ARIZONA WATER-PURIFIER COMPANY AGREES TO SETTLE FTC CHARGES OVER FALSE WATER-TEST CLAIMS, DECEPTIVE SALES PRACTICES

Water Resources International, Inc., which also conducts business as American Soap Products Company, of Phoenix, Arizona, and its officers, have agreed to settle Federal Trade Commission charges that they used various false and deceptive represen- tations about the safety of drinking water and the efficacy of their treatment devices in order to induce consumers to purchase home water-purification devices. Under the proposed settlement, filed in federal court today, the defendants would be prohibited from misrepresenting the results of in-home water testing and the efficacy of their treatment devices, and would be required to pay $100,000 as disgorgement.

The FTC's complaint detailing the allegations also names Lowell E. Foletta and Dorella Foletta, officers of Water Resources. According to the complaint, Water Resources sold its water treatment devices to consumers in 32 states through a network of distributors and franchisees or directly themselves. The defendants' sales network initially contacted consumers by telephone, purportedly to conduct a survey, distribute "free" soap, or to arrange a date for free home-water tests, the FTC alleged. During subsequent in-home sales presentations, the defendants or their sales representatives conducted various tests on the consumers' tap water and claimed that the testing indicated the presence of contaminants, pollutants or other impurities. They then pitched their treatment device as able to solve the particular problem identified, the FTC alleged. Consumers who then purchased the treatment device received a supply of "environmentally safe" soap, supposedly large enough to pay for the treatment device.

The FTC charged that the defendants falsely represented the primary purpose of their initial telephone calls. The defendants' claims that the "gift" soap had won ecology awards and that it was enough to pay for the device were also false, according to the complaint. The complaint also alleged that the in-home tests conducted by the defendants or their representatives could not accurately detect contaminants or impurities; nor could the defendants substantiate that their treatment devices could resolve any particular water purity problem consumers may have had. The FTC further alleged that Water Resources provided its distributors and franchisees with extensive marketing, advertising and training materials that the distributors and fran- chisors used in the deceptive telemarketing and in-home sales presentations to consumers.

The proposed final judgment and order to settle these charges, which requires the court's approval to become binding, would require the defendants to promptly and clearly disclose, during any telephone call to set up appointments to sell water- treatment products or services, that such is the purpose of the call. The defendants also would have to disclose any condition or obligation consumers must meet in order to obtain a "gift," "prize" or any free merchandise, in connection with selling water-treatment devices or services. The settlement also would prohibit the defendants from making any of the alleged misrepresentations, or any other material misrepresentations in selling such products or services in the future. Further, the settlement would require the defendants to have competent and reliable scientific evidence to support claims that:

• the results of any tests performed on consumers' water indicate that the water is or may be polluted, contaminated, or unhealthy to drink;
  
  
• any water treatment system can or will purify or remove contaminants from water;
  
  
• water processed through defendants' water treatment devices possess attributes that make the water healthier than non-processed water;
  
  
• the defendants' soap products possess attributes that makes them healthier than detergents; or
  
  
• consumers will save certain amounts on household expenses after having a home water treatment system installed.

In addition, the settlement would require the defendants to monitor their distributors and franchisees and terminate any that they know or should know are engaging in deceptive practices. The defendants also would be prohibited from shipping merchandise to any customer of such an entity, unless the consumer re-orders the item and acknowledges in writing a notice of the FTC lawsuit. The $100,000 payment required by the settlement would be paid over 18 months and, if redress to consumers is impractical, will be deposited in the U.S. Treasury.

Finally, the order includes various reporting requirements that would assist the FTC in monitoring the defendants' compliance with its provisions.

FTC staff suggests that consumers wanting the most accurate picture of the condition of their water should (1) ask the local water superintendent for the latest results of the public water supply and compare them to state and federal standards available from the state government and the Environmental Protection Agency, and/or (2) have their water tested by a private laboratory that is certified by a state health department or environmental agency. For state certified laboratories, you can call the EPA's Safe Drinking Hotline at 1-800-426-4791. The results of such tests may reveal that an in-home purification system may not be needed to render your water supply safe and free of unhealthy contaminants.

The Commission vote to file the proposed final judgment and order for permanent injunction was 5-0. The complaint and final judgment were filed in the U.S. District Court for the Central District of California, in Los Angeles, on Aug. 29, 1995.

NOTE: This final order is for settlement purposes only and does not constitute an admission by the defendants of a law violation. It has the force of law when signed by the judge.

The FTC has developed free fact sheets that offers tips for consumers on protecting themselves from water testing frauds. Copies of the complaint and settlement, as well as the free fact sheets on "Home Water Treatment Units" and "Water Testing Scams," 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 FTC news as it is announced, call the FTC's 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

(FTC File No. 902 3265)
(Civil Action No. 95-5802JMI (ex))