Two companies and their principals that the Federal Trade Commission alleged used high-pressure sales tactics to sell various home-based business opportunities have agreed to settle FTC charges that they made false and unsubstantiated earnings claims to entice consumers to buy their products and violated the FTC's Cooling-Off Rule, which gives consumers three days to cancel certain purchases of $25 or more. The proposed settlement would prohibit the defendants from violating the Cooling-Off Rule and from making false or misleading income, profit, or sales volume claims in connection with the sale of any franchise, business opportunity, or investment, and requires them to pay a $22,000 civil penalty.
According to the FTC's complaint, Visions Group of America, Inc., SOHO Technologies, Inc., and their principals, Mark Colosi, Rex Judd and Greg Kazimer, held high-pressure sales seminars in hotel conference rooms and other places in which they touted a variety of business opportunities. At the seminars, the defendants claimed inflated earnings that potential purchasers could expect, and promised discounts, limited time rebates and money-back guarantees to lure consumers into signing-up.
Visions Group, based in Rochester, New York, and SOHO (Small Office, Home Office), marketed their home-based business opportunities through advertisements, televised infomercials, and direct mail solicitation. The defendants' promotional materials contained numerous testimonials that led consumers to believe that they could have the same fantastic earnings experiences as the people in the testimonials. Consumers also were told to call an 800 number and transform "your life, your income, your future" by reserving seats for the next seminar. At the seminars, the defendants reiterated the false and unsubstantiated earnings claims and promised discounts, limited time rebates, and money-back guarantees to get consumers to sign up. To reinforce the earnings claims, the defendants promoted purchasers' "success" stories. The defendants sold various business opportunities including: "Inside Trader," a business that allegedly allowed purchasers to buy brand name merchandise at or below wholesale cost; "Net More Worth" and "Vision Net," businesses that allegedly allowed purchasers to sell classified ads on the Internet for a profit; and "Coupons on Demand" and "Fortunes in Coupons," businesses that allegedly allowed purchasers to buy and resell grocery coupons for profit. The cost of each business opportunity was approximately $499, but purchasers were frequently offered "sales" where they could buy multiple opportunities for a "reduced" fee of $599.
According to the FTC's complaint, consumers who signed-up for these business opportunities could not reasonably expect to achieve the specific levels of earnings contained in the come-on materials and advertisements and the defendants did not have a reasonable basis that substantiated the earnings claims that were made. In addition, the FTC alleged that the defendants violated the Cooling-Off Rule by not furnishing consumers with information that allows buyers to cancel a sales contract within three days following the sale.
The proposed settlement, which requires the court's approval, would prohibit the defendants from making deceptive income, profit, or sales volume claims in connection with the sale of any franchise, business opportunity, or investment. Also, it prohibits the defendants from violating the Cooling-Off Rule, which includes providing various cancellation notices to prospective purchasers, and would require them to pay a $22,000 civil penalty.
The settlement also contains various record keeping and reporting requirements designed to assist the FTC in monitoring the defendants' compliance.
The Commission vote to forward the complaint and consent order to the Department of Justice for filing was 4 to 1. They were filed by DOJ at the request of the FTC, in the U.S. District Court for the Western District of New York, on October 18. The settlement is subject to court approval.
NOTE: This consent order is for settlement purposes only and does not constitute an admission by the defendants of a law violation. Consent orders have the force of law when signed by the judge.
Copies of the complaint and consent order will be available shortly 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; 877-FTC-HELP (877-382-4357); 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. 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 and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies worldwide.
Office of Public Affairs
Barbara Anthony, Director
Ronald L. Waldman or Robin E. Eichen
Northeast Region - New York
(FTC File No. 972 3276)
(Civil Action No.: 00CV00896 S (SC))