Nutritional supplement maker NutraClick will change its billing practices and refrain from using negative option features as part of a deal with the Federal Trade Commission.
The agency accused the Massachusetts-based company of using "free" samples of its beauty products and supplements to trick consumers into providing their personal information. To receive the samples of products such as Peak Life and ProBioSlim, consumers were required to provide their personal information—including credit card data—to pay for the cost of shipping and handling. But NutraClick also enrolled them in a membership program, the FTC said, billing consumers between $29.99 and $79.99 per month depending on the product.
Because consumers did not realize they were being enrolled in the program, they often missed the 18-day trial period deadline to cancel, the agency added. NutraClick made "tens of millions of dollars" from the unauthorized recurring charges, the FTC said, and upwards of 70,000 complaints were filed about the company.
To settle the charges of violating the Federal Trade Commission Act and the Restore Online Shoppers' Confidence Act, NutraClick agreed to change its billing practices. The stipulated order prohibits the company from obtaining consumers' billing information without first disclosing that there will be a charge or that the charge will increase after a trial period, and that the charges will be on a recurring basis unless the consumer cancels. The company must also set details about the range of costs and the deadline and method for cancelling.
Within 10 days, consumers must receive confirmation of a sales transaction that includes the clear disclosures required by the order. NutraClick is also barred from using consumers' billing information to obtain payment absent express written authorization, from misrepresenting the cost of a product or service, or from falsely implying that offers are free when consumers will be charged. It must also provide a "simple" way for consumers to cancel.
The company must also turn over $350,000 to the FTC and avoid any future violations of ROSCA.
To read the complaint and the stipulated order in FTC v. NutraClick, click here.
Why it matters: In a blog post about the case, the FTC said companies should take a lesson from NutraClick's mistakes and remember that both the FTC Act and ROSCA apply to negative option plans, whether they are continuity plans (such as those used by NutraClick), trial conversions, or automatic renewals. Advertisers should also ensure that they clearly and conspicuously disclose all material terms of the program and that they obtain consumers' express informed consent before charging their credit cards.