Electronic Article Surveillance Systems - Retail Stores - Shoplifting: Advertising Law News

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ELECTRONIC ARTICLE SURVEILLANCE SYSTEM MAKERS SETTLE FTC CHARGES

The two largest marketers of the electronic article surveillance systems used in retail stores to prevent shoplifting agreed to settle FTC charges that they agreed to restrict comparative advertising in violation of federal law. Sensormatic Electronics Corporation and Checkpoint Systems, Inc. will nullify the section of the June 27, 1993, agreement that restricts comparative advertising regarding harm their products may cause to consumers and to merchandise and will be barred from entering any agreements that bar or restrict truthful, non-deceptive advertising in the future.

An electronic article surveillance system (EAS) uses bits of reactive metal called "tags" attached to retail products to deter and detect theft. When the electronic article surveillance system is bought, the tag's deactivated by a store employee. If the tag passes through an EAS sensor at a store exit without being deactivated, it sets off an alarm.

Sensormatic is the largest manufacturer of electronic article surveillance products in the world. Its 1996 revenues were $995 million. Checkpoint, based in Thorofare, New Jersey, had 1996 revenues of $214 million. Together, Sensormatic and Checkpoint have sold over 70% of the EAS systems bought worldwide.

In 1993, Checkpoint ran an ad in Billboard magazine alleging that components of Sensormatic's Ultra*Max EAS system could damage recorded media. Included in the ad were depictions of audio cassettes, video cassettes, reel-to-reel tape, and compact discs. Sensormatic sued Checkpoint, claiming that the ad was false and deceptive. According to FTC's complaint, as part of the settlement of that suit, Sensormatic and Checkpoint agreed to refrain from "negative" advertising about one another's products and services, including "statements that the other party's products or services cause or may cause harm to customers, consumers or merchandise." The agreement served to restrict advertising by either firm that would provide information comparing the features and functions of the competing products--including information about the potential harm to retail products and possible interactions between certain medical devices and EAS equipment--in violation of federal antitrust law, according to FTC.

NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.

(Sensormatic Electronics Corporation and Checkpoint Systems, Inc., FTC File No. 951 0083, January 21, 1998; materials relating to this FTC matter are available on the Internet at FTC's World Wide Web site at: http://www.ftc.gov.)

FTC CASE INVOLVES ADD-ON BRAKE ADS

FTC ordered Brake Guard Products, Inc. to discontinue ads claiming their add-on braking system performed as effectively as factory installed antilock braking systems and barred the firm from using the term ABS in marketing their braking devices. Writing for a unanimous Commission, Commissioner Mary L. Azcuenaga said,

"Because of the potential implications of this case for motor vehicle safety, the Commission takes this case particularly seriously. ... [T]he Commission concludes that there are no competent and reliable scientific data to support the respondents' advertising claims."

FTC's order also bars Brake Guard Products, Inc. and Ed F. Jones, its president, from misrepresenting the performance characteristics of the braking devices, the availability of insurance discounts resulting from installation of the brakes and their compliance with certain government standards.

In 1995, FTC charged that Brake Guard made false and unsubstantiated ad claims that its Brake Guard Safety System, also known as Advanced Braking System or Brake Guard ABS, is an antilock braking system as effective as manufacturer-installed ABS brakes; complies with a performance standard established by the Society for Automotive Engineers; and will qualify a vehicle for automobile insurance discounts in a significant proportion of cases. The Commission alleged that the false and unsubstantiated claims violated federal law. Administrative Law Judge Lewis F. Parker upheld the charges in a May 1997 decision, following trial. Brake Guard and Jones appealed Judge Parker's decision to the full Commission.

FTC's order would bar representations that Brake Guard Safety System, Advanced Braking System, Brake Guard ABS or any substantially similar product:

• is an antilock braking system;
• prevents or substantially reduces wheel lock-up, skidding, or loss of steering control in emergency stopping situations;
• will qualify a vehicle for an automobile insurance discount in a significant proportion of cases;
• complies with a performance standard pertaining to antilock braking systems set forth by the National Highway Traffic Safety Administration;
• reduces stopping distances by 20 to 30%;
• provides antilock braking system benefits that are at least equivalent to factory-installed ABS systems; or
• will stop a vehicle in a shorter distance than a vehicle that is not equipped with the product, in emergency stopping situations.

FTC's order would also require Brake Guard and Jones to have substantiation for any claims of enhanced safety from the use of any braking system, accessory, or device, or any other system, accessory, or device designed to be used in, on, or in conjunction with any motor vehicle; claims of insurance discounts as a result of installation of the brakes; and bars misrepresentations of endorsements.

The Commission vote to issue the decision was 3-0, with Commissioners Mozelle Thompson and Orson Swindle not participating.

NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.

(Brake Guard Products, Inc., et al., FTC Dkt. No. 9277, January 23, 1998; materials relating to this FTC matter are available on the Internet at FTC's World Wide Web site at: http://www.ftc.gov.)

FTC AND U.S. POSTAL SERVICE BRING ACTIONS AGAINST FIRMS USING "MISLEADING" CLASSIFIED ADS

Firms promising jobs with the U.S. Postal Service are breaking federal law. So said FTC and the U.S. Postal Service as they announced a national effort to "Stamp Out Job Fraud." Eleven law enforcement actions and a comprehensive national consumer education campaign are the components of the effort aimed at stopping private companies that falsely promise Postal Service jobs at generous wages. According to the agencies, these firms, through classified ads and telephone pitches, mislead consumers by masquerading as the Postal Service and implying they recruit for jobs in the areas in which the ads appeared. FTC and the Postal Service said these classified ads generate hundreds of thousands of calls per month to the target companies in the agencies' law enforcement effort.

In each of its three cases, FTC asked the courts for and has obtained a temporary restraining order. The courts froze or otherwise restrained assets in all three cases and in two cases appointed receivers. No trial dates have been scheduled. The U.S. Postal Service filed charges against eight promoters of postal job scams under 39 U.S.C. Section 3005. That statute is used by the U.S. Postal Service to try to make sure people or companies who solicit money or property through the mail do not do so based on false representations. The Postal Service will seek an order barring delivery of mail to the offending parties as well as cease and desist orders to bar future alleged false representations.

NOTE: The Commission files a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant has actually violated the law. The cases will be decided by the courts.

(FTC Release, January 22, 1998; materials relating to this FTC matter are available on the Internet at FTC's World Wide Web site at: http://www.ftc.gov.)