FTC Alleges Deceptive Selling of Bartending and Mystery Shopping Program

Two individuals and two corporations, who allegedly took in over $5 million from consumers, are charged by the Federal Trade Commission with using deceptive marketing tactics when selling their at-home certification programs for bartenders and mystery shoppers. The FTC alleges the defendants promised jobs as bartenders and mystery shoppers, but delivered only useless certification programs and general information on potential employers. According to the FTC, the defendants’ business activities not only violated federal law, but also the terms of an October 2001 court order entered against the two individual defendants in an earlier Commission case. One defendant has agreed to a lifetime ban from telemarketing to settle the FTC’s charges.

The FTC alleges that Stevan P. Todorovic and Michael G. Harvey, and two corporations that Todorovic controls – American Bartending Institute, Inc. and Intuitive Logic, Inc., based in Santa Barbara, California – misrepresented the products they were selling, charged consumers without authorization, and did not fully disclose their refund conditions and shipping and handling fees. All of these activities were barred by a prior court order resolving a 2000 FTC complaint. The FTC also charges that the defendants’ new business practices violated the Telemarketing Sales Rule (TSR).

According to the FTC, the defendants placed ads in the help wanted sections of local newspapers saying, “BARTENDER TRAINEES NEEDED,” and “MYSTERY SHOPPERS NEEDED!” When job-seekers called the listed numbers, the defendants’ telemarketers pitched at-home “certification” courses for bartenders and mystery shoppers that cost between $58.90 and $98.90. The defendants led consumers to believe that they would provide a valuable “certification” that was necessary before consumers would be eligible for available jobs. The defendants promised specific earnings, job placement assistance, and a 30-day trial period, during which customers could request and receive a refund. Yet consumers who agreed to purchase the bartending or mystery shopping programs received only an information booklet and an open-book certification test. Upon being “certified” by the defendants, consumers expected to be placed in jobs as mystery shoppers or bartenders. Instead, the defendants provided lists of potential employers who had not heard of the certification, were not affiliated with the defendants’ program, and often were not hiring.

Based on these allegations, the FTC has filed both a new complaint against the defendants as well as a civil contempt action alleging violations of the prior district court order. In the contempt action, the FTC alleges that the defendants violated the 2001 federal court order by:

• Misrepresenting the products they were selling, including a meaningless “certification” program and alleged “job listings”;
• Billing consumers without authorization or in amounts greater than authorized; and
• Failing to disclose prior to a consumer’s purchase all of their refund conditions, or the amount of their shipping and handling fees.

The Commission’s complaint includes the above allegations and also charges that the defendants violated the FTC Act by making false earnings claims about their mystery shopping program and violated the TSR by “upselling” third-party products to consumers after the telemarketing sales pitch ended, without identifying who was doing the selling or that the purpose of the conversation was to make a sale. According to the FTC, the defendants would also charge “upsell” products to the credit card account a consumer gave for the previously purchased product without getting the consumer’s express consent for the additional charge.

Defendant Michael G. Harvey, who is named in the new complaint and in the contempt proceeding, has agreed to settle the charges against him. The settlement imposes a lifetime ban on any future telemarketing, and provides other restrictions to address the deceptive practices challenged here and in the earlier Commission case. If Harvey is found to have lied about his financial condition, he would be responsible for $13.2 million in consumer redress – the alleged combined injury from the two cases.

The FTC brought its 2000 complaint against Todorovic, Harvey, and Nationwide Information Service, Inc. The FTC alleged in that case that the defendants had misrepresented their auction information guides by promising specific information about auction dates and times and the items that would be available, but instead providing consumers only general information that could be found elsewhere for free. The 2000 complaint also alleged that the defendants had engaged in unauthorized billing and did not fully disclose the terms and conditions of their refund policy. The October 2001 court order settling the FTC charges barred the defendants from misrepresenting their products, from billing consumers without authorization, and from failing to fully explain any refund policies prior to billing consumers. Defendants also paid $535,000 in consumer redress.

The FTC received invaluable assistance in this matter from the Better Business Bureau (BBB) of the Tri-Counties, the BBB of the Southland, and the Santa Barbara police department.

The FTC has issued a new consumer alert, “The Secrets of Mystery Shopping Revealed,” warning consumers that “marketers who promise lucrative jobs as mystery shoppers often do not deliver bona fide opportunities.” The alert is on the FTC’s Web site at http://www.ftc.gov/bcp/edu/pubs/consumer/alerts/alt151.shtm. It notes that becoming a mystery shopper for a legitimate company does not cost anything, and describes where real job opportunities can be found. The FTC says consumers should be skeptical when considering mystery shopper promoters who advertise in the “help wanted” section of newspapers; sell “certification”; guarantee a job as a mystery shopper; charge a fee for access to job opportunities; or sell directories of companies that provide mystery shoppers.

The Commission vote to issue the complaint and to initiate civil contempt proceedings against all defendants, and to accept the consent in settlement of the court actions for one defendant, was 4-0. The complaint and contempt action were filed on July 20, 2005, in the U.S. District Court for the Central District of California, Western Division, in Los Angeles. The FTC’s litigation against Todorovic and his corporations continues.

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant has actually violated the law. The case will be decided by the court.

NOTE: The proposed consent order is for settlement purposes only and does not constitute an admission of a law violation. Such orders have the force of law when signed by a judge.

Copies of the consumer alert, complaint, contempt order, and proposed stipulated order for permanent injunction and final judgment 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 in English or Spanish (bilingual counselors are available to take complaints), 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.