Two Florida-based companies and their president have settled Federal Trade Commission charges that they violated the Commission’s Mail or Telephone Order Merchandise Rule (Rule). According to the Commission’s complaint, filed today by the Department of Justice (DOJ) at the FTC’s request, the companies, which sold a wide range of goods including the “Big Mouth Billy Bass,” violated the Rule by not shipping products when promised, failing to have a reasonable basis for expecting to ship on time, not notifying consumers about shipping delays, and failing to deem delayed orders cancelled and promptly refund consumers’ money.
Under the terms of a proposed consent order settling the charges, defendants Deer Creek Products, Inc.; Golden Age Products, Inc., a.k.a. Lakeside Products; and Michael DiStephano, all based in Pompano Beach, Florida, are barred from violating the Rule in the future and are subject to strict recordkeeping and monitoring requirements to ensure their future compliance with the Rule. DiStephano and Golden Age also face a $150,000 civil penalty, which has been suspended due to their inability to pay.
The Commission’s Complaint
The defendants named in today’s complaint and proposed consent order advertised a variety of goods, including the Bio Ear Electronic Sound Amplifying Device, the Ink Jet Refill Kit, a Flag Case, an Indoor TV Antenna, and the ‘Big Mouth Billy Bass’ (a mountable, rubber, “singing” fish), in catalogs and through print media ads. In their advertisements, the defendants allegedly made no statements about when they would ship the products. In this circumstance, the Rule requires sellers to ship within 30 days of receiving orders. According to the complaint, however, these products were shipped late in numerous instances – ranging from 29 to 89 percent of the time.
In addition, the defendants allegedly used a notice of delay that did not comply with the Rule because it failed to advise consumers of the reason for the delay and when shipment could be expected, and it did not include a pre-paid means for consumers to cancel the order and obtain a prompt refund. Moreover, according to the FTC, many consumers were either not notified or not notified of the shipping delay in a timely manner. Under these circumstances, the Rule requires automatic cancellation of the delayed order and a prompt refund to the consumer. However, the defendants allegedly failed to make timely refunds.
According to the complaint, the defendants violated the Mail Order Rule by: 1) failing to have substantiation for the expectation of being able to ship the products within the required 30 days; 2) in delayed shipment situations, failing to provide delay option notices containing a definite revised shipment date and a prepaid means for consumers to exercise the cancellation option; 3) failing to provide delay option notices on time; and 4) failing to deem orders cancelled and make prompt consumer refunds when required to do so by the Rule.
Terms of the Proposed Consent Order
The proposed consent order announced today prohibits the defendants from violating the Commission’s Mail Order Rule in the future. It also imposes a $150,000 civil penalty, which has been suspended due to the defendants’ inability to pay. However, the entire amount will become due if it is subsequently determined that either corporate defendant materially misrepresented its financial condition or DiStephano misrepresented his financial situation.
The Commission vote to refer the complaint and proposed consent decree to the DOJ for filing was 5-0. The complaint and consent were filed on behalf of the FTC in the U.S. District Court for the Southern District of Florida in Miami on August 19, 2003.
NOTE: The proposed consent decree is for settlement purposes only and does not constitute an admission of a law violation. Consent decrees have the force of law when signed by the judge.
Copies of the documents mentioned in this release are available 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, DC 20580. 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 http://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.