DEBRA A. VALENTINE
General Counsel

RAYMOND E. MCKOWN, Bar No. 150975
JENNIFER LARABEE, Bar No. 163989
Federal Trade Commission
10877 Wilshire Blvd., Ste. 700
Los Angeles, California 90024
(310) 824-4343 ph.
(310) 824-4380 fax

Attorneys for Plaintiff
FEDERAL TRADE COMMISSION

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
WESTERN DIVISION

FEDERAL TRADE COMMISSION, Plaintiff,

v.

QBI, INC., a California Corporation, and
JEFFREY ALLEN DONOHUE, individually and as an officer of QBI, Inc., Defendants.

No. ________

COMPLAINT FOR INJUNCTIVE AND OTHER EQUITABLE RELIEF

Plaintiff, the Federal Trade Commission, ("FTC" or "Commission") for its complaint alleges:

1. The FTC brings this action under Section 13(b) of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C.  53(b), to secure preliminary and permanent injunctive relief, restitution, rescission or reformation of contacts, disgorgement, and other equitable relief for the defendants' unfair or deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. 45(a).

JURISDICTION AND VENUE

2. This Court has subject matter jurisdiction pursuant to 15 U.S.C.  45(a), and 53(b), and 28 U.S.C.  1331, 1337(a) and 1345.

3. Venue is proper under 15 U.S.C.  53(b) and 28 U.S.C.  1391(b) and (c).

PLAINTIFF

4. Plaintiff, the Federal Trade Commission, is an independent agency of the United States Government created by statute. 15 U.S.C.  41 et seq. The Commission is charged, inter alia, with enforcement of Section 5(a) of the FTC Act, 15 U.S.C.  45(a), which prohibits unfair or deceptive acts or practices in or affecting commerce. The Commission is authorized to initiate federal district court proceedings, by its own attorneys, to enjoin violations of the FTC Act in order to secure such equitable relief as may be appropriate in each case, and to obtain consumer redress. 15 U.S.C.  53(b).

DEFENDANTS

5. Defendant QBI, Inc. ("QBI") was incorporated in California in 1996. Its principal place of business is 3711 Lomita Boulevard, Suite 190, Torrance, California 90505. QBI transacts or has transacted business in this District and elsewhere.

6. Defendant Jeffrey Allen Donohue ("Donohue") is an owner, director, officer or manager of defendant QBI, Inc., and does business at 3711 Lomita Boulevard, Suite 190, Torrance, California 90505. At all times material to this complaint, acting alone or in concert with others, he has formulated, directed, controlled or participated in the acts and practices of defendant QBI. He transacts or has transacted business in this District and elsewhere.

COMMERCE

7. At all times relevant to this complaint, the defendants have maintained a substantial course of trade or business in the offering for sale and sale of hotel accommodations and other travel services and in the course of such business have used the telephone, the mail, and facsimile transmission, all in or affecting commerce, as "commerce" is defined in Section 4 of the FTC Act, 15 U.S.C.  44.

DEFENDANTS' COURSE OF CONDUCT

8. Since at least January 1996, defendants QBI and Donohue have marketed and sold a promotion to businesses that is intended to increase the revenue and customer base of the businesses. The promotion centers on a travel voucher that defendants represent can be redeemed by a business's retail customers for two round trip airline tickets, which are impliedly or expressly represented to be free, if the customers purchase hotel accommodations through the defendants for seven to ten nights. The defendants sell the vouchers to the businesses for approximately $10 each. The defendants have sold approximately 213,000 vouchers. QBI suggests that businesses market the promotion to their retail customers in the following manner: "Buy $300 or more at [the business] . . . you'll get a gift certificate good for 2 Round Trip Airline Tickets to Hawaii with your 7 night stay purchase at one of the participating hotels."

9. Retail customers of the businesses obtain vouchers when they satisfy certain conditions established by the businesses, such as opening an account, or purchasing a certain dollar amount worth of merchandise. Customers then submit their vouchers to QBI to receive the round trip airline tickets and purchase the hotel accommodations.

10. The defendants' vouchers typically restate some and introduce other conditions customers must meet in order to participate in the promotion. Among the conditions stated in QBI's vouchers are that the charges for the hotel accommodations are based on "standard published rack room rates." The vouchers sometimes include the rack rate room prices. The rack rate charges are higher than the typical rates available to consumers in the marketplace for the same accommodations.

11. Neither the vouchers nor other marketing materials disclose certain other charges consumers pay, including without limitation document and rush fees.

12. The vouchers further represent that customers must post a $100 per person deposit to process reservations, and if customers meet certain conditions but decline to have QBI process their reservations, that QBI will refund most of the deposit in a timely manner.

13. The vouchers also represent that QBI will fill customers travel needs in a timely manner when customers comply with certain conditions.

THE FEDERAL TRADE COMMISSION ACT

14. 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."

VIOLATIONS

COUNT ONE

15. In numerous instances since at least 1996, in connection with the advertising, marketing, promotion, offering for sale, or sale of travel vouchers, accommodations, or vacations, defendants have represented, expressly or by implication, that consumers will receive free roundtrip airline tickets with the purchase of hotel accommodations at standard published rack rates charged by hotels for seven to ten nights at the vacation destination.

16. Defendants have failed to disclose that standard published rack rates, which are the most expensive "peak demand" rates used very infrequently by hotels, are higher than the typical rates available to consumers in the marketplace for the same accommodations. Defendants also have failed to disclose, prior to consumers paying the required deposit, that consumers must pay other fees, including without limitation document and rush fees. These undisclosed rates and fees offset the savings consumers would otherwise realize on the "free" tickets offered by defendants.

17. In light of the representations made to consumers as set forth in paragraph 15, defendants' failure to disclose that they charge peak demand rates for hotel accommodations, which are higher than the rates typically charged by hotels, and that consumers must pay certain other fees, including without limitation document and rush fees, is false and misleading and constitutes a deceptive act or practice in violation of Section 5(a) of the FTC Act, 15 U.S.C.  45(a).

COUNT TWO

18. In numerous instances since at least 1996, in connection with the advertising, marketing, promotion, offering for sale, or sale of travel vouchers, accommodations, or vacations, defendants have represented, expressly or by implication, that consumers who comply with certain conditions will obtain a refund of their deposit.

19. In truth and in fact, in numerous instances, consumers who comply with the stated conditions do not obtain a refund of their deposit.

20. Therefore, defendants' representation set forth in paragraph 18 is false and misleading and constitutes a deceptive act or practice in violation of Section 5(a) of the FTC Act, 15 U.S.C.  45(a).

COUNT THREE

21. In numerous instances since at least 1996, in connection with the advertising, marketing, promotion, offering for sale, or sale of travel vouchers, accommodations, or vacations, defendants have represented, expressly or by implication, that they will process or fill consumers' vacation travel needs or requests in a timely manner.

22. In truth and in fact, in numerous instances, defendants do not process or fill consumers' vacation travel needs or requests in a timely manner.

23. Therefore, defendants' representation set forth in paragraph 21 is false and misleading and constitutes a deceptive act or practice in violation of Section 5(a) of the FTC Act, 15 U.S.C.  45(a).

CONSUMER INJURY

24. Consumers throughout the United States have suffered and continue to suffer, substantial monetary loss as a result of the defendants' unlawful acts or practices. In addition, defendants have been unjustly enriched as a result of their unlawful acts and practices. Absent injunctive relief, defendants are likely to continue to injure consumers, reap unjust enrichment, and harm the public.

THIS COURT'S POWER TO GRANT RELIEF

25. Section 13(b) of the FTC Act, 15 U.S.C.  53(b) authorizes this Court to order such ancillary relief as preliminary injunction, consumer redress, rescission, restitution, disgorgement of profits resulting from the defendants' unlawful acts or practices, and other remedial measures.

PRAYER FOR RELIEF

WHEREFORE, plaintiff Federal Trade Commission, pursuant to Section 13(b) of the FTC Act, 15 U.S.C.  53(b), and the Court's own equitable powers requests that the Court:

(1) Award plaintiff such preliminary injunctive and ancillary relief as may be necessary to avert the likelihood of consumer injury during the pendency of this action and to preserve the possibility of effective final relief, including but not limited to a preliminary injunction;
 
(2) Permanently enjoin the defendants from violating the FTC Act, as alleged herein;
 
(3) Award such relief as the Court finds necessary to redress injury to consumers resulting from the defendants' violations of the FTC Act, including, but not limited to, rescission or reformation of contracts, refund of monies paid, and disgorgement of ill-gotten monies; and
 
(4) Award plaintiff the costs of bringing this action, as well as such other and additional relief as the Court may determine to be just and proper.

Respectfully Submitted,

DEBRA A. VALENTINE
General Counsel

Raymond E. McKown
Jennifer Larabee
Attorneys for Plaintiff
Federal Trade Commission

Dated: ______ __, 2000