UNITED STATES OF AMERICA

FEDERAL TRADE COMMISSION

) 

In the Matter of ) FILE NO. 0623088 

) 

KMART CORPORATION, ) 

KMART SERVICES CORPORATION, ) AGREEMENT CONTAINING 

and ) CONSENT ORDER 

KMART PROMOTIONS, LLC, ) 

corporations. )

)

)

The Federal Trade Commission has conducted an investigation of certain acts and 

practices of Kmart Corporation, Kmart Services Corporation, and Kmart Promotions, LLC, 

corporations (“proposed respondents”). Proposed respondents, having been represented by 

counsel, are willing to enter into an agreement containing a consent order resolving the 

allegations contained in the attached draft complaint. Therefore, 

IT IS HEREBY AGREED by and between Kmart Corporation, Kmart Services 

Corporation, and Kmart Promotions, LLC, by their duly authorized officers, and counsel for the 

Federal Trade Commission that: 

1.a. Proposed respondent Kmart Corporation is a Michigan corporation with its principal 

office or place of business at 3333 Beverly Road, Hoffman Estates, IL 60179. 

1.b. Proposed respondent Kmart Services Corporation is an Ohio corporation with its 

principal office or place of business at 3333 Beverly Road, Hoffman Estates, IL 60179. 

1.c. Proposed respondent Kmart Promotions LLC is a Virginia corporation with its principal 

office or place of business at 3333 Beverly Road, Hoffman Estates, IL 60179. 

2. Proposed respondents admit all the jurisdictional facts set forth in the draft complaint. 

3. Proposed respondents waive: 

a. Any further procedural steps; 

b. The requirement that the Commission's decision contain a statement of findings of 

fact and conclusions of law; and 

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c. All rights to seek judicial review or otherwise to challenge or contest the validity 

of the order entered pursuant to this agreement. 

4. This agreement shall not become part of the public record of the proceeding unless and 

until it is accepted by the Commission. If this agreement is accepted by the Commission, it, 

together with the draft complaint, will be placed on the public record for a period of thirty (30) 

days and information about it publicly released. The Commission thereafter may either withdraw 

its acceptance of this agreement and so notify proposed respondents, in which event it will take 

such action as it may consider appropriate, or issue and serve its complaint (in such form as the 

circumstances may require) and decision in disposition of the proceeding. 

5. This agreement is for settlement purposes only and does not constitute an admission by 

proposed respondents that the law has been violated as alleged in the draft complaint, or that the 

facts as alleged in the draft complaint, other than the jurisdictional facts, are true. 

6. This agreement contemplates that, if it is accepted by the Commission, and if such 

acceptance is not subsequently withdrawn by the Commission pursuant to the provisions of 

Section 2.34 of the Commission's Rules, the Commission may, without further notice to proposed respondents, (1) issue its complaint corresponding in form and substance with the attached 

draft complaint and its decision containing the following order in disposition of the proceeding, 

and (2) make information about it public. When so entered, the order shall have the same force 

and effect and may be altered, modified, or set aside in the same manner and within the same 

time provided by statute for other orders. The order shall become final upon service. Delivery of 

the complaint and the decision and order to proposed respondents’ addresses as stated in this 

agreement by any means specified in Section 4.4(a) of the Commission's Rules shall constitute 

service. Proposed respondents waive any right they may have to any other manner of service. 

The complaint may be used in construing the terms of the order, and no agreement, 

understanding, representation, or interpretation not contained in the order or the agreement may 

be used to vary or contradict the terms of the order. 

7. Proposed respondents have read the draft complaint and consent order. They understand 

that they may be liable for civil penalties in the amount provided by law and other appropriate 

relief for each violation of the order after it becomes final. 

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ORDER 

DEFINITIONS 

For purposes of this Order, the following definitions shall apply: 

1. “Clearly and prominently” shall mean as follows: 

(A) In an advertisement communicated through an electronic medium (such as 

television, video, radio, and interactive media such as the Internet and online 

services), the disclosure shall be presented simultaneously in both the audio and 

video portions of the advertisement. Provided, however, that in any advertisement 

presented solely through video or audio means, the disclosure may be made 

through the same means in which the advertisement is presented. The audio 

disclosure shall be delivered in a volume and cadence sufficient for an ordinary 

consumer to hear and comprehend it. The video disclosure shall be of a size and 

shade, and shall appear on the screen for a duration, sufficient for an ordinary 

consumer to read and comprehend it. In addition to the foregoing, in interactive 

media the disclosure shall also be unavoidable and shall be presented prior to the 

consumer incurring any financial obligation. 

(B) In a print advertisement, promotional material, or instructional manual, the 

disclosure shall be in a type size and location sufficiently noticeable for an 

ordinary consumer to read and comprehend it, in print that contrasts with the 

background against which it appears. In multipage documents, the disclosure 

shall appear on each page where a gift card is advertised, promoted, mentioned, or 

depicted. 

(C) On a product label or gift card, the disclosure shall be in a type size and location 

on the principal display panel sufficiently noticeable for an ordinary consumer to 

read and comprehend it, in print that contrasts with the background against which 

it appears. 

(D) The disclosure shall be in understandable language and syntax. Nothing contrary 

to, inconsistent with, or in mitigation of the disclosure shall be used in any 

advertisement or on any label. 

2. “Commerce” shall mean as defined in Section 4 of the Federal Trade Commission Act, 

15 U.S.C. § 44. 

3. “Covered Fee” shall mean any fee or surcharge that is assessed automatically by 

respondents or their successors and assigns, following activation of any Kmart Gift Card, and 

that decreases the value of the gift card, including but not limited to any dormancy, maintenance, 

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inactivity, monthly, balance inquiry, or other fees assessed automatically by respondents, their 

successors and assigns. Provided, however this definition shall not apply to any replacement fee 

for any lost or stolen Kmart Gift Card. 

4. “Document” is synonymous in meaning and equal in scope to the usage of the term in 

Federal Rule of Civil Procedure 34(a), and includes writings, drawings, graphs, charts, 

photographs, audio and video recordings, computer records, and other data compilations from 

which information can be obtained and translated, if necessary, into reasonably usable form 

through detection devices. A draft or non-identical copy is a separate document within the 

meaning of the term. 

5. “Eligible Consumer” shall mean any consumer who purchased or received a Kmart Gift 

Card prior to the date of issuance of this order, that was diminished in value by a Covered Fee for 

which no reimbursement previously has been issued. 

6. “Kmart Gift Card” shall mean any payment device: (a) that is issued by, or on behalf of, 

respondents or their successors and assigns; and (b) that can be used to purchase goods or 

services at a Kmart retail location, or any other store or Web site operated by respondents or their 

successors and assigns; and (c) that is issued in a specified monetary amount; and (d) that may, or 

may not, be increased in value or reloaded; and (e) for which cash or other value or consideration 

was given. 

7. Unless otherwise specified, “respondents” shall mean Kmart Corporation, Kmart Services 

Corporation, and Kmart Promotions LLC, corporations, their successors and assigns, and their 

officers, agents, representatives, and employees. 

I. 

IT IS ORDERED that respondents, directly or through any corporation, subsidiary, 

division, or other device, in connection with the labeling, advertising, promotion, offering for 

sale, sale, or distribution, in or affecting commerce, of any Kmart Gift Card, shall not fail to 

disclose clearly and prominently: 

A. the existence of any expiration date or Covered Fee associated with the Kmart 

Gift Card; Provided, however, that, at the point of sale, prior to purchase, 

respondents shall not fail to disclose clearly and prominently all of the material 

terms and conditions of any expiration date or Covered Fee associated with the 

Kmart Gift Card; and 

B. on the front of each Kmart Gift Card, the existence of any expiration date or 

Covered Fee associated with the Kmart Gift Card. 

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II. 

IT IS FURTHER ORDERED that respondents, directly or through any corporation, 

subsidiary, division, or other device, in connection with the labeling, advertising, promotion, 

offering for sale, sale, or distribution, in or affecting commerce, of any Kmart Gift Card, shall not 

misrepresent, in any manner, expressly or by implication, any material term or condition of the 

Kmart Gift Card. 

III. 

IT IS FURTHER ORDERED that, upon issuance of this order, respondents, directly or 

through any corporation, subsidiary, division, or other device, shall: 

A. Not collect or attempt to collect any Covered Fee on any Kmart Gift Card 

activated prior to the date of issuance of this order; and 

B. Create, maintain, and distribute to all respondents’ retail stores and customer care 

network centers, a written reimbursement policy that describes the methods by 

which Eligible Consumers may contact respondents to request reimbursement of 

the value of any Covered Fees that were deducted from their Kmart Gift Cards 

and the means by which respondents will reimburse the value of such Covered 

Fees. At a minimum, the reimbursement policy: 

1. Shall specify a toll free number, a valid email address, and a postal address 

consumers may use to request and obtain reimbursement of the value of 

such Covered Fees assessed against a Kmart Gift Card; 

2. Shall specify that a consumer may complete a request for reimbursement 

of the value of any Covered Fees assessed against his or her Kmart Gift 

Card through the toll free number, email address, or postal address 

required by Part III.B.1.of this Order; 

3. For two (2) years after the issuance of the order, shall be clearly and 

prominently disclosed, including, but not limited to, the toll free number, 

email address, and postal address required by Part III.B.1.of this Order, on 

respondents’ primary web sites, including, but not limited to, 

www.kmart.com and www.kmartcorp.com web sites; 

4. Shall be disclosed to any consumer who complains or inquires about the 

balance on a Kmart Gift Card; and 

5. Shall require reimbursement of the value of any Covered Fee assessed on a 

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Kmart Gift Card activated prior to the date of entry of this Order, in the 

form of a check or a Kmart Gift Card, to any Eligible Consumer who 

meets the following qualifications: 

(a). contacts respondents using any of the methods specified in Part 

III.B.2 of this Order; and 

(b). provides the Kmart Gift Card number and the consumer’s mailing 

address and telephone number. The consumer may provide, but is 

not required to provide, the store where the card was purchased, 

the date the card was issued, and the physical Kmart Gift Card. 

Once a consumer provides the required information, respondents 

shall issue a reimbursement within ten (10) business days. 

Provided however, that for thirty (30) days after issuance of the 

order, respondents shall issue a reimbursement within fifteen (15) 

business days. 

IV. 

IT IS FURTHER ORDERED that respondents Kmart Corporation, Kmart Services 

Corporation, and Kmart Promotions LLC, and their successors and assigns, shall, for five (5) 

years after the date of issuance of this order, in connection with the labeling, advertising, 

promotion, offering for sale, sale, or distribution, in or affecting commerce, of any Kmart Gift 

Card, maintain and upon request make available to the Federal Trade Commission for inspection 

and copying: 

A. Accounting records that reflect the cost of Kmart Gift Cards sold, revenues 

generated, and the disbursement of such revenues; 

B. Records documenting the sales figures and unit sales figures for the Kmart Gift 

Card; the total amount of any and all Covered Fees that have been deducted from 

Kmart Gift Cards; and the total number of Kmart Gift Cards from which a 

covered fee was deducted; 

C. Records maintained in the ordinary course of business reflecting during their 

employment: the name, physical address, and telephone number of each person 

employed by respondents, and their successors and assigns, including as an 

independent contractor, with responsibilities relating to compliance with this 

Order; that person’s job title or position; the date upon which the person 

commenced work; and the date and reason for the person’s termination, if 

applicable; 

D. Complaints and refund requests relating to the Kmart Gift Card (whether received 

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directly, indirectly or through any third party) and any responses to those 

complaints or requests; 

E. Copies of all advertisements or other marketing materials promoting, advertising, 

or referring to the Kmart Gift Card; 

F. Representative copies of all versions of the Kmart Gift Card; and 

G. All other records and documents reasonably necessary to demonstrate full 

compliance with each provision of this Order, including but not limited to, all 

documents obtained, created, generated or which in any way relate to the 

requirements, provisions or terms of this Order, and all reports submitted to the 

FTC pursuant to this Order. 

V. 

IT IS FURTHER ORDERED that respondents Kmart Corporation, Kmart Services 

Corporation, and Kmart Promotions LLC, and their successors and assigns, shall deliver a copy 

of this order to all current and future principals, officers, directors, and managers who engage in 

conduct related to the subject matter of the Order, and to the officers, directors, and managers of 

any third-party vendor who engages in conduct related to the subject matter of the Order, and 

shall secure from each such person, within thirty (30) days of delivery, a signed and dated 

statement acknowledging receipt of the Order. Respondents shall deliver this Order to current 

personnel within five (5) days after the date of service of this Order, and to future personnel 

within ten (10) days after their assuming their responsibilities. 

VI. 

IT IS FURTHER ORDERED that respondents Kmart Corporation, Kmart Services 

Corporation, and Kmart Promotions LLC, and their successors and assigns, shall notify the 

Commission at least thirty (30) days prior to any change in any of the corporations that may 

affect compliance obligations arising under this order, including, but not limited to, a dissolution, 

assignment, sale, merger, or other action that would result in the emergence of a successor 

corporation; the creation or dissolution of a subsidiary, parent, or affiliate that engages in any acts 

or practices subject to this order; the proposed filing of a bankruptcy petition; or a change in the 

corporate name or address. Provided, however, that, with respect to any proposed change in the 

corporation about which respondent learns less than thirty (30) days prior to the date such action 

is to take place, respondent shall notify the Commission as soon as is practicable after obtaining 

such knowledge. All notices required by this Part shall be sent by certified mail to the Associate 

Director, Division of Enforcement, Bureau of Consumer Protection, Federal Trade Commission, 

600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. 

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VII. 

IT IS FURTHER ORDERED that respondents Kmart Corporation, Kmart Services 

Corporation, and Kmart Promotions LLC, and their successors and assigns, shall, within sixty 

(60) days after service of this order, and at such other times as the Federal Trade Commission 

may require, file with the Commission a report, in writing, setting forth in detail the manner and 

form in which they have complied and are complying with this order. 

VIII. 

This order will terminate twenty (20) years from the date of its issuance, or twenty (20) 

years from the most recent date that the United States or the Federal Trade Commission files a 

complaint (with or without an accompanying consent decree) in federal court alleging any violation of the order, whichever comes later; provided, however, that the filing of such a complaint 

will not affect the duration of: 

A. Any Part in this Order that terminates in less than twenty (20) years; 

B. This order's application to any respondent that is not named as a defendant in such 

complaint; and 

C. This order if such complaint is filed after the order has terminated pursuant to this 

Part. 

Provided, further, that if such complaint is dismissed or a federal court rules that the respondent 

did not violate any provision of the order, and the dismissal or ruling is either not appealed or 

upheld on appeal, then the order will terminate according to this Part as though the complaint had 

never been filed, except that the order will not terminate between the date such complaint is filed 

and the later of the deadline for appealing such dismissal or ruling and the date such dismissal or 

ruling is upheld on appeal. 

// 

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Signed this day of February, 2007. 

KMART CORPORATION 

By: 

WILLIAM HARKER 

KMART SERVICES CORPORATION 

By: 

TOM SHANAHAN 

KMART PROMOTIONS LLC 

By: 

TOM SHANAHAN 

LINDA A. GOLDSTEIN 

Manatt, Phelps & Phillips, LLP 

Attorney for Kmart Corporation, 

Kmart Services Corporation, and 

Kmart Promotions LLC 

JONATHAN M. KRADEN 

JULIE G. BUSH 

Counsel for the Federal Trade Commission 

APPROVED: 

PEGGY TWOHIG 

Associate Director 

Division of Financial Practices 

LYDIA B. PARNES 

Director 

Bureau of Consumer Protection 

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