On-Line Sellers of Inkjet Printer Cartridge Refills Agree to Pay $40,000 Civil Penalty to Settle with the FTC

On-line sellers of generic and remanufactured inkjet printer cartridge refills have agreed to pay a $40,000 civil penalty to settle Federal Trade Commission charges that they engaged in deceptive practices. The FTC alleges that E-Babylon, Inc. and its two principals, Michael Zaya and Aidin Yousif, deceptively represented on their Web sites that their inkjet printer replacement cartridges were new, brand-name items, rather than remanufactured or generic items. The Commission also alleges that the defendants violated the Mail or Telephone Order Merchandise Rule (Mail Order Rule) by failing to advise consumers of their right to cancel and receive a refund if the defendants were unable to ship the products on time.

According to the FTC's complaint, E-Babylon, based in Simi Valley, California, and its principals operate over a dozen Web sites - including "ProInkjets.com" and "123inkjets.com." Through these sites, the defendants sell remanufactured and generic replacement cartridges for inkjet printers.

"Remanufactured" refers to a used, brand-name cartridge that is refilled with third-party ink.

Because this process is not feasible for all cartridges, the defendants also market new, generic cartridges for use in some printers. According to the FTC, the defendants marketed their remanufactured and generic cartridges as brand-name products, then compared their prices for these products with the brand-name products available at office superstores.

The complaint alleges that the defendants misrepresented that their products were new, brand-name inkjet cartridges. In addition, the complaint alleges, the defendants advertised that dissatisfied consumers could receive "no questions asked" refunds, yet many consumers experienced significant difficulties in obtaining refunds. Further, because the defendants had no procedures in place to comply with the FTC's Mail Order Rule, they did not advise thousands of consumers who purchased their products of their right to cancel and receive a refund when the defendants determined they would not be able to ship on time.

The proposed consent decree to settle the charges requires the defendants to pay a $40,000 civil penalty. The proposed decree also requires the defendants to provide redress to consumers who were entitled to, but did not receive, a refund pursuant to either the defendants' money-back guarantee or the Mail Order Rule. In addition, the proposed decree would prohibit the defendants from: claiming that any product is a new, brand-name product, unless the representation is true; misrepresenting any refund offer; and violating the Mail Order Rule. Finally, the decree would require the defendants to respond promptly to future refund requests.

The Commission vote to authorize staff to refer the complaint and proposed consent decree to the Department of Justice for filing was 5-0. The complaint and proposed consent decree were filed by the DOJ at the request of the FTC in the U.S. District Court for the Central District of California, in Los Angeles, on Thursday August 22, 2002. The proposed consent decree is subject to court approval.

NOTE: This consent decree is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Consent decrees have the force of law when signed by the judge.

Copies of the complaint and the proposed consent decree 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, D.C. 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, identity theft and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

(FTC File No. 012 3209)
(Civil Action No.02-06561)