The Federal Trade Commission (“FTC”) recently announced a $7 million settlement with an office supply marketer and its individual owner. The FTC had filed a lawsuit in the United States District Court for the Central District of California in connection with charges of unfair and deceptive trade practices related to the marketing and sale of office and cleaning supplies to small business and non-profit organizations, such as child care centers and schools.
What are the Terms of the FTC’s Office Supply Marketing Settlement Agreement?
In its complaint, the FTC alleged that the office supply marketer and its owner had used a variety of aggressive tactics to deceptively induce consumers into purchasing merchandise without obtaining their consent. Specifically, the FTC alleged that the defendants systematically shipped unordered merchandise, together with associated invoices demanding payment for their goods, and upon receiving questions or complaints from consumers, advised these consumers either that fellow employees had authorized the subject purchases or that applicable shipments were part of a backorder.
As a result of the foregoing, the deceptive trade practices settlement agreement with the FTC bars the office supply marketer and its owner from: (1) sending any merchandise to recipients without first obtaining their prior express consent to do so (unless the merchandise is marked as a free sample); or (2) sending a bill requesting payment for unsolicited merchandise. Further, the settlement agreement prohibits misleading representations concerning any of the following: (1) that consumers have agreed to accept to pay for multiple shipments of goods; (2) that shipments of goods were related to prior orders or backorders; and (3) that consumers are obligated to pay for goods shipped that were not ordered.
How to Avoid a Deceptive Trade Practices Lawsuit
As we have previously blogged, federal authorities and state attorneys general alike have been active in investigating and prosecuting companies for deceptive trade practices. This settlement should serve as a cautionary tale that reinforces the importance of working closely with knowledgeable marketing counsel in order to avoid various regulatory pitfalls.