The FTC just filed a suit against 59 corporations and three individuals for violating the FTC Act and the Restore Online Shoppers Confidence Act (ROSCA) for deceptively selling products on 87 websites through free trials that converted to recurring charges on consumers’ credit cards. The defendants used affiliate marketers to drive traffic to their sites, often through embedded links in blog posts, banner ads, and purported surveys.
At the FTC’s request, a federal court temporarily halted the operation and froze the companies’ assets.
The copy on the sites directed consumers to TELL US WHERE TO SEND YOUR TRIAL TODAY! If consumers typed in their mailing address, they were taken to a check-out page that prominently displayed the cost this way: “Price $1.03; TOTAL $1.03 + S&P.” A blinking button stated COMPLETE CHECKOUT.
Now apparently there were offer terms which the FTC described as a “dense block of small grey text” below the COMPLETE CHECKOUT button. Those offer terms included a reference to the recurring price after the trial, the phone number to cancel, and even disclosed that by accepting the trial the consumer was also agreeing to the terms and conditions in How the Offer Works, including the Arbitration and Waiver of Class Actions sections.
However, the fine print and placement were not deemed sufficient.
Adding to the problem was the fact the defendants immediately charged the consumers’ credit cards $1.03 for the trial offer and then 8-10 days later charged them the balance of $94.31 for the first full-price. I assume this was the way the defendants authorized the validity of the credit cards but in this way consumers were charged upfront before they even tried the product. The defendants also sent the trial supply and the first month’s supply in one package so that consumers were charged twice – again, even before trying the product.
Lesson learned: I am sure most legitimate merchants would not utilize most of the unlawful tactics of these defendants. However, this is yet another reminder that offer copy below a checkout or submit button is simply not going to cut it in the eyes of the FTC or other regulators enforcing ROSCA.
ROSCA requires that you (1) clearly and conspicuously disclose all material terms of the transaction before capturing billing information; (2) get consumers’ express informed consent before making any charge; and (3) provide a simple mechanism for stopping recurring charges – and honor it.