Pro-Plastic Design & Marketing, Inc., and its president Kirk A. Harris, have agreed to an injunction against violating the Federal Trade Commission’s Franchise Rule in the future as part of a settlement of federal charges that Pro-Plastic Design and Harris failed to give potential investors information about the business opportunity they sold and documentation to support claimed earnings, as required by the Franchise Rule. The defendants' business opportunities involve vending machines to dispense "Peppermint Patty" mints.
Pro-Plastic Design & Marketing is based in Provo, Utah. Investors paid $5,496 for a package of 24 vending machines, relying on the defendants' claims that they would make as much as $15,120 a year from the 24 machines.
Charges against Pro-Plastic Design & Marketing and Harris were filed in July 1995 as part of “Project Telesweep,” a joint enforcement effort by the FTC and 20 state Attorneys General and securities regulators to crack down on deceptively-marketed business opportunity schemes. Project Telesweep snared nearly 100 marketers of vending machine business opportunities for failure to provide critical pre-purchase information to potential buyers. Many firms also were charged with making exaggerated earnings claims.
The complaint against the defendants alleged that they failed to give investors a required document containing substantiation for the earnings claims they made. In addition, the defendants' basic disclosure documents allegedly did not include the information investors need to properly evaluate the franchise; information that is required by the FTC's Franchise Rule.
The FTC’s Franchise Rule requires franchisors to give potential buyers detailed up-front disclosures about the financial and litigation history of their firms and their current and past franchisees, and also to provide documentation supporting any claims they make about future earnings.
The consent decree to settle these charges, which requires the court’s approval to become binding, would require Pro-Plastic and Harris to comply fully with all aspects of the FTC's Franchise Rule, and prohibit them from making unsubstantiated earnings claims or misrepresenting any other material aspects of any franchise or business venture they offer. The settlement also contains standard reporting requirements designed to assist the FTC in monitoring the defendants' compliance.
The FTC vote to authorize filing of the proposed consent decree was 5-0. It was filed in the U.S. District Court for the District of Utah, Central Division, in Salt Lake City, on Aug. 19, by the Department of Justice at the FTC’s request.
NOTE: This consent decree is for settlement purposes only and does not constitute an admission by the defendants of a law violation. Consent decrees have the force of law when signed by the judge.
Copies of the proposed consent decree, as well as other documents associated with Project Telesweep, 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 happens, call the FTC’s NewsPhone at 202-326-2710. FTC news releases and other documents also are available on the Internet at the FTC’s World Wide Web Site at http://www.ftc.gov
(FTC File No. X050092)
(Civil Action No. 2:95CV626J)