federal district judge has issued a temporary restraining order and frozen the assets of an Internet merchant who used online "auction houses" to offer merchandise, but never delivered the goods to the consumers. Judge Daniel T. K. Hurley acted on a complaint filed by the Federal Trade Commission alleging that Craig Hare used online auction houses to offer new and used computers for sale. After "successful bidders" paid as much as $1,450 per computer, Hare provided them neither the computer nor a refund. The agency has asked the court to order Hare to provide refunds to consumers who lost their money and to issue an injunction permanently barring Hare from violating the FTC Act and the Mail or Telephone Order Merchandise Rule.
Craig Lee Hare, also known as Danny Hare, did business as Experienced Designed Computers and C&H Computer Services, operating in Lake Worth, Florida. Stephanie J. Herter, also known as Stephanie Branham, was named in the FTC complaint as a relief defendant because checks received from consumers were deposited in her account.
Internet auction houses facilitate communications between would-be buyers and sellers. Sellers list their goods, and auctions are conducted using e-mail to send and receive bids. When the last bid is accepted, the buyer and seller negotiate terms of payment and delivery via e-mail and complete the transaction through the U.S. mails. According to the FTC complaint, Hare offered computers and computer hard drives for sale at auction houses with claims such as "Brand New in their Original Boxes," and "Refurbished, and Carry a (1) year Warranty from Toshiba." The FTC alleges that Hare accepted offers and money from the highest bidders, but failed to provide the promised merchandise or a refund to consumers, in violation of the FTC Act and the Mail or Telephone Order Merchandise Rule. The FTC Act bars deceptive or misleading acts in commerce. The Mail or Telephone Order Merchandise Rule requires that sellers ship merchandise in a timely manner -- a specified time or 30 days -- or offer to refund consumers’ money.
The FTC has developed a Consumer Alert, "Online Auctions: Going, Going, Gone, " with tips for online bidders. The Alert says that when consumers plan to bid in an online auction, they should take the following precautions:
- Try to pay by credit card;
- Ask about using an escrow agent, or paying by COD;
- Verify the seller’s identity;
- Ask how you’ll get follow-up service, if needed;
- Avoid impulse bids and purchases; and
- Ask about return policies.
The Commission vote to file the complaint was 5-0. It was filed, under seal, in the District Court for the Southern District of Florida, West Palm Beach Division. The seal was lifted April 9, 1998. The FTC received invaluable assistance in this matter from the economic crimes unit of the Palm Beach County Sheriff’s Department.
NOTE: The Commission files a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant has actually violated the law. The case will be decided by the court.
Copies of "Online Auctions: Going, Going, Gone" and "Shopping by Phone or Mail" are available from the FTC’s web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD 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 File No. 982 3132)
(Civil Action No. 98-8194)
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