HOME SECURITY COMPANY SETTLES FTC CHARGES IT CALLED CONSUMERS LISTED ON "DO NOT CALL REGISTRY"

FROM   FEDERAL TRADE COMMISSION 
FTC Reaches Settlement With Home Security Company that Called Millions of Consumers on the National Do Not Call Registry

The Federal Trade Commission, with the assistance of the U.S. Department of Justice, has settled a complaint against a Massachusetts-based home security company that illegally called millions of consumers on the FTC’s National Do Not Call (DNC) Registry to pitch home security systems.

According to the FTC, Versatile Marketing Solutions (VMS), under the guidance of its owner, Jasjit Gotra, called millions of consumers whose names and phone numbers VMS bought from lead generators. The lead generators claimed that those consumers had given VMS permission to contact them about the installation of a free home security system, but in reality, they had not. In its complaint, the FTC alleges that the defendants’ tactics violated the Commission’s Telemarketing Sales Rule.

The sales leads were obtained by illegal means through rampant use of robocalls from “Tom with Home Protection,” fake survey calls, and calls to phone numbers on the National Do Not Call Registry. According to the complaint, VMS subsequently called these consumers without first checking to see if they had registered their telephone numbers on the DNC Registry.

In addition, the complaint alleges that VMS ignored warning signs that the lead generators were engaged in illegal telemarketing practices. For example, many consumers contacted by VMS complained that they had not given the company permission to call, nor had they given permission to receive a robocall. Despite mounting complaints, VMS continued buying leads from the same lead generators, and calling consumers using those leads.

“Companies that use lead generators must exercise due diligence when they buy lists of phone numbers,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection, “or else they can be on the hook for illegal telemarketing. Relying on a say-so that the numbers were obtained legally, or that the consumers have agreed to be called, even if their numbers are on the Do Not Call Registry, isn’t enough.”  

According to the complaint, between November 2011 and July 2012, VMS made more than two million calls to consumers to try to sell home security goods and services. Of those calls, at least one million were to phone numbers listed on the DNC Registry, and more than 100,000 were to consumers who had previously told VMS not to call them again – another violation of the DNC rules.

The stipulated final court order settling the charges prohibits VMS and Gotra from making abusive telemarketing calls and from calling any consumer whose number is on the DNC Registry, unless they can prove that they have received written permission to make the call or that they have an established business relationship with that consumer. Further, it bars defendants from calling any consumer who has previously told VMS not to call them again. The order also places restrictions on how defendants can obtain and use lead-generated phone numbers in the future.

Finally, the order imposes a $3.4 million penalty judgment against the defendants, with all but $320,700 suspended due to their inability to pay. The entire amount will become due if the defendants are found to have misrepresented their financial condition.

The court settlement announced today resolves the FTC’s complaint against Versatile Marketing Solutions, Inc. also doing business as VMS Alarms, VMS, Alliance Security, and Alliance Home Protection; and its owner, Jasjit Gotra.

The Commission vote authorizing the staff to refer the civil penalty complaint to the Department of Justice, and to approve the proposed consent decree, was 4-0. The DOJ filed the complaint and proposed consent decree on behalf of the Commission in U.S. District Court for the District of Massachusetts on March 10, 2014. The proposed consent decree is subject to court approval.

NOTE: The Commission authorizes the filing of 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. Consent judgments have the force of law when signed by a district court judge.

HOME SECURITY COMPANY SETTLES DECEPTIVE ENDORSEMENTS CASE WITH FTC

FROM:  FEDERAL TRADE COMMISSION 
Home Security Company ADT Settles FTC Charges that Endorsements Deceived Consumers
Company’s Paid Spokespersons Failed to Disclose Their Connection to ADT

As part of its ongoing crackdown on misleading endorsements in advertising, the Federal Trade Commission has charged the home security company ADT LLC with misrepresenting that paid endorsements from safety and technology experts were independent reviews. Under an agreed-upon settlement, ADT is prohibited from misrepresenting paid endorsements as independent reviews in the future.

Boca Raton, Florida-based ADT manufactures and markets the ADT Pulse home security and monitoring system and various other security products and services.  The FTC’s administrative complaint alleges that ADT paid spokespeople to demonstrate and review the ADT Pulse on NBC’s Today Show, as well as other television and radio news programs and talk shows across the country, and in blogs and other online material.  ADT, the FTC alleges, misrepresented that the reviews were independent, and failed to disclose that the experts were being paid by ADT to promote the Pulse system.

 “It’s hard for consumers to make good buying decisions when they think they’re getting independent expert advice as part of an impartial news segment and have no way of knowing they are actually watching a sales pitch,” said Jessica Rich, Director of the Federal Trade Commission’s Bureau of Consumer Protection.  “When a paid endorser appears in a news or talk show segment with the host of that program, the relationship with the advertiser must be clearly disclosed.”

ADT paid three spokespersons, including a child safety expert, a home security expert, and a technology expert, more than $300,000 to promote the ADT Pulse, with one spokesperson receiving more than $200,000.  Two of those spokespersons also received a free ADT Pulse security system, valued at approximately $4,000, and free monthly monitoring service, according to the complaint.  In exchange, the spokespersons appeared on more than 40 different television and radio programs nationwide and posted blogs and other material online.

ADT set up media interviews for the endorsers through its public relations firms and booking agents – often providing reporters and news anchors with suggested interview questions, and background video, also known as b-roll, according to the complaint.  The paid ADT endorsers were introduced by program hosts as experts in child safety, home security, or technology, usually with no mention of any connection to ADT.  The endorsers sometimes demonstrated child safety, home security, or technology products other than the ADT Pulse, adding to the impression that they were providing an impartial, expert review of the products.

The proposed order:

prohibits ADT from misrepresenting that any discussion or demonstration of a security or monitoring product or service is an independent review provided by an impartial expert;
requires ADT to clearly and prominently disclose, in connection with the advertising of a home security or monitoring product or service, a material connection, if one exists, between an endorser and the company; and
requires the company to promptly remove reviews and endorsements that have been misrepresented as independently provided by an impartial expert or that fail to disclose a material connection between ADT and an endorser.
The Commission vote to issue the administrative complaint and to accept the agreement containing the proposed consent order for public comment was 4-0.  The FTC will publish a description of the complaint and consent agreement  in the Federal Register shortly.  The agreement will be subject to public comment for 30 days, beginning today and continuing through April 7, 2014, after which the Commission will decide whether to make the proposed consent order final.  Interested parties can submit written comments electronically or in paper form by following the instructions in the “Invitation To Comment” part of the “Supplementary Information” section.  Comments in electronic form should be submitted using the following Web link: https://ftcpublic.commentworks.com/ftc/adtconsent and following the instructions on the web-based form.  Comments in paper form should be mailed or delivered to:  Federal Trade Commission, Office of the Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue, N.W., Washington, DC 20580.  The FTC is requesting that any comment filed in paper form near the end of the public comment period be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions.

NOTE: When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $16,000.