Rather, the point of this page is to identify practices which may apply to DirectBuy, and to discuss what assertions would be required for them to be considered to be material and/or deceptive, and therefore be used as defenses in a lawsuit by DirectBuy.
These comments are the author's own opinions. The author does not hold a law degree and thus cannot be considered an authority on this subject.
The whole purpose of the open house is to pressure people into becoming DirectBuy members and to become contractually obligated to pay the membership fee. Signing on the dotted line makes a number of people happy, such as the salesperson, the franchisee, and DirectBuy's corporate office. How completely unreasonable to expect that you should be able to kill all this joy by changing your mind up to 3 days later!DirectBuy's corporate office continues to state that a 3-day cancellation period applies even if state law does not mandate this, but individual franchisees reportedly include a statement disclaiming any such right to cancel.
In other cases, customers calling their DirectBuy saying they want to cancel are told that there is no such right to cancel, instead of being told the correct procedure to follow. The effect of this is to obviate the promised opportunity to cancel within 3 days.
misrepresentation
Clearly, if a representation is made that there is a right to cancel when no such right exists, this is a significant misrepresentation.
materiality
The misrepresentation is material if, but for the belief that there was a 3-day right to cancel, the person would not have agreed to pay the membership fees.
remedy
Potential remedies for misrepresentation are monetary award for the amount of the damages, rescission of the contract, and incorporating the misrepresented term of the agreement into the agreement.
The obvious remedy in this case is the last: allow the customer to cancel the contract, in accordance with the representation within the 3-day period following the notice of the court's ruling. Or quite sensibly, the court may deem that the customer has indicated his intent to invoke this option and consider it done.
rebuttal
The franchisee will most likely try to show that the customer was given notice of the absence of a 3-day right to cancel, such as by having initialed such a provision of the contract. The customer must strive to convince the court that the circumstances of initialing such a provision essentially "overwhelmed" his appreciation of the significance of initialing such a provision.
At the open house, customers are routinely told that if they don't sign up today, they will not be allowed to join DirectBuy for some extended period of time.
misrepresentation
Reportedly, some people have obtained invitations to attend a second open house after failing to sign up at their first open house. However, even if individual franchisees actually enforce this rule, they cannot enforce what other franchisees do. Since there may be multiple franchisees operating within the vicinity of the customer, the franchisee would really need to know that these other franchisees were also enforcing this rule.
materiality
If in fact the franchisee is only making this claim as to their own enforcement of this rule, it's effectively a moot point whether or not they enforce it, because a customer could always obtain a membership from one of the other franchisees.
OTOH, if the claim is intended to indicate that the customer will not able to subsequently obtain a membership, then it would be a material claim if the customer felt pressured to buy because of this claim. In other words, in the absence of such a claim, the customer might have decided not to purchase a membership at the open house, and subsequently might have obtained additional information and decided not to purchase a membership. Thus this erroneous information could have caused the customer to enter into a contract which he would otherwise not have entered into.
remedy
Rescission is appropriate. Customer should be made whole for all out-of-pocket expenses, exemplary damages are called for.
rebuttal
The franchisee may claim that this 7-year thing is mandated by the franchisor, and that therefore, all other franchisees must also enforce it. The counter for this rebuttal is to demand the franchisee demonstrate that systems are in place to enforce this rule, including systems to share data as to who has attended open houses of other franchisees.
DirectBuy sales literature indicates that DirectBuy members will be able to buy things at insider prices, without quite saying what this is, but that somehow, it avoids the huge markups that retailers charge.This becomes a two-pronged issue:
- What is meant by the promise of an insider price ?
- Do DirectBuy members actually receive such prices?
misrepresenation
Is the promise of insider prices just puffery, indicating prices that are generally lower than what they might pay elsewhere, or is it possible to determine that someone is or is not receiving an insider price?
The hard part of the misrepresentation claim is dealing with anecdotal data. Just because you bought one item and obtained no savings or perhaps only a nominal savings doesn't tell you anything about the overall savings which are available. OTOH, if you have purchased several items, and have not obtained overall savings which come close to what was represented, then that starts to be fairly convincing.
Another issue to raise is how they factor in the rebates retailers often receive and whether those rebates are passed on to DirectBuy members. Are some retailers getting rebates which are large enough that the retailer is able to sell for about the same as the insider price plus the DirectBuy order handling fee?
materialty
The opportunity to buy at insider prices is the very essence of what DirectBuy is offering in exchange for the membership fee. If this isn't material, nothing is.
remedy
One could argue for monetary damages, in the amount of the savings that DirectBuy has promised it can provide. For example, if you would buy $250,000 of merchandise over a 10-year period at a 50% savings, while the actual savings would only be 15%, DirectBuy's breach has cost you $92,500. But the contract never promises anything, which is why the issue here is about deceptive practices that can void the contract.
rebuttal
The franchisee will no doubt point to the contract here, which promises nothing. But again, that's the point: just because the contract promises nothing doesn't mean there weren't deceptive practices employed in selling the membership.
This is the explanation that's offered for various DirectBuy practices, such as why you have to make a decsion that night and why you can't join for 7 years if you don't join the same day.
misrepresentation
Do manufacturers really pressure them to keep the insider prices a secret? It seems to be a pretty convenient excuse for some of DirectBuy's selling tactics. Is it in fact part of agreements with each manufacturer? And if so, doesn't DirectBuy have enough clout to overcome this? Besides, the Federal government publishes general data anyway, so everybody really knows what the wholesale prices are anyway... and if they didn't, there's nothing that DirectBuy could really do to prevent this from leaking.
materiality
The presumed secrecy of this data suggests that the savings are likely to be substantial, and provides the excuse that prevents you from doing your own research before agreeing to become a DirectBuy member. The logic goes something like this:
Were it not for the secrecy surrounding the insider prices, I would have found it unacceptable that I couldn't compare prices before deciding to become a member. I accepted their explanation as to why comparing prices was not an option, and ultimately paid thousands of dollars for my gullibility.
remedy
Rescission.
rebuttal
Their claim is essentially that there's a commercial necessity for this secrecy. IMO/FWIW, the best counter to this is that there are tens of thousands of people who have access to these insider prices, that any one of these could post such prices on the internet quite anonymously, and that there's really no secret and really never was a secret. The real secret they're hiding, however, is a selection of products that's relatively limited, which you can't readily determine until after you've become a DirectBuy member.
| Topic PotentialDeceptivePracticesClaimsAgainstDirectBuy . { Edit | Ref-By | Attach | Diffs | r1.1 } |
|
Revision r1.1 - 25 Nov 2007 - 05:36 by EliMantel
Privacy Policy |
Copyright © 2000-2005 by the contributing authors.
All material on this collaboration tool is the property of the contributing authors. Collect email addresses here. Ideas, requests, problems regarding TWiki? Send feedback. |