An operation that offered “free trials” of its bogus smoking cessation patches and debited consumers’ bank accounts without their consent has settled Federal Trade Commission charges that it violated federal law. The settlement order bars the defendants from future violations and requires them to pay $315,000.
According to a complaint filed by the FTC in March 2008, the defendants offered a 10-day “free” trial of various herbal products, including smoking cessation patches called “Nicocure,” “Stop Smoking 180,” and “Zero Nicotine,” and stated that consumers would pay only for shipping and handling. The defendants failed to disclose that along with the free trial came automatic enrollment in a continuity program that would bill consumers up to $99.95 per month until they canceled their participation in the program. Consumers found that cancellation was difficult or impossible. The complaint also alleged that the smoking cessation patch did not work.
The settlement order bars the defendants, when using a “negative option” feature such as automatic enrollment in a continuity plan, from making offers on a “free,” “trial,” or “no obligation” basis if, in fact, a charge will be assessed unless the consumer takes affirmative action to avoid the charge. They also are prohibited from making a number of other misrepresentations, including about how much a consumer will be charged. The order requires the defendants to clearly disclose certain information before asking consumers to pay or reveal billing information, including all material conditions of any negative option offer. Other requirements are designed to ensure that consumers know what they are buying, that they have clearly authorized the transaction, and that they are able to obtain any promised refund.
In addition, the order bars the defendants from making certain representations about smoking cessation and other types of claims for any dietary supplement, food, drug, device, or health-related program or service, unless the claims are true, not misleading, and supported by reliable scientific evidence. They also are prohibited from misrepresenting the results of any research on such products, programs, or services.
The order imposes a $3.4 million judgment that will be suspended upon payment of $315,000. The full judgment will become due immediately if the defendants are found to have misrepresented their financial condition. The settlement also contains record-keeping and reporting provisions to allow the FTC to monitor compliance with the order.
The defendants are NextClick Media, LLC, Kenneth Chan, and Albert Chen. The Commission vote to authorize staff to file the stipulated final order was 4-0. The Commission also voted to dismiss its complaint against Next Internet, LLC. The case was filed in the U.S. District Court for the Northern District of California, San Francisco Division. The stipulated order was entered by the court on November 3, 2009.
NOTE: Stipulated court orders are for settlement purposes only and do not necessarily constitute an admission by the defendants of a law violation. Stipulated orders have the full force of law when signed by the judge.
The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,700 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.