The FTC's $9.8 Million "Free Trials" Refund

by Bill McClellan on Oct 19, 2017 11:15:46 AM Government Relations

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I have just returned from the hugely successful 2017 ERA D2C Convention held at the Wynn Las Vegas. While in our meetings at D2C, there was a lot of conversation about self-regulation and the Federal Trade Commission (FTC).

Frankly, the industry chatter was such a big deal before the show that we decided to hold an emergency education session entitled “Managing the Risk of Negative Option Offers and Other Marketing  Strategies.” During this panel, industry experts led by Peter Marinello of ERA’s self-regulation program explored the issue. It was a high-level review that included Ellen T. Berge, Venable LLP, Ed Glynn, Locke Lord, Linda Goldstein, Baker Hostetler LLP, and John A. Grego Sr., One Technologies, LLC.

The panelists explored many of the issues I laid out in my post at the end of August entitled “Advisory: Free Trials, Automatic Renewals & the Road Ahead” on ROSCA enforcement, risk-free trials and state and local interest. This panel was certainly one of the most talked about education sessions from D2C. In fact, I had a whole bunch of attendees thanking me for the great intel and information covered in the session. If you missed it, be sure to reach out to our panelists to learn more about the latest developments from the FTC.

With so much happening with the FTC, I had barely made it back to my desk in Washington D.C. after the conference before I saw the most recent headline: “FTC Sending Refund Checks Totaling More Than $9.8 Million to People Who Were Charged for “Free Trials” for Health Products.”  In this case, the FTC is refunding $9.8 million to 227,000 customers who bought “fat burning” and “weight loss” products from Health Formulas LLC. In the initial complaint, filed in October 2014, the FTC claimed that the defendants advertised their products using fake “free trials” that tricked people into disclosing payment information. Additionally, customers were put into negative-option membership programs without consent.

This issue is not going away anytime soon. In addition to our traditional claims and substantiation work, industry participants should pay close attention to all of these surrounding back end issues. Take some time to review your customer order practices and be sure to reach out to legal representation if you find something that you are worried about. It is better to get things in order now before that knock on the door from the FTC or a State Attorney General.


 About the Author

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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  

Bill McClellan's blog
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