Diamond Rug & Carpet Mills, Inc. Pleads Guilty to Criminal Charges; Agrees to FTC Injuction over Mislabeling of Carpet; Fines Could Exceed $1 Million

For Your Information

An investigation by Federal Trade Commission and Department of Justice officials that revealed numerous instances in which Diamond Rug & Carpet Mills, Inc. apparently falsely labeled the fiber content and fiber weight of its carpets, has led to a guilty plea by the company to criminal violations of the Textile Act, a criminal fine that could exceed $1 million, and a consent decree settling allegations by the FTC of civil violations of the same statute that requires the company to label its carpets accurately in the future or face charges of contempt of court. FTC and Justice officials filed the documents in federal district court today.

"Strong cooperation between the FTC and the Justice Department has led to the first criminal enforcement of the Textile Act," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection. "The criminal fine and civil injunction in this case should send a message that we will not tolerate consumer fraud."

According to the Federal Trade Commission's civil complaint in the case, Diamond falsely labeled many of its carpet products as to the fiber content and weight, both of which are critical to how well a carpet wears and how much it costs. For instance, carpet made of polyester was identified as nylon, which is more durable, and carpet identified as having one weight actually had a lesser weight. Under the Textile Fiber Products Identification Act, it is illegal to falsely label or advertise the fiber content or the amount of the fiber in any textile product, and various textile products (including carpet and carpet samples) must carry labels stating their fiber content weight, generic name (for example, nylon) and other information. Moreover, the FTC complaint alleges, Diamond furnished a false, legally-required, guaranty that its products complied with the Textile Act labeling provisions.

The consent decree signed by Diamond to settle the FTC charges requires court approval to become binding. The settlement would require the company to comply with the Textile Act and its implementing rules in the future, and to set up a control system to ensure proper fiber identification on carpet labels and invoices, in advertising, and elsewhere. The consent decree also would prohibit Diamond from misrepresenting the fiber weight tufted into the backing of carpets it manufactures and distributes. Violations of the consent decree are punishable by contempt of court.

Diamond signed the civil settlement with the FTC as a condition for being permitted to plead guilty to the criminal charges brought by the Justice Department. The plea also contemplates the payment of criminal penalties ranging from $504,000 to more than $1 million. (See related Department of Justice release.)

The Commission vote to file the civil complaint and consent decree was 5-0. They were filed on Dec. 12 in U.S. District Court for the Northern District of Georgia, Rome Division.

Copies of the complaint and consent decree are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 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. 912 3409)
(Civil Action No. 4:95-CV 0388-RLV)