One Case Nets $20,000 Civil Penalty
The Federal Trade Commission today announced that it has reached settlements in two more of the 34 cases it filed last July as part of “Project Telesweep,” a federal-state crackdown on deceptively-marketed business opportunity schemes, most of which offered some sort of “turnkey” vending machine business. Both sets of settling defendants -- Li’l Snacks, Inc., of Spanish Fort, Alabama; and Nu-Idea Technologies, Inc. and related firms, of Tucker, Georgia -- have agreed to injunctions barring future violations of the FTC’s Franchise Rule. The rule requires franchisors to give potential buyers detailed up-front disclosures about the financial and litigation history of their firms and their current and past franchisees, and also to provide documentation of the evidence supporting any future earnings claims they make. Li’l Snacks also has agreed to pay a $20,000 civil penalty under its settlement with the FTC.
Project Telesweep snared nearly 100 marketers of vending machine business opportunities for failure to provide critical pre-purchase information to potential buyers. Many firms also were charged with making exaggerated earnings claims, and false promises about the amount and type of assistance they would provide franchisees. The project was a joint enforcement effort by the FTC and 20 state Attorneys General and securities regulators.
“Consumers considering the purchase of a franchise or business opportunity need access to the information required by the FTC’s Franchise Rule in order to evaluate the franchisor’s claims about the business,” said Jodie Bernstein, Director of the FTC’s Bureau of Consumer Protection. “The failure to provide this information is, in many instances, a harbinger of fraud.”
Eleven of the Project Telesweep cases brought by the FTC have been resolved in court. The settlements announced today require the courts’ approval to become binding. They have been negotiated with:
- Li’l Snacks, its president, Nava Jo Hartley, and her husband Cornelius (Eugene) Hartley, who sold candy and snack-food vending machine business ventures. The businesses sold for $15,000 and up, and purchasers purportedly could earn as much as $87,600 a year.; and
- Nu-Idea Technologies, Film Centers of America, Inc.; Mr. Popcorn, Inc.; Joseph Gilmore; James R. Davis, also known as Ron Davis; and T. Randall Bridges; who sold business ventures to operate vending machines that dispensed popcorn, or cameras and film. Ads for these business ventures touted earnings of up to $70,000 a year. Although this settlement does not require the payment of a civil penalty, it would permit the FTC to ask the court to reopen the matter should any of the defendants be found to have misrepresented their financial condition.
The FTC votes to authorize filing of the consent judgments settling these cases were both 5-0. They were filed at the FTC’s request by the Department of Justice in federal district courts as noted below.
NOTE: These consent judgments are for settlement purposes only and do not constitute admissions by the defendants of law violations. Consent judgments have the force of law when signed by the judge.
Copies of the consent judgments and other documents associated with Project Telesweep 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 happens, call the FTC’s NewsPhone at 202-326-2710. FTC news releases and other documents also are available on the Internet at the FTC’s World Wide Web Site at http://www.ftc.gov
(Li’l Snacks -- File No. X950101 / filed in U.S. District Court for the Southern District of Alabama, on April 10, 1996, Civil Action No. 95-0540-CB-C)
(Nu-Ideas -- File No. X950079 / filed in U.S. District Court for the Northern District of Georgia, Atlanta Division on April 11, 1996, Civil Action No. 95-CV-1753-GET)
Hugh G. Stevenson