A law that went into effect in Minnesota August 1 promises legal leverage for local florists and other business owners who expect to sue deceptive advertisers. The law was written to help small business advertisers - particularly florists and locksmiths - in their fight against services from out of state masquerading as local Minnesota-based companies.
For Steve McCulloch, owner of Linsk Flowers in St. Louis Park, Minnesota, floral gift sellers disguised in online and print yellow pages ads as local firms were disrupting his relationship with his customers and potentially harming his company's reputation. The unwanted presence of services disguised as local shops but actually based outside Minnesota became known to McCulloch one day when a customer located just steps away from his shop placed an order. Rather than going directly to Linsk, the customer placed the order through a service claiming to be a local retailer when in reality the service was located in another state. The service - which had no pre-arranged relationship with McCulloch - took the customer's flower order, then placed the order with Linsk, while skimming $25 from the customer's total payment as a sort of finder's fee.
Later that day, said McCulloch, the customer went to Linsk to complain: The floral arrangement was smaller than he'd expected for the amount he paid. "He thought he was dealing with a florist from St. Louis Park," said McCulloch.
Kym Erickson, manager at Soderberg's Floral and Gifts of Minneapolis/St. Paul, and president of the Minnesota State Floral Association, describes a Mother's Day order resulting in a $79 total customer payment of which Soderberg's received under $40. The company's website boasts it "Never Has A Service Charge Online!"
McCulloch went to Minnesota State Representative Steve Simon to tell him about the problems he had experienced with companies cloaked as local florists that garnered hefty fees for taking floral bouquet orders. According to Simon, locksmiths had also complained about a scourge of companies feigning a local presence.
Like the fake local florists, these advertisers typically run search ads or print ads in yellow pages books, including a localized business name and phone number with a local area code, but no address. When called, the phone numbers are routed to a call center that could be based across the country. Google searches for locksmiths in Portland, Oregon and Minneapolis, for instance, result in ads for Run-Local-Locksmith.com, which read, “24/7 Portland Area Locksmith...Call 503-610-8983” and “24/7 Minneapolis Locksmith…Call 612-605-9078.”
For locksmiths, the problem is bad enough to have prompted a 2008 consumer alert from the Federal Trade Commission. "Consider this scenario: A company far away from your town chooses a name for its business that is very similar to the name used by a local locksmith. The company advertises in the phone book or on the Web using a local telephone number and local address. When you call the number, you're actually connected to a call center in another city. What's more, there's no locksmith shop at the address listed," explained the alert.
Businesses advertising online or in phone directories are in violation of the law if their advertised name indicates the company is based somewhere other than its actual location, if the listing doesn't identify the actual business location, or if local phone numbers listed forward to a location outside that calling area. According to Simon, the law's sponsor, it is not intended to go after companies that serve as middlemen between local florists and customers that do not claim to be local Minnesota firms, such as 1-800 Flowers. The law was based on similar laws passed in other states, Simon told ClickZ News. He added that the head of the Minnesota Retailers Association worked closely with him on crafting the legislation, which Simon described as complementary to the Uniform Deceptive Trade Practices Act adopted in many states including Minnesota.
"We're not asking them to not advertise. What we want them to do is be honest and upfront with where they're located," said McCulloch. He said he and other retailers met recently to discuss next steps which will include sending letters to companies they believe violate the law.
The goal appears to be to provide legal support for Minnesota business owners. "This would give them what they thought they needed which was comfort language," said Simon. "This just augments the current private right of action." Simon said the law gained bipartisan support and no one lobbied against it.
"We're targeting the people who are openly, deceptively claiming they are in Minnesota," said Erickson. "We do expect to file a lawsuit, a class action suit…much farther down the line," she said, adding that a law firm has shown interest in handling the suit.
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Kate Kaye was Managing Editor at ClickZ News until October 2012. As a daily reporter and editor for the original news source, she covered beats including digital political campaigns and government regulation of the online ad industry. Kate is the author of Campaign '08: A Turning Point for Digital Media, the only book focused on the paid digital media efforts of the 2008 presidential campaigns. Kate created ClickZ's Politics & Advocacy section, and is the primary contributor to the one-of-a-kind section. She began reporting on the interactive ad industry in 1999 and has spoken at several events and in interviews for television, radio, print, and digital media outlets. You can follow Kate on Twitter at @LowbrowKate.