A Bagging of Tricks

From the FTC Files, Reasons to Be Wary

Before the New Year starts feeling old, let's take this opportunity for one of our periodic roundups of law enforcement actions by the Federal Trade Commission against the Dark Side of the American marketplace -- scammers, con artists and thieves -- and against some legitimate businesses that messed up, made bad decisions or tried to slip a fast one past the public.

The FTC rarely tackles individual consumer complaints -- you know that. It received more than 635,000 consumer complaints in 2004 (latest figure available), so you can't really blame it for focusing on big-money cases and trying to identify trends in fraud and unfair practices affecting many consumers. But by reviewing its latest cases, such as these from late 2005 and the first days of 2006, consumers can get a clue about the kinds of deceptive ploys currently testing Americans.

· Hello? DNC? Everybody knows that if you register your phone number with the National Do Not Call Registry, telemarketers (with a few exceptions) are forbidden from calling you with their annoying sales pitches, right? Well, not everybody, apparently.

The Nevada bed company FMFG Inc. made 900,000 or more unlawful telemarketing calls over the past two years to consumers on the registry, according to the FTC. Early this month, the commission had the Justice Department file a complaint against FMFG, which also sells beds as American Adjustable Beds, Tranquility Adjustable Beds and California Sleep Research, for allegedly calling consumers under the guise of polling them about their sleeping habits. Before the calls ended, FMFG's telemarketers pulled out the old sales pitch. Genuine survey calls are exempt from the registry; fake surveys aren't.

And this just three weeks after DirecTV agreed to pay $5,335,000 to settle charges that the satellite-TV company and telemarketers calling on its behalf had broken FTC rules over the past two years by cold-calling consumers listed on the registry.

· Beware Spyware You know those online pop-ups, banner ads and e-mails promoting anti-spyware programs that scan your computer for free in search of spyware? The FTC recently charged that two companies, MaxTheater Inc., which sells Spyware Assassin, and Trustsoft Inc., which sells SpyKiller, alerted consumers that their computers were infected with spyware when there wasn't any or when the computer hadn't been scanned. Then, they allegedly sold consumers software or spyware-removal services that didn't work as promised. The companies are paying nearly $2 million to settle the charges.

· A Bitter Pill The FTC charged one of the largest U.S. direct-mail marketers of health-related products, A. Glenn Braswell, with making "false and unsubstantiated claims" for several dietary supplements. As advertised in the Journal of Longevity, a direct-mail ad posing as a health information magazine, and in other direct-mail promotions, Braswell targeted elderly consumers with misleading claims that Lung Support Formula, AntiBetic Pancreas Tonic, Gero Vita G.H.3, ChitoPlex and Testerex were scientific or medical "breakthroughs" that would cure, prevent or treat illnesses such as Alzheimer's disease, diabetes and emphysema. Braswell, whom the FTC nabbed in 1983 for marketing products to combat baldness and cellulite, is settling the latest charges: He is banned from most direct-response marketing and will pay $1 million and hand over $3.5 million in assets to the feds.

· If the Shoe Fits. . . . DSW Inc., a shoe discounter based in Columbus, Ohio, with 190 stores in 34 states, is settling FTC charges that it failed to take reasonable security measures to protect sensitive customer data. The FTC said DSW's security lapses -- including storing multiple files of sensitive information that was no longer needed, failing to limit access to its computer networks using available security technology, failing to encrypt files, and failing to use measures to detect unauthorized access -- allowed hackers to access the sensitive credit card, debit card and checking-account data of more than 1.4 million customers in March. The settlement requires DSW to clean up its security program with new safeguards and submit to a security program audit every two years for the next 20 years.