Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: FTC files actions against California and Maryland office supply operations, (Feb 11, 2016)

By Michael Menzhuber, J.D., LL.M.

The FTC has charged two separate office supply operations with tricking non-profit organizations and small businesses into paying for overpriced office and cleaning supplies that they never ordered, in violation of the FTC Act, the Telemarketing Sales Rule (TSR), and the Unordered Merchandise Statute.

In the California case, Telestar Consulting Inc., also d/b/a Kleritec and United Business Supply, and Karl Wesley Angel alleged used a variety of tactics to persuade consumers to pay for unordered merchandise, including: (1) asking consumers to accept an additional shipment, by falsely calling it a “backorder” that was part of a paid order, and then billing the consumers for the “backorder”; (2) falsely claiming that consumers had agreed to multiple shipment orders; and (3) failing to disclose the total cost, quantity of goods, and terms of the sale when a consumer made a purchase. Consumers who challenged the billing or did not pay promptly were threatened with collection.

American Industrial Enterprises LLC, Easton Chemical Supply Inc., Lighting X-Change Company LLC, LMS Lighting & Maintenance Solutions LLC, Werner International Enterprises Inc., Benjamin Cox, Vincent Stapleton, and John Tharrington are named as defendants in the Maryland case. Relief defendant, TBC Companies, Inc., is also named.

According to the FTC’s complaint, Lighting X-Change telemarketers falsely indicated that: (1) they had done business with the consumers earlier; and (2) they were offering a free sample or catalog, without disclosing that they were making a sales call. The person who processed the invoices was often not the same person who received shipments and did not know that the merchandise had not been ordered. Those who paid became targets for future shipments of unordered merchandise and invoices seeking payment.

Federal courts in California and Maryland have, at the FTC’s request, temporarily halted and frozen the assets of the two operations. A temporary restraining order entered against the Telestar defendants on February 1 was followed by an amended temporary restraining order on February 2. A temporary restraining order against the Lighting X-Change defendants was entered on February 2.

Companies: Telestar Consulting Inc.; Lighting X-Change Company LLC; American Industrial Enterprises LLC; Easton Chemical Supply Inc.; LMS Lighting & Maintenance Solutions LLC; Werner International Enterprises Inc.; TBC Companies, Inc.

News: ConsumerProtection FederalTradeCommissionNews