The operators of a worldwide negative option scam admitted to deceptively promoting “risk-free” trials and then, charging the consumers full price for the items and enrolling them in long-term, automatically-renewed product plans without their consent.
A court order resolving the Federal Trade Commission’s complaint requires the defendants to no longer engage in this type of scam and pay more than $9 million in assets, which will be used to refund consumers.
The order settles the FTC’s charges against San Diego-based Triangle Media Corp., Jasper Rain Marketing, LLC, and Brian Phillips .
It prohibits them from engaging in or assisting others in misrepresenting any material facts about a negative option transaction, including the cost of goods or services and the terms of any refund, cancellation, or exchange policy.
Additionally, the court order also requires the defendants to provide clear and conspicuous disclosures to consumers, getting their express informed consent before charging them for a product or service with a negative option plan, and providing a simple means of cancelling any shipping order to avoid future charges. It also requires the defendants to obtain consumers’ express informed consent before making any electronic funds transfer and to provide the consumer with a copy of the written authorization.
The second order settles the case against Hardwire Interactive Inc., Global Northern Trading Ltd., and Devin Keer. They helped operate the scam from overseas. The order also forbids these defendants from engaging in the same activities mentioned above.
Andrew Smith, Director of the FTC’s Bureau of Consumer Protection, said in an FTC press release, that “products touted as ‘risk free’ shouldn’t come loaded with hidden costs and obligations.”
The FTC promises to continue seeking action against marketers that engage in deceptive and unfair practices.
“The FTC will continue to bring actions against this kind of deceptive and unfair marketing, and will seek to return money to victimized consumers.”
Background on the FTC Case
According to the FTC’s complaint, filed in June 2018, the defendants marketed and sold a variety of products online products, including skin creams, electronic cigarettes, and dietary supplements, for at least five years.
The defendants marketed their “risk-free trials” of products via websites, blogs, and surveys on third-party sites. Once a consumer clicked on an offer, the person was taken to the defendants’ site, which claimed that only the cost of shipping and handling, $4.95, would be charged for the product.
However, consumers who agreed to the $4.95 shipping and handling charge were actually billed $98.71 for the trial and enrolled in a negative-option plan without their consent.
Additionally, the FTC said the defendants used deceptive order confirmation pages to hoodwink consumers into ordering other items. Consumers were charged full price for these items and enrolled in other negative option plans.
In Conclusion
Any business operating online should ensure it is complying with all local, state, and federal guidelines for the areas they do business. This includes refraining from participating in any deceptive marketing practices.
Online businesses that would like to offer free trials should clearly state the conditions that come with the products, get consumers’ consent for any long-term renewal plans, and ensure consumers know how to cancel orders or unsubscribe from plans. Taking these steps prevents businesses from an exorbitant number of chargebacks, as well as prosecution and fines from regulatory bodies.
Those who want to file a consumer complaint with the FTC, which works to promote competition and protect and educate consumers can call 1-877-FTC-HELP (382-4357).
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