The Federal Trade Commission (FTC) recently announced that it has settled charges against a company called UrthBox, Inc., that allegedly promoted misleading consumer reviews and that failed to disclose key terms of its “free trial” offers. Among other things, the settlement requires the company to pay $100,000 to the FTC to compensate consumers deceived by the free trial offers.
UrthBox’s Misleading Consumer Reviews
The FTC’s charges focus on UrthBox’s practice of incentivizing positive consumer reviews without adequate disclosure. In 2014, UrthBox began an incentive program which provided store credit and free snack boxes to customers who posted positive reviews about UrthBox and UrthBox products on product review websites, such as TrustPilot.com, and on their personal social media accounts. In 2017, UrthBox expanded this program by proactively offering to send its customers free snack boxes if they posted positive reviews on the Better Business Bureau’s website. However, neither UrthBox nor UrthBox reviewers ever disclosed that the reviewers received benefits to provide such positive reviews. Additionally, UrthBox had no internal method for monitoring its reviewers.
In its complaint, the FTC stated that UrthBox’s practices violated Section 5 of the FTC Act by misleading prospective customers who were unaware that the reviews were not independently given. Specifically, the FTC noted that many UrthBox reviewers failed to comply with the Better Business Bureau’s requirement that reviewers certify that they have not been offered an incentive to provide a review. Because the Better Business Bureau does not publish reviews without such certification, consumers could be confused about the relationship between UrthBox and its reviewers. The FTC explained that “people should be able to trust that good customer reviews aren’t the result of companies secretly paying the reviewers.”
UrthBox’s Negative Option Marketing
The FTC also took issue with UrthBox’s “free trial” offers. In 2016, UrthBox began offering a “free trial” where customers would receive snack boxes upon payment of shipping costs. However, UrthBox failed to adequately disclose that the free trial would automatically convert into a “negative option” plan, in which UrthBox would automatically enroll customers in a six month subscription and charge customers approximately $269 for the full six months unless they took affirmative action to cancel at the conclusion of the free trial. Although UrthBox provided information about its free trial conversion in its online Terms and Conditions, consumers were not required to review the Terms and Conditions before beginning their free trial. In addition, the FTC noted that even if consumers did review the Terms and Conditions, they would have to scroll through lengthy pages to find the relevant information.
According to the FTC, these practices violate the Restore Online Shoppers’ Confidence Act, which prohibits sellers from enrolling consumers in negative option plans unless the seller:
- Clearly discloses all material terms of the deal before obtaining a consumer’s billing information;
- Gets the consumer’s express informed consent before making the charge; and
- Provides a simple mechanism for stopping recurring charges.
Consumer reviews and free trial offers are a popular marketing tool for brands and advertising agencies, particularly in online marketing, but this case serves as a warning that the FTC is closely scrutinizing these marketing practices and the e-commerce marketplace. Companies who engage in such methods to promote their products should carefully review their marketing materials to ensure they comply with all FTC disclosure requirements. Such disclosures must be adequate in terms of their content, presentation, proximity, prominence and placement such that consumers are likely to see and understand them.