Six months after federal regulators accused a group of online marketers of promoting deceptive “free” and “risk-free” trials of golf and kitchen products, the companies have agreed to pay hefty fines and revamp their billing practices to settle the allegations.
The Federal Trade Commission announced today a $2.5 million settlement with a group of online marketers accused of deceiving consumers about the actual cost of supposedly free cooking gadgets, golf equipments, and access to related subscription services.
The FTC’s original complaint [PDF] — which names Brian Bernheim, Joshua Bernheim, Jared Coates, Robert Koch AAFE Products Corp., JBE International LLC, BSDC Inc., KADC Inc., Purestrike Inc., and BNRI Corp., formerly known as Bernheim and Rice Inc., as defendants — accused the companies of luring consumers with “free” and “risk-free” trials that were neither free, nor risk-free.
The companies marketed their products under various names, including Kitchen Advance, Gourmet Cooking Online, Gourmet Cooking Rewards, Medicus Golf, Kick X Tour Z Golf Balls, Golf Online Academy, Golf Tour Partners, and Purestrike Swing Clinic.
According to the complaint, the companies used TV Infomercials, websites, and emails to mislead consumers into believing that the products and services being advertised were free.
In reality, the companies charged consumers’ stored credit cards for the products if they did not cancel their “free trials” or return the “free” products in a certain amount of time, the FTC claims.
For example, the website for Tour Z Golf Balls makes a prominent claim that consumers can try the product for “FREE!” followed by an “Add to Cart” button.
The trial offer, however, was not free if customer did not cancel and return the golf balls within a prescribed amount of time, according to the complaint.
In another instance, the FTC found that the company’s “bundled” offers — which included one product combined with free trial offers for one or more continuity plans — automatically enrolled customers into programs they were unaware of.
For example, one of the company’s websites bundled an offer to sell a Culinary Torch product with free trial offers for two online cooking subscriptions.
The FTC claimed that the marketers failed to provide adequate disclosures or obtain consumers’ consent before enrolling them in an online subscription program on a free trial basis for 30 days to 60 days at a cost of $9.95 per program for each 30 days unless canceled.
Additionally, the complaint alleged that during the purchasing process, the companies sign consumers up for more “free trials” after forcing them to click through as many as 14 upsell pages to reach the final confirmation page.
Canceling the programs and other product shipments was easier said than done, according to the FTC, as the companies often buried the process in the fine print that could only be reached through a small hyperlink.
The FTC claimed that cancellation and return requirements, and other information were not disclosed in a manner that consumers could reasonably see, read, or understand.
Under the FTC’s settlement, the defendants are prohibited from misrepresenting the cost of any good or service, that consumers will not be charged, that consumers can get something for a processing or shipping fee with no further obligation, and that a product or service is free.
The companies must also clearly disclose important details about any online negative option where customers’ enter billing information. The marketers must also get customers’ informed consent before charging them, and offer a simply way to cancel any recurring charges.
The orders also bar them from billing consumers who were first charged before March 1, 2016, and from selling or otherwise benefitting from consumers’ personal information and failing to dispose of it properly.
Finally, the FTC has fined operators a total of $2.5 million. Brian Bernheim and Joshua Bernheim must pay [PDF] a $1.86 million judgment in four installments within one year, while Robert Koch must pay [PDF] $632,000 in three installments over one year.