Janet Sparks write in Franchise Times – October 2009 that the Federal Trade Commission’s 2009 annual report clearly states, “Combating fraud, deception and unfair practices in the marketplace is one of the FTC’s highest priorities.” It backs up that statement showing that from March 2008 to February 2009, the FTC filed 64 actions in federal district court and obtained 83 judgments and orders requiring defendants to pay more than $371.2 million in consumer redress or disgorgement of ill-gotten gains. And cases referred to the Department of Justice resulted in 15 civil penalty orders and $9.6 million in assessed civil penalties, of which nearly $8.3 million has been collected.
But in the FTC 2009 report there is no mention of “franchising” under its consumer protection section, although it lists numerous other categories: identity theft, shop-at-home and catalog sales, Internet services, banks and lenders, prizes and sweepstakes, work-at-home plans and business opportunities. Up until the end of 2006, the FTC was fairly open as to what action it took against franchise companies when it found violations of the FTC Franchise Rule. But since 2007, little can be found on any actions taken against franchisors.
To get a better understanding of FTC’s enforcement, I tried to present these questions to franchise program director Craig Tregillus:
How many franchisors has the FTC investigated in the past three years? How many actions were filed, how many judgments were obtained and what were franchisors ordered to pay?
Does the FTC encourage franchisees to file complaints if they suspect fraud?
What should franchisors fear the most from the FTC’s enforcement division?
Is Project Fal$e Hope$ still in existence? If not, when and why was it ended?
Unfortunately, neither Mr. Tregillus nor anyone in FTC’s public affairs office returned my numerous phone calls.
In an effort to see what types of FTC complaints were being filed against franchisors and what action the agency had taken, I submitted several requests under the Freedom of Information Act (FOIA), choosing several systems inundated with lawsuits, starting with The Coffee Beanery, highly publicized and deeply engaged in legal action with two of its franchisees for the past five years. The request resulted in no complaints filed and no actions or investigations from the FTC for the past four years.
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