Digital Photo Vending Machine Franchisor Settles FTC Charges

Photo Vend International, based in Hollywood, Florida, has agreed to pay a $11,000 civil penalty to resolve Federal Trade Commission charges that it violated the FTC's Franchise Rule in connection with the sale of digital photo sticker vending machines. The Commission filed a complaint against the company in September 1998 as part of Operation VendUp Broke, a federal and state law-enforcement sweep targeting vending machine franchise and business opportunity sellers. The FTC had alleged that Photo Vend International failed to give to its customers the required basic disclosure or earnings claim disclosure statements. In addition to paying the civil penalty, the defendant is prohibited from future violations of the Franchise Rule and from making any false or misleading statement or representation of material fact, including representations relating to the income, profit, or sales volume of a franchise.

The FTC's Franchise Rule requires franchisors to give potential buyers detailed up-front disclosures about the financial and litigation history of their firms and their current and past franchisees, and also to provide documentation supporting any claims they make about future earnings.

In September 1998, the Department of Justice on behalf of the FTC, filed a complaint in Federal District Court in Florida against PVI, Inc., doing business as Photo Vend International. Photo Vend International sold digital vending machines for approximately $10,000 each. These machines allow consumers to take 16 postage stamp-sized digital color photos of themselves and have the photos superimposed on various themed backgrounds. The vending machines then print out the photos as color stickers. The defendant made oral and written earnings claims to potential investors via e-mail, telephone presentations and in their promotional materials, but failed to provide either a basic disclosure document or an earnings claims document in violation of the FTC's Franchise Rule, according to the complaint..

The settlement also includes various reporting and recordkeeping provisions designed to assist the FTC in monitoring Photo Vend International's compliance.

The Commission vote to authorize staff to refer the matter to the Department of Justice for filing was 4-0. The stipulated judgment and order was filed in the U.S. District Court, Southern District of Florida, in Fort Lauderdale, on August 27, 1999. It was approved by the court on September 10, 1999.

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

Copies of the news release and other documents associated with "Operation VendUp Broke" are available from the FTC's web site at http://www.ftc.gov and copies of the settlement are also available from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 1-877-FTC-HELP (877-382-4357); TDD for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

(FTC Matter No. X980084)
(Civil Action No. 98-6935 CIV-FERGUSON)