FTC ANNOUNCES SETTLEMENT WITH PLASTICS MANUFACTURER OVER BIODEGRADABILITY CLAIMS

FROM:  FEDERAL TRADE COMMISSION 

FTC Approves Final Order Settling Charges that Company Made Misleading and Unsubstantiated Biodegradability Claims for Its Plastic Products

Following a public comment period, the Federal Trade Commission has approved a final order settling charges that American Plastic Manufacturing, Inc.  made misleading and unsubstantiated biodegradability claims for its plastic products.  The final order is the fourth resulting from a set of “green” marketing cases, first announced in October 2013.  The Commission approved final orders in the related three cases in January.

Under the FTC’s final order, the company is prohibited from making biodegradability claims unless the representations are true and supported by competent and reliable scientific evidence.  The company must have evidence that the entire plastic product will completely decompose into elements found in nature within one year after customary disposal (defined as disposal in a landfill, incinerator, or recycling facility) before making any unqualified biodegradable claim.

In order to make qualified claims, the companies must state the time required for complete bio-degradation in a landfill or the time to degrade in a disposal environment near where consumers who buy the product live. Alternatively, the companies may state the rate and extent of degradation in a landfill or other disposal facility accompanied by an additional disclosure that the stated rate and extent do not mean that the product will continue to decompose or decompose completely.

The Commission vote approving the final order was 4-0.

FTC TARGETS MARKETERS WHO DECEIVE SMALL BUSINESSES INTO BUYING CREDIT/DEBIT CARD PROCESSING SERVICES & EQUIPMENT

FROM:  FEDERAL TRADE COMMISSION 

FTC Charges Marketers with Deceiving Small Businesses into Buying Credit/Debit Card Processing Services and Equipment

The Federal Trade Commission has charged an operation that sells credit and debit card payment processing services to small businesses with violating federal law.  The defendants allegedly made false and unsubstantiated claims and failed to disclose material facts to storefront businesses and sole proprietorships before they applied for services and equipment to process credit and debit card payments.  The FTC seeks to halt the allegedly illegal practices and return money to victims.

The defendants are Merchant Services Direct LLC (MSD), also doing business as Sphyra Inc.; Boost Commerce Inc.; Generation Y Investments LLC; Kyle Lawson Dove; and Shane Patrick Hurley.  The Washington State Attorney General’s Office has simultaneously filed an action against these defendants in the Superior Court for Spokane County, Washington.

According to the FTC’s complaint, as an “independent sales organization” (ISO), MSD sells to small local businesses the ability to accept credit and debit card payments.   The businesses pay fees whenever their customers pay with a credit or debit card.

As alleged in the complaint, MSD sales agents typically call small businesses and lead them to believe they are associated with the businesses’ current card processor, Visa or MasterCard, or their bank.  The sales agents allegedly promise substantial savings on credit and debit card processing.  They specify a much lower rate than the businesses currently pay, and quote one fee, a fixed per-transaction cost, without mentioning all the other fees the businesses will have to pay.  Merchants who ask if there are other fees allegedly are told there are none.

According to the FTC’s complaint, MSD agents also dupe customers into leasing new card processing terminals for two to four years, falsely claiming their current “swipe” terminals are outdated or incompatible with its services.  Sometimes they even claim the terminals are free.  Agents persuade merchants to sign fine-print, binding contracts on the spot by telling them the documents are merely applications – a ruse made easier, according to the FTC, by the fact that the contracts are labeled “applications.”  Merchants are often falsely told they can cancel any time.  Many victims discover their new lease obligation only after being billed, still owing the balance of their previous lease, which can be thousands of dollars.

Defendants also tout on various versions of their website “Guaranteed Lowest Rates,” claiming merchants could “save 30%” with “whole sale [sic] processing” or have “anywhere from 20% to 30% savings when switching to” MSD.  In fact, according to the FTC, there are no wholesale rates, as third parties process card payments, not MSD.   As alleged in the complaint, those who call MSD’s customer service department reach employees who either do not help them or say they will waive fees or provide refunds but don’t.  Customers who were promised they could cancel the “applications” they signed with no penalty are charged substantial cancellation fees, according to the FTC’s complaint.  Generally, only in response to complaints filed with the Better Business Bureau and state attorneys general have the defendants refunded money or waived fees.

The Commission vote authorizing the staff to file the complaint was 4-0.  The complaint was filed in the U.S. District Court for the Eastern District of Washington.  In addition to filing the lawsuit, the FTC has sought a court order immediately halting the unlawful practices along with an order freezing the defendants’ assets and appointing a receiver over the corporate defendants.

The FTC acknowledges the assistance of the Washington State Attorney General’s Office and the Better Business Bureau of Eastern Washington, North Idaho, and Montana.

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 case will be decided by the court.