Business Card Experts, Inc. (BCE) grossed over $16 million selling business-card dealerships. The prices of the dealerships ranged from $10,000 to $25,000. 

BCE recruited dealers through advertisements on the Internet and in newspapers and magazines. The ads claimed that dealers could earn $150,000 or more per year, when in fact only one or two people ever earned a third of that. Of the 1,300 people who purchased BCE dealerships, only about 300 were still ordering cards from BCE at the time of this suit.

BCE sales representatives told potential dealers that they could not lose money on the dealerships, and they were sometimes offered what they described as “money back guarantees”, which meant dealers received free boxes of cards and those who sold all of the free boxes at the suggested retail price of $49.95 would recoup their initial investment. But only about three percent of dealers actually recouped their investment.

When potential dealers asked for references, BCE sales reps lied and said they were independent dealers earning a living from selling business cards. The sales reps would offer prospective dealers exclusive territories knowing there were other dealers in the same areas, and one salesperson told an FTC investigator posing as a potential dealer that “We make over $200,000 a year net profit doing this business.” When in reality he had ordered only 5 boxed of cards in the prior three years. Another sales rep told and FTC investigator that he had fifteen people working for him and earned his investment back in three to four months, when in reality he sold less than $19,000 worth of cards in three years.

Dealers did testify that the BCE website was helpful for ordering cards, the cards were good quality, and they were competitively priced.

The court granted the FTC’s motion for a temporary restraining order. It enjoined BCE from selling dealerships, froze the company’s assets, and appointed a receiver to run the business. The FTC asked that the restraining order become permanent.

Questions:

1. Did BCE violate §5 of the FTC Act? If so, what is the proper remedy?

2. Is it reasonable for someone to believe that they could make $150,000 per year by selling business cards?

3. Is it the role of the law to protect the silly and gullible?

4. Did BCE tell the truth?

5. Were these business card dealerships a good investment?

6. Was it legal to sell them anyway?