Online Marketers Banned from Deceiving Shoppers, Will Pay $2.5 Million Penalty
The defendants offered 'free' products without disclosing that consumers were agreeing to be charged each month for a subscription
A group of online marketers will pay more than $2.5 million to settle charges brought by the Federal Trade Commission (FTC) of deceiving consumers with supposed "free" and "risk-free" trials for cooking and golfing products.
According to an FTC complaint filed in March 2017, the defendants in this case offered "free" products, without clearly disclosing that—by accepting the "free" product—consumers were agreeing to be charged each month for a subscription if they did not cancel. The defendants also allegedly misrepresented their return, refund, and cancellation policies.
Terms of the Settlement
Under the terms of a settlement with the FTC, the defendants are prohibited from misrepresenting:
- The cost of any good or service;
- That consumers will not be charged;
- That consumers can get something for a processing or shipping fee with no further obligation; or
- That a product or service is free.
The settlement orders also require the defendants to clearly disclose important details about any online negative option where consumers' enter billing information. They are also required to get consumers' informed consent before charging them, and must also offer a simple way for consumers to cancel recurring charges.
The orders also bar the defendants from billing consumers who were first charged before March 1, 2016, and from selling or otherwise benefitting from consumers' personal information and failing to dispose of it properly.
The order against Brian Bernheim and Joshua Bernheim imposes a $1,869,690 judgment that they must pay in four installments within one year. To secure the payment, they granted the FTC a security interest in real estate and other assets valued at more than two and a half million dollars.
The order against Robert Koch imposes a $632,304 judgment that he must pay in three installments within one year. To secure the payments, Koch granted the FTC a security interest in real estate worth more than one million dollars.