The Office of the Attorney General for the State of Franklin has been investigating the advertising practices of Bernhard's Appliances, Inc. ("Bernhard's").  The Attorney General believes that some of Bernhard's newspaper and television ads have crossed the line and violated the state's Consumer Protection Act (the "Act").

A few months ago, Bernhard's ran an ad in the Franklin City Newspaper promising "free" airline tickets to customers who made significant purchases. Based on that ad, the Investigations Unit conducted an investigation, and confirmed the Attorney General's concerns. The Attorney General would like to put an end to Bernhard's misleading ads.

You are a student intern working with the Attorney General's Office for the State of Franklin. The Attorney General would like to know whether Bernhard's ad, promising free airline tickets, violates the Act. A copy of the ad and the facts developed by the Investigation Unit are attached; also enclosed is a copy of the Act and supporting case law. Using the facts developed by the investigators and the relevant law, identify and develop arguments that will persuade the court that Bernhard's travel promotion violates the Act. Please put your arguments in a memo in which you
· state specifically which sections of the Act are violated by Bernhard's promotion; and
· explain why the promotion violates those sections of the Act.

Thanks in advance for your thorough attention to this matter.

Office of The Attorney General

State of Franklin

Consumer Protection Division

Benjamin C. Kelly, Attorney General
John P. Ripka, Director, Investigations Unit

Dale Margon and Phillip Harter conducted the investigation in this matter. Bernhard's Appliances is a statewide chain of appliance stores that has been in business for fifteen years, but has expanded rapidly in the last five. They have gone from two stores, one in Franklin City (which was the original one) and a second in Jackson (just a hole in the wall started two years later), to eighteen outlets, four of which are in urban locations, with the rest in suburban settings, mostly in shopping malls. The business press has reported that they have been considering expanding out of state. The chain has effectively used very aggressive marketing techniques to attract a high volume of customers. Their prices tend to be in the range of large national chains and local competitors, but they succeed by having a very lame selection of brands and models, advertising heavily, and devising gimmicks to bring lots of customers into their stores.

Bernhard's placed the ad you gave me in at least five newspapers around the state and also ran a related ad on television in the major markets in Franklin. The television version contained a visual disclaimer regarding the free airfare. The disclaimer, in fine print at the bottom of the screen, was shown for only a few seconds and was identical to the disclaimer in the print ad. Even the fastest speed reader, however, probably could not have finished reading this statement before it disappeared from view.

After consumers make a qualifying purchase and take delivery of the goods, they are given a Vacation Ventures, Inc. (VVI) brochure and airfare certificate. The airfare certificate is a Bernhard's computer printout that states, "This certificate entitles you to two free airline tickets from virtually anywhere in the U.S.. to the Bahamas."  The promotional brochure a three-fold color pamphlet describing the vacation package to the Bahamas.

The brochure contains a page of terms and conditions and a "registration request form" (the RRF). ).  The terms and conditions list the costs for the twelve-day minimum hotel accommodations, ranging from $85 to $190 per night, double occupancy, and require that the nonrefundable $15-per-person processing fee be mailed in with the RR-F. Other terms and conditions include: (1) the RRF must be completed and received by VVI at least 45 days in advance of the earliest requested date of departure; (2) the RRF must include three valid choices of departure dates; (3) the balance of the vacation cost must be paid at least 15 days prior to departure; and (4) certain "black-out" dates apply.

When a consumer sends in the completed RRF and processing fee, VVI provides the consumer with a "confirmation of availability." The confirmation sets forth the a cost of the vacation and specifies the down payment and the terms for payment of the balance.

Bernhard's purchased 21,000 brochures from VVI at $5.35 apiece We could not discover how many brochures were distributed, but so far VVI has received 128 RRFs from consumers as a result of the ad. Of the 128, only eleven consumers actually took vacations offered through VVI. 

We have interviewed seven consumers to date. A summary of each interview follows.

1. Errol Levelle, age 71, said that he bought his washing machine at Bernhard's because in addition to the fact that he needed a new washer, he had heard about the free airfare offer on television. To him, it "sounded like a good deal."  He was not given a copy of the VVI brochure until after he made his purchase, and until then, he did not know about the minimum hotel stay requirement. Once Mr. Levelle reviewed the brochure, he made cost calculations regarding the VVI offer and compared them to vacation prices he saw listed in newspapers. He concluded, "I could safely disregard Bernhard's offer because I could get the same transportation far cheaper through regular reservations." He therefore decided not to send in the RRF.

2. David Biggs said that he bought a television set at Bernhard's because of the airfare offer he had seen advertised on television. He did not recall seeing a disclaimer on the TV screen. He actually took a trip to the Bahamas and stayed 12 nights at a hotel. He discovered while there that he could have saved $300 on the hotel cost by booking directly with the hotel, more than the cost of the "free" airfare.

3. Michael Shiffler also made his purchase at Bernhard's based on a television ad publicizing its "free" airfare. He said that when he requested information in advance of his purchase, the salesperson told him that he would not receive the travel certificate until after he made his purchase. He initially thought that Bernhard's would give him "two tickets at the store." After making the required purchase and receiving the VVI brochure, he realized that he would have to pay for hotel stays "at certain places of [VVI's] choice for a set number of days."

4. Lorraine Johnston had seen the Bernhard's television and newspaper advertisements. Her husband wanted to go to Bernhard's to buy a VCR, and she agreed because of the airfare offer. She asked a Bernhard's salesperson about any "gimmicks" involved in the offer and was told that there were none and that she would get written information about the promotion upon delivery of her merchandise. Ms. Johnston said that she had not seen the "minimum hotel stay required" in the advertisements. After she made her purchase, she did not send in the RRF because of the hotel prices.

5. Sasha McCoy purchased a clothes dryer at Bernhard's because she read of Bernhard's airfare promotion in a newspaper ad. She decided to send in the RRF, along with the processing fee. After receiving the confirmation from VVI, she decided not to take the trip because (1) the confirmation required her to respond with a $300 deposit; (2) any cancellation would result to forfeiture of the deposit; and (3) among her requested dates of travel and all of the blackout days she had only one date for travel.

6. Houd Zidan was a walk-in customer who had not seen or read the ad. After a salesperson told him about the sales promotion, Mr. Zidan bought a CD player. He sent in an RRF and was told by VVI that he could not get any of the travel dates he requested because they were "blacked-out." but that if he were willing to pay extra, the dates could be secured for him. Moreover, according to Mr. Zidan, he could get "much more" through other travel agents he had contacted for the price charged by VVI.

7. Karen Ingersoll, Ph.D., said she saw Bernhard's ad on TV. She recalled that the ad indicated that free airfare for two was available with a minimum purchase. Because she was already planning to buy an air conditioner, she went to the store in Mayfield to get the details of the offer. She was given the written brochure and the salesperson explained the offer. When she asked him for the details, he explained that the airfare would be granted if she bought a minimum stay at a choice of hotels through a travel agency. Through a travel agent, she had previously priced a vacation package to travel to the Bahamas at $2,400. The airline tickets alone at that time cost $740 for two. When she computed the cost of the Vacation Ventures package, she realized it would cost only $2,100, saving her $300. Therefore, she decided to purchase the air conditioner at Bernhard's rather than somewhere else. Dr. Ingersoll also stated that she enjoyed her vacation through VVI and that she "never felt misled."