Georgia Agency Company, Inc

Text (OCR of the scan at left; may contain errors)

IN THE MA'IER OF GEORGIA AGENCY COMPANY, INC., ET AL.

CONSENT ORDER, ETC., IN REGARD TO ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION ACT Docket 2658. Complaint, Apr. 1975 - Decisi:on, Apr. 1975 Consent order requiring an Atlanta, Ga., seller of aerosol product distributorships and francbises, among other things to cease misrepresenting earnings and profits, nature of products, and survey results; making- unsubstantiated advertising- claims; and failng to disclose certain information, such as right-tocancel provision and cooling-off period, prior to the signing of contracts. Appearances For the Commission: Charles C. Murphy Jr. For the respondents: John Peagin, Jr. Atlanta, Ga. COMPLAINT Pursuant to the provisions of the Federal Trde Commission Act and by virtue of the authority vested in it by said Act, the Federa Trade Commission, having reason to believe that Georgia Agency Company, Ine., a corporation, Riehard A Bryant, Jr. and Riehar R. Royal, individually and as offeers of said corporation and Doyle Fleming, an individual and prieipal stockholder of said eorpration hereinafter referred to as respondents, have violated the provisions of said Act, and it appearing to the Commssion 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: PAR. 1. Respondent Georgia Agency Company, Ine., is a corporation organized, existing and doing business under and by viue of the laws of the State of Georgia, with its principal offce and place of business located in Suite 850, 8 Perimeter PI., N. , Atlanta, Ga. Respondents Richard A. Bryant, Jr., Riehard R. Royal, and Doyle Fleming are individuals and officers and/or stockholders of said corporation. Together they formulate, direct and control the acts and practices of the corporate respondent, including the acts and practices hereinafter set forth. Their address is the same a., that of the corporate respondent.

PAR. 2. Respondents are now, and for some time last past have been, engaged in the advertising, offering for sale, sale and distribution of aerosol health and beauty aid products, fire extingushers, lubricants and novelty items and in the advertising, offering for sale, and sale of Complaint 85 F.

distributorships or franchises for said products to members of the public.

PAR. 3. In the course and conduct of their business, respondents cause, and for some time last past have caused, their said products when sold, to he shipped from their place of business in the State of Georgia and their suppliers' places of business in the State of Georgia and other States, to purchasers thereof Ioeated in varous other States of the United States. In addition, in the course and conduct of their business, respondents have disseminated and caused to be disseminated in newspapers of interstate eireulation, advertisements designed to be read by persons residing outside the State of Georgia and intended to induce such persons to enter into contraetual agreements with respondents to purchase distributorships or franchises and products from respondents. Respondents maintain, and at all times mentioned herein have maintained, a substantial course of trade in products distributorships or franchises in commerce, as "commerce" is defined in the Federal Trade Commssion Act.

PAR. 4. In the course and conduct of their business as aforesaid and for the purpose of inducing the purchase of their distributorships or franchises and products, respondents have made numerous statements and representations in promotional material and in newspaper advertisements. Persons responding to said advertisements are eontacted by respondents or their representatives. Said respondents or their representatives, in soliciting the sale of said products, make varous oral statements and representations concerning the business opportunties and benefis to be derived by purchasing said distributorships or franchises and products.

Among and typieal, but not all inclusive, of the statements and representations made in newspapers, circular, foti letters, flyers and by other printed material given to prospective purehasers are the following:

IF YOU COULD t;ARN: $50 00 ANNUALLY Would you:

Work at least 3 days a week? Contact established accounts regularly? Distribute at wholesale level only, top nationally advertised products to drug, department, discount stores, etc.

And if:

There were no sellng, vending or employees? (Other than a manager, if you have other business interests)'! Could you:

Make an immediate decision? (Bring your wife, hanker, lawyer or supervsor). Invest 00 to $10 00 (fully rehatahle under contract)? If so, call: Jan O'Connell 724-3410.

If unable to reach Jan O'ConnelJ, call or wrte: The Georgia Agency Company, 8 Perimeter Place, N. , Suite 850, Atlanta, Georgia 803.19, (404) 0705. GEO (;lA AG.INCY cu. xU', HOG Complaint WE' RE GOING TO PUT A LOCAL MAN IN BUSINESS' , 'lie MUST REQUIRE $25 00 to $50 000 per year and not just a job. Very few jobs pay $50 , but a lot of businesses do. One of them is ours We merchandise to leading drug stores, departinentstores; etc., the No. 2 most used personal produd in America today, enhanced by the ten most coveted brand names in the industry. Only we offer this opportunity, and this you would have going for you if qualified* * * LOOKING FOR A $.00 00 JOB' There are not too many jobs paying $50 , but there are lots of businesses that do. One of them is ours and we are a national company in a Bilion Dollar Business. DO NOT CALL ME UNLESS YOU QUALIFY! We do not want a $10 00 to $20 00 per year man. You must desire and believe that $100 00 per year and up can be made. PAR. 5. By and through the use of the aforesaid statements and representations, and others of similar import and meaning not expressly set out herein, respondents have represented directly or by implication that:

A. Persons who purchase a distributorship or franchise from respondents ean earn from $25 000 to $100 00 annually working par time or fuil time.

B. Said earnings projections are the earngs made by a signifieant number of respondents' distributors or fraehisees. C. Respondents obtain top sales producing locations such as leading; deparment, discount, and drg stores for the placing of products purcha.,ed from them.

D. Respondents' products are nationally advertised. E. A distributors investment is fully refundable under the rebate provisions of respondents' contract.

F. Respondents' g;oods contain well known brand name products. G. Only respondents offer to sell distributorships to distribute the particular type of products they describe, to the exelusion of all others. Complaint 85 F.

PAR. 6. In the course and conduct of their aforesaid business and for the purpose of inducing the purchase of distributorships or franchises and products, respondents, through their agents and representatives have made and are now making, numerous oral statements and representations regarding ownership and operation of distributorships and franchises sold by respondents and the products supplied by respondents. Typical and ilustrative of such statements and representations, but notall inclusive thereof, are the following: A. A survey has been made of the market in which the prospective purchaser will operate.

B. The geographical terrtory granted to each distributor is exclusive.

C. The products of respondents are manufactured usmg exclusive formula.

D. Respondents' products are fast moving and easy to sell. E. A list given to a prospective distributor contains names and telephone numbers of sueeessful distributors of respondents located in varous major cities in the United States.

F. $60 of the prospective distributor's investment is used to pay for a "back up inventory.

G. "Many retail accounts secured by respondents will pay cah when the respondents' products are placed in their place of business. PAR. 7. In truth and in fact:

With respect to advertising representations: A. Few, if any, persons who purchased a distributorship or franchise from respondents earned from $25 00 to $100 00 annually working part-time or full-time. R Respondents' claimed earnings projections are far in excess of the earnings of most, if not all, persons who purchased and operated respondenb;' distributorships or franchises.

C. Respondents do not obtain top income producing locations, hut place most of the accounts in small stores which have very little consumer tmffc. The locations secured by respondents are few in number and usually undesirble, unsuitable and unprofitable. D. Respondents do not conduct any national advertising of their products and have no control over the extent to which their distributors conduct product advertising. E. A distributor s investment is not functionally refundable under the terms of the distributor s contract with the respondents, and few, if any, distributors have received a full refund of their investment tinder the contractual provisions of respondents' contract. F. Name brand products are not contained in respondents' products, but instead synthetically-prepared substances which simulate brand-name fragrnces such as, hut not limited to Arpegc, Chanel5, Joy, EsteeLauder, Shalimar, White Shoulders, Intimat.e Jade Ea.o;t, English Leather, Canoe and Brut are used in the manufacture of respondents products.

G. At least one company other than respondenLo; offers products or dist.ributorships t.o sell products the same a.'i or similar to the products distributed by respondents. With respect to oral representations:

A. Seldom, if ever, have respondent.s made a survey of the market in which the GIWRGIA AGENCY CO. 809 805 Complaint prospective purchaser intends to operate, prior to th( eon tact by the salesman or thereafter.

B. The geographic terrtory granted to distributors is not exclusive, hut is sometimes granted by respondents to from one to three other distributors. C. The formula employed in the manufacture of the products sold by respondents is not exclusive to the respondents' products hut is used by at least one other company in its aerosol products.

D. The aerosol products sold to distributors are not fast-moving and easy to selI, but are an off-brand and usually undesirable to consumers. E. The list given to prospective distributors did not contain names of distributors of respondents, successful or otherwse, hut were instead so-called "singers" or individuals set up by respondents to represent and hold themselves out a.'o; prosperous and successful distributo:' F. The $60 per account "back up inventory" charge is not used by respondents to purchase and warehouse products for their distributors but is merely an added cost for which distributors receive no consideration. G. Few, if any, retail accounts secured by respondents' representatives pay cash for respondents' products, but on the contrary, most, if not all, secured accounts are specifically told that the distributor is placing the product on a "consignment only" basis. Therefore, the statements and representations as set forth in Paragraphs Four, Five and Six hereof were, and are, false, misleading and deceptive.

PAR. 8. In addition to the foregoing statements, representations, acts and practices, respondents have eng-dged in the solicitation and sale of distributorships requiing a substantial outlay of money from persons with little or no previous experience in such business without affording such persons the right to eaneel such contracts of sale without penalty for a period of not Jess than five (5) business days following the finalization of such transaction.

Therefore, the solicitation of distributorship eontraets without allowing for eaneellation within a reasonable time constitutes an unfai practice where such contract involves substantial monetary obligations on the part of persons with litte or no experience in the typ of business arrangement sold by respondents.

PAR. 9. In addition to the foregoing statements, representations, acts and practices, respondents usually and normlly require payment in full of the contract price by distributors prior to fulfilling their eontractual obligations including, but not limited to, establishing locations and delivering merchandise.

Therefore, the requirement that dist,.butors pay the full eontractual price prior to the performance of eontrdCtual obligations by respondents under the circumstanees and conditions herein alleged constitutes an unair practice.

PAR. 10. The use by respondents of the aforesaid unfair, false misleading and deceptive statements, representations and practices has had the capaeity and tendeney to mislead members of the public 'i88- 7G - :'2 810 F,:DERAL TRADE COMMISSION DECISIONS Decision and Order 85 F.T. into the erroneous and mistaken belief that said statements and representations were true and complete, and into the purchase of respondents' distributorships or franchises and products by reason of said erroneous and mistaken belief and unaily into the assumption of obligations and the payment of monies which they might otberwse not have ineured.

PAR. 11. In the course and conduct of their business, and at all times mentioned herein, respondents have been in substantial competition, in commerce, with corporations, firm and individuals engaged in the sale of the same or similar products.

PAR. 12. The aforesaid acts and practices of respondents, as herein alleged, were all to the prejudice and injury of the public and of respondents' eompetitors and constitute unai methods of competition in commerce, and unfair or deceptive acts or practices in commerce, in violation of Section 5 of the Federal Trade Commssion Aet. DECISION AND ORDER The Federal Trade Commission having initiated an investigation of certain acts and practices of the respondents named in the caption hereof, and the respondents having been furshed thereafter with a copy of a draft of complaint which the Atlanta Regional Offce proposed to present to the Commission for its consideration and which if issued by the Commssion, would charge respondents with violation of the Federal Trde Commssion Act; and The respondents and eounel for the Commssion having thereafter executed an agreement contaning a con..,ent order, an admission by the respondents of all the jurisdictional facts set forth in the aforesaid draft of complaint, a statement that the signg of said agreement is for settlement purpses only and does not constitute an admission by respondents that the law has been violated as alleged in such eomplait and waivers and other provisions as required by the Commssion rules; and The Commission having thereafter considered the matter and having determed that it had reason to believe that the respondents have violated the said Act, and that complaint should issue stating its charges in that respect, and having thereupon aeeepted the executed consent agreement and placed such agreement on the public record for a period of sixty (60) days, now in furher eonfornty with the procedure preserited in Section 2.:M(b) of its rules, the Commssion hereby issues its complaint, makes the following jurisdictional findings, and enters the following order:

1. Respondent Georgia Agency Company, Ine., is a corporation organied, existing and doing business under and by virtue of the laws , vr,VnVI.t (1.Ul'"J. v'-,. H05 Decision and Order of the State of Georgia, with its offee and principal place of business located at Suite 850, 8 Perimeter PI., N. , Atlanta, Ga. Respondents Riehard A. Bryant, Jr., Riehard R. Royal and Doyle Fleming are offcers and/or stockholders of said corporation. They formulate, direct and control the policies, acts and praetiees of said corporation and their address is the same as that of said corporation. 2. The Federal Trade Commission hab jurisdiction of the suhject matter of this proceeding and of the respondents, and the proceeding is in the public interest.

ORDER It is ordered That respondents, Georgia Agency Company, Inc., a corporation, its successors and signs and its officers, and Richar A. Bryant, Jr. and Richard R. Royal, individually and aB officers of said corporation and Doyle Fleming, individually and aB principal stoekholder of said corporation, and respondents' agents, representatives and employees directly or through any eorpration, subsidiar, division or other device, in connection with the advertising, offering for sale, sale or distribution of aerosol health and beauty aid products, fire extinguishers, lubrieants and novelty items or any other products services, distributorships or franchises in commerce, as "commerce" is defined in the Federal Trade Commssion Act, do forthwith cease and desist from:

A. Representing, directly or by implication, that: 1. (a) Persons investing in respondents' distributorships, franchises or purchasing respondents' products will receive any stated amount of income or gross or net profits or other earngs, or misrepresenting in any manner, eargs, profits or other benefits to be derived by purchasers of respondents' distributorships, frachises or products. (b) Any stated sums of money are paBt eargs of distributors or purchasers of respondents' products unless such sum are based upon the actual figures for all distributorships grted by the respondents in operation durng the entire preceding twelve (12) month period, and without disclosing clearly and eonspieuously immediately adjaeent any such representation that "REPRESENTATIONS ARE BASED ON THE REPRESENTATIVE NET EARNINGS OR PROFITS OF ALL INDEPENDENT DISTRIBUTORS OF THIS COMPANY IN OPERATION DURING THE PAST YEAR. THESE FIGURES SHOULD NOT BE CONSIDERED AS ACCURATE REPRESEN- TATIONS OF POTENTIAL EARNINGS OR PROFITS m' ANY SPECIFIC DISTRIBUTOR."

2. Respondents wil obta satisfactory or profitable locations for sale of the products purchased from them; Provd, hmever That HI2 FEDERAL TRADE COMMISSION DECISIONS Decision ami Order 85 F.

nothing herein shall he eonstrued to prohibit respondents from truthfully and nondeeeptively representing that they have obtained locations or assisted in obtaining locations if respondents clearly and eonspieuously disclose, in immediate eonjunetion therewith, the average net or gross earnings realized by all distributors from sales of its products in locations obtained by respondents or through their assistance.

3. National advertising will be eondueted by or provided for by respondents.

4. The distributorship investment is fully rebatable or refundable under the contract without fully disclosing, both orally and in writing in the contract, the procedure by which such a refund may be obtained including the amount of product which must be purchased, based on the prospective distributor s investment in order to obtain full reimbursement of the investment.

5. Brand name products are used in the manufacture of respondents' products or misrepresenting in any manner the typ, nature or origin of respondents' products.

6. Respondents conduct sureys or investigations to find desir"ble market areas for their products or suitable retail locations for the sale of their products.

7. Geographie terrtories granted to distributors are exclusive or that the subsequent disposition by distributors of products are geographically restricted.

8. The formula employed in the manufacture of respondents products is exclusive.

9. The products of respondents that are sold to distributors are fact moving or easy to sell.

10. Persons named as references are distributors, successful or otherwse, unless such persons have been actual distributors aE described in Section of this order. 11. There is a charge aE par of the distributorship investment or otherwise for any goods or services speeifed in the distributorship contract or application that are not actually shipped or provided by respondents.

12. Retail aeeounts secured by respondents payor wil pay ea. h for respondents' products.

B. Making any claim in any advertising or promotional material for which the respondents do not have in their possession valid substantiating data, which data shall be made available to prospective distributors or the Commission or its staff upon demad.

C. Failing to fursh any prospective distributor with all of the following information, in writing and in a clear permanent form, at the GEORGIA AGENCY CO. 813 805 Dccision and Order time when contact is first established between such prospective distributor and the respondents or their representatives: 1. The offcial names(s) and address(es) of the corporate respondent, the parent firm or holding company of the respondent, if any; all affiiated companies that will engage in business with the distributor. 2. The business experience of the respondents, including the length of time the respondents have conducted a business of the type to be operated by the distributor, have granted distributorships for such business and have granted distributorships in other lines of business. 3. A list of the names and addresses of ten (10) persons who purchased distributorships, for products or product lines similar to, or the same as, those being offered by respondents to any prospective distributor.

4. A statement of the conditions and terms under which the respondents allow the distributor to sell, lease, assign, or otherwse transfers. Ahisstatementdistributorship,of theornumberany interestof personstherein. who have signed distributor agreements for whom locations have not yet been agreed upon by both the respondents and the distributor. All of the foregoing material is to be contained in a single package, is to be made available to the Commssion or its staff upon demad, and is to ear a distinctive and eonspieuous cover sheet with the following information (and no other) imprinted thereon in bold face typ of not less than ten (10) point size:

INFORMATION FOR PROSPECTIVE DISTRIBUTORS REQUIRED BY THE FEDERAL TRADE COMMISSION This package of information is provided for your own protection. It is in your best interest to study it carefully before making any commitment. If you do sign a contract, you may cancel it, and obtain a full refund of any money paid for any reason within five business days after signing. Details appear on the contract itself.

The i.nformation contained herein has not been reviewed or approved by the Federal Trade Commission, hut any misrepresentation constitutes a violation of Federal law. you feel you have been misled, you should contact the Federal Trade Commission in Washington, or the Ferler-d.l Tr,ule Commission Regional Offee nearest you. D. ailing to inelude immediately above and on the same page as the distributor's signature line of any eontmet establishing or eonfrming a distributorship agreement, the following statement in bold face print at least 50 percent larger than any other print in the body of such eontraet, or in bold face print of a eontrating color: NOTICE: YOU ARE ENTITLED TO CERTAIN IMPORTANT INFORMATION CONCERNING THIS TRANSACTION, ENTITLED "INFORMATION FOR PROS- PECTIVE DISTRIBUTORS REQUIRED BY THE FEDERAL TRADE COMMIS- SION." IT IS IN YOUR B,;ST INTEREST TO DEMAND AND STUDY SUCH Decision and Order 85 F.T.C. INFORMATION. YOU MAY CANCEL THIS CONTRACT FOR ANY REASON WITIIIN FIVE BUSINESS DAYS AFTER YOU SIGN fT. If you do choose to cancel you will be entitled to receive full refund of any money paid within five business days after Georgia Agency Company, Inc., receives notice of your cancellation. You may use any reasonable method to notify Georgia Agency Company, Inc., of your cancellation within the five business day grace period. For your own protection, you may wish to use certified mail with return receipt requested, or a telegmm, either of which should be sent to the address below. (Respondents will insert here the address to which such notices should be sent.) To cancel this transaction, the notice of cancellation must be nt not laterE.thanFailingmidnighttoofeancel(Respondentsany contractwil insert fordate.which a notice of eaneellation was sent by any reasonable means within five (5) business days after the contract's execution, or failing to refund any money paid by distributor within five (5) business days after the date of receipt of such notice of eaneellation.

As used in this order, the following definitions shall apply: 1. "Prospective distributor" means any person who approaches, or is approaehed by, respondents or their agents or representatives for the purpose of investigating a distributorship between such person and respondents;

2. "Time when eontact is first established" means the earlier of the time when: (a) a direct personal meeting rITt oeeur between respondents or their agents or representatives and a prospective distributor, or (b) any doeumcnt or promotional literature is distributed to a prospective distributor;

3. "Business day" means any calendar day except Sunday, or the following business holidays: New Years Day, Washington s Birthday, Memorial Day, Independenee Day, Labor Day, Columbus Day, Veteran s Day, Thanksgiving Day, and Chrstmas Day. It is furtlwr ordered That respondents:

Inform orally all prospective customers and provide in wrting in all contracts that the eontmct is not rmal and binding until respondents have completely performed their obligations thereunder by shipping all supplies and products to the customer and performing all services, and said customer has thereafter signed a statement indicating his satisfaction;

Refund immedately all monies to (1) customers who have refused to sign statements indicating satisfaction with respondents' shipments of supplies and products, and (2) eustnmers showing that respondents' contract, solicitations or performance were attended by or involved violations of any of the provisions of this order. It is furtlwr orred That respondents require that distributors pay no more than one-third of the amount of the contract price prior to the shipment of goods and the establishment of aeeounts to the satisfaction of the distributor.

815 Dccision and Order It is further ordered That respondents maintain fies containing all inquiries or complaints from any souree relating to acts or praetiees prohibited by this order, for a period of two (2) years after the receipt and that such fies be made available for examination by a duly authorized agent of the ederal Trade Commssion durg the regular hour of the respondents' business for inspection and copying. It is further ordered That the corporate respondent notify the Commission at least thirty (30) days prior to any proposed change in the corporate respondent such as dissolution, assigrent or sale resulting in the emergence of successor corporations, the creation or dissolution of subsidiares or corporate affiliates or any other change in the corporation which may affect compliance obligations arising out of this order.

It is further ordered That the individual respondents named herein promptly notify the Commission of the discontinuance of their present business or employment and of their affiliation with a new business or employment. Such notice shall include respondents' eurent business address and a statement as to the nature of the business or employment in which they are engaged as well as a description of their duties and responsibilities.

It is further ordered That respondents deliver a copy of this order to cease and desist to all present and future employees, agents and representatives engaged in the offering for sale or sale of respondents distributorships or products or in any aspect of prepartion, creation or placing of advertising and that respondents secure a signed statement acknowledging receipt of said order from each such person. It is further ordered That the eorprate respondent distribute a copy of this order to each of its operating divisions or deparments. It is further ordered That the respondents herein shall within sixty (60) days after servee upon them of this order, fie with the Commssion a report, in writing, setting forth in detal the manner and form in which they have eomplied with this order.