Current Events in July 2001

WASHINGTON, July 12, 2001 -- Data Medical Capital, Inc., and its principal, Bryan D'Antonio, will be permanently banned from selling business ventures, employment opportunities or work-at-home opportunities, and from telemarketing as part of a settlement with the Federal Trade Commission. They will also be required to pay more than $559,000 in consumer redress.

The Commission had alleged that the defendants were engaged in a scheme to sell bogus work-at-home medical billing opportunities.

"The ability to make a decent living working from home would be a dream come true for many young parents and people who have difficulty leaving the house, such as some people with disabilities and seniors," said Howard Beales, Director of the FTC's Bureau of Consumer Protection.

"Unfortunately, the dream in this case did not come true. The fact is that few consumers who purchase a medical billing business opportunity are able to find clients, start a business and generate revenues. Consumers should be very skeptical of pitches for work-at-home opportunities that sound too good to be true."

In October 1999, the FTC filed a complaint in federal district court against Data Medical Capital, Inc., also doing business as Datamed and MedCo, and Bryan D'Antonio, alleging that they misrepresented their medical billing work-at-home opportunities by bolstering false earnings claims and misrepresented the assistance that consumers would receive in getting medical billing work.

According to the FTC, the defendants promised consumers that they could earn a minimum of $23,400 per year by using their home computers to process medical bills for physicians with whom the defendants had established relationships. The court issued a temporary restraining order with asset freeze against the defendants.

In addition to the ban from engaging in the sale of business ventures, employment opportunities, or work-at-home opportunities and telemarketing, the proposed settlement would also require the defendants to stop any collection attempts and to return any uncashed checks to consumers. The defendants would also be prohibited from selling their customer lists.

July 20, 2001
Sears spinoff HomeLife abruptly closed its stores and filed for Chapter 11 bankruptcy with the U.S. Bankruptcy Court in Wilmington, Delaware, leaving thousands of consumers wondering if they will ever receive refunds for furniture they ordered but which has not been delivered.

The answer, unfortunately, is maybe. Those who paid by credit card should immediately contract their bank and dispute the charge. Those who used Sears cards should notify Sears. Customers who paid by check can stop payment if the check has not yet cleared their bank.

Those who paid cash, or whose checks have already cleared, will have to get in line with all the other creditors and wait for the bankruptcy court to sort it out. As unsecured creditors, consumers often get only a fraction of what is owed to them.

Sears founded HomeLife in the late 1980s. It sold a majority of the chain to Citicorp Venture Capital in 1998. As a minority stockholder, Sears allowed some of the stores to remain inside Sears stores and it provided financinc through Sears credit cards.

The company had sales of about $680 million last year and, with 130 stores in 26 states, was the eighth-largest furniture retailer in the country.

In its bankruptcy filing, the company said it owes more than $100 million to creditors. The closing came after HomeLife failed to raise $85 million in emergency funding.

Laura of Columbia MD writes (8/6/01):
Called on 1 August 2001 to get 2 new tires on my 1991 GEO Prizm. Person answering phone quoted me a price of $61.00 each for 2 Pirelli 400 tires. Then he said he could knock the price down to $51.00 I ageed and went to get the tires put on. I paid $138.28 for work that was done. Upon arriving at home and looking at my receipt I discovered that I had NO warranty on these tires.

I called NTB on Monday morning and spoke with Jason who said it was up to Pirelli whether to have a warranty or not and that basically I was out of luck. Well, I had pulled a report from the internet on tires and I have in front of me an ad for Pirelli P400 tires (which I got) that showed a warranty of 80,000 miles so I'm confused and don't understand not only that he said they don't volunteer information to customers they assume because they are there that they know everything. I'm not happy.

The consequences are that I basically got "screwed". I now have no warranty on my two new tires which means if anything goes wrong I will need new tires again and I will not go back to NTB. After all, why should I since I have no warranty and I would not recommend them to anyone.

Joseph of Rougemont NC (7/13/01):
I purchased a rather expensive (i.e., $150 each) pair of Michelin MXV4 205-60V-15 tires from a National Tire & Battery Store (3030 South Memorial Parkway) while on a trip in Huntsville, Alabama. Recently, one of these tires failed when it developed a bubble in the sidewall.

Today, upon taking the tire to my local NTB dealer, I was informed that, although there is still over 5/32 inches of tread left on this tire and it was otherwise in good shape, I could not receive any trade in allowance for this tire. They claim the tire was damaged hitting a pothole which, under the terms of the manufacturer's warrantly, is not covered because this is "impact damage."

First, we never hit a serious pothole (i.e., one that we remembered or one which either damaged the front end or required the front end to be realigned). Second, these are expensive high performance tires which should not fail under minor impact. However, NTB refuses to provide any allowance for this faulty tire. What are my recourses other than to never purchase any tires from either NTB or Michelin? Is this a problem with the manufacturer (i.e., does Michelin have a history of such defects with this tire) or is this a problem with the tire dealership (NTB) in a failure to provide adequate customer service?

High-performance doesn't always mean high durability. High-speed tires are "stickier" than their more pedestrian cousins and in many cases are more prone to damage and premature wear.

Lillian of Lithonia, GA, writes:
I have a 1999 Toyota Corolla. On November 10, 1999 I opened up an account for $255 and purchased a set of tires with the warranty up to 50,000 miles. My odometer had a reading of 23,359 miles. On April 27, 2000 I had a flat tire. I took my car to NTB to get the tires replaced. The odometer had a reading of 36,775 miles. Both tire were bald and the steel was exposed. NTB advised me that also needed an alignment. I paid them $170.00 for an alignment and two new front tires.

On November 28. 2000 I got a flat tire. My odometer reading was 49,181. Upon further checking I discovered I needed two new front tires. Both were bald and the steel was exposed. I went to The NTB dealer and was advised I needed an alignment and two new tires. They told me the car may have a problem due to an accident I had in March of 1999.

I went to the Toyota dealer and he informed me there was nothing wrong with the wheels. I called the NTB regional office and spoke to someone in Customer Service who had the store manager call me. He advised me to bring my car back. I went back and he agreed to give me a discount on the alignment and the tires. I spent $80.00 on two new front tires. It seems I am paying for tires that are supposed to give me 50,000 and I am having to replace tires every 14,000. In one year I have spent $504.00 on front tires on three occasions.

Deborah of Stone Mountain, GA:
I have bought two full sets of Yokohama tires from Sears NTB within less than two years and about 55,000 miles worth of usage. At least two tires went flat with cracks that were "unrepairable". Also, the first set of tires I bought were practically bald after about 45,000 miles.

Despite Sears NTB 60,000-mile warrenty, they do not honor it. IT IS ALWAYS THE CUSTOMER'S FAULT. I have complained to the NHTSB about what I believe are defective tires and I will complain to the appropriate authorities about SEARS. I spent almost $700 on 8 tires (2 sets) in less that 2 years.

WASHINGTON, July 13, 2001 --The Federal Trade Commission has challenged another Web purveyor of products made with comfrey, an unproven and dangerous substance that can lead to severe liver damage and death.

The target of the latest FTC action is Western Botanicals, Inc., a Fair Oaks, CA, company that manufactured and marketed a variety of products containing the herbal ingredient comfrey, for both external and internal uses. The FTC charges that the company made unfounded claims that the products were beneficial in the treatment of a wide variety of serious diseases and health conditions, and that they were safe. Last week, the FTC took similar action against Christopher Enterprises.

Western Botanicals has agreed, in a stipulated permanent injunction filed in federal court, to stop marketing comfrey products for internal uses or on open wounds, and to include a warning on comfrey products marketed for external uses. It has also agreed to stop making the challenged safety and health benefit claims.

According to the FTC, Western Botanicals, its president, Randy C. Giboney, and vice-president, Kyle D. Christensen, marketed and sold herbal products containing comfrey to distributors and directly to consumers by mail, newsletters, and on the Internet at www.westernbotanicals.com.

The products purportedly treated and alleviated symptoms of various diseases and health conditions. In their advertising and promotional materials the defendants represented their comfrey products were safe for consumers, including nursing women, when taken internally or applied to open wounds. The defendants also claimed that their comfrey products, when taken internally, would treat chronic bronchial diseases, gastritis, duodenal ulcers, colitis, rheumatism, arthritis, osteoporosis, multiple sclerosis, amyotrophic lateral sclerosis and other conditions. The FTC alleges that the defendants' representation that their comfrey products were safe is false, and that they did not have scientific evidence to substantiate their safety or efficacy claims.

The defendants have agreed to a stipulated final order for permanent injunction to resolve the FTC allegations. The stipulated final order would prohibit them from marketing any comfrey product for ingestion, for use as a suppository, or for external use on open wounds, unless they have evidence that the product is free of pyrrolizidine alkaloids and is safe. They would also be required to place the following disclosure warning in any advertisement, promotional material or product label for any comfrey products intended for topical use:

WARNING: External Use Only. Consuming this product can cause serious liver damage. This product contains comfrey. Comfrey contains pyrrolizidine alkaloids, which may cause serious illness or death. This product should not be taken orally, used as a suppository, or applied to broken skin. For further information contact the Food and Drug Administration: http//vm.cfsan.fda.gov

In addition, the order would prohibit the defendants from making the specific health claims challenged in the complaint or any unsubstantiated representations about the safety, health benefits, performance, or efficacy of any food, drug, dietary supplement or other health-related product or service. The order further would require them to notify their distributors that unsubstantiated claims violate the law and that the defendants will terminate distributors who make false or unsubstantiated claims. The stipulated order includes a suspended judgment of $50,800 and a right to reopen provision that would reinstate the judgment if the court finds that the defendants made material misrepresentations or omissions on their financial statements. Finally, the order includes various recordkeeping and reporting requirements designed to assist the FTC in monitoring the defendants' compliance.

On Friday July 6, 2001, the Food and Drug Administration issued a letter to industry communicating concern about the safety of supplement products containing comfrey. FDA's letter, which has been sent to trade associations and other industry groups, advises that, because comfrey contains certain toxic substances - pyrrolizidine alkaloids - that have been associated with liver damage and other health hazards, it should not be used as an ingredient in supplements. FDA further recommends that firms immediately stop marketing comfrey-containing supplements and alert consumers to stop using the products. Finally, FDA is urging manufacturers to identify and report any adverse events, including liver disorders, that have been associated with comfrey and other ingredients containing pyrrolizidine alkaloids. The letter is also posted on FDA's website at www.cfsan.fda.gov.

WASHINGTON, July 11, 2001 -- ValueVision International, Inc., the third largest television "home shopping" network retailer in the United States, has agreed to settle Federal Trade Commission charges that it aired advertisements for a variety of weight loss, cellulite treatment, and anti-hair loss products with claims it could not substantiate.

ValueVision has agreed not to make health-related claims about any food, drug, dietary supplement, cellulite-treatment product or weight-loss program, unless it can back those claims with competent and reliable scientific evidence. ValueVision also has agreed to offer refunds to dissatisfied consumers who bought the products at issue from ValueVision.

ValueVision, based in Eden Prairie, Minnesota, operates a cable television shopping service and markets a variety of consumer products principally through live, 24-hour per day television home shopping programming. ValueVision complements its television home shopping business by selling products through its Internet website (vvtv.com). Through its affiliation with the National Broadcasting Company, Inc. (NBC), ValueVision is now known as ShopNBC, and its website address has changed to ShopNBC.com.

"Consumers use advertising to help them make purchasing decisions, and they expect accuracy and truthfulness in product claims," said Howard Beales, Director of the FTC's Bureau of Consumer Protection. "Whether marketing online, in brick and mortar stores, or on television, retailers are responsible for being able to back up the claims they make for their products."

The FTC complaint alleges that ValueVision made health-related claims about the following five products without competent and reliable scientific evidence to support those claims:

• WeightPerfect Fat Loss Accelerators The WeightPerfect Fat Loss Accelerator, manufactured by WeightPerfect Products, Inc. of Dallas, Texas, is a two-part weight-loss product consisting of a capsule, containing bitter orange extract, guarana, pyruvate, and white willow bark, and a liquid formula, containing melatonin and amino acids. According to the FTC, ValueVision claimed (with little or no mention of diet and exercise) that the Accelerators decrease the appetite and cause fat loss while sleeping, and that people can lose 50 pounds or more in twelve weeks.
• Fight the Fat Another purported weight-loss product, Fight the Fat - distributed by Television Marketing Group of Newport Beach, California - is a liquid form of chitosan, a substance derived from shellfish. According to the FTC, with little or no mention of the need for diet and exercise, ValueVision claimed that Fight the Fat "will quite literally melt the pounds off you," and that by ingesting a few drops of chitosan, consumers could eat high fat foods, such as chocolate, butter, pizza, hamburgers, and fried chicken, without worrying about putting on weight. ValueVision claimed that the product worked by absorbing the fat in food consumed and "escorting" it out of the body through waste.
• NutriFirm Perfect Body Solution Perfect Body Solution is an anti-cellulite lotion manufactured by Isomers Laboratories of Toronto, Canada. According to the FTC, ValueVision claimed that the lotion eliminates or reduces cellulite by liquefying the underlying body fat that purportedly causes cellulite.
• NutriFirm Internal Cleanser The Internal Cleanser, also manufactured by Isomers, consists of two products, a fiber-based "Detox," and "Restore," which contain a variety of flora and acidophilus. According to the FTC, ValueVision claimed that the Internal Cleanser aids those who suffer from colds, flu, allergies, backaches, muscle aches, headaches, and impaired memory.
• NutriFirm Vitamin H Serum Vitamin H is a topical anti-hair loss solution that contains biotin. It, too, is manufactured by Isomers. According to the FTC, ValueVision claimed that Vitamin H prevents or reduces hair loss and slows down the rate at which hair falls out, emphasizing its ability to work for women who recently have given birth.

Under the terms of the proposed consent agreement, ValueVision would be barred from engaging in similar acts or practices in the future. ValueVision could not make any unsubstantiated claim (a claim lacking competent and reliable scientific evidence) that the WeightPerfect Fat Loss Accelerators, Fight the Fat, NutriFirm Perfect Body Solution, or any other food, drug, dietary supplement, or cosmetic: causes substantial weight loss or fat loss; causes substantial loss in body weight or body fat without exercise or restrictions on caloric intake; prevents weight gain, regardless of exercise or caloric intake; increases metabolic rate or burns calories; reduces or eliminates cellulite; suppresses the appetite; causes substantial loss in body weight or body fat while sleeping; prevents the human body from absorbing fat; or enables consumers to lose weight even if consumers eat foods that are high in fat, including steaks, pizza, hamburgers, butter, fried chicken, or chocolate.

The proposed order also would bar ValueVision from making unsubstantiated claims that NutriFirm Internal Cleanser, or any other food, drug, dietary supplement or cosmetic, alleviates backaches, muscle aches or headaches; alleviates colds, influenza or allergies; or improves impaired memory. In addition, the order would prohibit unsubstantiated claims that NutriFirm Vitamin H Serum, or any other food, drug, dietary supplement or cosmetic, prevents or slows the rate of hair-loss, including hair-loss in women after pregnancy.

The proposed order also would require ValueVision to have competent and reliable scientific evidence for any claims that any food, drug, dietary supplement, cellulite-treatment product or weight-loss program can or will cure, treat, or prevent disease, or will have any effect on the structure or function of the human body. The proposed settlement would allow ValueVision to make certain claims for drugs approved by the Food and Drug Administration or food or dietary supplement claims that are permitted by statute.

Finally, the proposed order would require ValueVision to send a letter to all purchasers who bought any of the five products through ValueVision since February 1, 2000. The letter would offer a complete refund for up to three bottles of the product, including shipping and handling charges, to those consumers who were dissatisfied.

July 11, 2001
Sears is taking off the make-up. The giant retailer said it's eliminating its own "Circle of Beauty" brand and eliminating the sale of other brands as well, including Avon Products, which it started selling last fall.

The Sears announcement hinted at additional changes in the works, calling it the "first element in a repositioning" of its 860 stores.

Sears isn't completely exiting cosmetics. It said it will continue to sell selected fragrances, bath and body products, including its own "Time Out" brand.

Sears began emphasizing its "softer side" in the mid-1990s but analysts said the effort was largely a flop. Cosmetics amounted to less than one percent of total sales as drug and discount chains offered larger selections and lower prices.

Avon kept a stiff upper lip. A spokesman said the company was disappointed that Sears was dumping beauty products just a few months before a major promotion campaign to support Avon's presence in Sears and J.C. Penney stores.

July 8, 2001
New rules going into effect August 1 require long-distance companies to inform customers about rate changes. Only problem is, the rules aren't very specific about how that notification has to be made. Most companies will probably just post the changes on a back page of their Web site.

The way it's worked for most of the last 100 years or so is that long-distance companies have filed tariffs -- lengthy, legalistic documents -- with the Federal Communications Commission whenever they wanted to change their rates. While in theory the tariffs were public information, only the most determined consumer would be able to understand the bureaucratic language used in a tariff if they ever managed to get their hands on one.

In theory, the FCC has had the authority to review the tariffs but it hasn't done so for years, on the theory that there are so many long-distance carriers that competitive pressures make such reviews unnecessary. In other words, it has let companies charge whatever they wanted and to change existing rates without bothering to tell anyone.

As long as the tariffs were filed and the FCC didn't object, they were the law of the land and consumers could not contest any charges that were properly levied under the terms of the tariff. In other words, they couldn't take the long-distance companies to court.

Under the new rules, the FCC is out of the picture and the state public utility commissions will have the authority to review the companies' rates and service plans. Additionally, now that tariffs are being thrown onto the scrap heap of history, state contract rules will apply to the relationship between the companies and their customers. In theory, this would open the companies to lawsuits by disgruntled consumers.

The new regulations leave it up to the companies to decide how to disclose changes in their rates. Most are mailing out notices this month that describe their plans -- and also contain a few zingers.

The notices generally take the form of revised service agreements. In small type the notices specify that the customer accepts the terms of the agreement by continuing to use the service.

Most companies are also taking this opportunity to slip in a provision taking care of that pesky right to sue. The new service agreements specify that all disputes will be submitted to mediation rather than being argued in the courts. In other words, consumers still won't be able to take the companies to court. And since the companies generally give themselves the right to appoint the mediator, the outcome of the mediation will seldom be in doubt.

Here's how the four largest companies say they'll handle the matter:

• Fading giant AT&T says it will mail notices about rate changes with customers' bills and maintain a toll-free number containing all the latest rate information.
• MCI WorldCom is sending subscribers a 31-page booklet that, among other things, promises it will tell customers about rate changes 15 days in advance. The details of just how this will work are in the booklet, it says. Customers are advised to read this little gem carefully.
• Sprint These prairie dogs have sent postcards to subscirbers giving them the Web site where rate information will be available long about Aug. 1.
• Qwest The remains of USWest, Qwest says it will post rate changes 15 days in advance on its Web site and make them available toll-free at (866) 467-5635.