Markets Wired

In the wake of a Federal Trade Commission complaint against a company that deceptively sold electronics to hundreds of British consumers, the company has agreed to stop its allegedly illegal tactics until the case is decided in federal court.

Using the Web site names www.bestpricedbrands.co.uk and www.bitesizedeals.co.uk, the California company tricked consumers into believing that they were buying from a company operating in the United Kingdom and were protected by manufacturer warranties that were valid there, according to the FTC complaint. When consumers received the cameras, video games, and other electronic goods, they discovered they had been charged unexpected import duties, were left with invalid warranties, and would be charged draconian cancellation and refund fees if they attempted to send the merchandise back, the complaint stated.

This is the first case the FTC has brought against a U.S. company exclusively doing business abroad. The U.S. SAFE WEB Act of 2006 gave the FTC the authority to sue U.S. companies deceiving foreign consumers, and was part of a strategy to prevent the United States from becoming a haven for fraud.

The Pasadena, California-based defendants charged in the case are Balls of Kryptonite, doing business as Best Priced Brands and Bite Size Deals, and its owner, Jaivin Karnani. Due in part to the defendants’ deceptive use of Web sites ending in “.uk”, the complaint alleges that consumers in the United Kingdom were duped into purchasing goods that carried no manufacturer warranties, were misled about their rights to return or exchange goods under U.K. regulations, were denied the option of cancelling orders, and were sent goods that were different from those depicted on the defendants’ Web sites – and in some cases were unusable.

The FTC also charged the defendants with deceiving consumers about their participation
in a program in which U.S. companies assure customers in the European Union that they secure the customers’ personal information, as required by European law. Known as the EU/U.S. Safe Harbor program, it is administered by U.S. Department of Commerce. The complaint alleges that although the defendants claimed to participate in the EU/U.S. Safe Harbor program, they did not.

European consumers who want to know whether a U.S. company believes it is complying
with European law by participating in the Safe Harbor program can go to http://export.gov/safeharbor to see if the company has self-certified.

The FTC was assisted in its investigation by the U.K. Office of Fair Trading, one of the FTC’s principal international law enforcement partners. Many consumers in the United Kingdom registered complaints with the FTC by using the Web site www.econsumer.gov. Established by consumer protection agencies from 25 countries, this Web site collects consumers’ complaints about problems in other countries, and facilitates international enforcement cooperation by making the complaints available to international consumer protection agencies through the FTC’s Consumer Sentinel Network.

The Commission vote authorizing the complaint was 4-0. The complaint was filed with
the request for a temporary restraining order on July 20, 2009, in the U.S. District Court for the Central District of California.

On July 31, 2009, the court entered a temporary restraining order in which the defendants agreed to halt their deceptive representations and provide an accounting of their assets.

NOTE: The Commission files 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. The complaint is not a finding or ruling that the defendant or respondent has actually violated the law. The stipulated final order is for settlement purposes only and does not constitute an admission by the defendants of a law violation.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,500 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

(FTC File No. 092-3081)
(Best Priced Brands NR.wpd)