SEND
FILED
CLERK, U.S. DISTRICT COURT
DEC 13 2005
CENTRAL DISTRICT OF CALIFORNIA
BY DEPUTY
WILLIAM BLUMENTHAL
General Counsel
JOHN D. JACOBS, Cal. Bar #134154
JENNIFER M. BRENNAN, Cal. Bar #225473
BARBARA Y.K. CHUN, Cal. Bar #186907
Federal Trade Commission
10877 Wilshire Blvd., Ste. 700
Los Angeles, CA 90024
(310) 824-4343 (voice)
(310) 824-4380 (fax)
E-mail: jjacobs@ftc.gov; jmbrennan@ftc.gov; bchun@ftc.gov
DAVID C. FIX (pro hac vice)
Federal Trade Commission
600 Pennsylvania Ave., N.W.
H-238
Washington, D.C. 20580
(202) 326-3298 (voice)
(202) 326-3395 (fax)
E-mail: dfix@ftc.gov
Attorneys for Plaintiff FTC
UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
WESTERN DIVISION
Case No. CV-02-9270 DSF (AJWx)
FEDERAL TRADE COMMISSION,
Plaintiff,
v.
TREK ALLIANCE, INC., et al.,
Defendants.
STIPULATED FINAL ORDER FOR PERMANENT INJUNCTION AND OTHER EQUITABLE RELIEF AGAINST CORPORATE DEFENDANTS TREK ALLIANCE, INC., TREK EDUCATION CORP., AND VONFLAGG CORP.
Plaintiff Federal Trade Commission (“Commission” or “FTC”) filed a Complaint for a permanent injunction and other equitable relief pursuant to Section 13(b) of the Federal Trade Commission Act (“FTC Act”). The Complaint charged Defendants with violations of Section 5(a) of the FTC Act, as amended, 15 U.S.C. § 45(a).
DOCKETED ON CM
DEC 14 2005
BY _____ 005
303
Plaintiff FTC and Corporate Defendants Trek Alliance, Inc., Trek Education Corp., and VonFlagg Corp. have agreed to entry of this stipulated Final Order for Permanent Injunction and Other Equitable Relief (“Order”) by the Court to resolve all charges against the Corporate Defendants set forth in the Complaint and all matters in dispute between Plaintiff and the Corporate Defendants in this action. Corporate Defendants have consented to entry of this Order without trial or adjudication of any issue of law or fact herein and have agreed that entry of this Order in the docket by the Court will constitute notice to them of the terms and conditions of the Order. Plaintiff and the Corporate Defendants having requested the Court to enter this Order, the Court hereby finds and orders as follows:
FINDINGS
1. This is an action instituted by the Commission under Section 13(b) of the FTC Act in connection with Defendants’ sale and offering for sale of the right to participate in Defendants’ multi-level marketing program. The Complaint seeks permanent injunctive and other equitable relief against Defendants.
2. This Court has jurisdiction of the subject matter of this case and over each of the Corporate Defendants. Venue in the Central District of California is proper.
3. The Complaint states a claim upon which relief may be granted against each of the Corporate Defendants under Sections 5(a) and 13(b) of the FTC Act, 15 U.S.C. § § 45(a) and 53(b).
4. Plaintiff has the authority under Section 13(b) of the FTC Act, 15 U.S.C. § 53(b), to seek the relief it has requested.
5. The activities of each of the Corporate Defendants charged in the Complaint are in or affecting commerce, as defined in Section 4 of the FTC Act, 15 U.S.C. § 44.
6. The Corporate Defendants have waived all rights to seek judicial review or otherwise challenge or contest the validity of this Order. The Corporate Defendants have also waived all claims under the Equal Access to Justice Act, 28 U.S.C. § 2412, as amended by PL 104-121 Stat. 847, 863-64 (1996).
7. Entry of this Order is in the public interest.
DEFINITIONS
1. The term “document” is synonymous in meaning and equal in scope to the usage of the term in Federal Rule of Civil Procedure 34(a), and includes writings, drawings, graphs, charts, photographs, audio and video recordings, computer records, and other data compilations from which information can be obtained and translated, if necessary, through detection devices into reasonably usable form. A draft or non-identical copy is a separate document within the meaning of the term.
2. “Material fact” means any fact likely to affect a person’s choice of, or conduct regarding, goods or services.
3. “Consumer” means an actual or potential purchaser, customer, subscriber, or natural person.
4. “Multi-Level Marketing Program” means any marketing program in which all of the following elements exist: (1) participants are given the right to sell goods or services; (2) participants are given the right to recruit additional participants into a first-level downline (however denominated), or to have additional participants placed by the promoter or any other person into the program participant’s first-level downline; (3) the first-level downline participants in turn have the right to recruit additional participants (second-level downlines), or to have additional participants placed into their downlines; and (4) participants may earn compensation based in whole or in part upon the sales or purchases of those in the participant’s second-level downline or beyond.
5. “Prohibited Marketing Program” means any marketing program or plan in which any participant pays money or valuable consideration to the company in return for which he receives the right to receive rewards, in return for recruiting other participants into the program, which are unrelated to the sale of products or services to persons who are not participants in the marketing program.
6. “Business Venture” means any written or oral business arrangement, however denominated, whether or not covered by 16 C.F.R. Part 436, that consists of the payment of any consideration for (i) the right or means to offer, sell, or distribute goods or services (whether or not identified by a trademark, service mark, trade name, advertising or other commercial symbol); and (ii) assistance to any person in connection with or incident to the establishment, maintenance, or operation of a new business, or the entry by an existing business into a new line or type of business.
ORDER
I.
Prohibition Against Participating in Multi-Level Marketing Programs
A. IT IS HEREBY ORDERED that each of the Corporate Defendants, whether acting directly or through any corporation, business entity or person under the control of any of them, is hereby prohibited from engaging or participating in (i) the operation or promotion of any Multi-Level Marketing Program or Prohibited Marketing Program, or (ii) the offering, marketing, advertising, promotion, distribution or sale of the right to participate in any Multi-Level Marketing Program or Prohibited Marketing Program. Examples of prohibited activities include, without limitation, having any ownership or equity interest in any such Program or acquiring or exercising any control or authority over the business decisions of any such Program.
II.
Prohibited Representations
IT IS FURTHER ORDERED that each of the Corporate Defendants, and the agents, servants, employees, and attorneys of any of them, and all persons or entities under the control of any of them, and all other persons or entities in active concert or participation with any of them who receive actual notice of this Order by personal service or otherwise, and each such person, whether acting directly or through any corporation, business entity or person under any of the Corporate Defendants’ control, in connection with the advertising, offering, marketing, promotion or sale of Business Ventures, are hereby prohibited from:
1. Falsely representing, expressly or by implication, the amount of earnings or income that can be or which is likely to be derived from the acquisition of the Business Venture;
2. Falsely representing, expressly or by implication, that persons who acquire the Business Venture are likely to realize substantial financial gain;
3. Falsely representing, expressly or by implication, the benefits that can or are likely to be derived from acquiring the Business Venture:
4. Falsely representing, expressly or by implication, the amount of sales that owners or acquirers of the Business Venture have made, or that acquirers of the Business Venture can or are likely to make:
5. Falsely representing, expressly or by implication, that all or most of the people who fail to make significant income from the Business Venture failed to devote substantial or sufficient effort;
6. Falsely representing, expressly or by implication, that salaried or permanent employment opportunities are available; and
7. Falsely representing, expressly or by implication, any other material fact.