Budget Marketing, Inc.; Analysis to Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 962-3247]

Budget Marketing, Inc.; Analysis to Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

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SUMMARY: In settlement of alleged violations of federal law prohibiting

unfair or deceptive acts or practices and unfair methods of

competition, this consent agreement, accepted subject to final

Commission approval, would prohibit, among other things, the Des

Moines, Iowa-based telemarketer of magazine subscriptions and 11 of its

dealers from misrepresenting that they are selling magazines and the

cost and conditions of the subscriptions they are selling. The

settlement also prohibits the companies from threatening and harassing

consumers to collect bills, failing to honor offers to allow

cancellation, and violating the Electronic Funds Transfer Act. A

related federal court decree would require the firms to pay a $395,000

civil penalty and $25,000 in court costs. A draft complaint

accompanying the consent agreement alleges that the respondents

misrepresented the costs and conditions of subscription agreements and

illegally deducted charges electronically from consumers' bank accounts

without consumer authorization.

DATES: Comments must be received on or before December 10, 1996.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,

Room 159, 6th St. and Pa. Ave., N.W., Washington, D.C. 20580.

FOR FURTHER INFORMATION CONTACT:

Justin Dingfelder, Federal Trade Commission, S-4302, 6th and

Pennsylvania Ave, NW, Washington, DC 20580. (202) 326-3017.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal

Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46, and Section 2.34 of

the Commission's Rules of Practice (16 CFR 2.34), notice is hereby

given that the above-captioned consent agreement containing a consent

order to cease and desist, having been filed with and accepted, subject

to final approval, by the Commission, has been placed on the public

record for a period of sixty (60) days. The following Analysis to Aid

Public Comment describes the terms of the consent agreement, and the

allegations in the accompanying complaint. An electronic copy of the

full text of the consent agreement package can be obtained from the FTC

Home page, on the World Wide Web, at ``http://www.ftc.gov/os/actions/

htm.'' A paper copy can be obtained from the FTC Public Reference Room,

Room H-130, Sixth Street and Pennsylvania Avenue, N.W., Washington,

D.C. 20580. Public comment is invited. Such comments or views will be

considered by the Commission and will be available for inspection and

copying at its principal office in accordance with Section

4.9(b)(6)(ii) of the Commission's Rules of Practice (16 CFR

4.9(b)(6)(ii)).

Analysis of Proposed Consent Order to Aid Public Comment

The Federal Trade Commission has accepted, subject to final

approval, an agreement containing a consent order from Budget

Marketing, Inc. (BMI), one of its officers, and some of its major

dealers.

The proposed consent order has been placed on the public record for

sixty (60) days for reception of comments by interested persons.

Comments received during this period will become part of the public

record. After sixty (60) days, the Commission will again review the

agreement and the comments received and will decide whether it should

withdraw from the agreement or make final the agreement's proposed

order.

This proposed consent order is part of a proposed settlement of a

civil penalty action that was filed against BMI and its dealers in

Federal District Court in Des Moines, Iowa in December 1988 (Civil No.

88-1698-E). The District Court consent decree that will be filed to

settle that matter provides for the payment of a total of $395,000 in

civil penalties (plus $25,000 in court costs) by BMI and some of its

dealers. The decree also contains an injunction ordering the defendants

in that action to obey this proposed consent order. The consent decree

will dissolve the Consent Decree and Permanent Injunction entered in

United States v. Budget Marketing, Civil No. 80-419-E (S.D. Iowa) on

October 10, 1980, and replace it with the proposed decree.

BMI and its dealers are engaged in the sale by subscription, of

magazines and other publications throughout the United States. This

matter concerns various sales and collection practices engaged in by

BMI and the named dealers to sell, by telephone, magazine subscription

contracts and to collect payments for its services. The Commission's

proposed complaint alleges that BMI and its dealers, among other

things, have misrepresented the terms and conditions of contracts;

misrepresented the identity of solicitors or firms they are

representing; misrepresented the savings which will be accorded or made

available to purchasers; misrepresented the action or results of any

action which may be taken to effect payment of alleged indebtedness.

The proposed complaint also charges respondents with violating the

Electronic Fund Transfer Act (EFTA) (15 U.S.C. 1693 et seq.) by not

obtaining the requisite authorization in writing as proscribed by

Section 205.10(b) of Regulation E, 12 C.F.R. Sec. 205.

The proposed consent order contains provisions designed to prevent

respondents from engaging in similar acts and practices in the future.

Part I of the proposed consent order contains a number of prohibitions.

Paragraph (a) prohibits respondents from failing to comply with

Regulation E requiring authorization by the consumer in writing only

for preauthorized electronic fund transfers from a consumer's account

and from failing to comply with the Official Commentary to 12 C.F.R.

Sec. 205.10, Question 10-18.6. Paragraph (b) prohibits respondents from

making representations, directly or indirectly, that its

representatives who are, in fact, calling to secure subscriptions are

conducting or participating in any survey or contest; performing

services for educational, charitable or social organizations; or giving

products or services for free or as a gift. Paragraph (c) prohibits the

respondents from failing to identify that the purpose of their contacts

is to sell products or services. Paragraph (d) prohibits respondents

from representing that the price covers only the cost of mailing or

misrepresenting the savings to be accorded to the purchaser. Paragraph

(e) prohibits respondents from representing that a subscription

contract can be cancelled at the purchaser's option, unless it can be

cancelled, while paragraph (f) requires respondents to cancel upon

request if such a misrepresentation has been made to the purchaser.

Paragraph (g) prohibits respondents from misrepresenting the

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terms of payments to prospective purchasers. Paragraph (h) prohibits

respondents from failing to reveal orally, prior to the customer's

entering into a contract, and in writing on the subscription form, the

names, number of issues, total cost, installment payments, method of

payments and the right to rescind the sale within three business days

of receipt of the sales agreement. Paragraph (i) prohibits respondents

from representing that a purchase agreement is any other kind of

document other than a contract or agreement. Paragraph (j) prohibits

respondents from failing to identify the nature and legal import of any

document that the consumer is required to execute. Paragraph (k)

prohibits respondents from engaging in any unfair or deceptive practice

in order to effect payment. Paragraph (1) prohibits respondents from

cancelling any subscription contract for any reason other than a breach

by the subscriber or a request by the subscriber; Paragraph (m)

prohibits respondents from failing to provide to each consumer a copy

of the subscription contract showing either the date it was mailed to

the consumer or the date the consumer signed the contract and the name,

address and telephone number of the seller or the service company used

by the seller, Paragraph (n) prohibits respondents from failing to

provide a sheet separable from the written sales agreement which can be

used as a notice of cancellation. Paragraph (o) prohibits respondents

from failing to cancel a sales agreement where the request is received

fourteen (14) calendar days from the date the agreement was mailed or

delivered to the purchaser and from refunding any payment received

within thirty (30) days after cancellation. Paragraph (p) prohibits

respondents from failing to furnish those PDS customers who use payment

coupons, with specific information on the coupon payment book including

the total coupons in the book, the total dollar amount of all such

coupons, and the seller's address and telephone number. Paragraph (q)

prohibits the respondents from failing to offer the right to substitute

magazines on a pro rata dollar-for-dollar basis or extending

subscription periods on magazines already selected, in the event of the

discontinuance of publication or availability of magazines already

subscribed for by the customer. Paragraph (r) prohibits respondents

from failing to cancel, at the subscriber's sole option, any portion of

a contract whenever any misrepresentation prohibited by the order has

been made. Finally, Paragraph (s) prohibits respondents from furnishing

the means and instrumentalities to others by which the public may be

misled in the manner or as to the things prohibited by this order.

Part II of the proposed consent order required BMI and its dealers

to distribute copies of the order to each of the present and future

dealers, employees and other representatives; to secure from such

persons a statement indicating their intention to be bound by the

order; to institute a program of continuing surveillance to reveal

whether such persons are conforming to the order and to discontinue

dealing with any such persons who are revealed to be engaging in

practices prohibited by the order.

Part III of the proposed consent order requires BMI to notify the

Commission at least thirty (30) days prior to the effective date of any

proposed change in the corporate respondent.

Part IV of the proposed consent order requires the individually

named respondents to notify the Commission at least thirty (30) days

prior to the sale or discontinuance of the entities through which they

have been engaging in the sale of subscription contracts or of the

creation of any additional businesses or entry into any new business

engaged in the telemarketing of products or services.

Part V of the proposed consent order vacates the Decision and Order

in Docket No. 8831, issued on August 3, 1972, insofar as it applies to

the respondents in this matter.

The purpose of this analysis is to facilitate public comment on the

proposed order. It is not intended to constitute an official

interpretation of the agreement and proposed order or to modify in any

way their terms.

Donald S. Clark,

Secretary.

[FR Doc. 96-26106 Filed 10-10-96; 8:45 am]

BILLING CODE 6750-01-M