Defendants Banned From Selling Work-at-Home Opportunities
A Miami company that advertised for home workers to assemble "Native American" or "hand-crafted bracelets" agreed to a settlement with the Federal Trade Commission that permanently bans it from selling work-at-home business opportunities. The FTC had alleged that National Crafters Corp. and its owner, Thomas F. Diaz, Jr., misled consumers about their prospects for profits in making the jewelry. In addition to the ban, the settlement announced today requires the defendants to pay $25,000 for consumer redress or disgorgement, and prohibits them from making misrepresentations about any work-at-home business opportunity.
The FTC filed a complaint in the U.S. District Court for the Southern District of Florida in December 2001, alleging that the defendants engaged in deceptive practices by falsely advertising that the assembly work was easy and required no prior experience, and that prospective assemblers could reasonably expect to earn $360 to $720 or more per week. The FTC also alleged that the defendants falsely advertised that they would provide all of the supplies needed to make the bracelets. However, the defendants required consumers to pay a "reimbursable" deposit for the materials and instructions in order to become an assembler. According to the FTC, few, if any, of the work-at-home assemblers ever realized the earnings promised, and the defendants frequently provided inadequate materials, both in quantity and quality, thereby prohibiting the assemblers from making bracelets in accordance with the defendants' instructions and specification.
The settlement, which was approved by the court, permanently bans the defendants from engaging or assisting others in the advertising, marketing, promoting, offering for sale, and sale of any work-at-home business opportunity. The settlement also prohibits the defendants from misrepresenting in the advertising, marketing, promoting, offering for sale, and sale of any good or services, including business ventures:
- the earnings consumers are likely to achieve;
- the earnings consumers actually have received;
- that the defendants will provide tools and materials of adequate quantity or quality to achieve the stated earnings;
- the typical amount of time needed to achieve the stated earnings;
- the level of skill that is typical or required to achieve the stated earnings;
- that the defendants guarantee remuneration to the consumer; and
- that the defendants have pending orders for products, or business to fulfill, or that they will purchase products from the consumers.
The settlement further prohibits the defendants from failing to:
- disclose the actual number of products consumers would have to produce and sell to achieve the represented level of earnings;
- provide tools or materials that are adequate in quantity to enable consumers to achieve the represented level of earnings; and
- provide goods or services that are adequate in quality to enable consumers to achieve the represented level of earnings.
The settlement also prohibits the defendants from selling their customer lists.
The settlement requires the defendants to pay $25,000 for consumer redress and/or disgorgement, and contains an avalanche clause in which the defendants would have to pay $1.25 million if the Commission does not receive payment within five days of the entry of the final order, or if it is found that the defendants misrepresented their financial condition. The order further requires the defendants to return any uncashed checks to those consumers who paid for the defendants' registration fee, and to give those consumers, as well as any consumer who submitted a complete bracelet, a notice of the Commission's action and the settlement.
Finally, the settlement contains various recordkeeping requirements to assist the FTC in monitoring the defendants' compliance.
The Commission vote to authorize staff to file the proposed stipulated permanent injunction and final order was 5-0. It was filed in the U.S. District Court, Southern District of Florida, Miami Division, and approved by the court on October 30, 2002.
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