California Vending Machine Franchisor Settles FTC Charges: Defendants Were Part of FTC's "Project Biz-illion$" Sweep

Great Pacific Vending Corporation, based in Los Angeles, California, and its president, Collie Wainer, have agreed to settle Federal Trade Commission charges that they failed to provide the pre-sale disclosures required by the FTC's Franchise Rule to prospective purchasers of their snack and soda vending machines business opportunities. The Department of Justice, at the request of FTC, filed a suit against the defendants as part of "Project Biz-illion$," a nationwide crackdown on fraudulent business opportunities. Under the settlement, the defendants are prohibited from violating the Franchise Rule and making false and misleading representations in connection with the sale of business opportunities. In addition, the defendants are required to pay $60,000 for consumer redress.

The settlement announced today ends the litigation in this case, which was among 22 cases the FTC referred to the DOJ for filing as part of "Project Biz-illion$," a multi-prong state/federal attack on traditional business opportunity scams. This case, like most of the "Project Biz-illion$" actions, was launched against defendants that advertised in the classified section of daily newspapers to peddle payphone, vending machine, display rack, and work-at-home scams. According to the FTC, with a minimum investment of $4,934 for one vending machine, the defendants represented that they would provide a vending service to consumers that consisted of equipment, their expertise and profitable locations for the vending machines.

The defendants' promotional materials suggested specific amounts of money that prospective purchasers could expect to achieve, but did not provide prospective purchasers with an earnings claim document containing written substantiation for the claims, as the Franchise Rule requires. The complaint also alleged that the defendants failed to provide prospective purchasers with a basic disclosure document that included the names, addresses and telephone numbers of prior purchasers, as required by the Rule to help potential purchasers protect themselves from false profitability claims.

Under the settlement, which was approved by the court, the defendants are prohibited from future violations of the Franchise Rule; making false and misleading representations in connection with the sale of business opportunities; and selling their customer lists. The settlement requires the defendants to pay $60,000 for consumer redress, with $40,000 due immediately after entry of the order and the balance due in four installments. The settlement also includes a consumer contract-termination option for current customers in order for them to terminate their contracts. Finally, the settlement contains various recordkeeping and reporting requirements designed to assist the FTC in monitoring the defendants' compliance.

The Commission vote authorizing staff to file the settlement was 5-0. The stipulated judgment and order was filed in the U.S. District Court for the Central District of California, in Los Angeles, on February 14, 2001 , by the Department of Justice and entered by the court.

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

Copies of the legal documents associated with these cases 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 thousands of civil and criminal law enforcement agencies in the U.S. and abroad.

(FTC Matter No. X000035)
(Civil Action No.: 00-01588 C.D. CAL.)
(GREAT PACIFIC)