UNITED STATES DISTRICT COURT
Plaintiff, the Federal Trade Commission ("FTC" or "the Commission"), for its complaint alleges: 1. The FTC brings this action under Sections 13(b) and 19 of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. §§ 53(b) and 57b, to secure preliminary and permanent injunctive relief, rescission of contracts, restitution, disgorgement, and other equitable relief for defendant's violations of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), and the FTC's "Mail or Telephone Order Merchandise Rule" (the "Rule"), 16 C.F.R. Part 435. JURISDICTION AND VENUE 2. This Court has jurisdiction over this matter pursuant to 28 U.S.C. §§ 1331, 1337(a) and 1345, and 15 U.S.C. § 53(b) and 57b. 3. Venue in the United States District Court for the Southern District of Florida is proper under 28 U.S.C. § 1391(b), and 15 U.S.C. § 53(b). PLAINTIFF 4. Plaintiff, FTC, is an independent agency of the United States Government created by statute. 15 U.S.C. §§ 41 et seq. The FTC is charged, inter alia, with enforcement of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), which prohibits unfair or deceptive acts or practices in or affecting commerce, as well as enforcement of the Mail or Telephone Order Merchandise Rule, 16 C.F.R. Part 435. The FTC is authorized to initiate federal district court proceedings to enjoin violations of the FTC Act in order to secure such equitable relief as may be appropriate in each case, and to obtain consumer redress. 15 U.S.C. §§ 53(b) and 57b. DEFENDANTS 5. Defendant CRAIG LEE HARE, a/k/a DANNY HARE ("Hare"), an individual, does business as EXPERIENCED DESIGNED COMPUTERS ("EDC") and C&H COMPUTER SERVICES ("C&H"). EDC and C&H are unincorporated entities. Hare conducts business from his residence located at 64 Plantation Boulevard, Lake Worth, Florida 33467. Defendant Hare offers computers and computer hard drives for sale on the Internet at "auction house" web sites. At all times material to this complaint, acting alone or in concert with others, defendant Hare has formulated, directed, controlled or participated in the deceptive acts and practices set forth in this complaint. Hare transacts or has transacted business in the Southern District of Florida. 6. Relief Defendant STEPHANIE J. HERTER a/k/a STEPHANIE BRANHAM ("Herter") resides at 64 Plantation Boulevard Lake Worth, Florida 33467, the same address where defendant Hare resides and from which Hare engages in the transactions complained of herein. Herter has endorsed for deposit money orders and cashier's checks that Hare received from consumers as a consequence of the unlawful acts and practices complained of herein. COMMERCE 7. At all times material to this complaint, defendant has maintained a substantial course of trade in or affecting commerce, as "commerce" is defined in Section 4 of the FTC Act, 15 U.S.C. § 44. DEFENDANT'S BUSINESS ACTIVITIES 8. Since at least January 1998, defendant Hare has offered computers and computer hard drives for sale on the Internet at auction house web sites. 9. An Internet auction house is an online forum that facilitates communications between would-be buyers and sellers of goods and services. Sellers use the auction house's web site to advertise the goods and services they seek to sell. Auctions are conducted on the auction house's web site with would-be buyers sending bids through electronic mail to the web site. At the conclusion of the auction, buyers and sellers typically communicate with each other via electronic mail about the terms of payment and delivery and then complete their commercial transactions through the U.S. mail system. 10. Defendant Hare places advertisements offering computers and computer hard drives on the web sites of Internet auction houses. Among other things, defendant states in advertisements that he is marketing Micron 266 MHZ Pentium II computers with monitors which are "Brand New in their Original Boxes [and] come standard with a 3 year warranty from Micron" or "Toshiba Satellite Pro 410 CDT" computers which are "Refurbished, and Carry a (1) year Warranty from Toshiba." Defendant also states in advertisements that he is marketing computer hard drives that are "brand new" and for which the manufacturer provides a "3 Year Warranty." 11. Consumers have placed bids for defendant Hare's merchandise which Hare has accepted. Hare has further accepted payment from those consumers who have "successfully" bid for the computer goods he offered for sale on the Internet at auction house web sites. In a number of instances, Hare has failed to provide either the promised merchandise of computers or computer hard drives, or a refund to those consumers whose bids he has accepted and from whom he has received payment. VIOLATIONS OF SECTION 5 OF THE FTC ACT COUNT I 12. In the course of offering computers and computer hard drives for sale via Internet auction houses, defendant has represented, expressly or by implication, that the consumers who offer the highest bids and send defendant the agreed-on payment for the computers or computer hard drives pursuant to those bids, will receive the promised computers or computer hard drives. 13. In truth and in fact, in a number of instances, the consumers who offer the highest bids and send defendant the agreed-on payment for the computers or computer hard drives, pursuant to those bids, have not received the promised computers or computer hard drives. 14. Therefore, defendant's representations set forth in Paragraph 12 are false and misleading and constitute deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a). THE MAIL OR TELEPHONE ORDER MERCHANDISE RULE 15. The FTC promulgated the Mail or Telephone Order Merchandise Rule, 16 C.F.R. Part 435, on October 22, 1975, and revised the Rule on September 21, 1993. The revised Rule became effective on March 1, 1994, and has remained in full force and effect since that time. 16. The Rule applies to sales in which the buyer has ordered merchandise from the seller by mail or directly or indirectly by telephone, such as by fax machines and computers. 16 C.F.R. §§ 435.1 and 435.2 (a) and (b). 17. The Rule prohibits a seller from soliciting any order for the sale of merchandise to be ordered by the buyer through the mail or telephone, unless, at the time of the solicitation, the seller has a reasonable basis to expect that it will be able to ship any ordered merchandise to the buyer within the time stated on the solicitation, or, if no time is stated, within thirty days of the completion of the order. 16 C.F.R. § 435.1(a)(1). 18. The Rule requires that the seller follow certain procedures if merchandise ordered through the mail or by telephone will not be shipped within the applicable time limit. Specifically, the Rule requires that, when there is a shipping delay, the seller must, prior to the expiration of the applicable time, offer the buyer an option either to agree to the delay or to cancel the order and receive a prompt refund (as defined in 16 C.F.R. § 435.2(f)). 16 C.F.R. § 435.1(b)(1). 19. The Rule also requires that a seller deem an order canceled and make a prompt refund to the buyer whenever the seller has failed to ship within the specified time period and has failed to offer the consumer the option to consent to further delay or to cancel the order. 16 C.F.R. § 435.1(c). 20. Pursuant to Section 18(d)(3) of the FTC Act, 15 U.S.C. § 57a(d)(3), and 16 C.F.R. § 435.1, violations of the Rule constitute unfair or deceptive acts or practices in or affecting commerce, in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a). DEFENDANT'S VIOLATIONS OF THE MAIL OR TELEPHONE ORDER MERCHANDISE RULE COUNT II 21. In a number of instances, defendant has solicited orders for the sale of merchandise to be ordered by the buyer indirectly through the telephone without a reasonable basis to expect that he will be able to ship any ordered merchandise to the buyer within the time stated in the solicitation, or, if no time was clearly and conspicuously stated, within thirty days of receipt of a properly completed order, thereby violating 16 C.F.R. § 435.1(a)(1). COUNT III 22. In a number of instances, after soliciting orders for the sale of merchandise ordered by the buyer indirectly through the telephone and being unable to ship merchandise within the applicable time as set out in Section 435.1(a)(1) of the Rule, defendant has violated the Rule by failing to offer to the buyer, clearly and conspicuously and without prior demand, an option either to consent to a delay in shipping or to cancel the order and receive a prompt refund, thereby violating 16 C.F.R. § 435.1(b)(1). COUNT IV 23. In a number of instances, defendant has failed to make a "prompt refund," as that term is defined in 16 C.F.R. § 435.2(f), to buyers when such refunds were required by Section 435.1(c) of the Rule, thereby violating 16 C.F.R. § 435.1(c). CONSUMER INJURY 24. Consumers in many areas of the United States have suffered substantial monetary loss as a result of defendant's unlawful acts or practices. These consumers have each paid between $310 and $1450 to Hare for computers or computer hard drives that they have never received. Absent injunctive relief by this Court, the defendant is likely to continue to injure consumers and harm the public interest. THIS COURT'S POWER TO GRANT RELIEF 25. Section 13(b) of the FTC Act, 15 U.S.C. § 53(b), empowers this Court to grant injunctive and other ancillary relief, including redress, disgorgement and restitution, to prevent and remedy any violations of any provision of law enforced by the FTC. 26. Section 19 of the FTC Act, 15 U.S.C. § 57b, authorizes the Court to grant such relief as the Court finds necessary to redress injury to consumers or other persons resulting from defendant's violations of the Mail or Telephone Order Merchandise Rule. 27. This Court, in the exercise of its equitable jurisdiction, may award other ancillary relief to remedy injury caused by the defendant's law violations. PRAYER FOR RELIEF WHEREFORE, plaintiff requests that this Court, as authorized by Sections 13(b) and 19 of the FTC Act, 15 U.S.C. §§ 53(b) and 57b, and pursuant to its own equitable powers: 1. Award plaintiff such temporary and preliminary injunctive and ancillary relief as may be necessary to avert the likelihood of consumer injury during the pendency of this action and to preserve the possibility of effective final relief, including, but not limited to, temporary and preliminary injunctions and an order freezing defendant's assets; 2. Permanently enjoin defendant from violating the FTC Act and the Mail or Telephone Order Merchandise Rule as alleged herein; 3. Award such relief as the Court finds necessary to redress injury to consumers resulting from defendant's violations of the FTC Act and the Mail or Telephone Order Merchandise Rule, including but not limited to, rescission of contracts, the refund of monies paid, and the disgorgement of ill-gotten monies; 4. Award such relief against relief defendant Herter as the Court finds necessary to protect and return funds and other property that were derived from defendant Hare's violations of Section 5 of the FTC Act and of the Mail or Telephone Order Merchandise Rule, including an asset freeze and an order to disgorge ill-gotten gains or proceeds that relief defendant Herter has received and that relate to the acts and practices complained of herein, and an order imposing a constructive trust on such gains or proceeds; and 5. Award plaintiff the costs of bringing this action, as well as such other and additional relief as the Court may determine to be just and proper. Respectfully submitted, Debra A. Valentine _______________________________ |