AdoreMe, Inc. seduced consumers into negative-option, no-exit programs

Racy to the Top

It was the unlikely pairing of buttoned-up business and intimate fashion.

AdoreMe, Inc., was born in 2010 when a former McKinsey & Company consultant sought to address the lack of lingerie lines that were affordable without being cheaply made. With its launch in 2012, the company became something of a venture capital darling, with millions of dollars raised in round upon round of venture capital funding.

By 2016, AdoreMe had been repeatedly celebrated as one of the fastest-growing private retailers by publications like Crain’s Chicago Business and Inc. Magazine.

That Model Looks Familiar …

That success was sullied by a spate of consumer complaints, which brought the company to the attention of the Federal Trade Commission (FTC or Commission).

According to the FTC’s complaint, AdoreMe was running a problematic negative option program that would lure in unsuspecting customers and then make it very hard for them to leave.

At the heart of it all was the company’s VIP program, which billed customers $39.95 a month – provided the customer did NOT buy something from the company website or click on a “skip” button within the first five days of each month. If they didn’t make a purchase or “skip” out, they were assured that they would receive the $39.95 as a credit toward future purchases – redeemable “anytime.”

The Takeaway

But according to the Commission, “anytime” never came for many AdoreMe customers – the company is alleged to have taken away unused credit from consumers who tried to cancel their subscription or raised a dispute with their banks. Disclosures related to this forfeiture were buried deep within legal notices that were reachable only by a link on the bottom of the website’s page. Moreover, the FTC alleges that AdoreMe made it unreasonably difficult to quit the service and stop the recurring charges, thus violating the Restore Online Shoppers' Confidence Act (ROSCA), which provides detailed notice, cancellation and other operational requirements for online negative option programs.

AdoreMe settled with the Commission the same day the complaint was issued, and is now prohibited from misrepresenting sales or services with a negative option feature, and must provide an easy means for the customer to opt out of recurring charges. Finally, the order mandates a $1.3 million judgment that will be used to refund AdoreMe customers. Negative option and sales continuity programs can be conducted legally, but retailers need to comply with the notice, cancellation and other requirements of ROSCA and the many state laws that govern these types of advertising and sales programs.