UNITED STATES DISTRICT COURT Case No. -Civ- / FEDERAL TRADE COMMISSION, Plaintiff, v. TRAVEL EXPRESS INTERNATIONAL, INC., a Georgia Corporation; ROBERT E. LEWIS, II; and ALAN D. HUMPHRIES, Defendants. COMPLAINT FOR PERMANENT INJUNCTION AND OTHER EQUITABLE RELIEF 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, and the Telemarketing and Consumer Fraud and Abuse Prevention Act ("Telemarketing Act"), 15 U.S.C. § 6101 et seq., to secure permanent injunctive relief, restitution, rescission or reformation of contracts, disgorgement, and other equitable relief for Defendants' deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), and the FTC's Telemarketing Sales Rule, 16 C.F.R. Part 310. JURISDICTION AND VENUE 2. This Court has subject matter jurisdiction pursuant to 15 U.S.C. §§ 45(a), 53(b), 57b, 6102(c), and 6105(b), and 28 U.S.C. §§ 1331, 1337(a), and 1345. 3. Venue in the Northern District of Georgia is proper under 15 U.S.C. § 53(b) and 28 U.S.C. § 1391(b) and (c). PLAINTIFF 4. Plaintiff, the Federal Trade Commission, is an independent agency of the United States Government created by statute. 15 U.S.C. §§ 41 et seq. The Commission 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. The Commission also enforces the Telemarketing Sales Rule, 16 C.F.R. Part 310, which prohibits deceptive or abusive telemarketing acts or practices. The Commission is authorized to initiate federal district court proceedings, by its own attorneys, to enjoin violations of the FTC Act and violations of the Telemarketing Sales Rule, 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), 57b, 6102(c), and 6105(b). DEFENDANTS 5. Defendant Travel Express International, Inc. ("TEI") is a Georgia corporation with its principal place of business at 5430 Jimmy Carter Boulevard, Suite 237, Norcross, Georgia 30093. TEI transacts or has transacted business in the Northern District of Georgia. 6. Defendant Robert E. Lewis, II, is an owner and an officer of Defendant TEI. At all times material to this complaint, acting alone or in concert with others, he has formulated, directed, controlled, or participated in the acts and practices alleged in this complaint. He transacts or has transacted business in the Northern District of Georgia. 7. Defendant Alan D. Humphries is an officer of Defendant TEI. At all times material to this complaint, acting alone or in concert with others, he has formulated, directed, controlled, or participated in the acts and practices alleged in this complaint. He transacts or has transacted business in the Northern District of Georgia. COMMERCE 8. At all times relevant to this complaint, Defendants have 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. DEFENDANTS' COURSE OF CONDUCT 9. Since at least 1998, Defendants have operated a business enterprise that deceptively markets vacation travel packages to consumers throughout the United States. 10. Defendants induce consumers to purchase vacation packages by means of a telephone sales pitch. Defendants have contacted consumers by sending unsolicited facsimile transmissions ("faxes") to consumers' places of employment that advertise discounted vacation travel packages. These faxes, addressed to "clients and staff, agents, employee benefits and incentive departments," typically state that the "wholesale travel department" is releasing previously budgeted, price reduced, corporate closeout, discounted vacations. Because of this heading, in a great many instances, consumers believe that these faxes are from the travel division of their company or are in some way approved or sponsored by their employer. As a further inducement to purchase, Defendants represent in their faxes that there are only a limited number of these "price reduced" packages available and that consumers need to call Defendants' toll free number immediately. Defendants also have induced and continue to induce consumers to call their toll free number through advertising other than unsolicited faxes. 11. The vacation travel packages sold by Defendants typically include one night's accommodation in Ft. Lauderdale, Florida, a round trip cruise to Freeport, Grand Bahama Island, and three nights' accommodation on Grand Bahama Island for a stated rate per person, plus port and service charges. As a "bonus," Defendants also offer a limited number of "promotional" three day, two night, Florida destination accommodations (the "Florida Segment"). 12. When the consumers call Defendants' toll free number, they are provided with little additional information by Defendants' sales representatives regarding the vacation travel package. The consumers are then asked to give a credit card deposit equal to approximately one half the total cost of a vacation travel package for two persons. 13. After the consumers have paid their deposit for the vacation travel package, Defendants send the consumers written materials, which more fully describe the vacation, the terms and the restrictions. When consumers read the fine print in written materials or begin scheduling their vacations, they often learn of previously undisclosed material terms and conditions. 14. Defendants do not disclose to the consumers prior to purchase that travel arrangements to use the Florida Segment are made through a third party and that, in most instances, the consumers are expected or required to attend lengthy timeshare sales presentations. 15. Defendants also do not disclose prior to purchase the full terms and conditions of their cancellation policy. While consumers are often told upon purchase that they will be assessed a one hundred dollar ($100.00) cancellation fee per package, Defendants fail to disclose that 30 days after the date of purchase, the cancellation fee doubles to two hundred dollars ($200.00) per package, and that after 180 days, consumers will lose their entire deposit. 16. Many consumers attempt to cancel their vacation travel package either soon after the initial sales call or after they receive the written materials and discover that there are previously undisclosed terms and conditions. Defendants routinely deny consumers' requests for full refunds or cancellations. 17. Those consumers who actually take the vacation offered by Defendants discover that the Florida Segment of the vacation travel package is a plan to compel them to attend previously undisclosed timeshare sales presentations. THE FEDERAL TRADE COMMISSION ACT 18. Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), provides that "unfair or deceptive acts or practices in or affecting commerce are hereby declared unlawful." VIOLATIONS OF SECTION 5 THE FTC ACT COUNT I 19. In numerous instances since at least 1998, in connection with the advertising, marketing, promoting, offering for sale, or sale of vacation travel packages, Defendants have failed to disclose, in a clear and conspicuous manner before consumers pay for the vacation travel package, (A) that consumers are expected or required to attend sales presentations for timeshare properties, and (B) all material terms and conditions of their cancellation or refund policy. 20. Defendants' failure to disclose the material terms and conditions set forth in Paragraph 19 is false and misleading and constitutes a deceptive act or practice in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a). THE TELEMARKETING SALES RULE 21. In the Telemarketing Act, 15 U.S.C. § 6101 et seq., Congress directed the FTC to prescribe rules prohibiting abusive and deceptive telemarketing acts or practices. On August 16, 1995, the Commission promulgated the Telemarketing Sales Rule, 16 C.F.R. Part 310. The Rule became effective on December 31, 1995. 22. Defendants are "sellers" or "telemarketers" engaged in "telemarketing," as those terms are defined in the Telemarketing Sales Rule, 16 C.F.R. §§ 310.2(r), (t) and (u). 23. The Telemarketing Sales Rule prohibits sellers and telemarketers "[b]efore a customer pays for goods or services offered" from "failing to disclose, in a clear and conspicuous manner . . . [a]ll material restrictions, limitations, or conditions to purchase, receive, or use the goods or services that are the subject of the sales offer." 16 C.F.R. § 310.3(a)(1)(ii). 24. The Telemarketing Sales Rule prohibits sellers and telemarketers "[b]efore a customer pays for goods or services offered" from "failing to disclose, in a clear and conspicuous manner, . . . if the seller or telemarketer makes a representation about a refund, cancellation, exchange, or repurchase policy, a statement of all material terms and conditions of such policy." 16 C.F.R. § 310.3(a)(1)(iii). 25. Pursuant to Section 3(c) of the Telemarketing Act, 15 U.S.C. § 6102(c), and Section 18(d)(3) of the FTC Act, 15 U.S.C. § 57a(d)(3), violations of the Telemarketing Sales 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). VIOLATIONS OF THE FTC TELEMARKETING SALES RULE COUNT II 26. In numerous instances, in connection with the advertising, marketing, promoting, offering for sale, or sale of vacation travel packages, Defendants have failed to disclose, in a clear and conspicuous manner before consumers pay for the vacation travel package, all material restrictions, limitations or conditions to purchase, receive, or use the vacation travel package, including, but not limited to, that consumers are expected or required to attend sales presentations for timeshare vacation property. Defendants have thereby violated Section 310.3(a)(1)(ii) of the Telemarketing Sales Rule, 16 C.F.R. § 310.3(a)(1)(ii). COUNT III 27. In numerous instances, in connection with the advertising, marketing, promoting, offering for sale, or sale of vacation travel packages, Defendants have failed to disclose, in a clear and conspicuous manner before consumers pay for the vacation travel package, all material terms and conditions of their cancellation or refund policy when making a representation about such policy including, but not limited to, that the one hundred dollar ($100.00) per package cancellation fee increases to two hundred dollars ($200.00) after 30 days from the date of purchase, and that the package is non-refundable after 180 days. Defendants have thereby violated Section 310.3(a)(1)(iii) of the Telemarketing Sales Rule, 16 C.F.R. § 310.3(a)(1)(iii). CONSUMER INJURY 28. Consumers throughout the United States have suffered, and continue to suffer, substantial monetary loss as a result of Defendants' unlawful acts and practices. In addition, Defendants have been unjustly enriched as a result of their unlawful acts and practices. Absent injunctive relief, Defendants are likely to continue to injure consumers, reap unjust enrichment, and harm the public. THIS COURT'S POWER TO GRANT RELIEF 29. Section 13(b) of the FTC Act, 15 U.S.C. § 53(b), authorizes this Court to issue a permanent injunction against Defendants' violations of the FTC Act and, in the exercise of its equitable jurisdiction, to order such ancillary relief as consumer redress, rescission, restitution and disgorgement of profits resulting from Defendants' unlawful acts or practices, and other remedial measures. 30. Section 19 of the FTC Act, 15 U.S.C. § 57b, and Section 6(b) of the Telemarketing Act, 15 U.S.C. § 6105(b), authorize the Court to grant to the FTC such relief as the Court finds necessary to redress injury to consumers or other persons resulting from Defendants' violations of the Telemarketing Sales Rule, including the rescission and reformation of contracts and the refund of money. PRAYER FOR RELIEF WHEREFORE, Plaintiff Federal Trade Commission, pursuant to Sections 13(b) and 19 of the FTC Act, 15 U.S.C. §§ 53(b) and 57b, Section 6(b) of the Telemarketing Act, 15 U.S.C. § 6105(b), and the Court's own equitable powers, request that the Court:
Respectfully Submitted, Barbara E. Bolton Valerie M. Verduce Attorneys for Plaintiff |