Must Disclose It Is A For-Profit Company UnaffiliatedWith Any Charity Or Government Agency
Southwest Marketing Concepts, Inc., d/b/a The Journal -- The Voice of Law Enforcement, and its principal, Stephen Inmon, have agreed to settle Federal Trade Commission charges that they misrepresented to businesses solicited by phone and mail in almost every state their affiliation with law enforcement and that advertising in The Journal was a meaningful way for businesses to support important causes, such as fighting crime or preventing drug abuse. The FTC also charged the defendants with billing businesses for advertisements that had, in fact, not been ordered or authorized. The proposed settlement of these charges would prohibit the defendants in the future from making the representations alleged in the complaint, and would require the defendants to pay a $40,000 monetary judgment. In addition, the proposed settlement would require the defendants to make an affirmative disclosure in all written or oral sales communications that they are not affiliated with any governmental or law enforcement agency or non-profit organization, and that payments to the defendants are not a charitable donation or contribution of any kind.
The April 1997 complaint against Southwest Marketing was announced as part of "OPERATION FALSE ALARM," an unprecedented attack against "badge-related" fundraising fraud. The joint federal/state law enforcement and public education campaign targeted the deceptive activities of certain for-profit fundraisers who misrepresent ties with police departments, fire fighters and other community organizations, and gave consumers key information about checking out the fundraisers who solicit them. The FTC and 50 state Attorneys General, Secretaries of State and other state charities regulators announced 57 law-enforcement or regulatory actions as part of the initiative against companies who engaged in deceptive fundraising.
According to the FTC, badge-related fundraising fraud targets both consumers and small businesses. For-profit fundraisers call consumers and, in some instances, falsely represent that they are police officers or firefighters and solicit donations. The solicitors may claim that contributions will be used locally, to support particular causes popular with consumers, such as funding a drug abuse education program, or buying bullet proof vests for local police. In some cases, contributions are solicited in the name of a fallen officer. According to the FTC, consumers should beware of solicitation claims like these, which are frequently false. Claims that the caller is a police officer should especially raise red flags for consumers because in many states and locales, police are prohibited by law or department policy from soliciting donations. The FTC warns consumers not to be fooled by misrepresentations about badge-related fundraising and suggests that consumers check with local police or fire departments BEFORE donating if the solicitor promises that money will be used locally or to fund particular programs.
Small businesses also are targeted by organizations claiming a badge affiliation. For-profit companies solicit small businesses by telephone, requesting that the business purchase advertising in publications with law enforcement, public safety or other civic purpose themes. In many cases, according to the FTC, the publications for which the ads are solicited lack the implied connection to legitimate law enforcement and are rarely distributed in the community as claimed, so that the businesses fail to get the promised advertising benefit. Worse, once a business purchases an ad, it may face repeated billing for more ads -- whether authorized or not -- and aggressive collection tactics for unauthorized invoices -- including threats that the bill will be turned over to a collection agency. Thousands of small businesses all over the country have paid unauthorized invoices for unordered advertising in these publications, the agency added.
According to the FTC's complaint detailing the charges against Southwest Marketing, telemarketers for The Journal frequently, and falsely, represented that the purchase of advertising would benefit a law enforcement organization or other civic endeavor and would benefit the advertiser's local community; that businesses had previously authorized advertising for which they were obligated to pay; and that businesses had ordered the advertisements for which they were invoiced and must pay or risk their credit ratings.
The proposed settlement, in addition to requiring the defendants to pay a $40,000 disgorgement remedy, would permanently prohibit the defendants from making false or misleading representations in connection with the sale, distribution, marketing or sponsorship of any advertisement, publication, program or product, and would prohibit misrepresenting their affiliation with any national, state or local organization. The settlement would prohibit any misrepresentations concerning any person's obligation to make payment for any publication or the advertising in any publication, or the utilization of any proceeds from the sale of any publication or the advertising in any publication. Further, in connection with any future telemarketing or fundraising activities, the defendants would be prohibited from misrepresenting any fact material to a consumer's decision to purchase any product or to make a charitable donation.
In addition, the proposed settlement would require the defendants to include, in a clear and conspicuous manner, in each written or oral communication to a current or potential advertiser, and prior to closing a sale, the following affirmative disclosure, if such is the case:
[Name of Publication] is a for-profit company that does not target or serve any particular locale and is not affiliated with any charitable, governmental, law enforcement, or other non-profit organization or agency. Payments are not a donation or contribution to any such agency or organization.
The proposed settlement also contains recordkeeping requirements designed to assist the FTC in monitoring the defendants' compliance.
The Commission vote to file the stipulated final judgment and order for permanent injunction to settle this case was 5-0. The settlement was filed in the U.S. District Court for the Southern District of Texas, Houston Division on May 28, and is subject to approval by the court. This case was handled by the FTC's Dallas Regional Office.
NOTE: The stipulated final judgment is for settlement purposes only and does not constitute an admission by the defendant of a law violation. The settlement has the force of law when signed by the judge.
Copies of the settlement, the news release announcing "Operation False Alarm," as well as a number of consumer education publications about charitable fundraising solicitations 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; 202-382-4357; (202-FTC-HELP); 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.
(Civil Action No. H-97-1070)
(FTC File No. X97 0037)
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