Exhibit 10.1 Federal Trade Commission Settlement Agreement
|---------------------------|
| X FILED LODGED |
| - - |
| RECEIVED COPY |
| - - |
| JUL 30 2001 |
| |
| CLERK US DISTRICT COURT |
| DISTRICT OF ARIZONA |
| BY /s/ DEPUTY |
| ------------- |
|---------------------------|
UNITED STATES DISTRICT COURT
DISTRICT OF ARIZONA, PHOENIX DIVISION
______________________________________
)
Federal Trade Commission, ) CV- No. 00-1210 PHX SMM
)
Plaintiff, ) STIPULATED FINAL JUDGMENT
) AND ORDER FOR PERMANENT
v. ) INJUNCTION AND OTHER
) EQUITABLE RELIEF
) AS TO DEFENDANTS XX.XXX,
XX.Xxx, Inc., et al., ) TELCO BILLING, PUBLICATION
) MANAGEMENT, XXXXXXX
Defendants. ) X'XXXX, AND XXXXXXX XXXXX
______________________________________)
Plaintiff, Federal Trade Commission ("FTC" or "Commission"), having filed
its Complaint for permanent injunction and other relief in this matter, pursuant
to Sections 5(a) and 13(b) of the Federal Trade Commission Act ("FTC Act"), 15
U.S.C. Sec.Sec. 45(a) and 53(b), and the parties having agreed to settle this
action without adjudication or admission of any issue of fact or law, therefore,
pursuant to stipulation of the parties, it is hereby ORDERED, ADJUDGED, AND
DECREED as follows:
FINDINGS
--------
1. This Court has jurisdiction of the subject matter of this case and of
the parties hereto.
2. Venue is proper as to all parties in the District of Arizona under 15
U.S.C. Sec. 53(b), and 28 U.S.C. Sec.Sec. 1391(b) and (c).
3. The alleged activities of Defendants (as "Defendants" are defined
below) are in or affecting commerce, as defined in the FTC Act, 15
U.S.C. Sec. 44.
4. The Complaint states a claim upon which relief may be granted against
Defendants under Sections 5(a) and 13(b) of the Federal Trade
Commission Act, 15 U.S.C. Sec.Sec. 45(a) and 53(b). There have been no
findings or admissions of any wrongdoing by the Defendants.
5. The Commission and Defendants, by and through their counsel, have
agreed that the entry of this Order resolves all matters arising from
the allegations of the Complaint in this action. This Order supersedes
all prior Orders in this matter.
6. Defendants waive all rights to seek judicial review or otherwise
challenge or contest the validity of this Order.
7. Entry of this Order is in the public interest.
ORDER
-----
DEFINITIONS
1. "DEFENDANTS" means Xxxxxxx X. Xxxxx, Xxxxxxx X. X'Xxxx, XX.Xxx, Inc., Telco
Billing, Inc., d/b/a Xxxxxx-Xxxx.Xxx, and Publication Management, Inc.
2. "DOCUMENT" is equal in scope and synonymous in meaning to the usage of the
term in Federal Rule of Civil Procedure 34(a), and includes writings,
drawings, graphs, charts, photographs, audio and video recordings, computer
records, and any other data compilations from which information can be
obtained.
3. "INTERNET" means a worldwide system of linked computer networks that use a
common protocol (TCP/IP) to deliver and receive information. The "Internet"
includes, but is not limited to, the following forms of electronic
communication: file transfers, electronic mail, the World Wide Web,
newsgroups, Internet Relay Chat, audio, and video.
4. "LEC" OR "LOCAL EXCHANGE CARRIER" means the local telephone company from
which a consumer or entity receives its telephone xxxx.
5. "SOLICITATION CHECK" means any check that, if deposited or cashed by the
consumer, signs the consumer up for any Internet-related goods or services,
sold by Defendants.
6. "WEB SITE" is a set of electronic documents, usually a home page and
subordinate pages, readily viewable on computer by anyone with access to
the Internet, standard software, and knowledge of the web site's location
or address.
7. "WEB PAGE" is a single electronic file or document displayed on the World
Wide Web that includes at least the following elements: copy, graphics,
layout, and internal technical design.
8. "INTERNET-RELATED SERVICES" means any product or service that assists
persons to access, use, browse, advertise on, communicate through, or do
business on the Internet, including, but not limited to: design, hosting
and maintenance of web pages and web sites, providing Internet access or
e-mail accounts, and establishing domain names and virtual domain names.
9. "RECEIVER FEES" means fees and costs incurred by the former Temporary
Receiver, Xxxxxxxx X. Xxxxxxxx, and his representatives, including
attorneys and consultants.
PROHIBITED CONDUCT
------------------
I.
INJUNCTION AGAINST MISREPRESENTATIONS
-------------------------------------
IT IS THEREFORE ORDERED that in connection with the advertising, promotion,
offering for sale, sale or provision of any goods or service, Defendants are
hereby permanently restrained and enjoined from making or assisting in the
making of, expressly or by implication, orally or in writing, any false or
misleading statement or representation of material fact, including, but not
limited to, representations that:
A. Consumers can obtain a monetary rebate from Defendants without
incurring any obligations to Defendants; and
B. Defendants have a prior or ongoing business relationship with
consumers.
II.
INJUNCTION AGAINST USING REBATE CHECKS TO SOLICIT CUSTOMERS
-----------------------------------------------------------
IT IS FURTHER ORDERED that Defendants are hereby permanently restrained and
enjoined from sending consumers any solicitation check that uses the term
"rebate," or any term that represents that Defendants have a prior or ongoing
relationship with consumers, if that is not the case.
III.
REQUIRED DISCLOSURES
--------------------
IT IS FURTHER ORDERED that in connection with the advertising, promotion,
offering for sale, sale or provision of any goods or service, Defendants are
permanently restrained and enjoined from failing to disclose, clearly and
conspicuously:
A. On the front of any solicitation check, or on the front of any stub
attached to the check, a statement that notifies the payee that the check is
part of a "solicitation" or that by cashing the check, the payee will become
obligated to pay for a good or service;
B. On the back of the solicitation check, and above the endorsement line,
a statement that notifies the payee of the amount and frequency of the charge
that Defendants will impose if the payee deposits or endorses the check;
C. In connection with any solicitation check that uses a "walking fingers"
logo, the statement in close proximity to the logo, in each place where the logo
appears: "Not affiliated with any local or long distance phone company", or "Not
affiliated with any phone company". Provided however, that if Defendants do in
fact become affiliated with any telephone company, in such statement, Defendants
may indicate the specific company affiliation as follows: "Affiliated with [name
of telephone company], but may not be affiliated with your phone company" ; and
D. In a letter or statement attached to or enclosed with the solicitation
check, all the material terms associated with depositing or endorsing the
solicitation check, including: 1) a statement that Defendants will impose a
charge if the payee deposits or endorses the check; 2) the amount, billing
method, and frequency of the charge; 3) a description of the goods or services
provided for the charge; and 4) an explanation of how to cancel and obtain a
full refund within one hundred twenty (120) days of depositing the check,
including a customer service telephone number for inquiries and/or
cancellations.
IV.
REQUIRED CONFIRMATIONS AND CANCELLATIONS
----------------------------------------
IT IS FURTHER ORDERED that Defendants shall send all consumers who deposit
solicitation checks from Defendants after the date of this Order, a written
communication, sent by mail, confirming their agreement to purchase Defendants'
services. Defendants shall send this communication within eighty (80) days
after the date that a consumer deposited the solicitation check. The
communication shall clearly and conspicuously state: 1) the good or service
purchased; 2) the billing method and price; 3) the procedures for canceling and
obtaining a full refund within one hundred twenty (120) days of depositing the
solicitation check; and 4) the name, address, and telephone number that will
appear on the consumer's Internet yellow page listing.
V.
CONSUMER NOTICES
----------------
IT IS FURTHER ORDERED that:
A. XX.Xxx shall, within thirty (30) days of the entry of this Order, mail
a written notice and Refund Application, in the forms appended as Attachments A
and B to this Order, to all XX.Xxx's current customers that signed up for
XX.Xxx's services after April 1, 2000 by cashing a solicitation check sent
before July 14, 2000.
B. Consumers shall have forty-five (45) days from the date XX.Xxx sent the
notice to mail back a completed Refund Application, in the form appended as
Attachment B to this Order. XX.Xxx shall provide a pre-addressed envelope with
the notice and Refund Application.
C. Within sixty (60) days of receiving refund requests, XX.Xxx shall issue
to each consumer the $25.00 refund referenced in Attachments A and B, provided
that the consumer has not already received a refund.
D. Within fifteen (15) days after they have mailed the notices, XX.Xxx
shall submit an affidavit to the FTC, which shall, at a minimum, affirm the
following: 1) the means used by Defendants to generate the list of consumers
eligible to receive a notice; 2) the means used by Defendants to ensure that
consumers' addresses are accurate; and 3) the number of notices sent and the
dates on which they were sent.
E. Within thirty (30) days after it has mailed the notices, XX.Xxx shall
submit an affidavit to the FTC, which shall affirm the following: 1) the number
of notices returned by the Post Office as undeliverable; and 2) with respect to
any such returned notices, the reasonable efforts made by XX.Xxx, such as
calling the telephone number that was billed or obtaining updated information
through the U.S. Post Office or other national databases, to obtain valid
addresses for those consumers and mail notices to such addresses.
F. Within sixty (60) days of the issuance of the refunds XX.Xxx shall
provide a report to the FTC describing the actions taken by XX.Xxx in compliance
with this Section of the Order; the report shall also include a list of the
names of consumers who received refunds, their addresses, and the amount of
refunds they received, as well as the list of consumers who could not be
contacted by mail or telephone. This report shall also contain a list of any
customers whose refund request was denied, and the reason for the denial.
GENERAL REQUIREMENTS
--------------------
VI.
ACKNOWLEDGMENT OF RECEIPT OF ORDER BY DEFENDANTS
IT IS FURTHER ORDERED that, within five (5) business days after receipt by
Defendants of this Order as entered by the Court, each Defendant shall submit to
the Commission a truthful sworn statement, in the form shown on Attachment C to
this Order, that shall acknowledge receipt of this Final Order.
VII.
DISTRIBUTION OF ORDER BY DEFENDANTS
IT IS FURTHER ORDERED that, for a period of three (3) years from the date
of entry of this Order, each Defendant shall:
A. Provide a copy of this Order to, and obtain a signed and dated
acknowledgment of receipt, or proof of service, from each officer, director, and
each individual serving in a management capacity, whether designated as
employees, consultants, independent contractors, or otherwise, immediately upon
employing or retaining any such persons, for any business where:
(1) A Defendant is the majority owner of the business or directly or
indirectly manages or controls the business, and where
(2) The business uses solicitation checks; and
B. Maintain and upon reasonable notice, make available to representatives
of the Commission, the original signed and dated acknowledgments of the receipt,
or proof of service, of copies of this Order, as required in Subsection (A) of
this Paragraph.
VIII.
RECORD KEEPING PROVISIONS
IT IS FURTHER ORDERED that, for a period of three (3) years from the date
of entry of this Order, Defendants, in connection with any business where:
(1) A Defendant is the majority owner of the business or directly or
indirectly manages or controls the business, and where
(2) The business uses solicitation checks are hereby restrained and
enjoined from failing to create, and from failing to retain for a
period of three (3) years following the date of such creation, unless
otherwise specified:
A. Books, records, and accounts that, in reasonable detail, accurately and
fairly reflect the cost of goods or services sold, revenues generated, and the
disbursement of such revenues;
B. Records accurately reflecting: the name, address, and telephone number
of each person employed by such business, including independent contractors;
that person's job title or position; the date upon which the person commenced
work; and the date and reason for the person's termination, if applicable. The
businesses subject to this Paragraph shall retain such records for any
terminated employee for a period of two (2) years following the date of
termination;
C. Records containing the names, addresses, phone numbers, dollar amounts
paid, quantity of items and services purchased, and description of the items and
services purchased, for all consumers to whom such business sold, invoiced, or
shipped any goods and services;
D. Records that reflect, for every consumer complaint or refund request,
received:
1. The consumer's name, street address, telephone number, and dollar
amount paid by the consumer;
2. The complaint or refund request, if any, and the date of the complaint
or refund request;
3. The basis of the complaint, if any, including the name of any
salesperson complained against, and the nature and result of any
investigation conducted concerning the complaint;
4. Each response by Defendant and the date of the response;
5. Any final resolution and the date of the resolution; and
6. In the event of a denial of a refund request, the reason for the
denial; and
E. Copies of all sales scripts, training materials, advertisements, or
other marketing materials used by Defendants; provided that copies of all sales
scripts, training materials, advertisements, or other marketing materials
utilized shall be retained for three (3) years after the last date of
dissemination of any such materials.
IX.
COMPLIANCE REPORTING BY DEFENDANTS
IT IS FURTHER ORDERED that, in order that compliance with the provisions of
this Order may be monitored:
A. For a period of three (3) years from the date of entry of this Order,
each Defendant shall notify the Commission of the following:
1. Any changes in Defendant's business address, mailing addresses, and
telephone numbers, within twenty (20) days of the date of such change;
2. Any changes in the employment status (including self-employment) of
any individual Defendant, within ten (10) days of such change. Such
notice shall include the name and address of each business that the
individual Defendant is employed by, or operates, a statement of the
nature of the business, and a statement of the individual Defendant's
duties and responsibilities in connection with the business or
employment;
3. Any change in the structure of each Defendant, such as creation,
incorporation, dissolution, assignment, sale, merger, dissolution of
subsidiaries, filing of a bankruptcy petition, or change in the
corporate name or address, or any other change that may affect
compliance obligations arising out of this Order, within thirty (30)
days of the effective date of any change;
B. Within one hundred eighty (180) days after the date of entry of this
Order, each Defendant shall provide a written report to the FTC, sworn to under
penalty of perjury, setting forth in detail the manner and form in which it has
complied and is complying with this Order. This report shall include, but not
be limited to:
1. Each individual Defendant's then current employment and business
address, mailing addresses, and telephone numbers; the individual
Defendant's title and responsibilities for each such employer or
business;
2. Each corporate Defendant's then current business addresses and
telephone numbers, a description of the business activities of each
such employer or business, including a description of its marketing
methods and goods and services sold, and a list of the names of all
current officers and managers;
3. A copy of each acknowledgment of receipt of this Order obtained by
each Defendant pursuant to Section VII of this Order;
4. A statement describing the manner in which each Defendant has complied
and is complying with this Order;
C. Upon written reasonable request by a representative of the Commission,
each Defendant shall submit additional written reports (under oath, if
requested) and produce documents on fifteen (15) days notice with respect to any
conduct subject to this Order;
D. For the purposes of this Order, each Defendant shall, unless otherwise
directed by the Commission's authorized representatives, mail all written
notifications to the Commission to:
Associate Director
Division of Marketing Practices
Federal Trade Commission, Room 238
000 Xxxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Re: FTC v. XX.Xxx, Inc., et al., CV- No. 00-1210 PHX SMM
--------------------------------
E. For purposes of the compliance reporting required by this Paragraph,
the Commission is authorized to communicate directly with Defendants unless or
until a Defendant informs the Commission that the Defendant is represented by
counsel and would prefer that the Commission communicate directly with the
Defendant's counsel.
X.
COMMISSION'S AUTHORITY TO MONITOR COMPLIANCE
IT IS FURTHER ORDERED that the Commission is authorized to monitor
Defendants' compliance with this Order by all lawful means, including, but not
limited to, the following:
A. For a period of three (3) years from the date of entry of this Order,
the Commission is authorized, without further leave of court, to obtain
discovery from any person in the manner provided by Chapter V of the Federal
Rules of Civil Procedure, Fed. R. Civ. P. 26-37, and the Local Rules of this
Court, including the use of compulsory process pursuant to Fed. R. Civ. P. 45,
for the purpose of monitoring Defendants' compliance with any provision of this
Order;
B. The Commission is authorized to use representatives posing as consumers
or suppliers to Defendants, Defendants' employees, or any other entity managed
or controlled in whole or in part by Defendants, without the necessity of
identification or prior notice, as allowed by federal law; and
C. Nothing in this Order shall limit the Commission's lawful use of
compulsory process, pursuant to Sections 9 and 20 of the FTC Act, 15 U.S.C.
Sec.Sec. 49 and 57b-1, to determine whether Defendants have violated any
provision of this Order or Section 5 of the FTC Act, 15 U.S.C. Sec. 45.
XI.
ACCESS TO BUSINESS PREMISES
IT IS FURTHER ORDERED that, for a period of three (3) years from the date
of entry of this Order, for the purpose of further determining compliance with
this Order, Defendants shall permit representatives of the Commission, within
four (4) business days of receipt of written notice from the Commission:
A. Access during normal business hours to any office, or facility storing
documents, of any business where:
(1) A Defendant is the majority owner of the business or directly or
indirectly manages or controls the business, and where
(2) The business uses solicitation checks. In providing such access,
Defendants shall permit representatives of the Commission to inspect
and copy all unprivileged documents relevant to any matter contained
in this Order; and shall permit Commission representatives to remove
such documents relevant to any matter contained in this Order for a
period not to exceed two (2) business days so that the documents may
be inspected, inventoried, and copied; and
B. To interview the owners, officers, directors, and employees, including
all personnel involved in responding to consumer complaints or inquiries, and
all sales personnel, whether designated as employees, consultants, independent
contractors or otherwise, of any business to which Subsection (A) of this
Paragraph applies, concerning matters relating to compliance with the terms of
this Order. The person interviewed may have counsel present, and counsel for
Defendants may be present as well.
XII.
COMPENSATION OF RECEIVER; RETURN OF DOCUMENTS
---------------------------------------------
IT IS FURTHER ORDERED that:
A. All Receiver fees, allowed by the Court, shall be paid by Defendant
XX.Xxx.
B. The Receiver shall return to Defendants all documents removed from
Defendants' premises, and any copies thereof.
XIII.
EXONERATION OF BOND
-------------------
IT IS FURTHER ORDERED that the bond posted by Defendant Crane pursuant to
the Preliminary Injunction is hereby exonerated.
XIV.
COSTS
-----
IT IS FURTHER ORDERED that each party shall bear its own costs and
attorneys' fees incurred in connection with this action.
XV.
RETENTION OF JURISDICTION
---------------------------
IT IS FURTHER ORDERED that this Court shall retain jurisdiction of this
matter for the purpose of enabling the parties to apply to the Court at any time
for such further orders and directives as may be necessary or appropriate for
the interpretation or modification of this Order, for the enforcement of
compliance therewith, or for the punishment of violations thereof.
XVI.
COMPLETE SETTLEMENT
--------------------
The parties hereby consent to entry of the foregoing Order which shall
constitute a final judgment and order in this matter. The parties further
stipulate and agree that the entry of the foregoing Order shall constitute a
full, complete and final settlement of this action. Defendants waive any
rights they may have under the Equal Access to Justice Act, 28 U.S.C. Sec. 2412.
SO ORDERED, this 26th day of July, 2001, at 10:40 A.M., Phoenix, AZ.
Xxxxxxx XxXxxx
----------------------------
United States District Judge
FOR DEFENDANTS FOR THE COMMISSION
/s/ Xxxxxx Xxxxx /s/ Xxxxxx X. Xxxxx
---------------------------- ------------------------------
Xxxxxx Xxxxx Xxxxxx X. Xxxxx
Chairman of the Board Xxxxxxx X. Xxxx
for Defendant XX.Xxx, Inc Attorneys for the Plaintiff
Federal Trade Commission
/s/ Xxxxx Xxxxxxx
----------------------------
Xxxxxx X. Xxxx
Xxxxx Xxxxxxx
Counsel for Defendant XX.Xxx
/s/ Xxxxxx Xxxxxx
----------------------------
Xxxxxx Xxxxxx
Director of Operations
for Defendant Telco Billing, Inc.
/s/ Xxxxxx X. Xxxx
----------------------------
Xxxxxx X. Xxxx
Xxxxx Xxxxxxx
Counsel for Defendant Telco Billing, Inc.
/s/ Xxxxx X. Xxxxxxx
----------------------------
Xxxxx X. Xxxxxxx
for Defendant Publication Management, Inc.
/s/ Xxxxxxx X. X'Xxxx
----------------------------
Defendant Xxxxxxx X. X'Xxxx
/s/ Xxxxxx Xxxxx
----------------------------
Xxxxxx Xxxxx
Counsel for Xxxxxxx X. X'Xxxx
/s/ Xxxxxxx X. Xxxxx
----------------------------
Defendant Xxxxxxx X. Xxxxx
/s/ Xxxxxx X. Xxxxxxx
----------------------------
Xxxxxx X. Xxxxxxx
Counsel for Xxxxxxx X. Xxxxx
ATTACHMENT A
XXXXXX-XXXX.XXX CUSTOMER NOTICE
Re: Billing for Xxxxxx-Xxxx.Xxx Internet yellow page services.
Date:
Dear Advertiser:
As a Xxxxxx-Xxxx.Xxx customer, you are currently being billed $12.50 a
month by Xxxxxx-Xxxx.Xxx for your Internet yellow page preferred listing either
on your telephone xxxx or by direct invoice. Concerns have been raised about
whether customers intended to sign up for our services or were signed up by an
unauthorized representative of your company. We are, therefore, writing to
ensure that you (or a representative of your company or organization) previously
authorized charges for our services.
According to our records, we mailed you a promotional Instant Cash Rebate
Sign Up Check. When the check was deposited, we began to xxxx you. If,
however, your company or organization did not knowingly authorize these charges,
you may be eligible for a $25.00 refund. If you would like to submit a refund
request, please complete the Refund Application and Declaration. Submitting a
Refund Application and Declaration will cancel your Xxxxxx-Xxxx.Xxx listing, and
prevent future charges from appearing on your telephone xxxx.
We apologize for this notice, but want to ensure that you are one of our
satisfied customers. If you have any questions about this notice or would like
to discuss our many services, please call our Customer Service Center at
0-000-000-0000 or visit our Web site at xxx.XX.Xxx.
-----------
Thanks.
____________________
Xxxxxx-Xxxx.Xxx
0000 Xxxx Xxxxxxx Xxxxxx
Xxxx, Xxxxxxx 00000
ATTACHMENT B
CUSTOMER REFUND APPLICATION AND DECLARATION
In order to obtain any refund for Xxxxxx-Xxxx.Xxx's services please
complete the declaration below:
I,________________________, hereby state and affirm as follows:
[Name]
1. My name is (please print). I hold the title of_________________ at the
company or organization of _____________, which has been charged for
Xxxxxx-Xxxx.Xxx services.
2. The charges to date total $__________.
3. The charges date from________ to _______.
4. The charges appeared on bills for phone number:( )_____-______.
5. My company or organization has not been issued a refund from
Xxxxxx-Xxxx.Xxx, or its telephone company.
6. My company or organization would like to terminate any relationship
with Xxxxxx-Xxxx.Xxx, stop any future billing, and obtain a refund of $25.00.
7. The individual at my company or organization who cashed the promotional
Instant Cash Rebate - Sign Up Check from Xxxxxx-Xxxx.Xxx did not know that doing
so signed the company up for Xxxxxx-Xxxx.Xxx's services or was unauthorized to
act on behalf of my company or organization.
I declare under penalty of perjury under the laws of the United States that
the foregoing is true and correct.
____________________________ DATED this ___ day of ____________, 2001.
[Signature]
Address:____________________ Contact Phone No.: ( )____-______
____________________ Contact Fax No.: ( )____-______
____________________ Contact E-mail: _______________
ATTACHMENT C
UNITED STATES DISTRICT COURT
DISTRICT OF ARIZONA, PHOENIX DIVISION
______________________________________
)
Federal Trade Commission, ) CV- No. 00-1210 PHX SMM
)
Plaintiff, ) DECLARATION OF
) DEFENDANT
v. )
)
)
XX.Xxx, Inc., et al., )
)
Defendants. )
______________________________________)
I,_______________, hereby state and affirm as follows:
[Name]
1. My name is______________, and I am a defendant in FTC v. XX.Xxx, Inc.,
et al., which has been filed in the District of Arizona.
2. On ____________ , I received a copy of the Order, which was signed by the
Honorable ______________________ and entered by the Court on _____________ 2001.
A true and correct copy of the Order I received is appended to this Declaration.
I declare under penalty of perjury under the laws of the United States that
the foregoing is true and correct.
_________________________
Signature
