Web Crammers Settle FTC Charges (April 2001)

Web site operators who billed consumers for "free trials" have agreed to settle Federal Trade Commission charges that their practices were deceptive and violated federal law. The settlement will bar the defendants from making false or misleading statements - including misrepresenting whether consumers will be charged for goods or services during a free-trial period - and will bar billing before providing clear and conspicuous notice of all terms and conditions. The settlement also will prohibit the defendants from changing the terms of their agreements, cancellation or refund policies without first giving consumers the opportunity to cancel the membership.

Voice Media Incorporated (VMI) and its officers, Ron Levi and Paul Lesser, are based in Carson City, Nevada.

In the complaint detailing its charges, the FTC alleged that the VMI operates adult content Internet sites and sells memberships for $19.95 to $34.95 per month. The sites promote membership by periodically offering "free" 7-day trial memberships. VMI asked those signing up for the free trials to provide credit card numbers for age verification. The complaint alleged that VMI represented that it would not charge membership fees to consumers who affirmatively canceled their trial memberships within the trial period. Contrary to that representation, VMI sometimes charged monthly membership fees to consumers who canceled within the trial period. Additionally, the complaint alleged that VMI immediately billed the credit cards of those consumers who signed up for the free trial at the outset, treating the submissions of credit card information as authorization to bill the accounts. However, consumers did understand that they had to take affirmative steps if they did not want to become members and be regularly billed.

The settlement will bar the defendants from making false or misleading statements, including false statements that they will not charge consumers during a free-trial period; that their services are free; and that a request for a credit card number is for age verification only. The order also prohibits them from requesting credit card information except for purposes of age verification, without giving consumers clear and conspicuous information about membership costs and the length of any free trial; terms of cancellation; and how consumers can provide notice of cancellation. The order prohibits the defendants from billing consumers who have not agreed to purchase their goods or services and from automatically billing consumers after a free-trial expires without first notifying the consumer in a clear and conspicuous way that the trial period has expired and billing is about to begin. It also prohibits the defendants from changing the terms and conditions of their agreements without giving consumers 15 days advance notice and an opportunity to cancel. The agreement also contains certain bookkeeping provisions to allow the Commission to monitor compliance.

The Commission vote to accept the proposed consent agreement was 5-0. A summary of the proposed agreement will be published in the Federal Register shortly. Comments may be submitted for 30 days, until May 17 2001, after which the Commission will determine whether to make the agreement final. Comments should be sent to: FTC, Office of the Secretary, 600 Pennsylvania Ave., N.W., Washington, D.C. 20580

NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.

Copies of the complaint, proposed consent agreement and an analysis to aid public comment 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, D.C. 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. 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. 002 3003)