Telebrands Corporation, a Roanoke, Virginia mail/telephone-order company, and its owner, Ajit Khubani, have reached settlements with the Federal Trade Commission resolving charges that they violated the FTC’s Mail or Telephone Order Merchandise Rule by failing to provide consumers with appropriate and timely notification of a delay in shipping their orders, and by failing to deem an order canceled and make prompt refunds in instances where the company failed to ship the order or to timely obtain the consumer’s consent to a delay. Telebrands and Khubani have agreed to pay a $95,000 civil penalty as part of the proposed settlement of alleged Rule violations and would be prohibited from violating the Rule in the future. A second proposed settlement would resolve charges that Telebrands and Khubani made unsubstantiated and false claims in advertisements for two of their products.
Telebrands Corp., formerly known as Telebrands Direct Response Corp. and Telebrands Wholesale Corp., sells various products through print ads in general circulation newspapers and broadcast ads. This is the second time, the FTC said, that Ajit Khubani has been charged with violating the Mail Order Rule. In 1990, Khubani and a mail order company he was operating at the time, Direct Marketing of Virginia, Inc., also known as The Direct Connection, were charged with similar Mail Order Rule violations, and the defendants then agreed to pay a $30,000 civil penalty.
The Mail or Telephone Order Merchandise Rule requires a company that sells merchandise over the phone or through the mail to ship ordered merchandise within the time stated in its ads or catalogs. If no time is stated, the company must send the merchandise within 30 days of receiving the properly completed order. If a company is unable to ship the order before the deadline, it must send the consumer an option notice which gives the consumer the choice of agreeing to a delay or canceling his order and receiving a prompt refund. When there will be a subsequent delay, the company must send a second option notice and, if the consumer does not respond, must cancel the order and issue a prompt refund. (The delay notice also must give the consumer a cost-free method of responding.)
The complaint and proposed consent decree settling the allegations of the Mail or Telephone Order Merchandise Rule violations, subject to federal district court approval, would require Telebrands and Khubani to pay the $95,000 civil penalty and would prohibit the defendants from future violations of the Rule.
The companion settlement announced by the FTC today would resolve charges that Telebrands and Khubani ("respondents" in this administrative settlement) made unsubstantiated and false claims in the advertising of two products they sold -- the WhisperXL, a sound amplification device, and the Sweda Power Antenna. The FTC also alleged that the respondents misrepresented a money-back guarantee with respect to the Sweda Power Antenna.
Sweda Power Antenna
According to the complaint, the respondents' ads for the Sweda Power Antenna -- a device purported to improve television and radio reception -- represented that the Sweda Power Antenna provides the best, crispest, clearest, or most focused television or radio reception achievable without cable installation; the Sweda Power Antenna takes a television or radio signal and electronically boosts it before it gets to a television or radio; and the installation of a Sweda Power Antenna will more effectively improve a television's or radio's reception, sound, or image than the installation of a television or radio dish antenna. These claims are all unsubstantiated and false, the FTC alleged.
The complaint further alleged that the respondents failed to timely honor their money back guarantee for the Sweda Power Antenna.
The proposed consent order would prohibit the respondents from representing that the Sweda Power Antenna provides the best, crispest, clearest, or most focused television or radio reception achievable without cable installation and that it will more effectively improve a television's or radio's reception, sound, or image than the installation of a television or radio satellite or external dish antenna. Moreover, the order would prohibit the respondents from making the claim that the Sweda Power Antenna takes a television or radio signal and electronically boosts it before it gets to a television or radio unless such claim is true and supported by competent and reliable evidence.
According to the FTC’s complaint, the respondents’ ads for the WhisperXL, which appeared in such publications as Parade magazine and New Jersey's Star Ledger newspaper, contained representations including that the WhisperXL is a major breakthrough in sound enhancement technology; is designed to produce and produces clear amplification of whispered or normal speech, television, radio and other mid-to-high frequency sounds at a distance of more than a few feet; and allows the user to hear a whisper from as far as 100 feet away. The FTC alleged that these representations are also unsubstantiated and false.
The proposed consent agreement to settle the charges, announced today for a public comment period, would prohibit the respondents from making these claims and require any claim that respondents make about the relative or absolute performance, attributes or effectiveness of any hearing aid be truthful and supported by competent and reliable evidence.
The settlements also contain various reporting and recordkeeping requirements that would assist the FTC in monitoring the defendants' compliance.
The FTC was assisted in this matter by the Office of the Minnesota Attorney General and the Better Business Bureau of Western Virginia.
The complaint and proposed consent decree to settle the alleged Mail or Telephone Order Merchandise Rule violations were filed on September 18, in the U.S. District Court for the Western District of Virginia, in Roanoke, by the Department of Justice at the request of the FTC. The Commission vote to authorize the filing of the complaint and proposed consent decree was 5-0. The consent decree requires the court's approval to become binding.
The Commission vote to accept for public comment the proposed consent agreement settling the deceptive advertising charges against Telebrands and Khubani was 5-0. The proposed consent agreement will be published in the Federal Register shortly and will be subject to public comment for 60 days, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580.
NOTE: A consent decree or consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $10,000.
The FTC has published a free brochure, "Shopping by Phone or Mail," which spells out consumers' rights under the Mail/Telephone Order Rule, offers suggestions on resolving complaints and lists entities consumers can call for assistance. Copies of the brochure, as well as the court-filed complaint and consent decree, and the complaint, proposed consent agreement, and an analysis to aid public comment, 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
Office of Public Affairs
Michael Bloom or Donald G. D'Amato
New York Regional Office
150 William Street, 13th Floor
New York, New York 10038-2603
212-264-1207 or 212-264-1223
(FTC File No. 932 3297)
(Civil Action No. 96-0827-R (Turk)