Martin Industries, Inc

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IN THE MA'IR MARTIN INDUSTRIES, INC., ET AL.

CONSENT ORDER, ETC., IN REGARD TO ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION AND TRUTH IN LENDING ACTS Docket C-2624. Complaint, Jan. 16, 1975 - Decision, Jan. 16, 1975 Consent order requiring three Kansa City, Mo., affiiated sellers of a cOITespondence course in livestock buying, among other things to cease using deceptive . sales tactics and from violating the Trth in Lending Act by failing to disclose to consumers, in connedion with the extension of consumer credit, such information as required by Reguation Z of the said Act. Appearance.

For the Commission: Keith Q. Hayes and Charles B. Wesonig. For the respondents: James D. Veselich Kansas City, Mo. Complaint 85 F.

COMPLAINT Pursuant to the provisions of the Federal Trade Commission Act and of the Truth in Lending Act and the implementing regulations promulgated thereunder, and by virtue of the authority vested in it by said Acts, the Federal Trade Commission, having reason to believe that Martin Industries, Inc., Cattle Buyers, Inc., and Educational Finance Corp., corporations, and Daniel M. Martin, Jr., and George C. Kopp, III individually and as officers of said corporations, hereinafter sometimes referred to as respondents, have violated the provisions of said Acts and of the implementing regulations promulgated under the Truth in Lending Act, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint stating its charges in that respect as follows: PARAGRAPH 1. Respondent Martin Industries, Inc. is a corporation organized, existing, and doing business under and by virue of the laws of the State of Delaware with its principal offce and place of business located at 2 E. Gregory Blvd., Kansas City, Mo. Respondent Cattle Buyers, Inc. is a corporation organied, existing, and doing business under and by virtue of the laws of the State Missouri with its principal offce and place of business located at 2 E. Gregory Blvd., Kansas City, Mo.

Respondent Educational Finance Corp. is a corporation organied existing, and doing business under and by virue of the laws of the State of Missour with its principal offce and place of business located at 2 E. Gregory Blvd., Kansas City, Mo.

Respondents Daniel M. Martin, Jr., and George C. Kopp, I II, are individuals and offcers of each of the corporate respondents. Together they formulate, direct, and control the acts and practices of the corporate respondents, including the acts and practices hereinafter set forth. Their addresses are the same as those of the corporate respondents.

Respondents cooperate and act together in carng out respondents business as hereinafter set forth.

PAR. 2. Respondents are now, and . for some time last pa. have been engaged in the fonnulation, development, advertising, offering for sale sale, and distribution of course(s) of vocational instruction purported to prepare graduates thereof for employment as livestock buyers. PAR. 3. In the course and conduct of their business as aforesaid respondents now cause, and for some time last past have caused, their course(s)of vocational instruction in livestock buying to be advertised sold, and financed to purchasers thereof located in the varous States of the United States, and maintain, and at all times mentioned herein have MARTIN INDUSTRmS, lng., ET AL.

Complaint maintained, a substantial course of trade in said livestock buying course(s), in commerce, as "commerce" is defined in the Federal Trade Commission Act.

COUNT I Alleging violations of Section 5 of the Federal Trade Commission Act, the allegations of Paragraphs One, Two and Three hereof are included by reference in Count I as if fully set out. PAR. 4. In the course and conduct of their aforementioned business respondents, for the purpose of obtaining leads to prospective purchasers and inducing the purcha."ie of their course(s) of instruction related products, and services by members of the public, have made and are now making, numerous statements and representations in advertising appearing in varous newspapers of general interstate circulation. Typical and ilustrative of the foregoing, but not all inelusive thereof, are the following:

MEN WANTED CATTLE AND LIVESTOCK BUYERS We want men in this area.

Train to buy catte, sheep and hogs.

We will train qualified men with some livestock experience.

For local interview wrte today with your background.

Include your full address and phone number.

CATTLE BUYERS, INC.

440 Madison Kansa City, Mo. 64111 THE LIVESTOCK INDUSTRY NEEDS MEN TRAINED AS CATTLE AND LIVESTOCK BUYERS* PAR. 5. By and through the use of the statements and representations as set forth in Paragraph Four and others similar thereto but not FEDERAL TRADf COMMISSION DECISIONS Complaint 85 F.

specifically set out herein, and through statemcnts made orally and in writing by respondents, their employees, agents, and representatives respondents have represented, and do now represent, directly or by implication, to the purchasing public that they offer employment to persons in the field of livestock buying.

PAR. 6. In truth and in fact, respondents do not offer employment to persons in the field of livestock buying, but are seeking prospective purchasers for their course(s) of instruction in livestock buying. Those persons, who respond to respondents' ads as set out in Paragraph Four above, are contacted for the purose of enrollng them in respondents coursers) of instruction in livestock buying. Therefore statements and representations as set forth in Paragraphs Four and Five hereof, were and are false, misleading, deceptive, and unfair.

PAR. 7. Respondents have offered, and now offer for sale, course(s) of instruction intended to prepare graduates thereof for employment in the livestock buying industry, without disclosing, in advertising or through their sales representatives:

I. That most persons enrolling in respondents' course(s) of livestock buying wil not be employed in the livestock buying industry during or after completion of said coursers) of instruction because livestock buying cannot be learned from a correspondence course. 2. That there is little, if any, demand for those persons who graduate from respondents' coursers) of livestock buying instruction by any industry.

3. That respondents do not provide employment or offer assistancc in obtaining employment in the field of livestock buying to those persons who graduate from respondents' coursers) of livestock buying. Knowledge of such facts would indicate the possibility of securng future employment as a result of enrollng in respondents' coursers) of livestock buying. Thus, respondents have failed to disclose a material fact which, if known to certain consumers, would be likely to affect their consideration of whether or not to purchase such course(s) of instruction.

Therefore the aforesaid acts and practices were and are false misleading, deceptive or unfai.

PAR. 8. (a) Respondents have been and are now using the aforesaid false, misleading, deceptive, or unfair acts and practices, which under all of the facts and circumstances, respondents should have known were false, misleading, deceptive, and unfair, to induce persons to payor to contract to pay substantial sums of money for their courers) of instruction which, in connection with said purchasers' future employment and careers, were, and are, virtually worthless- Respondents have MARTIN INUW:;'nor;::, lnl.. 1\1,.

Complaint received the said sum and have failed to offer refunds, or refund such sums, or rescind such contractual obligations of a substantial number of enrollees and participants in such cours(s) who were unable to secure employment in the positions and fields for which they purrtedly have been trained by respondents.

The use by respondents of the aforesad acts and practices, their continued retention of said swns of money, and their continued faillIe to rescind such contractual obligations of their customers, as aforesaid are unfair acts or practices.

(b) In the alternative, and separate to Paragaph Eight (a) herein, respondents, who are in substantial competition in commerce with corprations, firm, and individuals engaed in the sae of vocational coures of instruction, have been and are now using as aforesaid, false misleading, deceptive, or unfair acts or pratices to induce persons to pay suhstantial sums of money to purchase respondents' coure(s) of instruction.

The effect of using the aforesaid acts and practices to secure substantial sums of money is, or may be, to hinder, lessen, restrain, or prevent competition between respondents and the aforementioned competitors.

Therefore the said acts and practices constitute an unfair method of competition in commerce in violation of Section 5 of the Federal Trde Commission Act.

PAR. 9. In the coure and conduct of their business and at all times mentioned herein, respondents have ben and are now in substatial competition in commerce with corprations, finn, and individuals engaged in the sale of courses of vocational instruction covering the same or similar subjects.

PAR. 10. The us by respondents of false, misleaing, deccptive, and unfair statements, representations, acts, and pratices, and their failure to disclose material facts, as aforesaid, has had and now has a capacity and tendency to mislead members of the purchasing puhlic into the erroneous and mistaken belief that sad statements and representations are true and complete, and into the purhas of sad respondents' coure(s) in livestock buying, by reason of sad erroneous and mistaken belief.

PAR. 11. The aforesad acts and practices of respondents, as herein alleged, were all to the prejudice and injur of the public and constituted, and now constitute, unfair and deceptive acts and practices in commerce in violation of Section 5 of the Federal Trde Commission Act.

Decision. and Order 85 F. COUNT II Alleging violations of the Trth in Lending Act and the implementing regulations promulgated thereunder, and of the Federal Trade Commission Act, the allegations of Paragraphs One, Two and Three hereof are incorporated by reference in COUNT II as if fully set forth verbatim.

PAR. 12. In the course and conduct of their business as aforesaid respondents regularly extend, and for some time last past have regularly extended, consumer credit as "consumer credit" is defined in Regulation Z, the implementing regulation of the Trth in Lending Act duly promulgated by the Board of Governors of the Federal Reserve System.

PAR. 13. Subsequent to July 1 , 1969, respondents, in the ordinar course and conduct of their business and in connection with credit sales as "credit sale" is defined in Section 226.2(n) of Regulation Z, have caused and are now causing their customers to execute retail installment contracts, hereinafter referred to as the contract. PAR. 14. By and through the use of the contract, respondents, in a number of instances, have failed to:

1. Disclose the term "Finance Charge more conspicuously than other terminology as required by Section 226.6(a) of Regulation Z. 2. Use the term "Total of Payments" as required by Section 226.8(b)(3) of Regulation Z.

3. Use the term "Cash Price" as required by Section 226.8(c)(1) of Regulation Z.

4. Use the term "cash downpayment" as required by Section 226.8(c)(2) of Regulation Z.

5. U Be the term "amount financed" as required by Section 226.8(c)(7) of Regulation Z.

6. Use the term "Deferred Payment Price" as required by Section 226.8(c)(8)(ii) of Regulation Z.

PAR. 15. Pursuant to Section 103(q) of the Trth in Lending Act respondents' aforesaid failure to comply with the provisions of Regulation Z constitute violations of that Act and, pursuant to Section 108 thereof, respondents thereby violated the Federal Trade Commission Act.

DECISION AND ORDER The Commission having heretofore detennned to issue its complaint charging the respondents named in the caption hereto with violation of the Federal Trade Commission Act, and the respondents having been served with notice of said determination and with a copy of the MARTIN INDUSTRIES, INC., ET AL.

Decision and Order complaint the Commission intended to issue, together with a proposed form of order; and The respondents and counsel for the Commission having thereafter executed an agreement containing a consent order, an admission by the respondents of all the jurisdictional facts set forth in the complaint to issue herein, a statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by respondents that the law has been violated as alleged in such complaint and waivers and other provisions as required by the Commission rules; and The Commission having considered the agreement and having provisionally accepted same, and the agreement containing consent order having thereupon been placed on the public record for a period of sixty (60) days, now in further conformty with the procedure prescrihed in Section 2.34(b) of its rules, the Commission hereby issues its complaint in the form contemplated by said agreement, makes the following jurisdictional findings, and enters the following order: 1. Respondent Martin Industries, Inc. is a coi1oration organized existing and doing business under and by virue of the laws of the State of Delaware, with its offce and principal place of business located at 2 E. Gregory Blvd., Kansas City, Mo.

Respondent Cattle Buyers, Inc. is a corporation organized, existing and doing business under and by virtue of the laws of the State Missouri, with its office and principal place of business located at 2 E. Gregory Blvd., Kansas City, Mo.

Respondent Educational Finance Corp. is a corpration organized existing and doing business under and by virue of the laws of the State of Missour, with its office and principal place of business located at 2 E. Gregory Blvd., Kansas City, Mo.

Respondent Daniel M. Martin, Jr. is an offcer of said corporations and George C. Kopp, I II, was an offcer of said corporations unti Sept. , 1974. Prior to Sept. 1 , 1974, respondents formulated, directed and controlled the policies, acts and practices of said corporations. Subsequent to Sept. 1 , 1974, respondent Danel M. Marin, Jr., has formulated, directed and controlled the policies, acts and practices of said corporations. Respondents' principal offce and place of business prior to Sept. 1, 1974, was 2 E. Gregory Blvd., Kansas City, Mo. 2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondents, and the proceeding is in the public interest.

FF;DF;RAL TRADE COMMISSION DECISIONS Decision and Order 85 F. ORDER COUNT I It is ordered That respondents Marin Industries, Inc., Cattle Buyers, Inc., and Educational Finance Corp., corporations, their successors and assigns, and their officers, and Daniel M. Marin, J and George C. Kopp, III, individually and as offcers of each of said corporations and respondents' agents, representatives, and employees directly or through any corporation, subsidiary, division, or other device, in connection with the advertising, offering for sale, sale, or distribution of courses of study, training, or instruction in the field of livestock buying or any other course of instruction product, or service, in any field in commerce, as "commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from: 1. Respresenting orally, in wrting, or in any other manner, directly or by implication, that:

(a) Persons who enroll in any coursers) of instruction offered by respondents will be employed as buyers in the livestock industry or any other industry.

(b) Respondents offer employment in the livestock industry or any other industry.

(c) Respondents assist or are able to a.,;sist any person in securng employment as a buyer in the livestock industry or in any other position.

(d) There is a demand for persons completing the course offered by respondents in the area of catte buying, sellng, or trading. 2. Failng to disclose clearly and conspicuously, in all advertising and promotional material, that respondents are seeking prospective purchasers for their coursers) of instruction and do not offer employment or assistance in obtaining employment. 3. Failing to send by certifed mail, retur receipt requested, to each person who contracts for the sale of any course of instruction, a notice, in a form approved by the Commission, which shall disclose the following information and none other:

(a) The title IMPORTANT INFORMATION" printed in bold face type across the top of the form.

(b) A paragraph reciting the following aff"mnative disclosures: (1) A statement disclosing that most persons enrollng in respondents' coursers) of livestock buying will not be employed in thc livestock buying industry during or after completion of said coursers) of instruction.

(2) A statement disclosing that respondents do not offer or assist their students in obtaining employment.

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J""'' Decision and Order (3) A statement disclosing the total number of students who have enrolled in each course of instruction offered hy respondents for each of the three (3) preceding calendar years. (4) A statement disclosing the total number of students who have graduatcd from each course of instruction offered by respondents for each of the three (3) preceding calendar years. (5) A statement disclosing the total number of students which respondents can affrmatively show have become employed as a result of completing any of respondents coursers) of instruction for each of the three (3) preceding calendar years.

(6) An explanation of the cancellation procedure provided in this order, namely, that any contract or other agreement may be cancelled within three (3) days after receipt by the customer, via the United States mails, of this notice.

(7) Said notice shall contain a detachable form which the person may use as a notice of cancellation, which indicates the proper address for accomplishing any such cancellation.

(8) The said notice shall be sent by respondents no sooner than the next day after the person shall have executed a contract for the sale of any coursers) of instruction.

4. Contracting for any sale of any coursers) of instruction in the form of a sales contract or other agreement which shall become binding prior to the end of the third business day after the day of receipt by the customer of the form of notice provided in Paragraph 3 of this order. 5. Failing to keep adequate records which may be inspected by the Commission staff members upon reasonable notice: (a) Which disclose the facts upon which any placement statistics or claims or other representations of the typ described in Paragraph 3(b)(3), (4) and (5) of this order are based, and (b) From which the validity of any placement statistics described in Paragraph 3(b)(3), (4) and (5) of this order can be determined for so long as such statistics, claims, or other representations are disseminated, made, or authorized by respondents, or are required to be disclosed hereunder and for a period of three (3) year after respondents' termnation of dissemination, use, authorition, or disclosure of such statistics, claims, or representations (whichever period is the longer).

It is further ordered That respondents, in connection with the sale, or offering for sale of any coursers) of instruction or training: A. Inform orally all prospective purchasers to whom solicitations are made, and provide, in wrting, in all applications and contracts, in at least ten-point bold type, that the application or contract may be