FTC: Direct Marketing Company for As-Seen-on-TV Products Will Pay $7.5 Million Settlement
A direct marketing company that sells all of those as-seen-on-TV items we're all familiar with will be shelling out $7.5 million in a settlement agreement with the Federal Trade Commission (FTC).
The FTC complaint against Allstar Marketing Group alleged that the company used deceptive buy-one-get-one-free promotions and confusing language to charge customers for products without their consent. The $7.5 million settlement may be used to pay restitution to harmed customers.
The settlement also includes a $500,000 payment to the New York attorney general's office, which was also included in the suit.
According to the FTC's complaint, since at least 1999, Allstar, based in Hawthorne, New York, has been in the direct marketing business, using television commercials to sell its products, many of which are familiar to consumers such as Magic Mesh, Cat's Meow, Roto Punch, Perfect Tortilla, Forever Comfy, and Snuggies. While the products have varied, Allstar's pitch is often the same -- a buy-one-get-one-free offer without additional costs disclosed.
In a recent commercial for Magic Mesh, for example, the company promised that it would double the offer for consumers, if they just paid processing and handling fees. While consumers were led to believe that they would then be getting two $19.95 products for less than $10 each, in fact, the total cost with the undisclosed $7.95 processing and handling fees jumped from the advertised price of $19.95 to $35.85, according to the complaint.
Consumers who called Allstar were often immediately instructed to enter their personal and billing information, and were charged for at least one set of products, based on the buy-one-get-one-free offer, before they had a chance to indicate how many products they wanted to buy. Because the sales pitch was often confusing, some consumers purchased more sets than they actually wanted.
Allstar then attempted to upsell consumers additional products via automated voice prompts that requested the consumer accept the offer. Many times, the only way a consumer could decline the offer was to say nothing. At the end of the calls, Allstar sometimes routed consumers to other third-party sellers who made additional sales pitches.
Once all the offers ended, consumers were not told the total number of items they agreed to buy, or the total amount they would be billed, according to the complaint. The Commission has alleged that Allstar even charged those consumers who hung up mid-call, not intending to complete a sale.
According to the FTC's complaint, consumers who opted to buy Allstars' products online faced similar problems, including separate processing and handling fees which were only disclosed in very fine print at the bottom of the page, and a barrage of upsell offers. Consumers were not provided with the total price of their purchases, and despite a 30 day money-back guarantee (less processing and handling fees) full refunds were difficult for consumers to obtain.
The settlement order prohibits Allstar from failing to obtain consumers' written consent before billing them for any product or service. It also requires the company to clearly and conspicuously disclose – before billing consumers – the total number of products they have ordered, all related fees and costs, and material conditions related to the products purchased.
It also prohibits Allstar from violating the Telemarketing Sales Rule by: 1) failing to disclose the true costs of any goods or products it sells; 2) failing to promptly disclose the identity of the seller to consumers and that the purpose of the call is to sell a product or service; and 3) causing billing information to be submitted for payment without consumers' express authorization.