Toys Unlimited International, Inc., and its principals, have agreed to settle Federal Trade Commission charges that they violated the Commission's Franchise Rule. This case was brought as one of the 18 enforcement actions initiated under "Operation Trade Name Games," a cooperative law enforcement effort between the FTC and several state Attorneys General. Operation Trade Name Games targeted scam artists who used the allure of selling trademarked products of well-known manufacturers -- such as The Walt Disney Company, Warner Bros., The Coca-Cola Company, Pepsi-Cola Company -- to hook would-be entrepreneurs. The Toys Unlimited defendants operated a display rack business opportunity scam that featured merchandise of the Walt Disney Company.
The FTC's complaint alleged that the defendants -- Toys Unlimited International, Inc., of West Palm Beach, Florida; its president Robert G. Garrow and national marketing director Andrew B. Moss -- violated the Franchise Rule, a pre-purchase disclosure rule intended to give potential buyers key information about a business opportunity, including the legal and financial history of the seller and its principal officers. The rule requires franchisors to provide a detailed document containing this information prior to sale and, where franchisors make claims about the earnings of franchisees, to provide another document containing the substantiating evidence for those claims. The FTC charged that the defendants in this case either failed to provide these documents at all, or if these documents were provided, they were incomplete, inaccurate or untimely. (In May 1998, the FTC amended its complaint to name Brian Mylett. The case against Mylett is still pending.)
The separate settlements, which required the court's approval to become binding, prohibit the defendants from future violations of the Franchise Rule. The settlement with defendant Moss bans him from any involvement whatsoever in the marketing and sale of franchise and business opportunity ventures, either directly or assisting others. In addition, he is required to pay $15,000 in civil penalties.
The settlement with Garrow prohibits him from violating or assisting others to violate the Franchise Rule, and from misrepresenting, or assisting others to misrepresent, material facts in connection with telemarketing or the sale of business ventures or franchises.
In addition, both settlements contain various recordkeeping requirements to assist the FTC in monitoring the defendants' compliance.
The Commission vote to authorize the Department of Justice to file the proposed settlements was 4-0. The consent judgments were filed by DOJ at the request of the FTC, in the U.S. District Court for the Southern District of Florida, in Miami. The judge signed the settlements on August 24, 1998.
NOTE: These consent judgments are for settlement purposes only and do not constitute an admission by the defendants of a law violation. Consent judgments have the force of law when signed by the judge.
Copies of the news release are available from the FTC's web site at http://www.ftc.gov and copies of the news releases, the settlements and other documents associated with "Operation Trade Name Games" are also from the FTC's Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD 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 Matter No. X970074)
(Civil Action No. 97-08592 CIV-HIGHSMITH)