Recently, a highly placed source in the “know” forwarded me an excellent blog post from Leslie Fair entitled: FTC uses ROSCA to challenge risky “risk-free trials”. It was the type of back channel message that we sometimes get working on behalf of the industry. The message was clear, this is an issue that is going to get a lot of government attention very soon.
Leslie’s post describes how the FTC recently filed a lawsuit against three individuals and an astounding 59 corporations who offered a trial for teeth whitening. Many of the associated 87 websites offered the product through a negative option offer. A typical promotion would see affiliate marketers emailing invitations for people to fill out “customer satisfaction surveys” for branded retailers like Kohl’s or Amazon. Upon completing the so-called survey, people were offered a “reward” for participating and were directed to a link for the teeth-whitening site.
Once on the site, pressure marketing techniques were utilized to confuse the consumer to enroll in an ongoing “risk-free trial.”
Needless to say, the FTC was not amused. They have filed a lawsuit in federal court in Nevada alleging a violation of both the FTC Act and the Restore Online Shoppers Confidence Act (ROSCA).
But wait there’s more….
State Legislators Get in on the Act
At the beginning of July, I reported on California Bill, SB 313, introduced by Senator Robert M. Hertzberg that would affect trial offers, introductory offers, or free gifts used as incentives to enroll in an automatic renewal program by requiring a separate stand-alone opt-in for the trial, introductory,
or free component of the offer.
ERA weighed in with its opposition and, along with other interested parties, was pleased when the legislation was amended to address our concerns. DRTV dodged a bullet on that one. However, the news is not all good. In states around the country, consumer groups have begun pushing similar proposals modeled on this legislation.
The Bottom Line
The bottom line for direct response marketers is that ROSCA and legislative and regulatory focus on the combination of “risk free trials” and auto renewals is only going to intensify.
Clearly it is important that you take some time to review your company’s marketing practices to ensure that you do not get swept up into any enforcement activity. ERA’s guidelines for the industry are a good place to start. It is also a very good idea to periodically review your offerings in this area with an attorney who has relevant industry expertise.ERA will continue to actively monitor and inform you of additional developments as conditions warrant. Further, we continue to actively investigate the potential for self-regulatory solutions that could mitigate further unwarranted attention from consumer groups and government entities.
About the Author
Bill McClellan serves as ERA's Vice President of Government Affairs. Prior to joining the association, Bill worked as a lobbyist at the Georgia Automobile Dealers Association, covering the state legislature and Georgia's congressional delegation. Before working for the GADA, Bill managed political campaigns at both the congressional and state constitutional levels.