This week, the FTC announced a settlement with UrthBox and its president that addresses two topics that we frequently cover on this blog: (1) free trials; and (2) incentivized reviews.
The FTC alleged that Urthbox offered a “free” trial of its snack boxes for a nominal shipping and handling fee. For some consumers, the trial came with unexpected costs. Unless they took steps to cancel before the end of the trial, consumers were automatically charged for a six-month subscription. The FTC alleged that the terms of this automatic renewal were not adequately disclosed. Although the company made some improvements to the disclosures, the FTC found that the terms were not sufficiently conspicuous and that they failed to communicate certain important details.
The order prohibits the respondents from misrepresenting the terms of a free trial, and requires them to clearly make certain disclosures relating to the negative option feature, in accordance with the Restore Online Shoppers’ Confidence Act (or “ROSCA”). In addition, the company must provide consumers with a simple mechanism they can use to avoid charges for products that are offered through a negative option program. Finally, the order requires UrthBox to pay $100,000, which the FTC can use to provide refunds to affected consumers.
UrthBox conducted incentive programs to induce customers to post positive reviews on various sites. For example, when customers contacted the company’s customer service line, agents offered to send them a free snack box if they posted positive reviews on the BBB’s website. As a result of the program, the ratio of positive to negative reviews on that site jumped from 100% negative to 88% positive in the space of about a year. The company also ran similar incentives to generate positive reviews on Facebook, Instagram, Tumblr, and Twitter.
The order requires the company to take steps to ensure that reviewers who receive an incentive clearly and conspicuously disclose that they have received that incentive. For example, the company must get a signed statement from reviewers in which they acknowledge that they are required to make a disclosure, and the company must monitor reviewers to ensure compliance. In addition, the company must take steps to remove previously-posted reviews that do not include the required disclosures.
Whereas previous FTC orders addressing endorsements were more general in nature, recent orders include more detail about exactly what steps the FTC expects companies to take to ensure compliance. Some of these steps go beyond what most companies are currently doing. Whether or not your company should adopt some of the requirements in these orders will depend on your circumstances, but the orders provide good examples of what practices are likely to be considered “safe.”