Florida Display Rack Franchisor Settles FTC Charges

Automatic Merchandising Corporation, based in Jupiter, Florida, and its owner, Alan Manning, 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 breath mint display rack 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 proposed settlement, the defendants would be prohibited from violating the Franchise Rule and making false and misleading representations in connection with the sale of business opportunities.

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 $9,500, the defendants represented that they would provide a continuing supply of the breath freshener mint products to prospective purchasers and secure locations for the displays.

The defendants' promotional materials included specific amounts of money that prospective purchasers could expect to achieve; for example, an earnings chart showed annual gross sales for 100 displays racks from $74,880 to $187,200, 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 proposed settlement, which requires the court's approval, the defendants would be 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 proposed 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 proposed settlement was 5-0. The stipulated judgment and order was filed in the U.S. District Court for the Southern District of Florida, Miami Division, on February 13, 2001, by the Department of Justice and is subject to court approval.

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 news release and stipulated judgment and order are available from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 877-FTC-HELP (877-382-4357); TDD for the hearing impaired 1-866-653-4261. Copies of other documents associated with "Project Biz-illion$" are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710. 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 online complaint form. The FTC enters Internet, telemarketing and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies worldwide.

(FTC Matter No. X000031)
(Civil Action No. 00-8142-CIV-LENARD/TURNOFF)