Sellers of Girls Gone Wild Videos to Pay $1.1 Million To Settle Charges of Unauthorized Shipping and Billing

Under the terms of a stipulated court order announced today, the sellers of ‘Girls Gone Wild’ DVDs and videos will pay nearly $1.1 million as combined consumer redress and a civil penalty and will be barred from a wide range of activities detailed in a complaint the U.S. Department of Justice filed on behalf of the FTC in late 2003.

According to the FTC, the defendants marketed ‘Girls Gone Wild’ DVDs and videos as part of continuity programs that resulted in monthly shipments of DVDs or videos to consumers who did not agree to receive them. The defendants did not tell consumers clearly how the continuity programs operated, enrolled them without their consent, and automatically charged their debit or credit cards without their authorization for each of the unordered monthly shipments. The order prohibits the defendants from engaging in such conduct in the future. The order settles the FTC’s charges against the defendants, Mantra Films, Inc. and its sole shareholder, officer, and director Joseph R. Francis.

Mantra’s Alleged Business Practices

According to the FTC, beginning in December 2000, the defendants enrolled consumers who responded to Internet and television ads advertising a single video or DVD into “continuity” programs. Once consumers were enrolled in these programs, each month the defendants shipped additional, unordered videos and DVDs on a “negative-option” basis, charging consumers’ credit and debit cards for each shipment until consumers took action to stop the shipments. The FTC contended that the defendants’ advertising did not tell consumers how the continuity programs operated, failed to obtain consumers’ express consent to be enrolled, and did not give consumers an effective means to cancel their memberships once they were enrolled.

The Commission’s Complaint

The Commission’s complaint specifically charged Mantra and Francis with violating the FTC Act, the Electronic Fund Transfer Act (EFTA), and the Unordered Merchandise Statute. The complaint also charged them with violating previous Commission rulings that shipping unordered merchandise and sending communications that seek to obtain payment for, or return of, merchandise shipped without the express consent of the recipient are unfair and deceptive acts or practices. Specifically, the FTC charged that the defendants:

• failed to disclose adequately that the purchase of a video/DVD results in enrollment in a continuity program and the material terms and conditions of that program;
   
• misrepresented that consumers can cancel their continuity program membership at any time;
   
• caused charges to be submitted for payment for video/DVD shipments without the express informed consent of consumers;
   
• debited consumers’ checking accounts on a recurring basis without obtaining consumers’ written authorization for preauthorized electronic fund transfers from the accounts, as required by the EFTA;
   
• shipped unordered merchandise to consumers and sent communications seeking payment for the unordered merchandise; and
   
• continued to ship unordered merchandise and to seek payment for the merchandise, even after they had actual knowledge that the FTC had determined that these practices are deceptive, unfair, and unlawful based on prior cease and desist orders against other companies.

Terms of the Stipulated Order

The stipulated order, which requires court approval, requires Mantra and Francis to obtain consumers’ informed consent before causing their billing information to be submitted for payment. They must disclose clearly and conspicuously all material terms and conditions of membership in continuity programs before enrolling consumers, and they are prohibited from misrepresenting any fact material to a consumer’s purchasing decision.

The order also requires the defendants to obtain written authorization for recurring electronic withdrawals from a consumer’s checking account and to maintain procedures to avoid an unintentional failure to get such an authorization. Finally, the order prohibits the defendants from shipping unordered merchandise and attempting to obtain payment for it. These order components address each of the alleged violations of the FTC Act, the EFTA, and the Unordered Merchandise Statute. Finally, Mantra and Francis are barred from violating the Telemarketing Sales Rule to ensure that the order’s terms apply to future outbound sales pitches made via telemarketing.

The order further stipulates that $548,392 of the total $1,089,627 monetary judgment will be paid to consumers who were enrolled in a continuity program with the defendants between February 1, 2002 and June 1, 2003, and who canceled their enrollment by returning the first monthly shipment for a refund, but did not get a refund of any shipping costs. Mantra must refund the shipping costs to consumers within 60 days from the date the federal district court enters the order, and must complete the refund program within 180 days from that date. Mantra will administer the refund program and will contact eligible consumers directly.

The defendants also will pay a $541,235 civil penalty. The order also contains standard record-keeping, monitoring, and order distribution provisions to ensure the defendants’ compliance with its terms.

The Commission vote to approve a consent in settlement of the court action was 5-0. The order was filed by the U.S. Department of Justice’s Office of Consumer Litigation in Washington, DC on behalf of the FTC in the U.S. District Court for the Central District of California, Western Division, on July 30, 2004.

NOTE: The proposed stipulated order is for settlement purposes only and does not constitute an admission of a law violation. Stipulated orders have the force of law when signed by the judge.

Copies of the documents mentioned in this release are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies worldwide.

(FTC File No. X040019; Civ. No. CV 03-9184-RSWL (MANx))