Bogus "Rebate" Offers Violate Federal Law

A scheme that used deceptive "rebate" checks to dupe consumers into unwittingly signing up for Internet service violates a federal law that bars unfair and deceptive practices according to a federal district court. Judge Robert S. Lasnik of the U.S. District Court for the Western District of Washington in Seattle, has ordered a halt to the deceptive practice and continued the case to determine the amount of monetary relief the defendants will pay.

In October 2000, the Federal Trade Commission charged that defendants Ian Eisenberg, Chris Hebard, Olympic Telecommunications, French Dream Investments, Coto Settlement, and their affiliates engaged in an illegal scheme to deceive consumers by mailing $3.50 "rebate" checks to millions of small businesses and consumers. The check came with an attached form that looked like an invoice and used terms life "reference number," and "discount taken," making it look like there was a previous business relationship. By cashing the checks, the FTC alleged that many small businesses and consumers unknowingly agreed to allow the defendants to become their Internet Service Provider. After the checks were cashed, the defendants started placing monthly charges of $19.95 to $29.95 on the consumers' telephone bills. According to the FTC, the defendants then made it very difficult to cancel future monthly charges and receive refunds.

On July 10, 2002, Judge Lasnik entered an order in the case, finding the defendants had violated the law, and ruling ". . . that, as a matter of law, check/invoice combinations that do not clearly and conspicuously disclose the effects of cashing the check and/or clearly state the check is an offer for the sale of internet services on the face of the document constitute material representations that are likely to mislead consumers acting reasonably under the circumstances."

The defendants previously agreed to a court order issued on October 23, 2000, enjoining them from engaging in the future in the practices alleged by the FTC in its complaint. Judge Lasnik continued the case for further proceedings to determine the exact amount of monetary relief to be paid.

Copies of the complaint and order 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, 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.