Jeannette L. Douglass of Sheridan, Indiana, has agreed to settle Federal Trade Commission charges that potential earnings and profit claims made by the Computer Business Services, Inc. were false and misleading. Douglas is an officer of the firm. On August 14, 1996, three other principals, Andrew L. Douglass, Matthew R. Douglass and Peter B. Douglass agreed to settle the FTC charges by paying $5 million in consumer redress and by being barred from misrepresenting the success rates or profitability of its clients. They would also be barred from using deceptive testimonials or other deceptive statements to entice consumers to buy its products and would be required to disclose that federal laws restrict the use of certain automatic telephone dialing systems it sells. The order Jeannette L. Douglass has agreed to is similar, but contains no additional redress requirement.
CBSI ads touted its “turnkey” business opportunity -- a collection of computer hardware and software that cost investors between $3,000 and $16,000 -- claiming investors could “Earn $4000 Per Month From Your Home With A Computer!” In fact, according to the FTC complaint detailing the charges, the vast majority of investors never earn $4,000 a month and never even earn $4,000 over the duration of their business. In fact, “. . . it is rare for CBSI Center Owners to recoup even their initial investments,” the complaint says. The claims appeared in magazines, newspapers, and postcards, and also appeared on commercial online services, including CompuServe and America Online. The deceptive claims were amplified in information packets mailed to those who responded to the ads, the FTC alleged. Since 1991, the firm has sold its products to approximately 15,000 consumers.
Through such claims, CBSI represents that “Center Owners” ordinarily operate profitable businesses out of their own homes. In fact, the FTC alleged, CBSI Center Owners do not ordinarily operate profitable businesses and it is rare for them to recoup even their initial average investment of approximately $9,000. Contrary to ad claims that Center Owners can earn substantial income and can reasonably expect to achieve a specific level of earnings, such as $4,000 per month, investors can’t expect to earn substantial income and the vast majority never earn $4,000 per month or $4,000 over the entire duration of their business. The claims also are deceptive, according to the complaint, because the company did not have substantiation for the earnings claims.
To settle the FTC charges, Sheridan, Indiana-based CBSI and Andrew L. Douglass, Matthew R. Douglass and Peter B. Douglass previously agreed to pay consumer redress of $5 million -- the largest FTC consumer redress settlement obtained prior to the filing of an administrative or court complaint. In addition, the settlement announced today would bar Jeannette Douglass, as the prior settlement bound them, from misrepresenting the earnings or success rate of investors; the existence of a market for their products or services; the amount of time it would take investors to recoup their investments, and also would prohibit them from making any representation about the performance, benefits, efficacy or success rate of any product or service unless they possess reliable evidence to substantiate the claims. The settlement also would prohibit the use of misleading testimonials or endorsements and require that ads for automatic telephone dialing systems disclose federal restrictions on their use.
The Commission vote to accept the proposed consent agreement 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. This matter was handled by the FTC’s Chicago Regional Office.
NOTE: A 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 $11,000.
Copies of the complaint and consent are available from the FTC’s Public Reference Branch, Room 130, at the address listed above; 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
(FTC File No. 942 3311)