[Federal Register Volume 59, Number 99 (Tuesday, May 24, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-12623]
[[Page Unknown]]
[Federal Register: May 24, 1994]
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FEDERAL TRADE COMMISSION
[Dkt. 9264]
Hawthorne Communications, Inc.; Proposed Consent Agreement With
Analysis To Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed consent agreement.
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SUMMARY: In settlement of alleged violations of federal law prohibiting
unfair acts and practices and unfair methods of competition, this
consent agreement, accepted subject to final Commission approval, would
prohibit, among other things, an Iowa corporation from making any
representations about the performance, benefits, efficacy, or success
rate of any product or service concerning business opportunities unless
the respondent possesses competent and reliable evidence that
substantiates such representations. In addition, the consent agreement
would prohibit the respondent from misusing testimonials and
endorsements.
DATES: Comments must be received on or before July 25, 1994.
ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,
room 159, 6th St. and Pa. Ave., NW., Washington, DC 20580.
FOR FURTHER INFORMATION CONTACT: Jeffrey Dahnke, FTC/Denver Regional
Office, 1405 Curtis St., suite 2900, Denver, CO. 80202-2393. (303) 844-
2254.
SUPPLEMENTARY INFORMATION: Pursuant to section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Sec. 3.25(f) of
the Commission's Rules of Practice (16 CFR 3.25(f)), notice is hereby
given that the following consent agreement containing a consent order
to cease and desist, having been filed with and accepted, subject to
final approval, by the Commission, has been placed on the public record
for a period of sixty (60) days. Public comment is invited. Such
comments or views will be considered by the Commission and will be
available for inspection and copying at its principal office in
accordance with Sec. 4.9(b)(6)(ii) of the Commission's Rules of
Practice (16 CFR 4.9(b)(6)(ii)).
Agreement Containing Consent Order To Cease and Desist
In the matter of Hawthorne Communications, Inc., a corporation.
Docket No. 9264.
The agreement herein, by and between Hawthorne Communications,
Inc., a corporation, by its duly authorized officer, hereafter
sometimes referred to as respondent, and its attorney, and counsel for
the Federal Trade Commission, is entered into in accordance with the
Commission's Rule governing consent order procedures. In accordance
therewith the parties hereby agree that:
1. Respondent Hawthorne Communications, Inc., is a corporation
organized, existing and doing business under and by virtue of the laws
of the State of Iowa, with its office and principal place of business
located at 300 N. 16th Street, Fairfield, Iowa 52556.
2. Respondent has been served with a copy of the complaint issued
by the Federal Trade Commission charging it with violations of section
5(a) of the Federal Trade Commission Act, 15 U.S.C. 45(a) and has filed
an answer to said complaint denying said charges.
3. Respondent admits all the jurisdictional facts set forth in the
Commission's complaint in this proceeding.
4. Respondent waives:
(a) Any further procedural steps;
(b) The requirement that the Commission's decision contain a
statement of findings of fact and conclusions of the law;
(c) All rights to seek judicial review or otherwise to challenge or
contest the validity of the order entered pursuant to this agreement;
and
(d) any claim under the Equal Access to Justice Act.
5. This agreement shall not become a part of the public record of
the proceeding unless and until it is accepted by the Commission. If
this agreement is accepted by the Commission it will be placed on the
public record for a period of sixty (60) days and information in
respect thereto publicly released. The Commission thereafter may either
withdraw its acceptance of this agreement and so notify the respondent,
in which event it will take such action as it may consider appropriate,
or issue and serve its decision, in disposition of the proceeding.
6. This agreement is for settlement purposes only and does not
constitute an admission by respondent that the law has been violated as
alleged in the complaint, or that the facts as alleged in the
complaint, other than jurisdictional facts, are true.
7. This agreement contemplates that, if it is accepted by the
Commission, and if such acceptance is not subsequently withdrawn by the
Commission pursuant to the provisions of Section 3.25(f) of the
Commission's Rules, the Commission may without further notice to
respondent, (1) issue its decision containing the following order to
cease and desist in disposition of the proceeding, and (2) make
information public in respect thereto. When so entered, the order to
cease and desist shall have the same force and effect and may be
altered, modified or set aside in the same manner and within the same
time provided by statute for other orders. The order shall become final
upon service. Delivery by the U.S. Postal Service of the decision
containing the agreed-to order to respondent's address as stated in
this agreement shall constitute service. Respondent waives any right it
might have to any other manner of service. The complaint may be used in
construing the terms of the order, and no agreement, understanding,
representation, or interpretation not contained in the order or in the
agreement may be used to vary or to contradict the terms of the order.
8. Respondent has read the complaint and the order contemplated
hereby. It understands that once the order has been issued, ti will be
required to file one or more compliance reports showing that it has
fully complied with the order. Respondent further understands that it
may be liable for civil penalties in the amount provided by law for
each violation of the order after it becomes final.
Order
As used in this order, the term ``business opportunity'' means an
activity engaged in for the purpose of making a profit.
I
It Is Ordered that respondent, Hawthorne Communications, Inc., a
corporation , its successors and assigns, and its officers, agents,
representatives and employees, directly or through any corporation,
subsidiary, division or other device, in connection with the
advertising, offering for sale, sale or distribution of any Tronsoft
product or service, in or affecting commerce, as ``commerce'' is
defined in the Federal Trade Commission Act, do forthwith cease and
desist from selling, broadcasting, disseminating, or assisting or
encouraging others to sell, broadcast or disseminate the ``Freedom
Now'' commercial described in the complaint.
II
It Is Further Ordered that respondent, Hawthorne Communications,
Inc., a corporation, its successors and assigns, and its officers,
agents, representatives and employees, directly or through any
corporation, subsidiary, division or other device, in connection with
the advertising, offering for sale, sale or distribution of Tronsoft's
Home Business Starter Kit (``Starter Kit'') or any substantially
similar product, in or affecting commerce, as ``commerce'' is defined
in the Federal Trade Commission Act, do forthwith cease and desist from
misrepresenting, in any manner, directly or by implication, that:
A. Consumers who use such product readily succeed in starting and
operating successful businesses out of their own homes.
B. Consumers who use such product earn substantial income.
For purposes of this provision, ``substantially similar product''
means any product or material containing substantially similar
information or techniques as the Starter Kit and that purports to
instruct consumers how to start and operate a computer-based consulting
business at home.
III
It Is Further Ordered that respondent, Hawthorne Communications,
Inc., a corporation, its successors and assigns, and its officers,
agents, representatives and employees, directly or through any
corporation, subsidiary, division or other device, in connection with
the advertising, offering for sale, sale or distribution of the Starter
Kit or any other product or service concerning business opportunities,
in or affecting commerce, as ``commerce'' is defined in the Federal
Trade Commission Act, do forthwith cease and desist from representing,
directly or by implication, the performance, benefits, efficacy or
success rate of any such product or service, unless, at the time of
making the representation, respondent possess and relies upon competent
and reliable evidence, which when appropriate must be competent and
reliable scientific evidence, that substantiates such representation.
For purposes of this order, competent and reliable scientific evidence
shall mean tests, analyses, research, studies, or other evidence based
on the expertise of professionals in the relevant area, that has been
conducted and evaluated in an objective manner by persons qualified to
do so, using procedures generally accepted in the profession to yield
accurate and reliable results.
IV
It Is Further Ordered that respondent, Hawthorne Communications,
Inc., a corporation, its successors and assigns, and its officers,
agents, representatives and employees, directly or through any
corporation, subsidiary, division or other device, in connection with
the advertising, offering for sale, sale or distribution of any product
or service, in or affecting commerce, as ``commerce'' is defined in the
Federal Trade Commission Act, do forthwith cease and desist from:
A. Using, publishing, or referring to any endorsement (as
``endorsement'' is defined in Sec. 225(b), part 255, title 16, Code of
Federal Regulations) unless respondent has good reason to believe that
at the time of such use, publication, or reference, the endorsement
reflects the honest opinions, finding, beliefs, experience of the
endorser and contains no express or implied representations which would
be deceptive or unsubstantiated if made directly by respondent.
B. Representing, directly or by implication, that any endorsement
of the product or services represents the typical or ordinary
experience of members of the public who use the product or service
unless such is the case.
V
It Is Further Ordered that respondent shall distribute a copy of
this order to each of its operating divisions and to each officer,
agent and personnel responsible for the preparation, review or
placement of advertising, or other materials covered by this order, and
shall secure from each such person a signed statement acknowledging
receipt of this order.
VI
It Is Further Ordered that respondent shall for a period of five
(5) years from the entry of this order, notify the Federal Trade
Commission at least thirty (30) days prior to any proposed change in
the respondent, such as dissolution, assignment, or sale resulting in
the emergence of a successor corporation, the creation or dissolution
of new corporations or subsidiaries of the respondent, or any other
change in the corporation that may affect compliance obligations
arising out of this order.
VII
It Is Further Ordered that respondent, and its successors and
assigns, shall, for five (5) years after the date of the last
dissemination to which they pertain, maintain and upon request make
available to the Federal Trade Commission for inspection and copying:
A. All materials that were relied upon by respondent in
disseminating any representation covered by this order; and
B. All reports, tests, studies, surveys, demonstrations or other
evidence in respondent's possession or control that contradict,
qualify, or call into question such representation, or the basis upon
which respondent relied for such representation, including complaints
from consumers.
VIII
It Is Further Ordered that respondent shall, within sixty (60) days
after service of this order upon it and at such other times as the
Commission may require, file with the Commission a report, in writing,
setting forth in detail the manner and form in which it has complied
with this order.
Analysis of Proposed Consent Order to Aid Public Comment
The Federal Trade Commission has accepted, subject to final
approval, an agreement to a proposed consent order from Hawthorne
Communications, Inc. (``respondent'' or ``Hawthorne'').
The proposed consent order has been placed on the public record for
sixty (60) days for reception of comments by interested persons.
Comments received during this period will become part of the public
record. After sixty (60) days, the Commission will decide whether it
should withdraw from the agreement or make final the agreement's
proposed order.
Description of Complaint
This matter concerns advertising practices related to the sale of
Tronsoft Inc.'s Freedom Now Home Business Starter Kit (``Starter
Kit''). The Commission's complaint, issued on November 16, 1993,
alleges that Hawthorne promoted the sale of the Starter Kit by
scripting and producing a 30-minute television commercial entitled
``Freedom Now,'' which was broadcast in various areas throughout the
United States.
The complaint alleges that through the use of statements and
depictions contained in the ``Freedom Now'' commercial, respondent
Hawthorne falsely represented that consumers who use the Starter Kit
will typically and readily succeed in starting and operating a business
out of their homes and will typically earn substantial income. In
addition, the complaint alleges that Hawthorne falsely represented that
testimonials appearing in the commercial reflected both the actual
experiences of the people appearing as testimonialists and the typical
experiences of members of the public who had used the Starter Kit.
Finally, the complaint alleges that Hawthorne, at the time it made
various representations in the commercial, lacked a reasonable basis
that substantiated those representations.
Description of the Proposed Consent Order
The proposed consent order contains provisions which are designed
to remedy the alleged advertising violations and to prevent the
respondent from engaging in similar acts and practices in the future.
The proposed order prohibits respondent from disseminating the
``Freedom Now'' commercial and from misrepresenting that consumers who
use the Starter Kit (or any substantially similar product) can
typically use such product to start a business and earn substantial
income. The proposed order would further prohibit Hawthorne from making
any representations about the performance, benefits, efficacy or
success rate of any product or service concerning business
opportunities unless Hawthorne possesses competent and reliable
evidence that substantiates such representations. The proposed order
also contains prohibitions about using or misusing testimonials and
endorsements. In particular, the order prohibits Hawthorne from using
testimonials that do not reflect the actual opinions, beliefs, or
experiences of the endorser and from falsely representing that any
testimonial reflects the typical experiences of members of the public
who use the product being advertised.
The proposed order would require Hawthorne to distribute the
proposed order to its divisions and to officers, agents, and any
employees with advertising responsibilities. The order also requires
respondent to notify the Commission of any changes in its corporate
structure and to retain for five years all materials that it relies
upon in making representations covered by the order, as well as all
materials that call the representations into question. Finally, the
order requires Hawthorne to file compliance reports within sixty days
and at other times as the Commission may order.
The purpose of this analysis is to facilitate public comment on the
proposed order, and it is not intended to constitute an official
interpretation of the agreement and proposed order or to modify its
terms in any way. The proposed consent order has been entered into for
settlement purposes only and does not constitute an admission by the
respondent that the law has been violated as alleged in the complaint.
Benjamin I. Berman,
Acting Secretary.
[FR Doc. 94-12623 Filed 5-23-94; 8:45 am]
BILLING CODE 6750-01-M
