FTC Settles With Marketer Over Alleged Junk Fees and Subscription Traps

The Federal Trade Commission announced that it reached a settlement with a marketer of skin creams, resolving allegations that the marketer (through a series of companies) misled consumers about what they would be charged after taking advantage of a free trial offer.   

The allegations

In the FTC's lawsuit against the marketer, the FTC explained that the marketer advertised “Risk Free” trials where consumers would only be charged a small shipping and handling charge (typically $4.99 or less).  The FTC alleged, however, that the marketer didn't adequately disclose to consumers who took advantage of the free trial offer that they would be charged more than $90, and would also be enrolled in an autoship program, if they didn't cancel within the required time period.  The FTC explained that the marketer “frequently charged consumers for additional products and enrolled them in autoship programs related to these additional products without consumers' knowledge or consent.”  

Where were the program details disclosed?  According to the FTC, there was some fine print on the website, in “small, light grey font placed against a white background,” which informed consumers that, “Initially, just pay $4.95 for S&H today to fully evaluate Vita Luminance Cream for fourteen (14) days.  We know that you'll love your smooth, wrinkle free skin.  You will receive your product within 5 business days.”  The FTC also said that, at the bottom of the webpage, there was a link to “TERMS AND CONDITIONS.”  If consumers clicked on the hyperlink, and then scrolled through a pop-up window, they would learn about the charges that apply and the terms of the autoship program.  The FTC alleged, “No other web page displayed during the ordering process told consumers that if they did not cancel within the trial period Defendants would:  (1) charge them for the full price of the trial product and (2) enroll them in an autoship program with monthly charges.”  

The FTC also alleged that the marketer tricked consumers into ordering other products as well.  Apparently, after consumers tried to complete their checkout, an upsell offer would often appear that said, “WAIT!  YOUR ORDER IS NOT COMPLETE.”   Below that would appear what looked like a coupon for an additional product, and then below that was a large blue “COMPLETE CHECKOUT BUTTON.”  Then, in small grey print a bit below that there was a link that said, “No Thanks, I decline this offer.”   It looked like this: 

The FTC alleged that many consumers clicked “COMPLETE CHECKOUT” thinking only that they were confirming their order, not that they were buying an additional product (and subscribing to an additional autoship plan).  

The FTC also alleged that when consumers tried to cancel their orders, the marketer made it difficult or impossible for them to do so. 

The settlement

In the order settling the case, in addition to agreeing not to mislead consumers in the future, the marketer agreed to be permanently banned from marketing any negative option features.  The order also includes a judgment against the marketer for more than $34 million as well as other financial penalties.  

In announcing the order, Samuel Levine, the Director of the FTC's Bureau of Consumer Protection, said, "Our proposed order banning defendants from the subscription marketing business and ordering the return of assets is a big win for consumers, and it should send a strong message to other unscrupulous marketers.  The FTC will continue its crackdown on junk fees and subscription traps.”