Analysis of Proposed Consent Order to Aid Public Comment
The Federal Trade Commission has accepted, subject to final approval, an agreement containing a consent order from Voice Media Incorporated and its two officers and owners, Ron Levi and Paul Lesser (the "respondents").
The proposed consent order has been placed on the public record for thirty (30) days for receipt of comments by interested persons. Comments received during this period will become part of the public record. After thirty (30) days, the Commission will again review the agreement and the comments received, and will decide whether it should withdraw from the agreement or make final the agreement's proposed order.
The respondents own and operate several adult entertainment web sites. They sell paid memberships to their sites, and promote them by periodically offering "free" trial memberships. This matter concerns allegedly false and deceptive representations about those trial memberships. The Commission's proposed complaint alleges that the respondents falsely claimed that they would not charge membership fees to consumers who canceled their trial memberships within seven days of providing credit card information and agreeing to participate in the free trial membership offers. In fact, in numerous instances, the respondents charged monthly membership fees to consumers who canceled within seven days of agreeing to participate in the trial membership offers.
The complaint also alleges that the respondents failed to disclose clearly and conspicuously: (a) that they immediately charge consumers' credit or debit cards for one month's membership fee effective as of the date that the consumers first provide credit or debit card information and agree to participate in the free trial membership offers; and (b) that they treat consumers' submissions of credit or debit card information as authorization to bill consumers' credit or debit accounts.
Part I of the proposed order prohibits the respondents from making any false or misleading representation of material fact, or omission of material information in connection with the advertising, promotion, offering for sale, or sale of any goods or services via the Internet, including, but not limited to, false or misleading representations: (a) that they will not charge consumers for goods or services during any free-trial period; (b) that their goods or services are "free," "without risk," "without charge," or words of similar import denoting or implying the absence of any obligation on the part of the recipient of such offer to pay for the goods or services; and (c) that a request for a consumer's credit or debit card number is for age verification only.
Part II of the proposed order prohibits the respondents from requesting any payment information, other than for purposes of age verification, from any consumer before ensuring that the consumer has received notice of each of the following material terms and conditions: (a) the applicable membership cost and the length of any free or trial membership; (b) the way in which a consumer may cancel, including any limitation on the time period during which a consumer must cancel in order to avoid charges; (c) a telephone number, facsimile number, and e-mail address where consumers can contact the Proposed Respondents; and (d) access to the complete terms and conditions of the respondents' offer.
Part III of the proposed order prohibits the respondents from: (a) billing any consumer who has not agreed to purchase goods or services; and (b) billing any consumer after the expiration of any free or trial offer without having first clearly and conspicuously posted notice of the expiration of the offer or provided access to that information by means of a clear and conspicuous hyperlink on their log-in page.
Part IV of the proposed order prohibits the respondents from: (a) unilaterally changing any terms or conditions of their offer in a way that would increase the consumer's financial obligations; or (b) materially altering the cancellation or refund procedures or terms, without first providing a consumer with fifteen (15) days notice and an opportunity to cancel. The notice must be made clearly and conspicuously.
Parts VI through IX of the proposed order are reporting and compliance provisions. Part X is a provision "sun setting" the order after twenty years, with certain exceptions.
The purpose of this analysis is to facilitate public comment on the proposed order. It is not intended to constitute an official interpretation of the agreement and proposed order or to modify in any way their terms.