MORE RECENT CASE: If you doubt the power of FTC over advertising, consider this recent case (dated September 8, 1998) where an INTERNET MERCHANT WOULD BE BARRED FOR LIFE FROM "NET-BASED" COMMERCE! The Internet "entrepreneur" advertised low-priced computers online. Under the terms of a proposed consent agreement with FTC, the entrepreneur would be barred for life from conducting any Internet commerce. Advertising Compliance ServiceÔsubscribers get all the details in the latest issue! They realize that what you don't know about advertising law can indeed hurt you!

Let's get back to our 1996 FTC action:

On September 5, 1996, the Federal Trade Commission (FTC) announced "Project $cholar$cam," under which it filed charges in federal district court against five companies, alleging that they took advantage of education finance worries to exploit college-bound students and their families. The second half of Project $cholar$cam is a major campaign to educate consumers in how to identify a fraudulent scholarship search service.

In each of the five cases announced by FTC, the agency has obtained a temporary restraining order barring the challenged tactics and freezing defendants' assets in an effort to preserve funds for possible redress to consumers. Ultimately, FTC will seek court orders permanently barring the defendants from engaging in similar fraudulent or deceptive schemes, and requiring them to give refunds to their customers.

The following is a list of the defendants in Project $cholar$cam and FTC's allegations in each case:

1. Career Assistance Planning, Inc.

FTC's ALLEGATIONS: "Have sent millions of postcards stating recipients `may be eligible' for many grants and scholarships and listing an 800 number. Offered a full refund of its $199 fee for students who do not receive at least $1,000 in scholarship money within one year, or of its $299 fee for those who do not receive at least $2,000. Ultimately supplied a list of scholarships that are no longer available or for which students are ineligible. Some consumers received no list at all. Consumers received only partial refunds, or none at all. Defendants also debited consumers' checking accounts or charged their credit accounts without authorization."

(FTC File No. 952 3174; U.S. District Court for the Northern District of Georgia, in Atlanta, Civil Action No. 1 96-CV-2187-MHS).

2. Christopher Ebere Nwaigwe

FTC's ALLEGATIONS: "Obtained mailing lists of college students organized by field of study and sent at least a thousand letters a day to students nationwide representing that he has a scholarship for them or soliciting them to purchase a scholarship list for $10. Stated that the fee would be refunded for consumers who do not receive a specified level of funding. Consumers received nothing at all or a list of agencies that purportedly administer scholarships, but which includes scholarships for which deadlines had passed or students were ineligible, incorrect addresses, or sources that did not in fact award scholarships."

(FTC File No. 962 3242; U.S. District Court for the District of Maryland, Northern Division, in Baltimore, Civil Action No. HAR-96-2690).

3. Student Assistance Services, Inc.

FTC's ALLEGATIONS: "Have sent more than 1 million postcards to high school and college students advertising scholarship services and listing an 800 number. Telemarketers told consumers that, for a $179 up-front fee, they could find `unclaimed' scholarship and grant funds from private companies, and guaranteed to refund the fee if the students did not get at least $1,000. Consumers received either nothing at all, or a list of `sources' for financial aid for which they had to apply on their own or which in fact were contests, loans or work-study programs. Many sources were no longer available or not suitable for the student. Students seeking refunds had to apply in writing to each source on the list and provide rejection letters and, even then, many did not receive refunds."

(FTC File No. 962 3235; U.S. District Court for the Southern District of Florida, Fort Lauderdale Division, Civil Action No. 96-6995 CIV-Roettger).

4. College Assistance Services, Inc.

FTC's ALLEGATIONS: "Have mailed more than 1 million post cards to high school and college students stating that they were eligible for the defendants' College Scholarship and Grant Program and listing an 800 number. Callers were told that the company was a clearinghouse for corporations who give scholarships and that millions of dollars in scholarship funds remain unclaimed. Charged $179 to enroll consumers in their program on the guarantee that the students would get at least $1,000. Students received a list with about 40 sources of aid, many of which were contests, loan or work-study programs, and others of which were no longer in existence, had expired deadlines or specified eligibility requirements the students did not meet. In many instances, the defendants did not give refunds unless students provided a rejection letter from each source or complied with a variety of other conditions."

(FTC File No. 962 3226; U.S. District Court for the Southern District of Florida, Miami Division, Civil Action No. 96-6996 CIV-Highsmith).

5. Student Aid Incorporated

FTC's ALLEGATIONS: "Placed classified ads in college newspapers and posted flyers on campuses that touted `Money for College!!!!' and listed an 800 number. Callers were told that, for an up-front fee of $97, Student Aid would obtain at least $1,000 in scholarships or grants. Debited consumer's checking accounts without authorization. Sent some consumers a list which included scholarships and grants for which deadlines had passed or students did not qualify. Required students to provide a rejection letter from each source in order to get promised refunds."

(FTC File No. 962 3217; U.S. District Court for the Southern District of New York; in New York City, Civil Action No. 96 CIV 6548).

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 case will be decided by the court.

(FTC Release, September 5, 1996; materials relating to this FTC matter are available on the Internet at FTC's World Wide Web site at: http://www.ftc.gov.)

Restaurant menu items making such claims as "low fat" or "heart healthy" must be able to show there's a reasonable basis for believing the food is qualified to make this claim, according to recent FDA standards. FDA's July 30, 1996 final rule for the standards gives restaurant owners substantial flexibility in establishing this reasonable basis and in presenting the information to consumers. However, owners must be prepared to show officials that their menu claims are consistent with the claim definitions under the Nutrition Labeling and Education Act of 1990.

Unlike processed foods, restaurant menu selections needn't supply complete nutrition information. Also, menu items bearing a claim can be shown to meet the rule by more economical means than the strict standards of laboratory analyses required for processed foods.

Example: A restaurant could show that an item was designed to meet the requirements for the claim because it was prepared using a recipe from a recognized health professional association or dietary group, or that the nutritional values for the dish were calculated using a reliable nutrition database.

Also, nutrition information can be given to the consumer by any reasonable means. It doesn't have to be presented in the "Nutrition Facts" format seen on packaged food labels. Nor does it have to appear on the menu.

Example: Information on the fat content of all menu items that bear fat claims could be compiled in a notebook available to consumers on request.

FDA believes the rule's flexibility, limited scope, and compliance date of May 1997 will minimize its economic impact on the restaurant industry. The new menu rules are identical to standards in effect since May 1994 for nutrient content claims on placards and signs in large and medium-sized restaurants, and since May 1995 for such claims in smaller restaurants.

(Source: FDA Consumer Magazine, October 1996.)

FTC has extended until September 30, 1996, the deadline for public comments regarding the portion of its Guides for the Jewelry, Precious Metals, and Pewter Industries covering claims about platinum products. FTC granted the extension at the request of the Manufacturing Jewelers and Silversmiths of America, Inc., an industry group that requested the extra time to complete a survey of its members.

FTC's Jewelry Guides are voluntarily and extensively followed by jewelry and gemstone marketers in advertising their products to consumers. On May 30, 1996, the FTC announced revisions to the guides, except for the provision on platinum products, about which it sought additional comments, setting an original deadline of August 12, 1996.

If you have any comments on these Guides, send them to FTC, Office of the Secretary, Room H-159, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580. Identify your comments as "Comments Regarding Guides for the Jewelry, Precious Metals, and Pewter Industries."

Materials relating to this FTC matter are available on the Internet at FTC's World Wide Web Site: http://www.ftc.gov.)

(FTC Matter No. G711001, August 20, 1996.)