FTC Charges Two Companies that Targeted Small Businesses with Office Supply Schemes
Two office supply operations have been charged with tricking businesses into paying for overpriced office and cleaning supplies they never ordered. The companies targeted small businesses and nonprofit organizations.
At the request of the Federal Trade Commission (FTC), federal courts in California and Maryland have temporarily halted and frozen the assets of the two operations. The agency seeks to permanently stop the illegal practices and obtain refunds for the defendants' victims.
"The defendants lied to small businesses, charities and churches to get them to pay for overpriced supplies they didn't order," said Jessica Rich, Director of the FTC's Bureau of Consumer Protection. "That's not only shameful, it's also illegal."
In the California case, Telestar Consulting Inc., allegedly used a variety of tactics to persuade consumers to pay for unordered merchandise.
For example, the FTC alleges that the defendants called the consumers to offer supposed deals on, or free samples of, items like art supplies and cleaning products. They also asked consumers to accept an additional shipment by falsely calling it a backorder that was supposedly part of an order the consumer had already paid for, and then billed them for the so-called backorder.
In other instances, the defendants claimed that consumers had agreed to multiple shipments, when at most they had agreed to only one shipment. In addition, in instances in which consumers agreed to make a purchase, the defendants allegedly failed to disclose the total cost and quantity of goods, and the terms of the sale.
According to the FTC's complaint, on numerous occasions, the defendants threatened to send consumers to collections when they challenged the defendants' right to bill them or did not pay promptly. Consumers who paid under a mistaken belief that they had to do so – some paid thousands of dollars more than what they were legally obligated to pay – often received more unordered merchandise and bills for payment.
In the Maryland case, Lighting X-Change telemarketers – one of many named defendants -- falsely indicated that they had done business with the consumers earlier and that they were offering a free sample or catalog, without properly disclosing that they were making a sales call. The person who processed the invoices was often not the same person who received the shipments and did not know the merchandise had not been ordered. Those who paid became targets for future shipments of unordered merchandise and invoices seeking payment.
In both cases, the defendants are charged with violating the FTC Act, the Telemarketing Sales Rule, and the Unordered Merchandise Statute by shipping and billing for unordered merchandise.