REASONS FOR SETTLEMENT

This statement accompanies the Stipulation to Modify Consent Decree and Modified Consent Decree executed by defendants Telebrands Corporation and Ajit Khubani. In 1996 the defendants entered into a Consent Decree settling allegations that they had violated the Commission's Mail or Telephone Order Merchandise Trade Regulation Rule, 16 C.F.R. Part 435 (the "Rule"). The Consent Decree enjoined them from violating the Rule, required them to pay a $95,000 civil penalty (which they subsequently paid), and required them to maintain detailed records of each consumer's mail or telephone order. The Commission has reason to believe that after they entered into the Consent Decree, the defendants violated the Rule in numerous instances and violated a number of the recordkeeping provisions of the Consent Decree. To remedy these alleged new Rule violations and the violations of the Consent Decree, the Commission has negotiated with defendants a stipulation to modify the Consent Decree.

Pursuant to Section 5(m)(3) of the Federal Trade Commission Act, as amended, 15 U.S.C. § 45(m)(3), the Commission hereby sets forth its reasons for settlement by entry of a stipulated Modified Consent Decree:

On the basis of the allegations contained in the Modified Consent Decree, the Commission believes that the payment of $800,000 in civil penalties by Telebrands Corporation and Ajit Khubani constitutes an appropriate amount upon which to base a settlement. The amount should assure compliance with the law by the defendants and others who may be in violation. Further, the provisions requiring defendants (1) to obtain, at their expense, a monitor with fulfillment expertise to report at least twice to the Court and the Commission on their success in complying with the Rule and with the record keeping provisions of the Modified Consent Decree, and on any additional steps they might take to bring their operations into compliance, (2) to maintain more detailed records for a longer time than required by the Consent Decree, and (3) to monitor the record keeping and Rule compliance of any fulfillment house retained by them, coupled with an injunction against further violations of the Rule, constitute effective means to assure the defendants' future compliance with the law. Additionally, with the entry of the Modified Consent Decree, the time and expense of litigation will be avoided.

For the foregoing reasons, the Commission believes that the settlement by the entry of the attached Stipulation Modifying Consent Decree and Modified Consent Decree is justified and well within the public interest.