California Telemarketers Prohibited from Engaging or Assisting in Deceptive Acts in Connection with the Sale of Office Supplies, as Part of FTC Settlement

Allstate Business Distribution Center, Inc., based in Southern California, and doing business as Primary Distribution Center (Primary), and its owner, Robert Matz, have agreed to settle federal charges that they engaged in deceptive sales practices in connection with the sale of non-durable office supplies. Named as defendants in "Operation Copy Con," the Federal Trade Commission alleged that the defendants duped consumers into accepting and paying for office supplies. In addition, the Commission approved the filing of an amended complaint against the defendants to reflect that the defendants engaged or assisted and facilitated others who engaged in the alleged deceptive practices. Under the terms of the settlement, the defendants are prohibited from engaging in the deceptive acts detailed in the amended complaint, whether acting on their own or in concert with others, and are required to pay $10,000 in consumer redress.

The FTC filed its original complaint against the defendants in September 2000, as part of "Operation Copy Con"-- a multi-agency effort to crack down on bogus office and maintenance supply telemarketing schemes that targeted large and small businesses and non-profit organizations. The original complaint alleged that the defendants, in connection with the sale of non-durable office supplies, principally photocopier toner and dry ink cartridges, made false representations to induce consumers to purchase and/or pay for office supplies. In the amended complaint the FTC alleged that the defendants engaged or assisted and facilitated others who violated the FTC Act by misrepresenting that they were the regular supplier or were associated with the consumer's regular supplier or the manufacturer of the photocopier; that the toner supplies had been ordered by the consumer; and that the consumer would be charged the same price they had been paying for the toner.

In addition, the amended complaint alleged that the defendants engaged or assisted and facilitated others who violated the Telemarketing Sales Rule (TSR) by making false and misleading statements, failing to disclose the identity of the seller, and failing to disclose the sales purpose of the call.

According to the FTC, the defendants operated exclusively as service providers for telemarketers, soliciting sales for non-durable office supplies. The defendants contracted with several telemarketers that made the initial calls to consumers, and the defendants would then handle all other aspects essential to completing the sale, including all customer service related functions. The telemarketers would claim to be the consumers' regular supplier and state that the price of toner had increased, but they would offer it to consumers at a discount if they purchased right away. The telemarketer would then send the orders to the defendants. The defendants would then ship the merchandise to consumers at prices substantially higher than the consumers normally paid their regular supplier. Sometimes the defendants would send additional shipments of unordered toner to consumers. The settlement announced today resolves the case.

The settlement, which required the court's approval, prohibits the defendants from engaging in, or assisting and facilitating others who engage in, violations of the FTC Act and the TSR. The defendants are prohibited from, among other things:

• shipping unordered goods;
• billing for unordered goods;
• misrepresenting any association with the consumer or their regular supplier, the price of goods or services, including discounts or special prices; and
• misrepresenting the purpose of telemarketing calls, or that a person had ordered the supplies the defendant had shipped, or that consumers have an obligation to pay for merchandise they did not order.

The settlement further prohibits the defendants from misrepresenting any fact material to a consumer's decision to purchase or accept any good or service, and from providing substantial assistance or support to any seller or telemarketer when that person knows or consciously avoids knowing that the seller or telemarketer is engaged in conduct that violates the TSR. In addition, the settlement requires the defendants to pay $10,000 in consumer redress, with a right to reopen provision if the FTC finds that the defendants misrepresented their financial situation. Finally, the settlement contains various record keeping requirements to assist the FTC in monitoring the defendants' compliance.

The Commission vote authorizing staff to file the amended complaint and the stipulated final judgment and order was 5-0. They were filed in the U.S. District Court for the Central District of California, in Los Angeles, and entered by the court on June 20, 2001. The FTC's Midwest Region Office - Chicago handled the investigation.

NOTE: This stipulated final judgment and order is for settlement purposes only and does not constitute an admission by the defendants of a law violation. The stipulated order is subject to court approval and has the force of law when signed by the judge.

Copies of the complaint and stipulated order are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at www.ftc.gov. The FTC enters Internet, telemarketing, identity theft and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

(FTC Matter No. X000108)
(Civil Action No. 00-10335AHM (CTx))