PURSUANT TO Chapter 501, Part II, "The Florida Deceptive and Unfair. Trade Practices Act,,, Florida Statutes, the OFFICE OF TIIB ATTORNEY

Transcription

1 STATE OF FLORIDA OFFICE OF THE ATTORNEY GENERAL DEPARTMENT OF LEGAL AFFAIRS In the Matter of: DirectBuy, Inc. an Indiana Corporation, d/b/a DirectBuy, AG Case Number: L Respondent ASSURANCE OF VOLUNTARY COMPLIANCE PURSUANT TO Chapter 501, Part II, "The Florida Deceptive and Unfair Trade Practices Act,,, Florida Statutes, the OFFICE OF TIIB ATTORNEY GENERAL, STATE OF FLORIDA, DEPARTMENT OF LEGAL AFFAIRS (hereafter the "Department") investigated certain business practices of DIRECTBUY, INC. (hereafter "Respondent"), which currently has one independently owned and operated franchisee doing business in the State of Florida. These practices primarily occurred between approximately January 2010 and the present (hereafter "the Relevant Period"). During the Relevant Period, Respondent had as many as ten franchises in Florida. Respondent has cooperated with the Department's investigation and maintains that its business practices fully did and do comply with all local, state, and federal laws and regulations. Respondent is prepared to enter into this Assurance of Voluntary Compliance (hereafter "A VC") with the Department without any admission of

2 wrongdoing and solely for the purpose of resolving this matter. Pursuant to Section (6), Florida Statutes, the Department, by virtue of the power vested in it by said statute, by and through its undersigned Director of Consumer Protection does accept this AVC in connection with the termination of its investigation into Respondent's business practices and actions occurring on or before the Effective Date (defined herein) of this A VC without litigation or further proceedings. I. GENERAL 1.1 This A VC is made without trial or adjudication of fact or law and is being entered into for the sole purpose of resolving disputed claims without the necessity of protracted and ~xpensive litigation. 1.2 This A VC does not constitute evidence or an admission of any issues of fact suggesting fault or wrong doing by Respondent or of any violation by Respondent of any provisions of Florida law. 1.3 This AVC does not constitute an approval by the Department of any of RespondenCs business practices. Respondent shall not represent directly or indirectly, or in any way whatsoever, that the Department has sanctioned, condoned or approved any part or aspect of Respondent's business practices. 1.4 This A VC sets forth the entire agreement between the Department and Respondent (hereinafter collectively referred to as the "Parties") and supersedes all 2

3 prior agreements or understandings, whether written or oral, between the Parties with respect to the subject matter hereof. This A VC may be amended by written agreement between the Parties, subject to a!ly :further requirements under state law. 1.5 The failure of either party to exercise any rights under this A VC shall not be deemed a waiver of any right. 1.6 The Parties further acknowledge that this A VC constitutes a single and entire agreement that is not severable or divisible, except that if any provision herein is found to be legally insufficient or unenforceable, the remaining provisions shall continue in full force and effect. II. STATEMENT OF FACTS 2.1 Respondent DIRECTBUY, INC., an Indiana corporation, is a franchisor that has a single franchise location in Florida. Respondent had as many as ten franchisees in Florida during the Relevant Period. 2.2 Since at least January 2006, Respondent had sold franchises in the State of Florida. Those franchisees purported to adopt business practices, policies, and procedures conforming both to their franchise agreements with Respondent and to all applicable laws. 2.3 Respondent is a consumer buying club. It attracts Members by promising such items as furniture and appliances at prices comparable to those purchased straight from the manufacturer. At times, advertising stated these 3

4 discounts to be up to 30% and in some instances up to 70% less than the competition. However, to be eligible for these offers, Respondent requires that consumers be Members of a buyer's club by paying a membership fee. It is Respondent's position that, as a Member, the consumer has incredible buying power, and can experience thousands of dollars in savings by purchasing from among the more than one million brand-name items available through Respondent. 2.4 Many consumers first learned the details of Respondent's club membership by attending a sales presentation at a franchised location, which from time to time promised a free gift in exchange for their attendance. Free gifts have sometimes included Android tablets, restaurant gift cards, or cruise vouchers. Some consumers assert that they were subjected to high-pressure sales techniques at the sales presentations. By way of example, some consumers complain they were told they must sign a membership contract on the same day as the sales presentation or be forever barred from purchasing a membership. Respondent disputes any high-pressure sales techniques, and affirmatively states that it has eliminated and now prohibits any representation in the sales process that consumers must enroll as Members on the same day as the sales presentation. 2.5 Consumer complaints also allege that during the Relevant Period, Respondent's franchisees failed to adequately explain the following: the policies and procedures to Members regarding club benefits; any costs and fees added to 4

5 the price of merchandise including freight and shipping costs, handling fees, and any other fees; and the right to cancel the membership. Respondent disputes these consumer assertions. 2.6 Consumer complaints additionally allege that during the Relevant Period, Respondent's franchisees sometimes were either unable or unwilling to grant consumers a refund after the expiration of the statutory three-day cancellation period provided in Section , Florida Statutes, representing to the Members that they were locked into a deal and were ineligible for refunds. Respondent disputes that its franchisees denied refunds to consumers who timely exercised their cancellation right Consumer complaints stated that the purported discounts were exaggerated and were actually comparable to what they would find from a different retailer. They also complained that managers at Florida locations simply reaffirmed that Respondent's prices were inherently lower. The consumers stated that Respondent failed to match or live up to the discounts that were promised. Respondent disputes these consumer assertions. 2.8 Moreover, consumers complained that they received letters from certain of Respondent's franchisees indicating they had won a free Android tablet if they called the "gifting department." Once they called the phone number on the letter as instructed to obtain the Android tablet, the consumers were told they have 5

6 to attend a sales presentation. The consumers stated that they were not aware of the requirement to attend a sales presentation until either they called the phone number on the letter or they read the very small print on the back of the letter. Some consumers also stated that, when they called the phone number on the letter, they were asked if they were between the ages of 25 and 65. If the consumer was outside that age range, they were sometimes told they did not qualify for the free Android tablet. Respondent disputes these consumer assertions or that the asserted issues constituted anything improper or unlawful. III. DEFINITIONS 3.1 "Clear and conspicuous" (including "clearly and conspicuously,,) shall mean that a statement, representation, claim or term is readily noticeable and reasonably understandable. The following shall be considered in determining whether a statement, representation, claim or term is clear and conspicuous: (a) Whether it is presented in a coherent and meaningful sequence with respect to other statements, representations, claims, or terms being conveyed; (b) Whether it is in close proximity to the statement, representation, claim or term it clarifies, modifies, explains, or to which it otherwise relates; ( c) Whether it is contradictory to any statement, representation, claim or term it purports to clarify, modify, or explain, or is otherwise 6

7 contradictory or confusing in relation to any other statement, representation, claim or term being conveyed; ( d) Whether it is conveyed by means of an abbreviation and, if so, whether the abbreviation is commonly understood by the public, or approved by federal or state law; ( e) Whether it is legible; (f) Whether it is of sufficient prominence in terms of print, size and contrast, as compared with accompanying statements, representations, claim_s or terms, so as to be readily noticeable and reasonably understandable; (g) Whether it is at a decibel level and speed so as to be readily noticeable and reasonably understandable; and (h) Whether it appears for a duration of time sufficient to allow a listener or viewer to have a reasonable opportunity to notice, read, and understand. 3.2 "Effective Date'' shall mean the date that Respondent receives a copy of this A VC duly executed by Respondent and the Department. 3.3 "Member" refers to a person or entity who purchased a membership from Respondent or one of its Florida franchisees. 7

8 3.4 "Represent" means to state, or to imply through statements, questions, conduct, graphics, symbols, lettering, formats, devices, language, documents, messages, or through any other manner or means by which meaning might be conveyed. This definition applies to other forms of the word "represent," including without limitation "representation." IV. COMPLIANCE 4.1 Respondent shall comply or continue to comply with the following provisions, and shall make best efforts to ensure that its present and any future franchisee in Florida as well as Respondent's representatives, agents, owners, officers, directors, managers, employees, successors, assigns, independent contractors or any other person who acts under, by, through, or on behalf of Respondent, including a franchisee, directly or indirectly, or through any corporate or other device, comply or continue to comply with the following provisions: (a) Comply with the Florida Deceptive and Unfair Trade Practices Act, Chapter 501, Part II, Florida Statutes; (b) Clearly and conspicuously disclose the terms of any gifts or prizes promised in exchange for attending a sales presentation or signing a membership contract, as provided in Section (5), Florida Statutes; 8

9 ( c) Honor the terms of any gifts or prizes promised in exchange for attending a sales presentation or signing a membership contract, as provided in Section (3)(c), Florida Statutes; ( d) Clearly and conspicuously disclose prior to the sale of a membership any costs and fees added to the price of merchandise including freight and shipping costs, handling fees, and any other fees, as provided in Section (1)(c), Florida Statutes; ( e) Respondent shall provide, and shall require its franchisees to provide and use best efforts to comply fully with, the three business day right to cancel to consumers in accordance with Sections (1), (1), and (2), Florida Statutes, including as follows: ( 1) The membership agreement shall clearly and conspicuously state that a buyer has the right to cancel the agreement until midnight of the third business day after the day on which the buyer attains membership by receiving access, including online access, to all of the membership services, as provided m Section (2), Florida Statutes; 9

10 (2) A buyer's cancellation shall be accepted when the buyer gives written notice of cancellation to Respondent at the address stated in the agreement or contract or delivers the notice by mail or personal delivery within three business days of attaining membership by receiving access, including online access, to all of the membership services. Written notice of cancellation shall be effective upon the date of postmarking by the U.S. Postal Service or other similar delivery service, as provided in Section (2), Florida Statutes. Personal delivery is effective when delivered to Respondent at the appropriate address; (3) A buyer's notice of cancellation need not take a particular form and is sufficient if it indicates, by any form of written expression, the intention of the buyer not to be bound by the membership agreement with Respondent, as provided in Section (2), Florida Statutes; and ( 4) Respondent shall provide the buyer with written instructions for a "MEMBER'S RIGHT TO CANCEL", 10

11 as provided in Section (2), Florida Statutes, with the additional understanding that the cancellation period begins to run from the date that the consumer attains membership by receiving access, including online access, to all of the membership services. (f) Provide refunds for all properly cancelled agreements within ten (10) business days without charging a cancellation fee, as provided in Section (3), Florida Statutes; (g) Honor all advertised prices in accordance with any advertisements put forth by Respondent; (h) Provide all potential Members, at the time of any in-club sales presentation, with the opportunity to view a list of suppliers and the nature of the merchandise available to Members, prior to those potential Members choosing whether to purchase a membership, as provided in Section (2), Florida Statutes; (i) Continue to make its "membership guide" available for review to all potential Members during any in-club sales presentation and before the potential Members choose whether to purchase a membership; 11

12 G) Provide mandatory and ongoing training to all employees sufficient to ensure compliance with the terms of this A VC; and (k) Refrain from the following conduct: (1) Making any false or misleading representations when selling memberships and retail items to consumers, including but not limited to, inaccurate statements concerning the terms of their memberships, the savings consumers will achieve, and the nature and quality of the merchandise available through Respondent; (2) Representing that a consumer must sign a membership contract on the same day as a sales presentation or be forever barred from purchasing a membership; (3) Enrolling consumers as Members of club locations when Respondent knows or has reason to believe that the location is closing during the term of the membership contract, unless consumers are first advised of such fact; (4) Comparing its prices to those of other retailers unless such price comparisons are based on prices of the same or comparable merchandise sold by retailers in the trade area in which such savings claims are made, and at prices 12

13 actually offered for sale within a reasonable period of time prior to such representations, as provided in Section (3)( ), Florida Statutes; 4.2 Within thirty (30) calendar days of the Effective Date of this AVC, Respondent shall modify the membership agreement utilized by its Florida franchisee to include the Member's right to cancel the membership as follows: "MEMBER'S RIGHT TO CANCEL If you wish to cancel this contract, you may cancel by delivering or mailing a written notice to the club. To prove that you canceled, it is recommended that you send the notice by certified mail. The notice shall state that you do not wish to be bound by the contract and shall be delivered or mailed before 12 midnight of the third business day after you attain membership by both signing this contract and receiving access, including online access, to all of the membership services. The notice shall be delivered or mailed to: (insert name and mailing address of club). If you cancel, the club will return, within 10 days of the date on which you give notice of cancellation, a total refund. It is recommended that you mail the notice of cancellation by certified mail, return receipt requested; check with your post office as to the time when you will be able to mail a certified letter. Be sure to keep a photocopy of the notice of cancellation which you mail." 4.3 Respondent shall preserve and retain all its relevant business and financial records relating to the acts and practices at issue in this AVC and other information reasonably sufficient to establish compliance with the provisions of this A VC for three (3) years from the Effective Date of this A VC. At any point during the three (3) year retention period set forth herein, Respondent shall make 13

14 any and all such books and records available at its offices to the Department within five (5) business days of any reasonable request. 4.4 For a period of three (3) years from the Effective Date of this A VC, for. the purpose of further determining compliance with this A VC, Respondent shall permit representatives of the Department, upon the Department's receipt of a complaint and upon written request to Respondent, a.ccess during normal pusiness hours to any office, warehouse, retail location, or facility storing documents, of Respondent. In providing such access, Respondent shall permit representatives of the Department to inspect and copy all documents relevant to any matter contained in thi~ A VC, and to interview officers, directors, and employees, all personnel involved in responding to consumer complaints or inquiries, and all sales personnel, whether designated as employees, consultants, independent contractors or otherwise, concerning matters relating to compliance with the terms of this A ye. The person interviewed may h~we counsel present. Nothing in this AVC limits the Department's lawful use of its compulsory process, pursuant to Section , Florida Statutes, to obtain any documentary, material, tangible things, testimony, or information relevant to unfair or deceptive acts or practices (within the meaning of Sections , Florida Statutes), or other means available under Florida law, including, but not limited to, posing through its representatives as consumers or suppliers without the necessity of identification. 14

15 4.5 Any personal or financial information of consumers in the custody, control or possession of Respondent or any franchisee shall be securely stored in such a manner as to reasonably protect against inadvertent disclosure of consumer information. Except in connection with financing a consumer's membership as provided in the Privacy Policy section of the Membership Agreement, neither Respondent nor any franchisee shall directly or indirectly, market, sell, share or otherwise disclose the name, contact information, or financial information of any consumer in the care, custody or control of Respondent. 4.6 Future consumer complaints received by the Department may be forwarded to Respondent to the attention of the DirectBuy General Counsel, 8450 Broadway, Merrillville, IN 46410, or another agent designated by Respondent whose contact information shall be provided to the Department for future correspondence. For all complaints forwarded to Respondent from the Department, Respondent shall provide a written response to Department within fifteen (15) business days detailing the nature of the consumer's complaint, Respondent's response to the complaint, and any actions taken to cure and/or resolve the complaint. Any actions taken by the Department with regard to future complaints shall not be construed as a waiver of the Department's remedies under this AVC or approval of Respondenfs actions and/or resolution of such complaints. 15

16 V. CONSUMER REDRESS 5.1 Without admitting any liability, Respondent, independent of any investigation by the Department, represents and warrants that it periodically has reviewed and continued to improve various aspects of its policies and procedures, including, but not necessarily limited to, sales practices, delivery, refund and cancellation procedures, and member service. 5.2 Respondent represents and warrants that as of April 30, 2016, either Respondent or its :franchisees have offered refunds totaling at least $7, in total to Florida consumers who filed complaints with the Department or other entities, including expediting the refunds of Members to whom refunds were issued, and otherwise have addressed non-monetary concerns of certain consumers. Additionally, as a result of the ongoing escalation of complaints by the Department to Respondent, Respondent has provided multiple Florida consumers with other compensation in the form of Android tablets, gift certificates, and credit vouchers. VI. STIPULATED PAYMENT 6.1 The parties agree that Respondent shall pay a total of $15, to the Office of the Attorney General, State of Florida, Department of Legal Affairs, pursuant to Section , Florida Statutes, as reimbursement of all legal fees, costs and investigative fees regarding this investigation. Payment shall be made by cashier's check or other certified funds, made payable to Department of Legal 16

17 Affairs Revolving Trust Fund, and shall be paid simultaneous with the submission of a partially executed copy of this AVC by Respondent. VII. ACCEPTANCE 7.1 This A VC shall become effective upon its acceptance by the Director of the Consumer Protection Division, who may refuse to accept it at her discretion. The receipt of or deposit by the Department of any monies pursuant to this A VC does not constitute acceptance by said Department, and monies received will be returned if this A VC is not accepted. This document may be signed in counterparts. VIII. APPLICABILITY 8.1 This A VC shall be governed by Section , Florida Statutes. Pursuant to Section (6), Florida Statutes, unless this A VC is rescinded by agreement of the parties or voided by a Court for good cause, subsequent failure to comply with the terms of this A VC is prima facie evidence of a violation of the Florida Deceptive and Unfair Trade Practices Act, Chapter 501, Part II, Florida Statutes. 8.2 Any future violations of this A VC may subject Respondent to civil penalties and sanctions provided by law. 8.3 The obligations under this AVC shall apply to and continuously bind Respondent and its affiliated entities (including Florida franchisees), its successors, 17

18 and its assigns. Further, Respondent shall be responsible for the actions of its officers, directors, agents, servants, and employees, whether acting directly or through any corporation, subsidiary, division, or other entity, that are in violation ofthis AVC. 8.4 Respondent shall be responsible for making the substantive terms and conditions of this AV<:; known to its relevant officers, directors, employees, agents, and any Florida franchisee Respondent and its successors and assigns shall be on notice of the provisions of the Florida Deceptive and Unfair Trade Practices Act, Chapter 501, Part II, Florida Statutes. 8.6 Respondent shall not, except as provided in,4.6 above, effect any change in the form of doing business, or the organizational identity of any of its affiliated entities, or create any new business entities, as a method of avoiding the terms and conditions set forth in this A VC Nothing in this A VC shall be construed as a waiver of any private rights of any person or release of any private rights, causes of action, or remedies of any person against the Respondent. In addition, nothing herein shall be construed to limit or bar any other governmental entity from pursuing other available remedies against the Respondent for acts and practices addressed by this AVC. 18

19 FOR DIRECTBUY, INC.: BY MY SIGNATURE, I affirm that I am acting in my capacity and within my authority as a corporate officer of DIRECTBUY, INC., and that by my signature I am binding DIRECTBUY, INC., to the terms and conditions of this A VC. Its: (print name) J~ p~qvvr STATE OF..::f:nti.1 'anc<.. COUNTY OF. 1-tA I<<... BEFORE ME, an officer duly authorized to take acknowledgments in the State of Indiana, personally appeared C. JoseRh fqs f as V1'Le. President of DIRECTBUY, INC., and acknowledged before me that he/she executed the foregoing instrument for the purposes therein stated, on this cf{:; day of ;t1 tt..y, 2016 Sworn to and subscribed before me this Jl(;;, day of, 2016, JANET L. DAVIDSON Notary Public Seal State of Indiana My Commission Expires Aug 14, 2020 Type of Identification Produced: rint, type or stamp commissioned name of Notary Public) C. Jose1Jh ~f;,)fa..f~ issu-t:d ;Jr/vers /r'c_ens-e_, 19

20 FOR THE OFFICE OF THE ATTORNEY GENERAL: Accepted this..:2. '7 day of YY\.~ '2016 r~~ Victoria Butler Director of Consumer Protection Division Office of the Attorney General Department of Legal Affairs 107 W. Gaines Street Tallahassee, FL