Over the past two years, entrepreneur Joseph Sugarman has been engaged in a highly public battle with the Federal Trade Commission, accusing it of waging a vendetta against his Chicago company, JS&A Group Inc., in an investigation of the firm's mail-order practices.
Spending about $300,000, Sugarman bought full-page advertisements in national newspapers, published special comic books and issued periodic "Battle Reports," branding the FTC "The Monster That Eats Business."
But according to a just-released congressional report, Sugarman and his comic books are off base.
After a six-month investigation, prompted by a flood of 2,000 letters from other small businessmen urging it to look into Sugarman's complaints, the House Energy and Commerce subcommittee on oversight and investigation "found no evidence of wrongdoing or vendetta by the FTC." Rather, the panel found the FTC's probe "reasonable" and "appropriate," and that Sugarman's comic books "do not present a fair rendering of the facts."
Although Sugarman had not seen the subcommittee report late last week, he disagreed with the findings, saying, "I believe the oversight subcommittee was prejudiced in its investigation . . . I will continue to fight this--I guess now in the courts."
Sugarman pointed out that although the subcommittee rejected his complaint, it did recommend some changes in the way the FTC handles investigations to give greater guidance to the investigated companies about FTC procedure. Had the changes been made before the investigation, "many of problems wouldn't have arisen in the first place."
The FTC investigation involves charges that JS&A violated the commission's mail-order rules requiring all items ordered by mail to be promptly delivered. If they can't be, customers must be notified that not only will delivery be late but that they also have the right to cancel their order.
On behalf of the FTC, the Justice Department last September sued JS&A in U.S. District Court, charging the company with violating the rule in at least 22,000 cases.
Sugarman contends that the problems stemmed primarily from a unique situation in January, 1979, when snowstorms and computer troubles delayed his orders of calculators and electronic gadgets. But the government says its case involves customer orders in 1977 and 1978.
Sugarman contends the FTC investigation has hurt his business. JS&A achieved a 35 percent annual growth rate and almost $12 million in sales in 1979. This year, revenues are going to total about $2 million, Sugarman indicated.
According to the staff report, Sugarman said he had "intentionally" reduced his business so it would not look like he was trying to create more business by his attack on the FTC. Sugarman acknowledged the decision in a telephone interview, but said it was made only to "devote full attention and effort to this battle."