FTC alleges deceptive “free” offers teed off golfers and left home chefs feeling burned

When websites prominently advertised “FREE!” golf balls and other gear, duffers and low-handicappers alike swung for the deal. But according to the FTC, 10 related defendants drove consumers into the rough with poorly disclosed terms and conditions, deceptive negative options, and misleading upsells, in violation of the FTC Act and the Restore Online Shoppers’ Confidence Act.

On their sites, the defendants pitched golf equipment, kitchen gadgets, and related subscription services – for example, online golf instructional videos. But according to the complaint, the defendants used illegal methods to sign consumers up for subscriptions they didn’t want and made unauthorized charges to their credit and debit cards for merchandise sent without their express approval.

Tactic #1:  The defendants prominently claimed that consumers could get merchandise – for example, Tour Z Golf Balls – for “FREE!” Under that was an “Add to Cart” button a consumer could click to take advantage of the offer. But according to the FTC, the golf balls weren’t really free. Consumers would be billed if they didn’t return them within a certain time. The lawsuit alleges that the true nature of the “free” offer wasn’t disclosed in a way consumers could see, read, and understand.

The complaint also charges that the defendants buried material terms – like the length of the trial period, the shipping fee, and how much consumers would be charged – in fine print at the bottom of the first page and surrounded by irrelevant stuff like additional product claims and the defendants’ copyright information. What’s more, those details were placed well below the “Add to Cart” button and without any visual cue telling consumers to scroll down. When people clicked “Add to Cart,” all they were told was that “other terms, conditions and restrictions may apply.”

Tactic #2:  The FTC also says the defendants made bundled offers that included one product combined with poorly explained “free trial offers” for one or more continuity plans. For example, when consumers bought the Culinary Torch (crème brulee anyone?), the complaint alleges that the defendants enrolled them in multiple “free trial” online subscription programs for recipes, coupons, etc. But like the golf ball deal, the FTC says the defendants deceptively hid the true nature of the programs – free for 30 (or 60) days and then consumers’ credit cards would get dinged $9.95 per month per program until they cancelled.

Tactic #3:  Then there were the upsells. In many cases, after submitting their billing information for an initial purchase, consumers had to click through as many as 14 upsell pages making negative option offers before reaching the final confirmation page. According to the FTC, the defendants disguised the true nature of those offers in dense blocks of fine print or obscure hyperlinks that didn’t clearly explain that consumer would be billed (and billed and billed) for those negative options.

If you can’t imagine how the defendants’ practices could get more confusing, try viewing the sites on a smartphone. The complaint alleges that the already confusing transactions were even harder to follow on the small screens of mobile devices.

For many consumers, their first inkling that they had been enrolled in a continuity program was when they saw unexpected charges on their credit card statements with cryptic descriptions like “JBEI,” “KAVI,” or “RMC.” The FTC says the defendants also didn’t make it easy for consumers who wanted to return a product, cancel recurring charges, or get a refund. For starters, the confirmation page didn’t disclose the seller’s name, how much consumers would be charged, the fact that consumers had been enrolled in a continuity program, and the steps to take to stop monthly charges. The complaint alleges that the defendants’ refund and return policies were similarly hard to find and hard to follow.

The lawsuit charges that the defendants violated the FTC Act by misrepresenting trial offers, failing to clearly disclose the terms of negative options, and failing to clearly disclose their return, refund, and cancellation policies. The FTC also alleges the defendants violated the Restore Online Shoppers’ Confidence Act (ROSCA) by failing to clearly and conspicuously disclose all material terms of negative option-type transactions before obtaining consumers’ billing information, failing to get consumers’ express informed consent before charging them, and failing to offer a simple mechanism to stop recurring charges.

If your company makes “free” offers or uses negative options, this is a case to watch.  The lawsuit against AAFE Products Corp., JBE International, LLC, BSDC, Inc., KADC, Inc., Purestrike, Inc., BNRI Corp., Brian Bernheim, Joshua Bernheim, Jared Coates, and Robert Koch is pending in federal court in California.