|ROBERT S. MUELLER, III
United States Attorney
Northern District of California
Assistant United States Attorney
IN THE UNITED STATES DISTRICT COURT
UNITED STATES OF AMERICA, Plaintiff,
FRANKLIN W. BISHOP, an individual doing business as Minidiscnow.com, Defendant.
Plaintiff, the United States of America, acting upon notification and authorization to the Attorney General by the Federal Trade Commission ("Commission"), for its complaint alleges that:
1. Plaintiff brings this action under Sections 5(a)(1), 5(m)(1)(A), 13(b), 16(a) and 19 of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. §§ 45(a)(1), 45(m)(1)(A), 53(b), 56(a) and 57b, to obtain monetary civil penalties and injunctive and other relief for defendant's violations of the Commission's Trade Regulation Rule Concerning the Sale of Mail or Telephone Order Merchandise (the "Mail Order Rule" or "Rule"), 16 C.F.R. Part 435.
JURISDICTION AND VENUE
2. This Court has jurisdiction over this matter under 28 U.S.C. §§ 1331, 1337(a), 1345, and 1355 and under 15 U.S.C. §§ 45(m)(1)(A), 53(b), 56(a) and 57b. This action arises under 15 U.S.C. § 45(a)(1).
3. Venue in the Northern District of California is proper under 15 U.S.C. § 53(b) and under 28 U.S.C. §§ 1391(b-c) and 1395(a).
4. Defendant Franklin W. Bishop is sole proprietor and owner of Minidiscnow.com, located at 1000 W. Texas Street, Suite H, Fairfield, CA 94533. Individually or in concert with others, he has formulated, directed, controlled, supervised, and/or participated in the acts and practices of Minidiscnow.com, including the acts or practices set forth in this Complaint. He resides and transacts business in this district.
DEFENDANT'S COURSE OF CONDUCT
5. Defendant sells minidisc audio equipment and accessories over the Internet, representing that orders will be shipped in two to three weeks.
6. Defendant accepts only checks, money orders, or wire transfers as payment for his products. Defendant deposits these payments upon receipt of the orders.
7. Defendant accumulates a group of orders, and then submits them to a supplier in Japan for fulfillment and delivery. Defendant has little or no knowledge of when the supplier in Japan will actually ship the ordered products to his customers. Many customers must wait two or three months for products that were promised in two to three weeks.
8. Defendant has never instituted procedures to comply with the Mail Order Rule. Indeed, in direct opposition to the requirements of the Rule, defendant never initiates contact with customers to inform them of delay, and maintains a written policy never to issue refunds due to delay. When customers contact defendant to inquire about the status of a late order, defendant typically denies any request to cancel the order and receive a refund.
THE MAIL ORDER RULE
9. The Mail Order Rule was promulgated by the Commission on October 22, 1975, under the FTC Act, 15 U.S.C. § 41 et seq., and became effective February 2, 1976. The Commission amended the Rule on September 21, 1993, under Section 18 of the FTC Act, 15 U.S.C. § 57a, and these amendments became effective on March 1, 1994.
VIOLATIONS OF THE MAIL ORDER RULE
10. At all times material herein, defendant has engaged in the mail order sale and telephone order sale of minidisc audio equipment and accessories in commerce, as "commerce" is defined in Section 4 of the FTC Act, 15 U.S.C. § 44.
1. In numerous instances, after having solicited mail orders and telephone orders for merchandise and received "properly completed orders," as that term is defined in Section 435.2(d) of the Mail Order Rule, 16 C.F.R. § 435.2(d), and having been unable to ship some or all of the ordered merchandise to the buyer within the Mail Order Rule's applicable time, as set out in Section 435.1(a)(1) of the Mail Order Rule, 16 C.F.R. § 435.1(a)(1) (the "applicable time"), defendant has:
12. Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), provides that "unfair or deceptive acts or practices in or affecting commerce are hereby declared unlawful."
13. Pursuant to Section 18(d)(3) of the FTC Act, 15 U.S.C. § 57a(d)(3), a violation of the Mail Order Rule constitutes an unfair or deceptive act or practice in violation of Section 5(a)(1) of the FTC Act, 15 U.S.C. § 45(a)(1).
CIVIL PENALTIES, CONSUMER REDRESS AND INJUNCTION
14. Defendant has violated the Mail Order Rule as described above with knowledge as set forth in Section 5(m)(1)(A) of the FTC Act, 15 U.S.C. § 45(m)(1)(A).
15. Each sale or attempted sale, during the five years preceding the filing of this complaint, in which defendant has violated the Mail Order Rule in one or more of the ways described above constitutes a separate violation for which plaintiff seeks monetary civil penalties.
16. Section 5(m)(1)(A) of the FTC Act, 15 U.S.C. § 45(m)(1)(A), as modified by Section 4 of the Federal Civil Penalties Inflation Adjustment Act of 1990, 28 U.S.C. § 2461, and Section 1.98(d) of the FTC's Rules of Practice, 16 C.F.R. § 1.98(d), authorizes this Court to award monetary civil penalties of not more than $11,000 for each such violation of the Mail Order Rule.
17. Section 19 of the FTC Act, 15 U.S.C. § 57b, authorizes the Court to award such relief as is necessary to redress the injury to consumers or others resulting from defendant's violation of the Mail Order Rule.
18. Under Section 13(b) of the FTC Act, 15 U.S.C. § 53(b), this Court is authorized to issue a permanent injunction against defendant's violating the FTC Act.
WHEREFORE, plaintiff requests this Court, pursuant to 15 U.S.C. §§ 45(a)(1), 45(m)(1)(A), 53(b) and 57b, and to the Court's own equity powers to: