The Federal Trade Commission banned the operators of an office supply business from telemarketing pursuant to a settlement deal in Texas federal court.
In December 2015, the agency filed suit against three individual defendants and related corporate entities for violating Section 5 of the Federal Trade Commission Act by tricking small businesses and nonprofit organizations into purchasing office supply products at either higher prices or larger quantities than they had agreed to.
The defendants would quote a per-unit price for items such as pens and paper clips, the FTC alleged, even though they only sold multi-unit quantities. Because the defendants did not disclose the final price, quantity or shipping cost of an order, many customers believed the price they were quoted applied to a package of items and not a single item, the agency said.
According to the FTC's complaint, the defendants "aggressively" sought payment from the small businesses and nonprofits, and when customers tried to return unwanted products the defendants demanded "hefty" shipping and restocking fees (typically 15 percent of the invoice amount).
After the court halted the operation and froze the defendants' assets, they agreed to a stipulated final order banning them from telemarketing and from misrepresenting any product or service. In addition, the defendants must clearly disclose the total cost, all material restrictions or conditions, and the terms of any refund policy before asking consumers for billing information or consent to buy any product or service.
If a policy is in place not to provide refunds, cancellations, exchanges or repurchases, a statement must be made to that effect. The order also prevents the defendants from selling or otherwise benefiting from consumers' personal information. A $6.7 million judgment will be suspended upon surrender of certain assets.
To read the complaint and stipulated order in FTC v. Liberty Supply Co., click here.
Why it matters: For their alleged violations of the FTC Act, the defendants are now banned from telemarketing and future misrepresentations, as well as subject to a host of requirements, including disclosures about the total cost of a sale before finalizing a transaction.