Major Seller of Vending Machne Distributorships To Pay $1 Million To Settle FTC Charges

Antares Corporation, trading and doing business as Natural Choice-USA, ORION Products Corporation, and their president Dana M. Bashor (collectively ORION), have agreed to pay $1 million in consumer redress to settle Federal Trade Commission charges of misrepresenting, among other things, the potential earnings of prospective distributors, and using shills as references. Under the proposed settlement, in addition to paying consumer redress, the defendants are permanently prohibited from making misrepresentations about the income, profits or sales volume that distributors could expect to earn and from violating the FTC Act in the future. The defendants would also be required to disclose the names of five current distributors located within the county nearest to prospective distributors.

The FTC's complaint detailing the charges, filed today, names ORION Products Corp., based in Venice, California, and Antares Corporation, based in Culver City, California, and their president. Both companies were trading and doing business as Natural Choice-USA.

ORION advertised through direct mail inviting consumers to its sales seminars throughout the United States. At the seminars, it enticed prospective distributors to buy their vending machine business opportunity and location assistance program. The defendants' vending machines are sold in "packages" which are composed of sets of three machines -- a snack machine, a drink machine and a change machine. Some distributors have paid over $60,000 for the defendants' vending machine opportunities, relying on the defendants' claims that they would gross as much as $2,800 a year per snack machine, and $5,000 a year per beverage machine. The defendants also told prospective distributors that they would find locations for their vending machines quickly and easily, sometimes in less than two months.

Specifically, the complaint alleges that the defendants, in both written and oral sales pitches to prospective purchasers, violated the FTC Act, by misrepresenting, among other things:

• the potential earnings and profits prospective distributors could realize;
• the substance and success of their location assistance program;
• the number of ORION distributorships established in any given geographic market;
• that testimonials of "successful" distributors represent the typical experience of ORION distributors; and
• that some of the comments by distributors were unsolicited and uncompensated.

The complaint also alleges that the references provided by ORION to potential distributors to substantiate their representations were not existing successful owners of the defendants' vending machine business opportunities.

The proposed consent judgment to settle these charges, which requires the court’s approval to become binding, would prohibit ORION from, among other things, making any false statements about potential earnings and the extent of location assistance.

In addition, the order would require ORION to pay $1 million to the FTC for consumer redress when the order becomes final. If the Commission determines that redress is impracticable, the funds would be disgorged to the U.S. Treasury.

The order would permanently prohibit ORION from providing any references to prospective purchasers unless:

• such references are engaged in distributing ORION's snack and beverage products on a full-time or part-time basis at the time of such referral;

• ORION instructs all references that any specific information regarding their actual sales, income, ability to locate vending machines, or the quality of those locations, shall be limited to their operation and to refrain from making any representation regarding the results that the prospective purchaser may achieve; and

• ORION makes periodic reviews to verify that the information provided by the references complies with the order.

The settlement would also prohibit the defendants, for three years, from entering into or enforcing any agreements that prohibit present or former distributors from disclosing his or her experience with ORION to any prospective purchaser. The settlement would further prohibit ORION from entering into or enforcing any agreements that prohibit present or former distributors from voluntarily complying with FTC requests for information.

To ensure that prospective distributors are able to obtain information about the business opportunities, the settlement also requires that ORION disclose to prospective distributors, the names, addresses and telephone numbers of five current distributors within the county nearest to where the prospective distributor is located.

Finally, the settlement contains standard reporting requirements necessary to assist the Commission in monitoring the defendants' compliance.

The Commission vote to authorize filing of the proposed settlement was 5-0. The complaint and proposed consent judgment were filed in the U.S. District Court for the Northern District of California, in San Francisco, on July 19. The FTC's San Francisco Regional Office handled the investigation.

NOTE: This consent judgment 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 complaint and consent judgment are available from the FTC’s Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580: 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it happens, call the FTC’s NewsPhone at 202-326-2710. FTC news releases and other documents also are available on the Internet at the FTC’s World Wide Web Site at http://www.ftc.gov

(Civil Action No. C-96-2586 VRW)
(FTC File No. 942 3236)