On June 25, 2015, the FTC announced that it had taken action to stop a group of approximately 15 companies and 7 individuals from using allegedly deceptive “risk-free trial” offers to sell skincare products online. At the FTC’s request, the U.S. Federal District Court, Central District of California, issued a temporary restraining order against the defendants, halting their marketing practices, freezing their assets, and appointing a receiver over their business.
According to the FTC’s complaint, which is attached here, the defendants used various deceptive practices to market skincare products to consumers nationwide, including offering risk-free trials through online banners, pop-up advertisements and websites. Further, the defendants required consumers who accepted risk free offers to provide their credit card billing information, purportedly to pay nominal shipping and handling fees to receive the advertised products. Instead, however, consumers who provided their credit card information were charged higher prices for the products and enrolled without their consent in subscription plans under which they were shipped more products and charged recurring fees. The defendants also made it difficult for consumers to cancel the subscriptions or obtain a refund. The FTC Complaint further alleges the defendants also falsely misrepresented themselves as accredited by the Better Business Bureau with an A- rating.
In announcing the enforcement action, Jessica Rich, Director, FTC Bureau of Consumer Protection, noted that “companies need to give clear, honest information about charges. If a company advertises a ‘risk free trial,’ then that’s what it must provide”. The FTC is currently seeking a court order permanently barring the defendants from the allegedly illegal conduct while also providing refunds for defrauded consumers.
This is not the first case of FTC enforcement involving the use of free trials or automatic renewals in product marketing. In addition, state attorneys general have become more active with regard to deceptive marketing promotions.