American Distribution, Inc.

American Distribution, Inc. and its president and founder, Stephen E. Milo, have agreed to pay a $50,000 civil penalty and to exchange for cash as much as $150,000 to $200,000 worth of "credit vouchers" held by their customers, under a settlement with the Federal Trade Commission. The settlement resolves charges that the defendants, who sell comic books and other entertainment novelties by mail, failed to ship merchandise within the times specified in their advertising. The FTC also alleged that the defendants failed to properly notify customers of their option to either consent to the delays or cancel their orders and receive prompt refunds, and that they improperly issued company credits rather than refunds on cancelled orders. These practices violate the FTC's Mail or Telephone Order Merchandise Rule, and the settlement would prohibit the defendants from violating the rule.

American Distribution, which does business as American Comics, American Entertainment, and Entertainment This Month, is based in Manassas, Virginia. It markets its products, which also include t-shirts, videos, posters and figurines, through catalogs and advertisements in magazines and comic books.

The Mail or Telephone Order Merchandise Rule was promulgated in 1975 to govern shipping times and refunds for mail order sales. It was expanded in 1994 to cover sales conducted over the telephone, computer or facsimile machine. The rule requires a company to ship ordered merchandise within the time stated in its ads. If no time is stated, the company must send the merchandise within 30 days after receiving the order. If a company is unable to ship the order before the deadline, it must send customers an option notice which gives them the choice of agreeing to a delay or cancelling their orders and receiving prompt refunds. When there will be a subsequent delay, the company must send a second option notice and, if the consumer does not respond, must cancel the order and issue a prompt refund.

According to the FTC complaint detailing the charges in this case, American Distribution did not ship orders within the proper times. When there were delays, the defendants allegedly failed to provide consumers whose orders would be delayed with a proper option notice. The complaint states that the notices did not inform consumers of their right to cancel their orders and obtain prompt refunds. Nor did the notices give consumers a cost-free means for cancelling their orders, the FTC charged. Finally, the Commission charged, the defendants failed to issue the required refunds in the same cash, check or money order form as payment was tendered.

The proposed consent decree settling these charges, subject to federal district court approval, would require the defendants to pay the $50,000 civil penalty within five days. In addition, the defendants would be required to notify all individuals on the current mailing lists for their publications, "American Entertainment" and "Entertainment This Month," that anyone holding one of their credit vouchers is entitled to a cash refund. Alternatively, the customers could use their vouchers to obtain a credit against any purchase of merchandise in the catalog. The consent decree also would bar the defendants from violating the Mail or Telephone Order Merchandise Rule in the future.

The Commission vote to authorize the filing of the complaint and proposed consent decree was 5-0. They were filed on June 16 in U.S. District Court for the Eastern District of Virginia, in Alexandria, by the Department of Justice at the request of the FTC.

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

The FTC has published a free brochure, "Shopping by Phone or Mail," which describes consumers' rights under the Mail/Telephone Order Rule and offers tips for resolving problems. Copies of the brochure, as well as the complaint and consent decree in this case, are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580. FTC news releases and other materials also are available on the Internet at the FTC's World Wide Web Site at: http://www.ftc.gov

(FTC File No. 932 3278)

(Civil Action No. 95-801-A)