Simplified Tax Records, Inc.

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IN THE lV TIR OF SIMPLIFIED TAX RECORDS, INC., ET AL.

CONSENT ORDER , ETC. IN REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE CO:Il:JIISSION ACT Docket 8361. Complaint, Apr. 1961-Decision, May, 1962 Consent order requiring a :Kew York City seller of business record-keeping systems, incluuing its ;'.Master I'Jl1ition Deluxe Edition, flnd ;;Standard Edi tion" systems, to franchised distributors to sell to small business menwho were then entitled to receive various consultation and advisor.)' services as well as sets of fonns for recording receipts, expenditures, assets, and other data and, in the case of those -purchasing the "::Iaster " and "Deluxe systems, to have their tax returns prepared by the company-to cease representing falsely in ne-.vsvaper advertising and other promotiunal material the income and profits that purchasers of its distributorships would receive as well as making a variety of other deceptive claims, as in the order below indicated.

, SDiPLIFIED TAX RECORDS ) INC. , ET AL. 1103 1102 Complaint COl\PLAINT Pursuant to the provisions of the Federal Trade Commission Act and by virtue of the authority vested in it by said Act, the Federal Trade Commission, having reason to believe that Simplified Tax Records, Inc., a corporation, and Villinm Frankel, also known as ,Villiam B. Foster and ,V. F. Foster, individually and as an offcer of said corporation, hereinafter referred to as respondents, have violated the provisions of said Act, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public intere.st, hereby issues its complaint stating it.s charges in that re-spect as follows:

PARAGRAPH 1. Respondent Simplified Tax Records, Inc., is a New York corporation organized, existing and doing business under and by virtuo of the laws of the State of New York, with its principal offce and place of business located at 170 Varick Street in the city of New York, State of New York.

Respondent ,VjIJiam Frankel, also known as ,Villiam B. Foster and as ",V. F. Foster, is an offcer of the corporate respondent. He formulates, directs and controls the acts and pract.ices of t11C corporate respondent, including the acts and practices hereinafter set forth. His adrlress is the same as that of the corporate respondent. PAR. 2. Respondents fire now, and for some time last past have been engaged in the sale and distribution or product.s consisting of business recordkeeping systems to distributors 'iho 1'8-sell thenl to owner'.s and operators of small businesses. The said systems, c1desig1ulted by respondents as ;' \Iaste.r .Edition Deluxe Edition " and "Standard Edition, \Then pnrchf'. sec1 from distributors by owners and operators of small businesses, yariously entitle the businessmen purchasers thereof to sets of forms used for the recording of their receipts and expendiTures and equipmr.nt, property, tax and payroll records. Purchase of respondents Thiaster Edition" of fOrIns entitles the businessman to receive it quantity of forms suffcient to last him one year a.nd entitles him: at. the end of each year on subnlission of properly prepared business data summaries to respondents, to preparation of his tax returns by respondents. Additionally, the businessman may avail himself of a "business consultation service" during the year he uses respondents :Master Edition . Respondents' distribut.ors sell respondents Master Edition" and services to businessmen for $120.00. Purchase of respondents' "Deluxe Edition " of forms entitles the businessman to receive a quantity of forms suffcient to last him two years and entitles him, at the end of each year on submission of Complaint 60 F.'l' properly prepared business data summaries to respondents, to pl'epn,ration of his tax returns by respondents. Additionally, the busincssman may avail himself of a consultation and advisory service on tax matt61'S during the two years he uses respondents Deluxe Edition . Respondents' distributors sell respondent.s' two- year "Deluxe Edition and services to businessmen for $99.50.

Purchase of respondents' "Standard Edition" of forms entitles the businessman to receive a quantity of forms suffcient to last him two years and entitles him to use of respondents' consultation and rtclvisory service on tax matters during the two years he uses respondents Standard Edition " but does not entitle him to preparation of any tax returns by respondents. Respondents' distributors sell respondents' two- yeai' "Standard Edition" and services to businessmen for $79. 50.

PAR. 3. In the course and conduct of their business, as aforesaid respondents cause, and have caused, their products, when sold, to be transported from their place of business in the SLate .of New Y ork t.o distributors and purchasers thereof located in various other states of the United States. Hesponclents maintain, and at an times rnentioned herein have maintained, a substantial course of trade, in said products in C01Ill1erce, as "comnlerce" is defined in the Federal Trade COlIllllission Act.

PAR. 4. In the course and conduct of their business as aforesaid respondents h 1ve been and are in substantial competition, in commerce wit.h corporations, firms and individuals engaged in the sale of products and services of the same general kind and nature as those sold by respondents.

PAR. 5. In the course and conduct of their business as aforesa.id, and for the PULL)ose of inducing the sale of their products and services respondents have engaged, and now are engaged, in the sale of territorial distributorships to persons desirous of being respondents' dis tributors in the sale of respondents' products and services to businessmen. In furtherance of the course and conduct of their business as aforesaid, respondents have made various statements and representations to prospective distributors concerning the nature and value of distributorships offered for sale and methods of conducting their said business. Such statements and represent, tions have been Hnd are made by means of advertisements published in The New Yark Times, The 'Vall Street Journal, The Baltimore Sun, The Hichmond Times-Dispatch, The Atlanta Constitution, The CJeveland Plain Dealer, The Detroit N e"\' , The Chicago Tribune, The Omaha "Todd Herald, Thc St. Louis Post Dispatch, The Dallas News, The Rocky ;\Ioll1tain News snv1ELIFIED TAX RECORDS INC. ET AL. 1105 1102 Cornpluint The Salt Lake City Tribune, the Seattle Post and other newspa pel's of general circulation throughout the country too numerous to set out herein, all of ,which newspapers are circulated ill areas \\'here respondents do business, and by means of lette:i.s, brochurcs and other prolllotional and other advertising literature mailed and circulated throughout the country t.o prospective distributors. Among and t.typical, a.nd illustrative, but not all-inclusive, of the statmnents and representations Jllac1e, circulated and disseminated to prospective distributors as aforesaid arc the following: 1. (By lie\vspul,cr advertisements) :

IF YOC AHE COKSIDEHING A BCSIKESS OF YOUR OWN AND ARE seeking e real financial security Ii a Lmsiness of your own with a good steady, high income . an opportunity to recoup .yom investment within 6 to 8 montlJs . a successful business establislwd over 25 years . a steady renc\val business that grows year after year o freedom fr(nn traveling', overhead, labor, credit or warehousing headaches o the prestige of bunk, trade association, and user endorsement Q a business tllat requires lio IJrevious experience * * * tl1cn here is a higl1ly respected, essential business that should provide you with everything you want, including an unusually high income starting tbe very first year.

If you can qualify with sellng, executive, or business experience, can devote full time to your business, and make an iuwlltory investment of $$) 500 to $14 500 depending Oil territory, you wil be eligible to own outright a prime, lJigl1ly desirable francbise in a choice area. IVe wil give you thorough field and 110me offce training at our expense, and assure your' success by continuing support. Please consider this carefully before applying: we want only substantial, dedicated iil1ividnals seeking a lifetime career opportunity, 'Vrite stating lJack ground, address, phono number, and territory preference. If you qualify, a personal interview wil be 'arranged with the company executive covering your territory.

Choice territories available in Mihvankee, .Wis. (first time in 5 years) ; Peoria Springfeld, Ill.; .Wichita, Kans. ; Cleveland, Toledo, Columbus, Ohio; Detroit, l\Iich, areas, and various other sections of Illnois, Indiana, Iowa, Kentucky, Michigan, )'Iinnesota, Missouri, Montana, Nebraska No. and So. Dakota, Ohio, Wisconsin and ,\ wyoming, Some with a substantial number of repeat active accounts, WrHe aU. President, Box CL-200, The Wall Street Journal. June 7 , 1960. If You Had Your Pick Of Any Business, . .

'Vouldn t It Be One That:

REQUIRBJD no experience, no complicated details, no traveling, EARNED an excellent income at aU times regardless of economic conditions. HAD a repeat business feature that provided a semi-retirement income. 'VAS dignified and highly endorsed by government and industry, and established over 25 years.

Complaint 60 F.

SUPPLIED a very necessary product and service. . . vital to its users year after year.

INCLUDED proven successful sales and business aids plus company-paid home-offce and field training.

GAVE you an available exclusive territory.

MADE no physical demands upon you.

HERE IS A .VALUABLE nUSINKSS OF YOCR OWN That j\feets Each and Every One of These- Helluiremcnts l:\T ATLAXTA AND SURROrNDING AREA '" .. '" AND all it requires is ambition with an investment of $9 500 to $14 ;300 (normally recouped within 6 to 8 months), Find out more about this unusual full-time business that has everything yon could ask for. ' Write us toclay, with a brief resume about yourself, including phone number. 'VRITE BE , 269, Journal-Constitution. January 10, 19GO. A Busn, ESS OF YOUR O,VN With Unusual Repeat Features We have a highly respected essential business that should provide :\,ou with unusually high income the first year. A business that can earn a semi-retirement income n renewals alone in 2 to 3 years. Xot sensonal. not depenclent on economic conditions. Endorsed h T banks, tralle associations, thousands of users. No overhcad, warehousing, credit or labor costs. A trouble-free business that yields exceptional income year after year. Established over 25 years. 'Ve give you the benefit of a thorough field training as well as training at our home offce (expenses paid by us) and keep a continuing supervisory interest in your operation.

If you have a spark of salesmanship and/or executive abilty an investment of $9 500 to $14 500 (usually recouped in 6 to 8 months) wil place you in a position to own outright a prime highly desirable franchise in a choice area. PLEASE CONSIDER THIS CAREFVLLY BEFORE APPLYn, G: This is no gimmick or gadget operation, but a dignified business, highly endorsed. We want only dedicated individuals who can and are wiling to devote full time to the success of their franchises. While stating background, give address and phone number and territory preference. If qualified, a personal interview at our home offce (expenses paid by us) wil be arranged. Choice territories available in Dallas, San Antonio, Austin, Tyler and other choice areas in Texas, Oklahoma, Louisiana several with a substantial number of repeat active accounts. Write Box 114-0 , Dallas ews. January 31 , 1960. Let 300 Successful Businessmen'1' ell You How You, Too, Can Own This High-Income Business From Maine to California, for over 25 years, owners of this successful business have been earning five-figure incomes-plus enjoying additional semi-retirement income. We ll be glad to have you talk to them direct-let them be the ones to explain to you how you may join their ranks as an independent, respected, pros. perous business distributor.

., , . .. SIMPLIFIED TAX RECORDS , INC., ET AL. 1107 1102 Complaint None of them had previous experience 1n this field, but our company-paid home offce and field training and continuing support bas assured their success. The business is unaffected by economic conditions and has the enthusiastic approval of government and industry. It has the further advantages of requiring no labor or overhead costs, and no physical exertion or traveling. All you need is your executive or .bales abilty, and your full time devotion to its success. Your investment cost is $9 500, depending on territory. This may be recouped within 6 to 8 months, * *"' Rocky ::lountain e\vs, ::larch 13, 1960. Here Is An Exceptional Business Opportunity '1' his opportunity is for men of courage, foresight, dilgence and intellgence in one of the most profitable and fastest growing fields in America-with net profit the first year usually exceeding investment. A trouble-free business that also yields exceptional income year after year from repeat business alone. No travellig, warehousing or labor costs. ". * * The Wall Street Journal, May 26, 1959.

VALUABLE DISTRIBUTORSHIP CHOICE AREAS AVAILABLE JACKSONVILLE & SURROUNDING AREAS Available to high calibre men with unquestionable integrity to handle products and service indorsed by banks, credit men s associations, C of C's throughout nation. I)argest company of its kind in the world. Established over 24 years. Those accepted wil own an exclusive territory and become part of our nation. wide organization. Continued access to our many departments and staff. You avoid all overhead. Applicants must be able to make cash investment of $9 500 covered by inventory and be prepared to start 10 day training period within 60 days. Full time basis only. Not suitable to add to other lines. Five figure earnings first year. If you are serious about seeking a fine highly productive headache-free repeat business of ;your own, write giving as much information as possible about yourself. Include phone number. You wil be granted inter. view by a member of our executive staff. Write, Attention President, Box A- Times-Union & Journal.

The (Jacksonvile) Florida 'rimes-Union, October 4 1969. " * over 300 Distributors in 49 states. '" :I '" Richmond Times-Dispatch, :March 27, 1960.

PLEASE COC'SIDER THIS CAREFULLY BEFORE APPLYING: This is no gimmick or gadget operation, but a dignified business, highly endorsed, with over 300 successful distributors nationally The Wall Street ,Journal, April 19, 1960.

CHOICE AREAS Avo,ilable MEMPHIS Tbe Memphis Commercial Appeal, September 13, 1959. * * .. earn a substantial, ever-increasing income, year after year. T19- 64-llOS FEDERAL TRADE COMMISSION DECISIONS Complaint 60 P.

Repeat business '" '" . assures a valuable equitr growth and builds a semiretirement income in as fe\"\ as 2 to 3 years. The Wall Street Journal, June 14 1960.

'" '" .. You can realize high earnings the Very first year and enjoy a greatly increased semi-retirement income from rene\vals alone within 2 years. '" '" '" The New York Times, September 13, 1959.

'" * '" recoilmended by '" * '" government agencies. The 'Vall Street Journal, January 21 , 1960. 2. (By form letter) :

* '" * Tax preparation and business advisory services are performed at the Home Offce. Our Distributors function is to sell Systems Exclusive Territory protected by a negotiable Sales Franchise agreement- '" '" '" Every territory allocated is large enough to permit the Distributor to profit from the efforts of one or more sub-distributors working under him. * '" '" * .. this is a valuable permanent business affliation * 3. (By personal letter) :

'" '" '" It has been our experience with all IDen Owt their investment had been recovered in approximately six to seyen months. , 4. (By brochure) :

snlPLU' IED TAX RECORDS offen'! its 81tV8Uribers guaranteed comp'/ehel sive program, called the JL1STEll PLA.

A TROTJBLE-FREE BUSI"n No '" '" '" financing, no accounts receivable, no delinquent credH * * " IT' S NO:K-CO:.fPETITIVE '" .. '" You have no competition. Once you 11a ve made the sale and introduced the subscriber to our services, practically all your work is ended. You are free to SIJeud time building ne'" business. Everything else is taken care of by the PARENT'r ORGANI- ZATION! WHEN YOU lake A SALE, YOU SDlPLY snow THE SUBSCRIBER HOW TO ese THE SYSTEM. . .

ACTUAl, TA.X PRI,PARATION AND TAX QUESTIONS ARE HAN. DLED DIHECT, FROM THE PARENT CmlPANY THE GHOWTH POTEKTIAL of a Simplified distributorship A CONSTANTLY EXPANDING BUSINESS In a few years it can start working "for you" and give you n. lucrative everincreasing income. The grmvth pol:sibilties are extraordinary. You establish for yourself hundreds of friendly subscribers, who create for you a permanent ever-increasing, steady income through the renewal of 0111' System Service every twelve months. It is a constantly increasing income. since you arc continually adding new Subscribers, who in turn keep renen' ing. ___ _ ! . , . SIMPLIFIED TAX RECORDS , INC. , ET AL. 1109 1102 Complaint SCHEDI:LE OF COST AKD POT);:\TIAL PROFIT (Based on new Simplified MASTER PLAN program) These figures are based on a conservative 50% renewals, However many our Distributors report up to 82% renel..' als. Distributor s Profit From Per- Distributor s Override from Cost to subscriber for 1 sonal Sales for each su bserip- Sub-Distributors for each ycaL_n - $121 tioll___ - $58 subscriptioIln-- - $15 From Personal Sales I From Sub-Distributor Over- Ride for Your ! each sub-distributor working for . Yearly you :First year u_ - $11,600 , ZO lzooncIY sales Ci $58 profit ea 000 $14 600 Second year-- -- ZOO ncw sales $58_ -- $11,60U 200 new sales (I $15-- -- $3,000 100 renewals Ca:;S58-- ')800 ; 100rencwaJs(Q$IIi - 1..'100' TOTAL FRO.\I PER- - TOTAL FRO),! OVER- - SONAL SALES $17, 400 RIDEn__ --- $4 500 $21 900 Third year.__ 1 200 new sales (g $58-- - $11 600 200 Dew sales (Q $15_ -- $3 000 100 renewals (1st Yr,) (g $58- 5, 800 I 100 renewals (1M ) (g 815- __- 1 500 ' 100 renewals (2nd Yr. $15-- 1. 500 og5 TOTAL FROM PER- 800 TOTAL FROM PER- SaKAL SALES - $23 200 , SO:"TAL SALES - $6,000 i $29 200 SEOURITY You are the boss * * * free from the fear of being discharged uecallse of employers' whims, relatives, ('Tt-downs personality conflicts or lack of appreciatioll of your efforts. * II '"

In response to inquiries induced by 'such advertisements, letters and literature, respondents or their employees, agents or representatives call upon members of the public initiating such inquiries, and then make oral representations repetitive or elaborative of and in addition to those contained in the aforementioned printed materials. PAR. 6. Through the use of the aforesaid statements and representations set out and referred to in paragraph 5, above, respondents have represented, directly or by implication to the purchasing public: 1. That they were selling valuable distributorships which enabled the purchasers thereof to earn a substantial income that increased yearly.

2. That respondents had over three hundred (300) successful distributors.

3. That the sale of distributorships by respondents conferred outright ownership thereof on the purchasing distributors and created permanent business a.fI1iatiolls between respondents -and distributors. 4. That the purchase price of distributorships would be recovered by distributors in six (G) to eight (8) months. 5. That protection against loss of the purchase price or any part of the purchase price of distributorships was provided by the inventory of record-kee.ping systems furnished with said distributorships. Complaint 60 F.

6. That no less than ten thousand dollars ($10 000) would be earned by the purchasers of distributorships in the first year of their operation, and that the typical net profits earned in the first year by respondents' other distributors had exceeded the amount of the distributorship purchase prices.

7. That the potential of sales of respondents' record-keeping systems and services by franchised distributors to purchasers thereof warranted such distributors' employing subdistributors; that the additional net income derived by each of such distributors from such subdistributor sales would likely be three thousand dollars ($3 000) the first year of opcration, four thousand five hundred dollars ($4 500) the second year, and six thousand dollars ($6 000) the third year; and that the total net profit to the distributor, when combinig the profit made through his own sales efforts with that resulting from sub-distributor sales, would likely 'amount to fourteen thousand, six hundred dollars ($14 600) in the first year of operation, twenty-one thousand, nine hundred dollars ($21 900) the second year, and twenty-nine thousand two hundred dollars ($29 200) the third year. 8, That distributors were assured of the growth of valuable equities inc01ne inin their businesss, which would provide semi-retirement two (2) to three (3) years.

9, That distributors could devote their time exclusively to making sales, with respondents ' attending to an other phases of operations. 10. That distributors incurred no costs in connection with the extension of credit to purclmsers of respondents' record-keeping systems and services.

11. That the sale of respondents' systems and service entailed no financing and no holding of accounts receivable by distributors. 12. That distributors would encoUl1ter no competition in the sale of respondents' record-keeping sysWms and services. 13. That the successful operation of distributorships required no travel on the part of distributors.

14. That respondents' record- keeping systems and services had tile enthusiastic approval of, and were highly endorsed and recommended by the federal u,nd state governments.

PAR. 7. The aforesaid statements and representations were and are false, misleading and deceptive. In truth and in fact: 1. The distributmships which respondents have sold have been of little value to many purchasers thereof, the income earned therefrom by n, great many distributors being insubstantial and in many instances insignificant in c.omparison with the distributors' investments. SIMPLIFIED TAX RECORDS , INC., ET AL. 1111 1102 Complaint and many of the distributorships sold failed to provide incomes to purchasers thereof that increased yearly.

2. Respondents diel not a,nel do not have as many as three hundred (300) distributors, and all of the actual number of distributors have not been and are not successful in selling respondents' record-keeping systems and services.

3. By the terms of the contracts negotiated by respondents and their distributors, respondents could, and can, absolutely cancel and termil1ilte the distributorship lgroomel1ts ,"dth the purchasers thereof seven (7) months after the beginning dates of the said distributorships for failure to meet sales quotas contractually required, and in any event all distributorships sold were te.rminated or will termi nate t\VO (2) years after said beginning dlltes subject to renewal for additiomtl two (2) year periods on respondents' own terms. The busir).ess affliations between respondents and their distributors have been and are of an impermanent nature, only a small minority of all current distributors having maintained affliation with respondents for Jonger tlmn three (3) years.

4, Many purchasers of respondents' distributorships have not recovered the purchase price of their distributorships in six (6) eight (8) months, or in any longer period of time that they performed as distributors for respondents.

5. Distribut.ors of respondents' systems have not been and are not 110W protected from the loss of substantial proportions of the purchase prices paid to respondents in the event. distributors should be unsuccessful in sening all of the inventory of systems furnished with distributorships, 01' in the event that beeallse of -illness or for other reason distributors should "wish to terminate their relationships , as with respondents, 01' in the event that respondents should elect they have numerous times, to cancel dist.ributorships before inventories ,were sold out. It has been and is now respondents' practice, in t.he occurrence of such events, to buy back systems inventories at prices that have not and will not equal the amounts paid by distributors for their distributorships.

0. Ten thousand c ollars ($10 000) has not been earned in the first year of their operations by distributors of respondents' systems, Hnd such an amount is not typical of first year earnings by distributors. Seldom, if at all in recent years, has any distributor of respondents systems earned net profits in the first year of his operations in all amount which exceeded the amount paid by him to respondents for his distributorship.

1112 FEDERAL TRADE COMMISSION DECISIOKS Complaint 60 F.'l' 7. Sales records established by numerous distributors demonstrate that the claimed potential for employment of sub-distributors was not warranted, a.nd many distributors have found and are now finding that the employment of sub-distributors was and is economically not feasible; distributors' earnings have not been and are not typically nl1gmented by income derived from sub- distributor sales in the mounts of threo thousand dollars ($:1 000) in the first year of operation, foul' thousand fh-e hundred dollars ($4 500) in the second year and six thousand dollars ($6 000) in the third year; and seldom, if ever, has any distributor earned net profits, through his own efforts combined with those of subdistributors, \which amounted to fourteen thousand, six hundred dollal's ($14 600) in the first year of operation twenty-one thousand, nine hundred dollars ($21 900) the second year and twenty-nine thousand, two hundred dollars ($29 200) the third year.

8. Distributors have not been and are not now assured of the growth if equities which would provide semi-retirement income in two (2) to three (3) years. In many ca.,ses where distributorships have been cancelled by respondents, respondents required distributors to sign releases discharging respondents from all claims the said distributors might have had against respondents.

9. Distributors have been and are now required as part of their responsibilities as distributors to perform many services of a timeconsuming nature for their customers to whom they have sold respondents' systems and services, and such distributors as a result thereof have been and now are unable to devote their time exclusively to attem_pting to make sales.

10. :Many of respondents' systems and services have been and now are sold by distributors to purchasers thereof on an installment plan of purchase. For distributors to utilize such plan a cost has been and is imposed on them as t.he result of an arrangement made by respondents with a financing agency which assumes the responsibility of makiJlg collections from distributors' customers. 11. In order to make sales of some types of respondents' recordkeeping systems, many distributors have found that it has been necessary for them to finance such sales by extending credit to customers, resulting in distributors' holding accounts receivable amounting, in some instances, to thousands of dollars. 12. Distributors have cncountercd and now encounter competition in the sale of respondents' systems and services, from dealers in similar systems and services, and from bookkeepers and accountants located in the communities where distributors have attempted to make sales. , ,, SIMPLIFIED TAX RECORDS , INC. , ET AL. 1113 1102 Decision and Order 13. Distributorships may, and often do, embrace an area of several counties. Sales to prospective customers cannot be accomplished under such circumstances without travel on the part of distributors. 14. Respondents' systems and services have not been and are not now approved, endorsed or recommended by the federal or state governments or any agencies thereof.

PAR. 8. The use by respondents of the aforesaid false, misleading anel deceptive statements, representations and practices has had, and now has, the capacity and tendency to mislead prospective distributors into the erroneous and mistaken belief that said statements and representations were and are true and into the purchase of substantial numbers of respondents' distributorships and systems. As a consequence thereof, substantial trade in commerce has been, and is being, unfairly diverted to respondent.s from their competitors and substantial injury has thereby been, and is being, done to competition in commerce.

PAR. 9. The aforesaid acts and practices of respondents, as herein alleged ere and are all to the prejudice and injury of the public and of respondents' competitors and constituted, and now constitute, unfair and deceptive acts and practices and unfair methods of competition in commerce, within the intent and meaning of the Federal Trade Commission Act.

DECISION AXD ORDER This matter having come on to be. heard by the Commission upon n. record consisting of the Commission s complaint charging the respondents named in the caption hereof with violation of the, Federal Trade Commission Act and an agreement by and between respondent Simplified Tax Records, Inc., a corporate.ion, and its attorney, and counsel supporting the complaint, which agreement contains an order to cease and desist, an admission by said respondent of all the jurisdictional facts alleged in the complaint, a statement that the signing of said agreement is for settlement purposes only and does not consti tut.e an admission that it has violated the law as alleged in the complaint, and ,,'waivers and provisions as required by the Commission rules; and ,,,hieh agreement, among other' things, further provide. for dismissal of t.his proceeding as to respondent VVilliam Frankel deceased; and The Commission having cOIlsidered said agreement. and the affda vits made a pfl.rt of such agreement; and the Commission having determined that the agreement provides an adequate basis for appropriate disposition of the proceeding, the. agreement. is hereby accepted, the 1114 FEDERAL TRADE COMMSSIOK DECISIONS Decision and Order 60 F. T. following jurisdictional findings are made, and the following order is entered:

1. Respondent Simplified Tax Records, Inc., is a corporation organized, existing and doing business under and by virtue of the laws of the State of Kew York, with its principal offce and place of business located at 170 Varick Street, in the city of New York, State of X ew York.

2. The Federal Trade Commission has jurisdiction herein and this proceeding is in the public interest.

ORDER It is ordered That respondent Simplified Tax Records, Inc., a corporation, and its offcers, and responclenfs agents, representatives and employees, directly or through any corporate or other device, in connection with the offering for sale, sale or distribution of business record -keeping systems in commerce, as "commerce)' is defined in the Federal Trade Commission Act, do forthwith cease and desist representing, directly Or indirectly, to prospective distributors of such systems:

1. That purchasers of respondent' s distributorships are assured of earning substa,ntia-l incomes that will increase yearly. 2. That respondent has any specified number of distributors not in accordance with fact, or that any number-r of distributors are successful not in accordance with fact.

3. That the sale of distributorships confers permanent ownership thereof on the purchasers or that a, pernlanent business affliation between the parties is created by such sale, without disclosing that the permanency of such ownership or affliation is dependent on purchasers' complying with requirements set out in franchise agreements. 4. That distributors are assured of recovering the purchase price of distributorships in six (6) months, eight (8) months, or any other specified period of time.

5. That the net profit of a new distributor in his first year of operation will e.exceed the amount paid by hilTI to respondent for his distributorship, or that any distributor is assured of earnings amOtUlting to ten thousand dollars ($10 000) in his first year of operation. 6. (a) That distributors customarily or typically employ subdistributors.

(b) That distributors employing sub-distribut.ors are assured of deri"Fing additional.l net income in the amount of three thousand dollars ($3 000) during the first :yar of operation, four thousand five SIMPLIFIED TAX RECORDS , INC., ET AL. 1115 1102 Decision and Order hundred dollars ($4 500) the second year, or SIX thousand dollars ($6 000) the third year.

(c) That distributors employing sub-distributors will realize a combined profit through their own sales efforts with that resulting from sub-distributors' sales of fourteen thousand six hundred dollars ($14 600) in the first year of operation, twenty-one thousand nine hundred dollars ($21 900) the second year, or twenty-nine thousand two hundrcd dollars ($29 200) the third year. 7. That profits or earnings to be realized by distributors or to be derived by distributors from sales by sub-distributors will be any amounts in excess of the average earnings or profits in fact being realized or derived by all of respondent's distributors similarly engaged in selling respondent' s systems and services; provided, however that nothing herein shall prohibit the respondent froln representing that qualified persons may, during given periods of time, realize or derive earnings or net profits at levels or in amounts exceeding those typically realized or derived by respondent's distributors, if such higher stated levels or amounts in fact have been realized or derived by distributors of respondent in the regular course of business during similar periods of time, and respondent clearly and conspicuously discloses in immediate conjunction therewith the average earnings or profits in fact being realized or derived by all of respondent's distribu. tors similarly engaged in selling respondent's systems and services. 8. That distributors arc assured of the growth of valuable equities in their distributorships, or that senll-retirement income will be provided by said distributorships in two (2) to three (3) years. 9. 11hat distributors will be able to devote their time exclusively to lnaking sales.

10. 'Jha:t distributors incur no costs in connection with the extension of credit to purchasers of respondent's systems and services. 11. That the sale of respondent's systems and services will entail no financing or holding of accounts receivable by distributors. 12. Tllat distributors will encounter no competition in the sale of respondent:s systems and services; provided, hmvever, that nothing herein shall prohibit respondent from representing that it is the only one in its field which furnishes a business advisory service to customers if such be the fact, 13. That the operation of distributorships will require no travel on the part of distributors; provided, however, that nothing herein shall prohibit respondent from rE;presenting that no overnight travel is required.

Complaint 60 F.

14. That repondenfs systenls or services 'are approved, endorsed or recommended by the federal government or a state government., or any agency thereof; provided, however, that nothing herein shall prohibit respondent from stating, when such is the fact, that employees of state governments or agencies thereof have approved, endorsed 01' recommended the same in t.their individual capacities. It is fUTtheT ordered That the allegations of the complaint insofar as they relate to respondent 1Villiam Frankel, deceased, be, and the same hereby are, dismissed.

It is furthe1' ordered That paragraph six (5) of the complaint be a.nd the same hereby is, dismissed.

It is further ordel'ed That the respondent Simplified Tax Records Inc., shall, within sixty (60) days after service upon it of this order file with the Comnlission a report in writing setting forth in detaD