Best Marketing, Inc. has agreed to settle Federal Trade Commission charges brought in July 1996 as part of “Project Jackpot,” a major federal/state enforcement effort targeting firms that offered purportedly valuable prizes to consumers to induce them to purchase products. The FTC alleged that the company and its president, Edward Hexter, also known as David D. Best, misrepresented the value of prizes they awarded to small business owners who bought advertising specialty products. The settlement prohibits the company and Hexter from misrepresenting the nature or value of any prize awarded in a prize promotion, and prohibits the defendants from failing to disclose that no purchase or payment is necessary in order to win a prize. In addition, the settlement requires Hexter to post a $500,000 bond before engaging in or assisting others engaged in telemarketing activities. The settlement also requires Hexter to transfer the majority of his corporate and personal assets -- totaling about $75,000 -- to the FTC as a disgorgement remedy.
"Project Jackpot," coordinated by the Federal Trade Commission, resulted in 56 enforcement actions against 79 defendants in 17 states. The FTC filed eight actions, the State Attorneys General filed 43 actions, and the U.S. Postal Service filed five actions.
According to the complaint, Best Marketing allegedly telemarketed to small businesses and sole proprietors, claiming that they would win one of five “premiums” if they ordered advertising speciality items, such as “Say No to Drugs” ballpoint pens or magnetic calendars. The FTC’s complaint charged that Best Marketing’s telemarketers also represented that every prize was worth at least $1,200, or that each prize was worth more than what the consumers paid for the items. In fact, the complaint alleged, the prizes -- usually a low-quality ring or an inferior vacation package -- were worth less than what consumers paid and less than $1,200. In addition, the complaint alleged that Best Marketing failed to disclose, clearly and conspicuously, to consumers that those who won a "vacation" would have to pay hundreds of additional dollars to redeem the prize. Best Marketing, no longer in business, was headquartered in Lauderhill, Florida. Upon filing of the FTC’s complaint, a federal court in Fort Lauderdale issued a temporary restraining order barring the challenged sales practices and freezing the defendants’ assets. Subsequently, the defendants stipulated to a preliminary injunction continuing the asset freeze and conduct restrictions.
The settlement prohibits the defendants from misrepresenting:
- the nature or value of any prize offered in a prize promotion;
- the likelihood that any consumer will receive any particular prize;
- that consumers must purchase goods or services to participate in a prize promotion;
- the manner in which any consumer was selected to be solicited (including that any consumer was "specially" selected); and
- any material cost, restriction, limitation or condition to receive, redeem or use a prize offered in a prize promotion.
In addition, the settlement prohibits the defendants from violating any provision of the Telemarketing Sales Rule. The settlement prohibits the defendants from failing to disclose that no purchase or payment is required to win a prize or to participate in a prize promotion, and from failing to disclose the method of participating without making a purchase or payment, as required by the Telemarketing Sales Rule. The settlement also prohibits the defendants from falsely representing or failing to disclose any fact material to a consumer’s decision to purchase any item, product, service, or investment opportunity. Further, the settlement requires Edward Hexter to post a performance bond in the amount of $500,000 before engaging in or assisting others engaged in telemarketing.
Finally, the settlement requires Hexter to transfer the bulk of his frozen assets to the FTC, and also requires Hexter to sell his home and transfer a portion of the net proceeds of the sale to the Commission. The funds collected by the Commission will be deposited in the U.S. Treasury.
The Commission vote to file the settlement was 5-0. It was filed in the U.S. District Court for the Southern District of Florida, Fort Lauderdale Division, on Feb. 26, 1997. The settlement, which is subject to the court’s approval, was signed by the judge on Feb. 28.
NOTE: This stipulated final judgment and order for permanent injunction is for settlement purposes only and does not constitute an admission by the defendants of a law violation. The judgment has the force of law when signed by the judge.
Copies of the settlement, as well as other documents associated with "Project Jackpot," are available from the FTC’s Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC’s World Wide Web site at: http://www.ftc.gov
(Civil Action No.: 96-6781-CV-ZLOCH)
(FTC Matter No. X96 0077)
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