Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: Operators of “brand-name goods” reselling scheme banned from telemarketing, (Jan 13, 2015)

By Greg Hammond, J.D.

Operators of a telemarketing scheme that allegedly targeted Spanish speaking women with false promises that they could make money reselling brand-name goods have agreed to a permanent ban on telemarketing in order to settle FTC charges that they violated the FTC Act and the Telemarketing Sales Rule (FTC v. Cream Group, Inc., FTC No. 132 3047).

According to the Commission’s complaint, Cream Group, Inc. and owners John and Sami Charchian allegedly targeted Hispanic women across the United States in a telemarketing scheme that supposedly provided the opportunity to buy popular brand-name merchandise at wholesale prices. The defendants purportedly promised brand-name merchandise that consumers could resell for a profit in their communities, convincing consumers to pay between $400 and $490 for cash-on-delivery shipment. The Commission claimed, however, that the defendants shipped cheap, poor quality merchandise. In addition, the defendants allegedly threatened consumers who refused to accept and pay for additional shipments with phony lawsuits, fines, garnishment, damage to credit history, and—in some cases—threatened consumers with arrest or referral to immigration authorities.

The FTC filed suit, claiming the defendants violated the FTC Act—through deceptive representations in the sale of merchandise and deceptive representations regarding refunds—and the Telemarketing Sales Rule, through misrepresentation; refund misrepresentations; failure to disclose refund, cancellation, exchange, or repurchase policy; and threats and intimidation.

“These defendants preyed on people who were just trying to make an honest living,” stated FTC Bureau of Consumer Protection Director Jessica Rich. “Consumers are better off now that the defendants are out of the telemarketing business.”

The final order for permanent injunction and monetary judgment against the defendants permanently restrains the defendants from participating in telemarketing or assisting others in engaging in telemarketing. The defendants are also permanently banned from misrepresenting: (1) consumers will receive well-known or brand-name merchandise, or merchandise at low or wholesale prices; (2) consumers who pay for additional shipments of merchandise will receive the products they ordered, or a refund of the amount paid; (3) that any adverse action will be taken against a consumer; (4) any material terms of any refund or cancellation; (5) the total costs to purchase or the quantity of goods or services; or (6) any material restriction, limitation, or condition on purchasing, receiving, or using a good or service.

A monetary judgment of $5.17 million was entered against the defendants, but will be suspended upon the payment of $650,000 and the transfer of rental properties they own to a court-appointed receiver to sell. In addition, a separate judgment in the amount of $375,000 has been entered against John Charchian.

Companies: Cream Group, Inc.

News: Advertising ConsumerProtection FederalTradeCommissionNews