STEPHEN L. COHEN
MICHAEL DONOHUE
Federal Trade Commission
6th & Pennsylvania Ave., NW
Washington, DC 20580
202-326-3222; 326-3563

MONICA TAIT (CA BAR # 157311)
Local Counsel
Federal Trade Commission
10877 Wilshire Blvd. #700
Los Angeles, California 90024
(310) 824-4343

Attorneys for Plaintiff
FEDERAL TRADE COMMISSION

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA

FEDERAL TRADE COMMISSION,

Plaintiff,

v.

INTERACTIVE AUDIOTEXT SERVICES, INC.,

et al.,

Defendants.

CIVIL NO. 98-3049 CBM

STIPULATED PRELIMINARY INJUNCTION

Whereas this matter comes before the Court on Plaintiff Federal Trade Commission's complaint for an injunction and other equitable relief. The Complaint and summons having been served on all defendants, the Court now being fully advised of the premises, finds:

1. This Court has jurisdiction of the subject matter of this case, and there is good cause to believe it will have jurisdiction over all named parties.
2. There is substantial likelihood that the Commission will ultimately succeed in establishing that defendants have engaged in and are likely to continue to engage in acts and practices that violate Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), and the 900-Number Rule, 16 C.F.R. Part 308, and, therefore, the Commission is likely to prevail on the merits of this action;
3. That irreparable harm will occur if a preliminary injunction is not issued; and
4. Weighing the equities and considering the Commission's likelihood of ultimate success in its causes of action, this Preliminary Injunction is in the public interest;

WHEREAS the parties agree to the entry of this Order containing a preliminary injunction; and

WHEREAS the defendants, by agreeing and sipulating to this Order, make no admission or denial as to the truth of plaintiff’s allegations, IT IS AGREED TO, COMPROMISED AND STIPULATED by the undersigned parties, and their attorneys of record as follows:

ORDER

Definitions

1. "Document" is synonymous in meaning and equal in scope to the usage of the term in Federal Rule of Civil Procedure 34(a), and includes writings, drawings, graphs, charts, photographs, audio and video recordings, computer records, and other data compilations from which information can be obtained and translated, if necessary, through detection devices into reasonably usable form. A draft or non-identical copy is a separate document within the meaning of the term.
2. The term "800 Number" includes any number advertised as or widely understood to be toll-free.
3. "Defendants" means Interactive Audiotext Services, Inc. ("IAS"), Allstate Communications, Inc. ("ACI"), American Billing & Collection, Inc. ("ABC"), U.S. Interstate Distributing., Inc. ("USID"), Frank Montelione ("Montelione"), Russel Leventhal ("R. Leventhal"), Stuart Leventhal ("S. Leventhal"), and John O. Cooper ("Cooper"), and their agents, employees, officers, and servants, their successors and assigns, and those persons in active concert or participation with them who receive actual notice of this order by personal service or otherwise.

I. PROHIBITED BUSINESS ACTIVITIES

IT IS THEREFORE ORDERED that, in connection with the offering for sale or sale of any information or entertainment service accessed through any 800 number, or the billing and collection for such service, directly or through any intermediary, defendants are hereby temporarily restrained and enjoined from:

A. Billing, causing to be billed to, or attempting to collect from, any consumer for purchases made by a minor;

B. Billing, causing to be billed to, or attempting to collect from, any consumer on the basis that defendants’ service was accessed from such consumer’s telephone;

C. Billing, causing to be billed to, or attempting to collect from, any consumer who exercised his or her rights under the Truth in Lending Act, 15 U.S.C. § 1601 et seq., or Regulation Z, 12 C.F.R. Part 226;

D. Using as a personal identification number ("PIN") a social security number, credit, charge, or debit card number, checking account number, or telephone number;

E. Making any misrepresentation of material fact, including, but not limited to:

1. Any misrepresentation that a consumer is obligated to pay for any service that the consumer did not purchase;
2. Any misrepresentation that a consumer is obligated to pay for any service because the service was accessed from that consumer’s telephone; or
3. Any misrepresentation that a purchase has been authorized; and

F. Failing, in any non-credit card transaction, to:

1. Clearly and conspicuously disclose all material terms and conditions associated with the use of any service, including the service provider’s name and address, a business telephone number which the consumer may use to obtain additional information or to register a complaint, and the rates for the service;
2. Notify the consumer of any future rate changes;
3. Obtain the consumer’s agreement to utilize the service on the terms and conditions disclosed by the service provider; and
4. Require the use of an identification number or other means to prevent unauthorized access to the service by nonsubscribers.

II.

IT IS FURTHER ORDERED that defendants are hereby temporarily restrained and enjoined from:

A. Connecting any consumer to a 900 number without providing a preamble message, as required by § 308.5(a) of the 900-Number Rule, 16 C.F.R. § 308.5(a);

B. Failing to disclose in any solicitation to call a pay-per-call service the cost of the call in a slow and deliberate manner;

C. Referring any caller to a 900, 500, or international number without first disclosing, clearly and conspicuously, the cost of calling any such number; provided, however, that defendants shall not be in violation of this provision if, after exercising due diligence to determine the cost of calling any international numbers to which a consumer is referred, the defendants do not know the cost of such calls, defendants disclose, clearly and conspicuously, that: "International long distance telephone charges to [insert country of call termination] apply"; and "To determine your exact per-minute charges, contact your long distance carrier"; provided, further, that defendants shall have until July 3, 1998 to comply with this provision; and

D. Making any misrepresentation that normal or standard rates apply to international long distance calls.

III.

IT IS FURTHER ORDERED that, in connection with the offering for sale or sale of any information or entertainment service accessed through any 800 number, or the billing and collection for such service, directly or through any intermediary, defendants are hereby temporarily restrained and enjoined from obtaining or submitting for payment a check, draft, or other form of negotiable paper drawn on any consumer’s checking, savings, share, or similar account, without that consumer's express verifiable authorization. Such authorization shall be deemed verifiable if any of the following means are employed:

A. Express written authorization by the consumer, which may include the consumer's signature on the negotiable instrument; or

B. Express oral authorization which is tape recorded and made available upon request to the consumer's bank and which evidences clearly both the consumer's authorization of payment for the services that are the subject of the sales offer and the consumer’s receipt of all of the following information:

1. The date of the draft(s);
2. The amount of the draft(s);
3. The payor's name;
4. The number of draft payments (if more than one);
5. A telephone number for customer inquiry that is answered during normal business hours;
6. The date of the customer's oral authorization;
7. The cost per minute of any call, or if unknown:

   1. the maximum possible per-minute charge; or
   2. a stated range of possible costs per-minute for the call, where the maximum possible per-minute charge is disclosed at least as prominently as any lower estimate of possible charges; and

8. Whether any recurring charges will be billed to the consumer; or

C. Written confirmation of the transaction, sent to the consumer prior to submission for payment of the consumer's check, draft, or other form of negotiable paper, that includes:

1. All of the information contained in Paragraph B.1 - 8, above; and
2. The procedures by which the consumer can obtain a refund in the event the confirmation is inaccurate.

IV. PRESERVATION OF RECORDS

IT IS FURTHER ORDERED that defendants, and their affiliates, subsidiaries, agents, independent sales organizations, officers, servants, and attorneys, and those persons in active concert or participation with them who receive actual notice of this order by personal service or otherwise, are hereby temporarily restrained and enjoined from destroying, erasing, mutilating, concealing, altering, transferring, or otherwise disposing of, in any manner, directly or indirectly, any contracts, accounting data, correspondence, advertisements, computer tapes, discs, or other computerized records, books, written or printed records, handwritten notes, telephone logs, telephone scripts, receipt books, ledgers, personal and business canceled checks and check registers, bank statements, appointment books, copies of federal, state or local business or personal income or property tax returns, and other documents or records of any kind that relate to the business practices or business or personal finances of the defendants.

V. SERVICE OF ORDER BY DEFENDANTS

IT IS FURTHER ORDERED that defendants shall immediately provide a copy of this Order to each: parent; affiliate; subsidiary; division; sales entity; successor; assign; officer; director; supervisory employee; employee whose duties include customer service, billing, and collections; independent contractor; independent sales organization; agent; attorney; and representative of any defendant, and shall, within ten (10) days from the date of entry of this Order, provide the Commission with a sworn statement that defendants have complied with this provision of the Order, which statement shall include the names and addresses of each such person or entity who received a copy of the Order.

VI. RETENTION OF JURISDICTION

IT IS FURTHER ORDERED that this Court shall retain jurisdiction of this matter for all purposes.

SO ORDERED, this ___ day of _____________, 1998, at ___.m.

________________________________
United States District Judge

The parties, by their signature and by the signature of their counsel, hereby stipulate and agree to the entry of this Order:

FOR DEFENDANTS

FEDERAL TRADE COMMISSION

_____________________________
Stephen L. Cohen
Michael Donohue
Counsel for Plaintiff
Federal Trade Commission
Washington, DC 20580
202-326-3222; 3563