Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: Telemarketing scheme pitching designer merchandise to Hispanic consumers temporarily shut down, (Jan 3, 2014)

By Linda O’Brien, J.D., LL.M.

The FTC announced yesterday that a federal district court in Los Angeles has granted its request for a temporary restraining order (TRO) temporarily shutting down a telemarketing operation that allegedly targeted Hispanic consumers with false advertising that they could make a profit by reselling designer products, such as Gucci and Ralph Lauren, and then charged them up front fees between $400 and $490 for shoddy, off-brand products. The FTC also alleged that the telemarketers threatened consumers who refused to pay with arrest, phony lawsuits, and made other intimidating statements.

The FTC has charged the telemarketing operation, known by various business names including Oro Marketing, with violations of the FTC Act and the Telemarketing Sales Rule (TSR), and is seeking to permanently end its misleading and intimidating practices. In its complaint, (FTC v. Cream Group, Inc., File No. 132-3047, Case No. 2:13-CV 13-8843), the FTC charges that Oro made unsolicited telephone calls to Spanish-speaking consumers during which the telemarketers offered to send them packages of brand-name designer merchandise, such as clothing, purses, and perfumers, at wholesale prices. Oro allegedly told consumers that they could resell the products they bought from the telemarketers and make a profit in their local communities.

Oro Marketing telemarketers instructed consumers to pay the shipping agent delivering the merchandise with a money order for the package, according to the complaint. When Oro sent the merchandise, it specifically instructed the delivery drivers not to allow the consumer to open the package upon delivery until the delivery driver had the money order in hand. When the consumers received Oro’s package and paid with the money order, they typically found that the products were of low quality and generic or unbranded. The FTC charges that consumer who complained to the company were told that they would be sent another shipment with the correct products, along with a refund for the first shipment, if they would again pay between $400 and $490 upon delivery. Consumers who paid for the second shipment found the items to be as shoddy as those in the original shipment and not the brand-name designer products promised.

The complaint also alleges that consumers who failed to accept and pay for the merchandise were often threatened by Oro with fines, phony lawsuits, wage garnishment, and damage to their credit history. Oro allegedly also threatened that consumers would be arrested or reported to immigration authorities.

“Oro Marketing used deception and threats to take advantage of people who were trying to make ends meet,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “We intend to permanently stop this conduct.”

The Commission vote to authorize staff to file the complaint was 4-0.

Companies: Cream Group; Terra Nova; TNT, Inc.; CRM, Inc.; Oro Marketing, Inc.; Modo Modo Industry; Oro Max; Casa de Oro; Casa de Moda; Oro Mundo; Nation/Modo

News: ConsumerProtection FederalTradeCommissionNews