Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: Internet Business Assistance Program Telemarketers Agree to Settle FTC Charges, (Jan 17, 2013)

By Tobias J. Gillett, J.D., LLM.

Ivy Capital, Inc. and a majority of associated companies and individuals engaged in a business coaching enterprise have agreed to settle FTC charges that they defrauded consumers by misrepresenting the earning potential of their coaching program, by misrepresenting their goods and services, and by failing to disclose and fully honor their refund policy, the FTC has announced (FTC v. Ivy Capital, Inc., FTC File No. 1023218 , Case No. 2:11-cv-00283-JCM-GWF).

The FTC’s complaint alleged that the defendants had made telemarketing sales calls to consumers that had expressed an interest in establishing internet businesses. The calls would claim that the consumers could recoup their investment within a very short period of time, or that participants typically earned $3,000 to $10,000 per month, and could be successful by spending only five to ten hours a week on their business.

The defendants allegedly charged from $2,000 to more than $20,000 for their services, which they claimed included a personal business coach, coaching sessions, e-mail support, access to articles and webinars, and technical and web design assistance. After consumers paid for the program, the defendants would allegedly attempt to sell them additional services, such as assistance establishing limited liability corporations, access to corporate lines of credit, tax-related services, and drop-shipping services. The FTC alleged that the consumers typically did not profit from the programs, and that the defendants often did not provide the promised services.

The defendants also allegedly imposed a three-day limit on refunds, often not disclosed to consumers, and would require consumers to agree not to disparage the company before receiving a refund. The defendants also frequently did not provide a refund even when a consumer requested one within the three-day period. The defendants would also allegedly make calls to consumers on the Do Not Call Registry. The FTC alleged that these actions constituted violations of the FTC Act and the FTC’s Telemarketing Sales Rule (TSR).

The settlement orders prohibit the defendants from offering or assisting in offering any business coaching programs, from making false representations regarding the content of a refund policy or whether they would provide a refund within a specific time period, from requiring consumers to sign a non-disparagement agreement before receiving a refund, from disclosing or benefiting from any consumer information obtained prior to entry of the orders, and from violating the TSR, including the Do Not Call Registry.

The orders also lift a previous asset freeze to permit assets to be turned over, and appoint a receiver to wind down the corporate defendants and liquidate their assets. The orders impose monetary judgments against the defendants, including $130 million against the corporate defendants, $130 million against six individual defendants, $46 million against Enrich Wealth Group LLC and its principal, and judgments ranging from $113,000 to $812,000 against seven companies and individuals that profited from the enterprise but did not participate in it. The judgments will be suspended once the defendants release certain assets, but will be reinstated if the defendants are found to have misrepresented their financial condition. Certain defendants must also surrender specified residential properties, vehicles, and personal bank accounts.

The FTC continues to litigate cases against two more defendants that participated in the scheme, and three others that profited from it.

The FTC previously announced on March 2, 2011 that it had obtained a temporary restraining order halting the defendants’ business and freezing their assets.

Companies: Ivy Capital, Inc.

News: ConsumerProtection FederalTradeCommissionNews