Saga International, Inc

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IN THE MATTER OF SAGA INTERNATIONAL, INC.

CONSENT ORDER, ETC. , IN REGARD TO ALLEGED VIOLATION OF SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT Dockel C-3196. Complaint, Aug. 20, 1986-IJecision, Aug. 20, 1986 This consent order, among other things, requires a Compton, Calif manufacturer and seller of ultrasonic pest-control devices to refund the full purchase price of its Home Free" pest-control product to any consumer who bought the device after Dec. 31 , 19R3. Additionally, respondent is required to provide signs for retailers to post about the availability of refunds and advertise their availability through newspaper ads. Further, respondent is prohibited from making any performance or efficacy claims about any ultrasonic pest-control product unless it possesses and relies upon competent and reliable evidence that substantiates its claims. Appearances For the Commission: Harrison J. Sheppard. For the respondents: Vicki E. Boer, Holme, Roberts Owen Denver, Colo.

COMPI.AINT Pursuant to the provisions of the Federal Trade Commission Ad and by virtue of the authority vested in it by said Act, the Federal Trade Commi sion, having reason to believe that Saga International Inc., a corporation, hereinafter sometimes referred to as respondent has violated the provisions of said Act, and it appearing to the Commission that a proceeding by it in respect thereof would be in the public interest, hereby issues its complaint stating its charges in that respect as follows:

P ARAGHAPII 1. Respondent Saga International, Inc., is a corporation organized, existing, and doing business under and by virtue of the laws of the State of California, with its offces and principal place of business located at 1220 West Walnut Street, Compton, California. PAR. 2. Respondent, at all times mentioned herein, has maintained a substantial course of business, including the acts and practices as hereinafter set forth, which are in or affecting commerce, as !!commerce" is defined in the Federal Trade Commission Act. PAR. 3. Respondent, advertises, offers for sale, sells and distributes ultrasonic pest control devices under the brand name oC' IIorne Free . . .

Complaint PAR. 4. In the course and conduct of its business, and for the purpose of inducing the purchase of the Home Free ultrasonic pest control product, respondent has disseminated, directly and through its marketers and distributors, various promotional materials, including suggested advertisements, sales brochures and promotional pamphlets which contain statements respecting the performance of the Home Free ultrasonic pest control product. Examples of such promotional materials, which include the Home Free package, are attached hereto as Exhibits A through J.

PAR. 5: Typical statements in said promotional materials, but not necessarily inclusive thereof: are:

A. Ultrasonic sound waves repel rats, mice, and many insects from your home repels. . .roaches, flies, fleas, mosquitos, bedbugs, spiders, and ticks. R Electronically drives away insects and pests, with powerful pulsating blasts of sound waves. . .in a safe em ctive way! C. Safe. . .eliminates dangerous poisons from your home. D. It has been found effective on a wide range of pests including fleas, fles, mosquitos crickets, roaches, rats, and mice. The HOME FREE, when properly used, sends out an ultrasonic signal that irritates the super sensitive auditory nerves of insects and rodents, and thereby forces them to leave the area protected by it's (sic) sound. E. Rodents. .willeave the area right away and results wil be apparent almost at once.

F. It may take up to 4- weeks before the insect army is gone. G. HOME FREE keeps your home free from bugs, insects, rats, and mice. . . H. HOME FREE combined science and electronics to create a pest control system that is efiective, and easy to use.

PART I Pest Elimination Claims Alleging violations of Section 5 of the Federal Trade Commission Act, the allegations of Paragraphs One, Two, Three, Four and Five are incorporated by reference herein.

PAR. 6. Through the use of statements referred to in Paragraph Five and others not specifically set forth therein, respondent has represented, and is now representing, directly or by implication, that use of the Home Free:

a. Eliminates rats, mice, cockroaches, and other pests from a purchaser s home or place of business.

b. Eliminates rodents and insects from a purchaser s home or place of business within four to six weeks or sooner. c. Prevents rodents and insects from remaining in or entering an area in a purchaser s home or place of business where the Home Free device is in use.

PAR. 7. In truth and in fact, use of the Home Free: Complaint 108 F.

a. Does not eliminate rats, mice, cockroaches, and other pests from a purchaser s home or place of business.

b. Does not eliminate rodents and insects from a purchaser s home or place of business within four to six weeks or sooner. c. Does not prevent rodents or insects from remaining in or entering an area in a purchaser s home or place of business where the Home Free device is in use.

Therefore, the representations set forth in Paragraph Six were, and are, false and misleading.

PART II Pest Control Claims Alleging further violation of Section 5 of the Federal Trade Commission Act, the allegations of Paragraph One, Two, Three, Four and Five are incorporated by reference herein.

PAR. 8. Through the use ofthe statements referred to in Paragraph Five, and others not expressly set out therein, respondent has represented, and is now representing, directly or by implication, that use of the Home Free:

a. Effedively controls rats and mice in the home or place of business.

b. Effectively controls insects, such as cockroaches, in the home or place of business.

c. Eliminates the need to use, in the home or place of business alternative rodent or insect control products such as traps, powders sprays or other chemicals.

PAR. 9. In truth and in fact, use of the Home Free: a. Does not effectively control rats and mice in the home or place of business. Any reaction by rodents to the Home Free would, at best only be of short duration. Rodents habituate to ultrasound and will return to their chosen nesting or feeding habitats even in the presence of such ultrasonic products.

b. Does not effectively control insects, such as cockroaches, in the home or place of business.

c. Does not eliminate the need to use, in the home or place of business, alternative rodent or insect control products such as traps powders, sprays, or other chemicals.

Therefore, the representations set forth in Paragraph Eight were and are, false and misleading.

SAGA INn;RNATIONAL. INC.

Complaint PART III Reasonable Basis-Substantiation Alleging further violation of Section 5 of the Federal Trade Commission Act, the allegations of Paragraphs One, Two, Three, Four and Five are incorporated by reference herein.

PAR. 10. Through the use ofthe statements referred to in Paragraph Five, and others not expressly set out therein, respondent has represented and is now representing, directly or by implication, that at the time of making the representations set forth in Paragraphs Six and Eight respondent possessed and relied upon a reasonable basis for those representations.

PAR. 11. In truth and in fact, at such times, respondent did not possess and rely upon a reasonable basis for making those representations.

Therefore, the representation set forth in Paragraph Ten was, and , false and misleading.

PAR. 12. The use by respondent of the aforesaid representations as set forth in Parts I - III, and the placement, in the hands of distributors and retailers, of promotional materials through which others may have conveyed those representations, have had the tendency and capacjty to mislead consumers and to induce the purchase of respondent' s ultrasonic pest control products.

PAR. 13. The acts and practices of respondent, as herein alleged constituted, and now constitute unfair and deceptive acts or practices in or affecting commerce in violation of Section 5 ufthe Federal Trade Commission Act. The acts and practices of respondent, as herein alleged, are continuing and will continue in the absence of the relief herein requested.

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Complaint 108 FTC.

EXHIBIT H HQHEfJUE :55/:05 LISTEN CAREFULLY.

YOU ARE ABOUT TO HEAR THE SOUND OF A REVOLUTION IN HOME PEST CONTROL. THE SOUND OF ULTRASONIC WAVES UNLEASHED BY THE HOYXFREE ULTRASONIC PEST CONTROL WY ARE YOU LISTENING? HERE WE GO:

lTHREE- FDUR SECONDS SILENCE) YOU DIDN' T HERE IT , DID YOU? YOU WON' AND YOUR KIDS AND P TS WON' EV7 FLEhS FLIES, BUGS, EVEN RATS k D y.ICr ILL. A..\.: THAT SOUl,D WE C;" T HL.J..R, KILL Delve 7E::1': CRAZY, AND OUT OF YOUR HOUSE FOR GOOD. THE HQMEFREE BLANKETS YOUR H01' WITH HIGH FREQUENCY ULTRASONIC SOUND ONLY PESTS, BUGS, AND RODENTS CAN HEAR LFREE COMBINED SCIENCE D ELECTRONICS TO CREATE A PEST TROL SYSTEM THAT IS EFFECTIVE. AND EASY TO VSE. ALL YOU DO. IS PLUG IT IN.

AND REJiEHBER, YOU CAN' T HEAR IT WORJ.

YOU CAN ONLY SEE THE RESULTS! HOY FREE ULTRASONIC.

(,05 TAG) ;

Complaint EXHIBIT I HOMEFRIE .55/.05 LISTEN VLRY CAREFULLY.

YOU 1tre ABOUT '10 HEAR THE: SOUND OF THE: HOP-.EFRIE ULTRASONIC PEST CONTROL SYSTEM HARD AT WORK. DRIVING BUGS AND RODENTS CRAZY. AND OUT OF YOUR HOUSE FOR GOOD.

AR YOU LISTENING? HERE IT IS:

REE-FOUR SECONDS SILENCE) YOU DID:i' T HEAR IT, DID YOU? YOU wm:' A1\D YOti? KIDS J.!\D PETS \rQ BUT FLEhS, FLIES. BUGS, E\ K RhTS k ICE 'iill. AND THAT SOUND CAh' ! HEAR , IRRIThTES TE SO MUCH . THEY LEAVE YOUR HO IN DROVES.

THE BOMEFREE BLANKETS YOUR 8m:! WITH HIGH FREQUENCY ULTRA0 IC 5DUtm W1IVES 01\LY PESTS. BUGS AND RODENTS CAN HEAR. BY CO INING SCIENCE k D ELECTRONICS , Ho rree HAS MAE PEST cmiTROL EFFECTIVE, AND EASY TO USE.

NO CHEKICALS. ODORS, OR SPILLS- ALL YOU DO IS PLUG IT IN.

AND REl':.MEER. YOU CA' 'I EEAR IT WORK.

YOU CA ONLY SEE THE RESULTS.

HDMEFREE ULTRASONIC.

(,05 TAG! . .. , . 108 p, P-4CIr 12-inner D' 24_MCls ISPICly erc/n E.c :c:.

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Decision and Order 108 F. DECISION AND ORDER The Federal Trade Commission having initiated an investigation of certain acts and practices of the respondent named in the caption hereof, and the respondent having been furnished thereafter with a copy ofthe draft complaint which the Bureau of Consumer Protection proposed to present to the Commission for its consideration and which it issued by the Commission, would charge respondent with violation of the Federal Trade Commission Act; and The respondent, its attorney, and counsel for the Commission having thereafter executed an agreement containing a consent order, an admission by respondent of all the jurisdictional facts set forth in the aforesaid draft of complaint, a statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by respondent that the law has been violated as alleged in such complaint, and also containing waivers and other provisions as required by the Commission s Rules; and The Commission having thereafter considered the matter and having determined that it had reason to believe that the respondent has violated said Act, and that complaint should issue stating its charges in that respect, and having thereupon accepted the executed consent agreement and placed such agreement on the public record for a period of sixty (60) days, now in further conformity with the procedure prescribed in Section 2.34 of the Rules, the Commission hereby issues its complaint, makes the following jurisdictional findings and enters the following order:

1. Respondent Saga International, Inc., is a California corporation with its offces and principal place of business located at 1220 West Walnut Street, Compton, California.

2. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondent, and the proceeding is in thc public interest.

ORDER It is ordered That respondent Saga International, Inc., a corporation, its successors and assigns and its officers, agents, representatives, and employees, directly or through any corporation, subsidiary, division or other device, in connection with the advertising, offering for sale, sale or distribution of the "Home Free" ultrasonic pest control device or any other ultrasonic pest control product or device in AG-A lNTt;.hl\jATlU1'lal" U"Ilj.

Decision and Order or affecting commerce, as "commerce" is defined in the Federal Trade Commission Act, do forthwith cease and desist from: A. Representing, directly or by implication, that the Home Free or any other ultrasonic pest control product will: (1) eliminate cockroaches, rats, mice or other pests from a home or place of business;

(2) eliminate rodents or insects from a home or place of business within four to six weeks, or within any other specified period of time; (3) protect an area where said product is in use in a home or place of business from rodents or insects, or will cause an area to be free of rodents or insects; or (4) serve as an effective alternative to the use of conventional products such as sprays, powders, traps or other chemicals in providing protection from insect and rodent infestation. B. Representing, directly or by implication, any performance characteristic of any ultrasonic pest control product, unless at the time of making such representation respondent possesses and relies upon competent and reliable evidence which substantiates the representation. Evidence in the form of tests, experiments, analyses, research studies, or other evaluations shall be competent and reliable only if they are conducted in an objective manner by persons qualified to do , using procedures generally accepted in the relevant professions or sciences to yield accurate, reliable, and reproducible results. C. Representing, directly or by implication, that any ultrasonic pest control product is effective in providing protection from insect or rodent infestation in a home or place of business, unless at the time of making such representation respondent possesses and relies upon competent and reliable evidence which either directly relates to such home or place of business use conditions, or which can properly be applied to such conditions. Evidence in the form oftests, experiments analyses, research studies, or other evaluations shall be competent and reliable only if they are conducted in an objective manner by persons qualified to do so, using procedure generally accepted in the relevant professions or sciences to yield accurate, reliable, and reproducible results.

II.

It is further ordered That respondent, its successors and assigns and its offcers, employees, agents and representatives shall provide consumer refunds in accordance with the provisions of this paragraph to any retail purchaser of the Home Free device who purchased the Decision and Order 108 F. Home Free device from any retail outlet at any time on or after January 1, 1984.

A. Notification of Consumers 1. Respondent shall:

(a) Within sixty (60) days from the date of service ofthis order, cause to be distributed to each of respondent's distributors, and to each retail outlet which is known by respondent or its distributors to have purchased the Home Free device for resale to the public, the "Notice set out in Attachment A to this order, to which respondent shall cause to be affxed in tablet format (in suffcient quantities to anticipate foreseeable consumer demand) the form set out in Attachment B to this order;

(b) Within sixty (60) days from the date of service ofthis order, cause to be disseminated to each retail outlet identified in response to Paragraph II A.1(a), a request that said retail outlet prominently display said " Notice" and tablet forms;

(c) Within sixty (60) days from the date of service of this order, as to those retail outlets which together have accounted for at least 75% of respondent's sales ofthe Home Free device, take all steps necessary to cause said "Notices" to be placed in public areas within each such retaij outlet where such "Notices" are most likely to be seen by customers, particularly past purchasers of the Home Free device; and take all steps necessary to cause such "Notices" to remain in said public areas for a continuous period of six months from the date on which such "Notices" are first placed in each such retail outlet; and (d) Within ninety (90) days from the date of service of this order, but no sooner than respondent has complied with the provisions of Paragraphs ILA.1.(a), (b) and (c), cause to be published, clearly and prominently, the text of the "Notice" set out in Attachment A of this order in display advertising format in the weekend or Sunday edition of each local newspaper in which each retailer identified in Paragraph ILA.1.c) regularly advertises.

2. The "Notice" referred to in Paragraph ILA.1. above shall consist of a free standing sign of mounted wall poster of at least (8- 10 by 11 inches) in dimension, on which is written verbatim in clear - and prominent print of no Jess than 24 point print, the text as shown in Attachment A to this order.

3. Respondent shall, within ninety (90) days from the date of service of this order, cause to be published the text of the "Notice" set out in Attachment A to this order in each market area in which respondents caused newspaper, magazine, radio, or television advertisements for tn tJuO\ the Home Free to be placed at any time from .lan1JRrv 1 1 qA Decision and Order date of service of this order. The text of the "Notice" shall be published in a clear and prominent form in display advertising format in the newspaper of greatest general circulation in the market area in which each such advertisement appeared.

B. Consumer Refund Procedures 1. Any purchaser of the Home Free shall be entitled to a refund in accordance with the provisions of this order upon: (a) return of a Home Free device to any retailer who has sold the Home Free on or after January 1, 1984 and submission of either a sales receipt for the device issued by that retailer and dated on or after January 1, 1984 or a signed "affdavit" (as hereinafter defined and described); Or (b) shipment of the Home Free device to respondent with either a sales receipt for purchase of the device issued by a retailer and dated on or after January 1, 1984, or a signed "affdavit" (as hereinafter defined and described).

2. The "affdavit" referred to in Paragraph ILB.1. shall consist of either: (a) the form affxed in tablet format to the Notices furnished to all retailers in accordance with paragraph II. 1.(a) above, or (b) at the discretion of the person claiming the refund, a substantially equivalent written and signed statement.

3. Where a Consumer returns the purchased Home Free device(s) to respondent or to a participating retailer for refund(s), and the claim for refund is accompanied by some statement other than the affdavit form referred to herein (as permitted by Paragraph ILB.2.(b) above), and respondent or a participating retailer rejects the alternate statement as not "substantially equivalent" to the affdavit, respondent shah immediately provide the consumer, or shall cause the consumer to be provided, with an affdavit form so that the consumer may promptly obtain the refund to which the consumer is entitled under the provisions of this order.

C. Respondent s Consumer Redress Obligations Respondent or its successors or assigns shall: (1) cause consumer refunds to be made by retailers to any purchaser of the Home Free device who returns the device and submits to the retailer either (a) a sales receipt issued by a retailer and dated on or after January 1 1984, or (b) a signed affdavit (or its equivalent) as described in Paragraph ILB.2. above; and (2) make direct consumer refunds, including the cost of postage, to any purchaser of the Home Free device who returns the device and submits either (a) a sales receipt issued by the retailer and dated on or after January 1, 1984, or (b) a signed affdavit (or its equivalent) as described in Paragraph 1I.B.2. above. Any claim in compliance with Part II of this order shall be valid if made within Decision and Order 108 F. one calendar year of the date of service ofthis order and, when made directly to respondent, shall be honored by respondent within thirty (30) days of receipt of the claim.

D. Amount of Individual Refund Any consumer shall be entitled to a refund ofthe full amount ofthe purchase price paid for each Home Free device purchased as proven by a sales receipt issued by a retailer. In the absence of such a receipt consumers shall be entitled to a refund of no more than $19.95 plus postage ifthe device has been shipped to respondent at the consumer expense.

E. Respondent s Reporting Requirements Respondent shall report to the Federal Trade Commission the status of the consumer redress program required by this agreement in accordance with the following schedule:

(1) One hundred and twenty (120) days from the date of service of this order, respondent shall advise the Commission, in writing, of the number and location (by retail establishment address) of notices placed as required by Paragraph ILA.1. of this agreement and shall provide the Commission with a sample of each advertisement caused by respondent to be disseminated in accordance with the provisions of Paragraphs ILA. l.d) and ILA.3. of this order, along with the schedule of publication of such advertisements; and (2) Fifteen (15) months from the date of service of this order, respondent shall provide the Commission with a summary report of the consumer redress program which shall include, but shall not necessarily be limited to, a tabulation, on a total cumulative basis, of the number of former purchasers of the Home Free who have claimed a refund as authorized by this agreement, the dollar amount of con sumer refunds given (either by respondent directly or by retailers), and the number, name, and last known address of each claimant, if any, whose claim for refund has been denied by respondent. F. Respondent s Record-Keeping Requirements Respondent shall for at least two (2) years after service ofthis order maintain and upon requests make available to the Federal Trade Commission at a place it designates for inspection and copying, suffcient records to identify:

(1) The name and last known address of each purchaser ofthe Home Free who received reimbursement and the amount of such reimbursement; and (2) The name and last known address of each purchaser ofthe Home Decision and Order and the reasonFree who requested reimbursement and was refused, for each refusal to reimburse.

II.

It is further ordered, That for a period of three (3) years after the last date of dissemination of any representation concerning the performance characteristics or effcacy of any product covered by this order, respondent shall maintain and upon request make available to the Federal Trade Commission for inspection and copying copies of all materials relied upon to substantiate such representation, and copies of all documents in respondent's possession that contradict, qualify, or otherwise call into question said representation, including complaints from consumers.

IV.

It is further ordered That respondent shall for a period ofthree (3) years distribute, or cause to be distributed, a copy of this order to all present and future managerial employees, distributors, independent sales agents, and former, present, and future direct purchasers from respondent of any product covered by this order. It is further ordered That for a period of ten years: A. Respondent shall notify the Commission at least thirty (30) days prior to any proposed change in the respondent that may affect compliance obligations arising out of this order, such as dissolution signment ofthe ultrasonic pest control business, sale resulting in the emergence of a successor corporation, or the creation or dissolution of subsidiaries.

VI.

It is further ordered, That respondent shall, within one-hundred file with the and twenty (120) days after service upon it ifthis order, Commission a report, in writing, setting forth in detail the manner and form in which it has complied with this order. Decision and Ordcr 108 F. ATTACHMENT A REFUND ANNOUNCEMENT FOR PURCHASERS OF TI-I HOME FREE" PEST CONTROL DEVICE UNDER THE TERMS OF' A t'EDERAL TRADE COMMISSION ORDER, YOU ARE ENTITLED TO A REFUND FOR ANY "HOME FREE" PEST CONTROL DEVICE BOUGHT ON OR AFTER JANUARY I , 1984, UPON RETURN OF THE PRODUCT AT ANY TIME UNTIL lDate to BeSupplied: O e Year From Date or Service afOrdef bv Commission Upon Respondent) THE FEDERAL TRADE COMMISSION HAS CHARGED THAT SUCH DEVICES ARE NOT EFFECTIVE FOR THE PURPOSES ADVERTISED. SEE YOUR RETAILER ABOUT OBTAINING THE RRFUND OR CALL 1-800-24-3083 if you are in California) or 1--00-344--522 if you a outside of California).

ATTACHMENT B STATEMENT OF PURCHASE TO OBTAIN A REFUND FROM A PARTICIPATING RETAILER, YOU MUST RE- TURN THE "HOME tree" TO THE RETAILER AND SUBMIT EITHER (1) A DATED SALES RECEIPT OR (2) THIS FORM, COMPLETED AND SIGNED. I purchased a HOME FREE pest control device from on or after January 1 , 1984. Name of Retailer On penalty of perjury I certify that all of the above information is true and correct to the best of my knowledge. (See 28 United States Code 1746 (1985). Date Signature Address IF YOUR RETAILER IS NOT A PARTICIPATING RETAILER, OR YOU ARE UNA- BLE TO OBTAIN A m;FUND FROM THE RETAILER FOR ANY REASON, YOU MAY OBTAIN A m;FUND FROM THE MANUFACTURER BY SUBMITTING A DATED SALES RECEIPT OR THIS FORM (COMPLETED AND SIGNED) AND SHIP- PING THE HOME FRE TO: Qi5g University Drive ompton, CA 902 ATTN: Custo Service Department. YOU MAY SHIP THE DEVICE C. D. OR THE MANUFACTURER WILL REIMBURSE YOU FOR THE COST OF SHIPMENT. EACH REFUND FOR A HOME FREE PURCHASE IS LIMITED TO $19.95 UNLESS YOU SUBMIT A SALT,S RECEIPT SHOWING YOU PAID A HIGHER PRICE. ), Complaint