure that only those
parties who have permissible purposes will receive these reports.
Privacy is becoming an important concern to consumers. Following up on the Commission's
1996 privacy workshop and report, a four-day public workshop on consumer privacy issues
was held in fiscal year 1997. Through the workshop, the Commission began to gather data
for a Congressionally requested study on "look-up services," or computer databases that
contain identifying information about consumers. The Commission also examined the
computer database industry's response to the growing concern about personal privacy in the
new online marketplace, including concerns about unsolicited e-mail and the privacy of
children. Similarly, the Consumer Electronic Payments Task Force, on which the
Commission participates, held two public meetings to address privacy and other consumer
issues arising from emerging electronic payment systems.
Charging higher prices or denying credit for reasons unrelated to creditworthiness (such as
race or age) continues to be a serious problem. Attempting to ensure that everyone is able to
obtain credit on an equal basis is part of this program.
The way credit or leases are advertised and the information that is given to the borrower
before the transaction is consummated are also important. Consumers must be able to
meaningfully compare terms and costs to shop effectively for credit. Program staff monitor
the way credit is advertised, to ensure that it is not deceptive, and the subsequent disclosure
of information, to ensure that it is conspicuous as well as accurate. The same concerns arise
with leasing, particularly with the rising popularity of automobile leasing.

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Once credit is granted, delinquency and default can occur for a variety of reasons. How
consumers are handled who do not or cannot pay is extraordinarily important to the efficacy
of the overall credit transaction. It is the responsibility of the Commission to prevent
abusive, deceptive, and unfair debt collection practices.
Credit scams are always emerging in the marketplace. Misleading promises about credit
availability or procurement are constantly being made and advertised. Credit card fraud is
increasing in a variety of contexts. Typically, perpetrators of deception and fraud prey on
consumers who are unable to obtain credit legitimately and thus are most vulnerable to false
claims. The Credit Practices Program works to protect these consumers as well as all who
need credit to live and prosper.
The Commission also enforces the current Fair Credit Reporting Act (FCRA). Extensive
FCRA amendments became effective on September 30, 1997. As mandated by the newly
enacted amendments, the Commission prescribed notices that will be distributed by credit
bureaus - one for consumers, which summarizes their FCRA rights, and others for those that
furnish information to credit bureaus and use credit reports, which summarize their FCRA
responsibilities.
During fiscal year 1997, the new Credit Repair Organizations Act was passed. The Act
prohibits false claims about credit repair and makes it illegal for credit repair companies to
charge a fee until they have performed their services. The Commission began working with
states to implement the Act, and hosted a public/private conference to discuss possible joint
efforts in this area. The Commission sent information on the new law directly to over 1,000
credit repair companies. It conducted a "surf day" for credit repair ads on the Internet and
created a new section on the Commission's home page (www.ftc.gov) providing information
on credit repair.
The Commission continues to work in the area of identity theft, which occurs when an
individual appropriates another's name, address, social security number, or other identifying
information to commit fraud. In fiscal year 1997, the Commission held a meeting at which
industry members, consumer representatives, and law enforcement officials discussed
specific problems and proposed solutions in working groups. Through these types of
meetings, the Commission focuses the attention of the consumer credit industry on the plight
of the victims of identity theft and prompts changes in industry practices.
Enforcement Program
The Enforcement Program enforces Commission administrative orders and more than a
dozen statutes and rules, covering such diverse areas as care labels on clothes, mail and
telephone order sales, energy labels on appliances, buyers' guides on used cars, octane
ratings, door-to-door sales, and the receipt of unordered merchandise. This program also
initiates cases involving false or unsubstantiated product claims that may result in significant
economic injury. In fiscal year 1997, staff investigated the truthfulness of advertising claims
for air-cleaning devices, such as ozone generators, and automotive products, such as engine
oil treatments.
The Commission's administrative orders, which are issued to address a wide array of unfair
or deceptive practices, govern the sales and marketing conduct of many major, national

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firms. The Enforcement Program monitors and enforces compliance with these orders,
overseeing redress programs, such as cash reimbursement to consumers, to ensure that firms
comply with their obligations as specified in the orders.
Program staff also process requests by firms to modify or vacate orders on the basis of legal
or factual changes or other grounds. Under a rule adopted in January 1996, existing
Commission administrative orders that are more than 20 years old expire automatically,
unless there has been a court-filed action to enforce the order during the last 20 years.
Adoption of this rule has resulted in the termination of over 10,000 orders that reflected
outmoded policies or contained requirements no longer of value to consumers.
Another important responsibility is to implement the Commission's ongoing project,
initiated in 1992, to review all rules and guides every 10 years. During the last 27 months,
additional efforts were focused on regulatory review, responding aggressively to President
Clinton's memorandum urging agencies to streamline and eliminate unnecessary or obsolete
regulations. Since the beginning of the regulatory review project, the Commission has
reviewed more than half of its rules and industry guides, repealing more than one-third of
them - 12 rules and 15 guides. An additional 19 rules and guides have been updated,
clarified, or streamlined.
The statutes and rules enforced by this program require sellers to provide consumers with
information they need to make informed choices. For example, the Care Labeling and
Textile Rules require sellers to disclose care and fiber content information accurately on
more than 10 billion garments annually so individuals can make informed purchases and
care for their garments properly.
Global harmonization of labeling requirements received significant attention in fiscal year
1997. The Commission announced that it would permit the use of symbols in lieu of words
to provide care instructions on garments, thus avoiding the necessity of giving information
in three languages in North American markets. Implementation efforts, including working
with business groups to conduct a comprehensive consumer education campaign to help
consumers learn the meaning of the symbols, began during the last quarter of fiscal year
1997. In addition, to facilitate global trade, efforts were made to harmonize the care labeling
symbol system developed for use in North America by the American Society for Testing and
Materials with the system adopted for use in Europe by the International Organization for
Standardization.
An area of significant product innovation and improvement has been with so-called "green"
products, those promoted as beneficial for the environment. The Commission enforces
Environmental Marketing Guides that both give companies a basis to conform their
environmental labeling and advertising claims with the law and provide a basis for a
coordinated enforcement policy between the states and the Commission. International
standard-setting organizations have based their standards on many of the principles
embodied in the Guides. The Commission recently determined, after conducting a formal
review and a public workshop, that the Guides were effective in preventing deception and
encouraging truthful claims.
As the states pass electricity restructuring and deregulation legislation allowing consumers
to choose their electricity supplier, many consumer protection issues are raised.
Accordingly, the Commission works with other federal and state agencies on consumer

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information disclosure issues, including "green" marketing claims for electricity, and
provides informal advice regarding proposed federal legislation to permit retail competition
for electricity.
In fiscal year 1997, the Commission completed a project, organized with state Attorneys
General and state weights and measures authorities, to investigate the accuracy of electronic
price scanning devices through a multi-state survey. The resulting report showed that many
retailers have achieved high levels of pricing accuracy but that scanner errors continue to
happen. The report, which was co-authored by the National Institute of Standards and
Technology and the states of Florida, Massachusetts, Michigan, Tennessee, Vermont, and
Wisconsin, discusses efforts to enlist industry cooperation in improving pricing accuracy.
The report's sponsors developed brochures offering guidance to consumers and businesses.
Some states also brought actions where frequent or serious overcharge incidents were
uncovered.
A fiscal year 1997 report on the accuracy of the net content labeling of milk containers sold
to schools for student meals, as well as in retail stores, was released by the Commission and
three other federal agencies: the Office of Weights and Measures of the National Institute of
Standards and Technology, the Food and Consumer Service of the U.S. Department of
Agriculture (USDA), and the Office of Food Labeling of the Food and Drug Administration.
The report, based on inspections conducted by weights and measures inspectors in 20 states,
found that about 40% of inspected lots of milk and other products contained less than the
labeled amount. Business education efforts were initiated to reduce the incidence of
under-filling, and states and the USDA pursued enforcement actions where appropriate.
Marketing Practices Program
The Marketing Practices Program works to stop injury caused by unfair and deceptive
practices in the marketing and sale of products and services to consumers and small
businesses. Its scope includes virtually any deceptive or unfair practice occurring within a
marketing or sales context, ranging from hard-core fraud to inadequate pre-sale disclosure of
warranty information. Its principal focus, however, is deceptive sales practices, and a major
goal is to halt those abuses that cause the greatest consumer injury or otherwise undermine
consumer confidence and fair competition.
The Commission monitors the sales and marketing practices of the multi-billion-dollar
franchise industry and enforces the Franchise and Business Opportunities Rule, which
requires sellers of franchises and business opportunities to give prospective buyers a
disclosure document containing specific information about the franchise and any earnings
claims that are made.
During fiscal year 1997, several federal-state efforts were undertaken attacking the
fraudulent sale of business activities. "Operation Missed Fortune" targeted a variety of
self-employment schemes, including work-at-home scams, pyramid schemes often pitched
on the Internet, and pre-packaged small businesses involving everything from vending
machine frauds to sophisticated medical billing services. This coordinated law enforcement
effort involved more than 75 law enforcement actions, 11 of which were filed by the
Commission.
"Operation Trade Name Game," conducted by the Commission and eight states, was an

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aggressive campaign against scam artists selling bogus business opportunities to own and
service in-store carousel racks that display products licensed by well-known companies,
including plush toys, t-shirts, and trinkets. A total of 18 enforcement actions, 6 by the
Commission and 12 by the states, were brought against companies and their principals
involved in this business. The campaign also involved a massive educational component
launched in coordination with industry members whose trade names have been used by the
scam artists.
Economic fraud directed at consumers and small businesses is one of the most common
consumer protection problems. The Marketing Practices Program targets fraud that cannot
be readily detected by most consumers or is aimed at vulnerable populations, like older
consumers. Many perpetrators of this type of fraud use new technologies in new ways to
confuse consumers, such as the Internet, new payment systems (such as 900 numbers and
other innovative telecommunications services), credit cards, electronic fund transfers, and
demand drafts (bank transactions that deduct money from a consumer's checking account
without a written instrument bearing the consumer's signature).
A high priority is enforcement of the Telemarketing Sales Rule, which requires material
disclosures and prohibits misrepresentations in telemarketing. The Commission also
enforces the Pay-Per-Call Rule, which governs disclosures and billing dispute procedures in
the 900-number industry.
During fiscal year 1997, four major law enforcement efforts were initiated under the
Telemarketing Sales Rule. "Operation Trip-Up" targeted travel scams and resulted in 36 law
enforcement actions, 5 filed by the Commission and 31 filed by 12 state Attorneys General.
The American Society of Travel Agents partnered with the Commission in this effort to
produce and distribute a variety of consumer education materials designed to provide
consumers tips on how to avoid being a victim of travel fraud. With participation from all 50
state charities regulators, "Operation False Alarm" targeted deceptive activities of certain
for-profit "telefunders" who falsely represented that they engaged in fundraising on behalf of
police departments, fire fighters, and other community organizations. This effort involved 57
law enforcement actions, including 3 filed by the Commission and 54 filed by the states. In
conjunction with this effort, the Commission launched a nationwide public education
campaign in cooperation with the National Association of Attorneys General. In a third
effort, "Operation MagaScheme," fraudulent magazine marketers who bilked tens of
thousands of consumers out of millions of dollars were targeted in a crackdown by the
Commission and Attorneys General from five states. Finally, "Peach Sweep," targeted
geographically based fraud in one particular region of the United States and resulted in 3
actions filed by the Commission and 23 actions taken by eight states.
In a significant fiscal year 1997 initiative, the Commission asserted its leadership as the
Nation's chief consumer protection agency by improving the process for handling
consumer-protection-related complaints from the public. This effort has a threefold mission:
to continue to develop and improve the Commission's role as the custodian of the leading
consumer protection law enforcement database; to respond promptly and helpfully to public
inquiries, whether by telephone, mail, or e-mail; and to generate statistics and other
information, both for public education and for measuring how effective the agency is in
meeting its overall consumer protection mission.
As a follow-up to an earlier conference, in fiscal year 1997 program staff organized a second

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conference on cross-border fraud and represented the Commission in several meetings with
Canadian officials to discuss mutual law enforcement concerns. The conference, co-hosted
by the Commission and the Canadian Provincial Attorney General's office, resulted in the
formation of working groups on cross-border criminal law enforcement, civil law
enforcement, and information sharing. In addition, Canadian officials are reviewing the
Telemarketing Sales Rule as a starting point for consideration of how Canada's consumer
protection laws, which are primarily criminal, might be expanded to the civil arena. Greater
attention to cross-border fraud has already started to pay off as the number of complaints
related to Canadian-based telemarketing appear to have begun a downward trend.
One innovative way the Marketing Practices Program is addressing the growing problem of
fraud on the Internet is through the organization of law enforcement Internet "surf" days.
Commission staff identifies Internet advertisements that appear fraudulent (e.g., illegal
pyramid or business opportunity schemes) and trains other law enforcement personnel to
search the Internet for similar advertisements. Internet sites that appear fraudulent are
identified, and messages are sent to Web site operators informing them of relevant laws and
directing them to the Commission's Web site (www.ftc.gov) for additional information.
Each surf undertaken in fiscal year 1997 took only three hours, but yielded hundreds of
offending sites. After messages were sent to Web site operators, more than one-fifth of the
offending sites were removed; other sites became targets for further investigation.
Another goal of this program is to remedy consumer injury that occurs when sellers fail to
provide important information to consumers. By enforcing its Funeral Rule, the Commission
imposes sanctions on funeral providers who fail to give consumers information about
choices and prices for all goods and services sold. In conjunction with the National Funeral
Directors' Association (NFDA), the Commission designed an industry training and
certification program, the Funeral Rule Offenders Program (FROP), to bring noncomplying
funeral homes into compliance with the Rule without formal law enforcement actions.
FROP participants make a voluntary payment to the U.S. Treasury or the state, which is
generally less than paying the civil penalty that may have been assessed by the court. They
also agree to enroll their personnel in NFDA's training program and submit to NFDA
certification and business form review procedures.
Service Industry Practices Program
The Service Industry Practices Program addresses a variety of frauds and market failures
that cost consumers a substantial amount of money each year. A major focus is consumer
fraud in the sale of investment goods and services. Fraudulent telemarketers and Internet
operators have increasingly turned to investment scams, and deregulation in the
telecommunications industry continues to spawn numerous investment ventures designed to
capitalize on purported new markets. False claims are made concerning the value and
capabilities of the particular technologies being promoted, the profits to be earned, and the
risks of investing.
In fiscal year 1997, the Commission continued its efforts to combat investment fraud as well
as to educate consumers against these pervasive frauds with its project known as "Field of
Schemes." This effort by U.S. and Canadian enforcement authorities resulted in 61 law
enforcement actions, 8 filed by the Commission and 53 filed by the states. It also included a
major consumer education campaign warning consumers about the hottest investment scams
being pitched and encouraging them to report suspected frauds.

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Consumers also continue to purchase what are claimed to be rare coins, precious metals,
gemstones, and other hard assets. The Service Industry Practices Program targets
unscrupulous telemarketers who often blatantly misrepresent the value, past performance,
and risk of these investments.
It also challenges deceptive and fraudulent representations made by idea promotion firms
who offer services of very little value to consumers who want to make money from their
inventions. In fiscal year 1997, the Commission and two state Attorneys General brought
actions against a significant number of companies in the invention promotion industry for
perpetrating a massive fraud on consumers. As part of this effort, called "Project
Mousetrap," a message of extreme caution was issued to consumers about using the very
expensive, but almost always fruitless, services of invention promotion firms.
In addition, this program addresses fraudulent representations in the area of career services
and education. In fiscal year 1997, staff continued to follow up on "Project $cholar$cam," a
massive consumer education and law enforcement effort highlighting scams that target high
school and college students in need of money to finance their education. Consumer
education materials have been widely distributed to high schools and colleges throughout the
country, including bookmarks and posters targeted for high school and college students,
posters distributed in 2,000 college bookstores, flyers for college financial aid offices, and
alerts targeted at high school guidance counselors and college financial aid advisors. The
Commission worked with many partners in the private sector: The Interactive Services
Association's Project Open launched its public service announcement campaign with the
Commission by featuring alerts warning of scholarship scams through member online
services. The National Association of Student Financial Aid Administrators, the College
Board, and Sallie Mae all publicized "Project $cholar$cam" and provided links to the Scam
Alert located at the Commission's home page (www.ftc.gov). In addition, Olan Mills
distributed posters to 5,000 high schools in 27 states. The Commission joined with the New
York Attorney General's Office to notify 25 operators of Web sites offering scholarship
services that they may be engaged in deceptive or unfair practices. Law enforcers had
identified the sites as containing many of the claims the Commission warns consumers are
"red flags" of a scam.
"Project Career Sweep," conducted in fiscal year 1996, resulted in seven law enforcement
actions against employment-search schemes. In fiscal year 1997, in conjunction with this
effort, the U.S. Attorney's Office for the Middle District of Florida secured federal grand
jury indictments of six telemarketers of fraudulent employment services, charging them with
99 counts of mail and wire fraud, conspiracy, and money laundering. Three of the
individuals pled guilty and received prison sentences. Authorities in central Florida report
that, since the Commission actions, complaints about fraud perpetrated by the entire
telemarketing community have significantly dropped.
The Commission joined forces with the U.S. Office of Personnel Management and the U.S.
Postal Service in fiscal year 1997 to produce a consumer alert on federal job placement
scams. This alert was made available on job information computers located at federal
facilities and a new Web page that lists job openings (www.usajobs.opm.gov).
The Commission's authority to go into federal district court to halt violations of the Federal
Trade Commission Act is a powerful weapon in the fight against consumer fraud. In the past

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five years, the Commission has obtained nearly 400 federal district orders against individual
and corporate defendants. In fiscal year 1997, a vigorous enforcement program was initiated
to ensure compliance with these orders and to prevent further harm to consumers.
The Commission also focuses on the fraud and deception in the promotion, marketing, and
sale of health care goods and services. The amount of information available to consumers
about health care and health care products is unprecedented, and with emerging technology
such as the Internet, it will continue to expand dramatically, as will consumer fraud. The
Commission coordinates its health services activities with federal, state, and local law
enforcement agencies; works with other private and consumer groups concerned with health
care issues; and has expanded its efforts to encourage professional associations to adopt
advertising guidelines. In fiscal year 1997, in consultation with Commission staff, five
professional associations developed and endorsed advertising guidelines for refractive eye
surgery. The Commission also co-sponsored a two-day conference with the National
Association of Attorneys General and the Federation of State Medical Boards, which
focused on coordination of federal and state resources to combat fraudulent and misleading
advertising and marketing of health care services.
This program also addresses a variety of consumer problems that may arise in other service
industries. These include newly deregulated services (e.g., certain segments of the financial
planning industry), services that target the elderly and homeowners, and private product
standards and certification bodies that may deceive consumers or inhibit innovation.
Finally in fiscal year 1997, the Commission published its first annual report documenting its
efforts to combat consumer fraud. The report, entitled "Fighting Consumer Fraud: The
Challenge and the Campaign," described recent efforts led by the agency to fight
telemarketing fraud against older people, investment fraud, business opportunity and job
placement scams, and consumer finance scams. The report outlined a road map for
combating fraud through collaborative, cooperative law enforcement actions combined with
innovative public-private sector consumer education campaigns.

< Back | Table of Contents | Next >

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combinations in the defense industry. Boeing and Rockwell entered into a consent
order that will prevent Boeing's acquisition of Rockwell's Aerospace and Defense
business from reducing competition and innovation in the markets for
high-altitude-endurance unmanned air vehicles and space launch vehicles.
Prevented auto salvage yards, auto insurance companies, and consumers from having
to pay monopoly prices for computerized information systems and trading networks
vital to the used auto parts market. The Commission's order required Automatic Data
Processing to divest the rival computerized system and trading network it had acquired
in 1995 after violating the Hart-Scott-Rodino (HSR) Act filing requirements.
Ensured for consumers and businesses in the Southwest the benefits of competitive
prices for natural gas by requiring Phillips Petroleum, which had acquired ANR
Pipeline Company, to divest substantial natural gas gathering services in certain
sections of Oklahoma.
Required the divestiture of 10 supermarkets in Mississippi and Florida after the
merger of Jitney Jungle and Delchamps. The divestiture ensured that competition by
supermarkets would continue in those areas.
In two separate challenges to drug store mergers, protected consumers from higher
prices by securing the divestitures of over 200 stores in four states along the East
Coast.
Commission actions in nonmerger cases, although often less visible than faster paced merger
enforcement, also addressed anticompetitive conduct that threatened consumer welfare. For
example, the Commission's actions:
Prevented associations of health care providers from collectively increasing prices to
consumers, government agencies, and third-party payers. In the case Mesa County
Physicians Independent Practice Association, Inc., the Commission accepted a
settlement agreement of an administrative complaint alleging that the Colorado
physicians organization conspired with its members to fix fees charged for their
services with third-party payers of other health plans. In another case, College of
Physicians & Surgeons of Puerto Rico, the Commission and the Commonwealth of
Puerto Rico joined together to halt boycotts and other illegal conduct by a physicians
group against the Puerto Rican government's managed care plan for indigents. The
Commission's consent order resulted in a $300,000 restitution payment by the College
to the Puerto Rico Department of Health.
Challenged practices that could increase the price of toys. A Commission
Administrative Law Judge found that Toys "R" Us, the Nation's largest toy retailer,
extracted agreements from toy manufacturers to stop selling some of the country's
most popular toys to warehouse clubs or to put the toys into more expensive
combination packages. Based upon the evidence submitted, the Judge found that the
actions of Toys "R" Us had harmed consumers, limiting their ability to obtain
lower-priced toys from the clubs or to compare prices easily. The case is currently
before the Commission on appeal.
Prevented an association of dentists from denying important advertising information to
consumers. In the case California Dental Association, the Commission issued an order
finding that the association unlawfully restrained truthful and nondeceptive advertising
regarding the price, quality, and availability of dental services. The U.S. Court of
Appeals for the Ninth Circuit affirmed the Commission's order. A petition for
certiorari is pending before the U.S. Supreme Court.
Protected farmers from paying higher prices due to vertical price fixing. In American

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Cyanamid, the Commission accepted a consent order settling charges that the firm had
violated the antitrust laws by fixing the resale prices of agricultural chemical products
through a rebate program that induced dealers to sell at or above specified minimum
prices. In a coordinated enforcement action by 50 state Attorneys General, $7 million
in damages was recovered.
Minimizing the Burden on Business.--While the Commission looks out for consumers'
interests, it attempts to do so with the least possible burden on business. Obviously, the
Commission cannot avoid all burdens on business if it is to investigate and enforce the law.
The agency constantly reassesses its policies and procedures, however, to see where it can
streamline them or eliminate any unnecessary requirements. During fiscal year 1997, for
example, the Commission:
Revised, in coordination with the Department of Justice, the Horizontal Merger
Guidelines to clarify the way the agencies analyze efficiency claims and determine
whether claimed efficiencies are likely to lead to lower prices, the creation of new
products, or enhanced competition in the marketplace.
Improved the Premerger Notification process by adding a Premerger section to its
Web site to make more accessible the existing guidance on HSR Act filing
requirements.
Responded to an estimated 44,000 phone calls to help business in complying with the
HSR Act.
Penalized a supermarket chain for allowing assets it had agreed to divest to deteriorate
significantly before they could be sold. In Schnuck Markets, Inc., the Commission
obtained a $3 million civil penalty and divestiture of other stores under terms of the
proposed settlement agreement.
Implemented the Commission's policy to review cases in which a District Court has
denied the Commission's request for a preliminary injunction in order to determine if
further administrative litigation is warranted.
Continued its commitment to work with state antitrust agencies to leverage antitrust
resources. The Commission has engaged in several joint investigations with the states,
including Staples/Office Depot, American Cyanamid, and College of Physicians &
Surgeons of Puerto Rico, enabling it to conduct thorough investigations with fewer
Commission resources and reducing the burden on business by allowing joint
interviews and joint requests for documents and information.
Cooperated with foreign antitrust agencies to enforce the antitrust laws in cases where
the actors and effects may be subject to scrutiny in foreign countries as well as in the
United States, including such transnational mergers as Ciba-Geigy/Sandoz.
Forward-Looking Antitrust Enforcement.--Rapid technological development and increased
globalization of the marketplace have increased the need for dynamic antitrust enforcement.
The Commission continues to refine its analysis to adapt to these changes and to structure
the least intrusive enforcement that effectively protects free and competitive markets. During
fiscal year 1997, the Commission:
Held hearings on the appropriate role of antitrust enforcement regarding joint
ventures. The hearings included testimony from economic and legal scholars, business
executives, consumer groups, state enforcement authorities, and foreign enforcement
authorities.
Considered the critical importance in merger analysis of "innovation markets," or the

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competition between companies in the research and development of new products that
currently may not be available to consumers. For example, in Ciba-Geigy/Sandoz, the
Commission's consent order required the divestiture of intellectual property necessary
for scientists to continue research and development toward novel, life-saving gene
therapy products that are expected to be used for many diseases, including hemophilia
and cancer. As a result, consumers may enjoy the benefit of competition in the
products of this research when they begin to appear in the near future.
Protected innovation and competition in the market for "routing" software, used in the
design of microchips to map out the connections between millions of miniature
components. The Commission's consent order in Cadence Design Systems, Inc.
requires Cadence to allow participation by other developers of routing software in its
programs for the development of interfaces between Cadence products and the
software design tools of other manufacturers.
Programs Under the Competition Mission
The Commission implements its Competition Mission through three major program areas:
the Hart-Scott-Rodino (HSR) Premerger Notification Program, the Mergers and Joint
Ventures Program, and the Nonmerger Program.
Premerger Notification Program
Through its implementation and enforcement of the HSR Act, the Premerger Notification
Program helps protect consumers from anticompetitive mergers. Prior to enactment of the
Act, mergers often were consummated and assets and operations combined before the
antitrust agencies learned of the transactions. It was then difficult, if not impossible, to
"unscramble the eggs" and restore the benefits of a competitive market. The HSR Act
requires entities that meet certain size requirements and that plan significant acquisitions to
file notice with the Commission and the Antitrust Division of the Department of Justice.
Consummation of the merger must be delayed for statutorily prescribed periods of time. The
HSR Act thus allows the antitrust agencies to analyze and take action against
anticompetitive mergers before they actually take place.
The program strives to minimize the burden on businesses that are required to comply with
the HSR Act. To improve voluntary compliance, the Commission's Premerger Office
provides assistance to filers in understanding the Act's requirements, primarily through
responses to tens of thousands of telephone inquiries annually.
The HSR Act has become an essential component of antitrust enforcement. In particular, the
Commission's effective enforcement of the Act has made parties to mergers and acquisitions
more certain of the timing of stages along the investigation path, enabling them to schedule
business activities with greater confidence. Similarly, the Commission can make more
reliable enforcement decisions because it has access to most of the relevant data concerning
the competitive effect of a proposed merger. In sum, the Premerger Program is an important
example of efficient antitrust enforcement that protects the consumer's interest in a
competitive market while minimizing costs to business.
Premerger Notification Enforcement Activities
During fiscal year 1997, the number of premerger filings increased for the sixth year in a
row, totaling 3,702. This number of filings represents a 20% increase over the number
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reported during fiscal year 1996 and a 142% increase over the 1,529 filings recorded in
fiscal year 1991.
[Chart 2]
The Premerger Office works closely with the private bar to minimize unnecessary filings
and to make the entire process work as efficiently as possible. The Premerger Office's
activities in fiscal year 1997 included responding to an estimated 44,000 phone calls seeking
information under the HSR Act. Approximately one-half of the calls concerned whether a
proposed transaction was covered under the reporting requirements, while the other half
concerned details involved in completing and filing notices of proposed transactions.
The HSR Act can ensure swift and efficient review of proposed mergers only if the parties
comply with the Act's requirements and provide complete information. When parties fail to
comply with these requirements, the Act provides for the imposition of civil penalties.
During fiscal year 1997, the Commission collected $5.752 million in civil penalties after
obtaining consent decrees for violations of the HSR Act. In the settlements:
Mahle GmbH, a German automotive parts manufacturer, and Metal Leve, S.A., a
competing Brazilian automobile parts manufacturer, paid a combined $5.602 million,
the largest civil penalty ever paid for an HSR violation;
Harry E. Figgie, Jr., paid a civil penalty of $150,000 for an alleged failure to file.
Mergers and Joint Ventures Program
The Mergers and Joint Ventures Program seeks to prevent mergers and acquisitions that are
likely to harm competition and consumers. The program also investigates joint ventures and
interlocking directorates among competing firms that may have similar anticompetitive
effects. The program has three essential components:
Detecting potentially harmful mergers before they occur by monitoring merger activity
and screening all significant mergers, in conjunction with the Premerger Notification
Program;
Investigating those mergers that the screening process has targeted for further inquiry;
and
Taking appropriate action to prevent (or undo) those mergers or portions of mergers
that, after investigation and analysis, appear likely to substantially lessen competition.
In the case of some mergers, the Commission can act to prevent harm to consumers and
competition only by preventing the merger or, in rare cases, by undoing it. In many other
cases, however, competition can be preserved by more narrowly tailored relief that still
allows the overall merger or transaction to proceed. Determining the kind of relief necessary
entails investigations that are designed to answer fundamental questions about the merger
and the affected relevant product and geographic markets:
Is the merger likely to result in a lessening of actual or potential competition, increase
the market power of the merging firms, and lead to market dominance or a significant
increase in the likelihood of collusion?
Is the merger likely to increase barriers to entry or expansion or to foster
interdependent conduct among firms?

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To protect consumers from mergers that may substantially lessen competition, the most
efficient and cost-effective strategy is to prevent mergers before they occur. The
Commission has authority under Section 13(b) of the Federal Trade Commission Act to seek
a preliminary injunction in federal district court to stop a merger pending administrative
adjudication, but more often, it resolves the competitive problem through consent
agreements with the merging parties. In addition to injunctive relief, the Commission may
rely on administrative remedial powers to restore competition lost as a result of a merger. In
either case, the principal (though not exclusive) remedy is the prompt divestiture of assets
sufficient to restore competition.
Merger and Joint Ventures Enforcement Activities
During fiscal year 1997, Commission staff opened investigations on 82 transactions,
including 32 initial-phase investigations (9 of these were later converted to full-phase) and
50 full-phase investigations. The Commission issued requests for additional information or
documentary materials under the HSR Act ("second requests") for 45 of these proposed
transactions. Preliminary injunction cases were authorized in two transactions. One of these
cases, Mediq, was subsequently abandoned by the parties once the complaint was
authorized. In the other transaction, the proposed merger between Staples and Office Depot,
a federal court granted the Commission's motion for a preliminary injunction, and the parties
then abandoned the transaction. Finally, parties abandoned five transactions after the
Commission issued second requests for information.
During the year, the Commission authorized an appeal of a federal court decision denying
the Commission's 1996 motion for a preliminary injunction to block the proposed merger of
Butterworth and Blodgett, two hospitals in the Grand Rapids, Michigan, area. The Sixth
Circuit upheld the lower court's decision on July 6, 1997. On September 26, 1997, the
Commission ended its administrative challenge to the merger, concluding that further
litigation was no longer in the public interest. The Commission's action was in keeping with
its policy to determine on a case-by-case basis whether to pursue administrative litigation in
merger cases in which the federal court had denied the Commission's motion for a
preliminary injunction.
The Commission's merger investigations included a number of complex and significant
transactions in the defense, health care, and computer and software industries, where
Commission efforts helped protect competition in the midst of intense industry restructuring
as a result of rapidly changing economic forces and technology. Notable examples include
the merger between Boeing and Rockwell, the merger between Ciba-Geigy and Sandoz, and
the acquisition of Cooper & Chyan Technology by Cadence Design Systems.
During the year, the Commission also accepted for public comment 17 new consent
agreements (of which 15 were also finalized during the year) in the following industries:

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Competition Mission

http://www.ftc.gov/os/ar97/competition.htm

Health care
Defense and technology
Drug stores
Automotive
Oil and natural gas
Supermarkets and food
Manufacturing

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The Commission continued to improve the analysis of, and the remedies for, the
anticompetitive effects of proposed mergers and made significant gains in achieving
divestitures more quickly. During fiscal year 1997, the Commission built on efforts begun in
earlier years to shorten the time to accomplish divestitures ordered to remedy otherwise
anticompetitive mergers. The Commission has done so by insisting, where appropriate, that
signed purchase agreements for divestiture assets be provided to the Commission before the
order becomes final. Other provisions that advance this goal include shorter divestiture
periods, broader asset packages, and so-called "crown jewel" provisions, which provide for
the divestiture of an alternative, generally more marketable package of assets by a trustee if
the respondent fails to divest the basic package of assets by a specific date. Enforcement of
the terms of these orders also has been made a high priority, with stringent penalties
assessed for noncompliance.
Finally, the Commission continued its commitment to work with state antitrust agencies to
coordinate antitrust enforcement. The Commission's regional offices have particularly close
working relationships with state antitrust enforcers. Staff from both the regional offices and
the Bureau of Competition conduct joint and parallel antitrust investigations with the states.
Last year, the regional offices hosted two "Common Ground" conferences, bringing together
representatives of state Attorneys General offices, several Commission regional offices, and
the Department of Justice. The conferences were designed to discuss substantive antitrust
issues and to explore areas where the state and federal agencies could work together to
promote consumer welfare. Plans are underway for future conferences.
Nonmerger Program
The Commission's Nonmerger Program includes three areas of potential anticompetitive
conduct: horizontal restraints, distributional arrangements, and single firm violations. The
Horizontal Restraints Program is directed at investigating collusive or other collaborative
activities involving direct competitors that may harm consumers, such as price fixing. Such
activities can harm consumers by raising prices and reducing the quantity and quality of
available goods and services. Although some joint activity among competitors, such as
setting standards and promulgating legitimate ethical codes, can be procompetitive and even
essential, such agreements also can be abused in a way that harms consumers.
The Distributional Restraints Program seeks to protect consumers from anticompetitive
consequences that arise from certain vertical agreements among firms in the chain of
distribution - from producers to distributors to retailers. An agreement on minimal resale
price between firms in a vertical relationship is an example of a distributional practice that
has a harmful effect on consumers and is considered per se illegal. The Commission
investigates distributional restraints carefully to avoid challenging vertical agreements that
may benefit consumers.

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Competition Mission

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The Single Firm Program seeks to prevent firms from creating or maintaining market power
through conduct that is injurious to consumer welfare. A single firm with market power can
use various anticompetitive practices to reduce output below the competitive level and to
maintain supracompetitive prices, thereby injuring consumers and misallocating resources.
While neither the existence of market power nor the attempt to gain market share is unlawful
in itself, achieving market power by practices that exclude competition is unlawful. The
principal challenge of the Single Firm Program is to distinguish anticompetitive conduct
from conduct that merely constitutes vigorous competition. Conduct investigated under this
program that may be unlawful includes exclusive dealing arrangements, tying arrangements,
and price and non-price predation - all of which can have the effect of driving competitors
from a market through means other than vigorous competition on the merits.
Nonmerger Enforcement Activities
Under the three nonmerger programs, the Commission opened 38 initial-phase investigations
during fiscal year 1997. Ten of these investigations were converted to full-phase, along with
15 others that had been opened in earlier years.
The Commission accepted three consent agreements for public comment (with two of them
made final during the year), finalized three other consent agreements, and modified two
others. The consent agreements accepted for public comment included:
American Cyanamid (resale price maintenance on agricultural chemicals);
College of Physicians & Surgeons of Puerto Rico (physician boycott to demand
price-related changes under Puerto Rico's health care plan for the indigent); and
Montana Associated Physicians, Inc. (concerted action to obstruct managed care plans,
to set prices, and to thwart cost containment measures).
During fiscal year 1997, adjudicated decisions were issued in three significant nonmerger
matters:
In Toys "R" Us, an administrative law judge upheld the Commission's complaint and
ruled that Toys "R" Us entered into illegal vertical agreements with toymakers to
restrict sales to warehouse clubs and facilitated horizontal agreements to prevent
competition among toy manufacturers. The initial decision is currently on appeal
before the Commission.
In California Dental Association, the Court of Appeals for the Ninth Circuit upheld
the Commission decision finding antitrust violations for restrictions against truthful,
nondeceptive advertising involving the price, quality, and availability of dental
services. A petition for certiorari is pending before the Supreme Court.
A Commission decision in International Association of Conference Interpreters upheld
portions of the complaint regarding the Association's rules, fees, and expenses, but
found insufficient evidence to support charges concerning rules that governed
non-price-related practices.

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Annual Report of the Federal Trade Commission - FY 1997

http://www.ftc.gov/os/ar97/index.html

This sculpture is one of a pair outside the
Federal Trade Commission building,
entitled "Man Controlling Trade." It was
completed in 1942 by New York sculptor
Michael Lantz.

EXECUTIVE OFFICES OF THE FEDERAL TRADE COMMISSION
Pennsylvania Avenue at Sixth Street, N.W.
Washington, D.C. 20580
Phone: (202) 326-2222
Internet address: www.ftc.gov

REGIONAL OFFICES

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Annual Report of the Federal Trade Commission - FY 1997

http://www.ftc.gov/os/ar97/index.html

Atlanta, Georgia
Suite 5M35, Midrise Building
60 Forsyth Street, S.W.
Zip Code: 30303
Phone: (404) 656-1390

Denver, Colorado
Suite 1523
1961 Stout Street
Zip Code: 80294-0101
Phone: (303) 844-2272

Boston, Massachusetts
Suite 810
101 Merrimac Street
Zip Code: 02114-4719
Phone: (617) 424-5960

Los Angeles, California
Suite 700
10877 Wilshire Boulevard
Zip Code: 90024
Phone: (310) 824-4343

Chicago, Illinois
Suite 1860
55 East Monroe Street
Zip Code: 60603-5701
Phone: (312) 960-5634

New York, New York
Suite 1300
150 William Street
Zip Code: 10038
Phone: (212) 264-8290

Cleveland, Ohio
Suite 200, Eaton Center
1111 Superior Avenue
Zip Code: 44114
Phone: (216) 263-3455

San Francisco, California
Suite 570
901 Market Street
Zip Code: 94103
Phone: (415) 356-5270

Dallas, Texas
Suite 2150
1999 Bryan Street
Zip Code: 75201
Phone: (214) 979-9350

Seattle, Washington
Suite 2896
915 Second Avenue
Zip Code: 98174
Phone: (206) 220-6350

FEDERAL TRADE COMMISSION
1997 ANNUAL REPORT
Contents
COMMISSIONERS
Robert Pitofsky
Mary L. Azcuenaga
Janet D. Steiger
Roscoe B. Starek, II
Christine A. Varney
OVERVIEW
Competition Mission
Consumer Protection Mission
Economic Analysis
Management and Administration
APPENDIX
Competition Mission
Part 2 Consent Orders Issued
Part 3 Administrative Complaints

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Annual Report of the Federal Trade Commission - FY 1997

http://www.ftc.gov/os/ar97/index.html

Part 3 Consent Order Issued
Initial Decision
Final Orders
Injunctions
Civil Penalty Actions
Order Modifications
Staff Advisory Opinions
Consumer Protection Mission
Part 2 Consent Orders Issued
Part 3 Administrative Complaint
Part 3 Consent Orders Issued
Initial Decisions
Final Orders
Permanent Injunctions
Civil Penalty Actions
Consumer Redress Actions
Civil Contempt Actions
Criminal Contempt Actions
Consumer and Business Education
Rulemaking Activities
Economic Analysis
Economic Reports and Working Papers
Advocacy Filings
Index of Cases Listed in the Appendix

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Full text of Annual Report of the Federal Trade Commission : Annual Report of the Federal Trade Commission : For the Fiscal Year Ended September 30, 1997

FRASER