Operations Charged with Business Opportunity Scams

The Federal Trade Commission has charged companies that used false earnings claims and other deceptive representations to sell vending machine business opportunities with violating federal law. A federal district court has halted the companies' alleged illegal practices at the request of the FTC. The court also has frozen assets of the defendants pending trial. The FTC will ask the court to bar permanently the alleged misrepresentations and to order redress for consumers who lost money by investing in the scheme.

Manhattan Vending, LLC, is a New York company based in Greenlawn, New York. The FTC filed its complaint in United States District Court in Islip, New York.

In its complaint, the FTC alleges that the defendants advertised "tremendous returns" for their vending machine routes in classified ads placed in newspapers across the country and on their own Web site. The ads commonly touted "established vending machine routes" with big money potential for products such as soda and snack food. The ads directed consumers to call a toll-free number, where the consumers received a sales pitch making specific earnings claims. Following the call, the consumers received a packet of promotional material typically claiming that a $1,500 investment in a vending machine would generate approximately $5,300 in profit a year. According to the FTC, the earnings claims are false.

Investors signed contracts that claimed they could cancel if the defendants didn't deliver the machines within 30 business days. The FTC alleges that, while some consumers received their vending machines late, others did not receive them at all. According to the FTC, in most instances, consumers were not able to cancel their orders.

The FTC has charged that the deceptive earnings and delivery claims violate the FTC Act. The FTC also alleges the defendants failed to provide the disclosure documents that the FTC's Franchise Rule requires.

The FTC named Manhattan Vending, and its predecessor companies, Essex Marketing Group, Inc., Westbrook Marketing Group, Inc., and Westbrook Marketing Associates, LLC, as well as its principals, as defendants.

The Commission vote to file the complaint was 5-0.

NOTE: The Commission files a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant actually has violated the law. The court will decide the case.

Copies of the complaint 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.

(FTC File No. 022-3141)