If you watch as much TV as we do, you may have been tempted to reach for the phone to order the Snuggie, that blanket with sleeves for couch potatoes; Forever Comfy, the answer to rump-sprung chairs; or a host of other items sold by New York-based Allstar Marketing Group. And if one Magic Mesh, Cat's Meow, Roto Punch, or Perfect Tortilla wasn’t enough, the ads reeled buyers in with a “double the offer” buy-one-get-one-free promotion the FTC and New York Attorney General said was misleading. Settlements totaling $8 million offer guidance on how to make sure your BOGO doesn't turn into a no-go.
According to the FTC’s complaint, Allstar deceived consumers about key parts of the transaction. As a result, many people ended up with merchandise they didn't order and charges they didn't authorize. For example, Magic Mesh – a self-closing screen for doors – was advertised for “just $19.95.” But "call now” and the company promised to “double the offer. Just pay separate processing and handling fees.” That’s right, said the pitchman, “you get two Magic Mesh curtains for $19.95. That’s less than $10 each.”
Now for what the defendant didn’t tell people. First, Allstar charged $7.95 processing and handling for each Magic Mesh. What’s more, it was impossible to decline the BOGO, meaning that the minimum processing and handling fee was $15.90. That bumped the advertised $19.95 offer up to $35.85, without clear upfront disclosures about what consumers would get and how much they’d be billed.
The FTC says Allstar’s labyrinth-like telephone and online ordering processes compounded the problem. For example, the toll-free number used an Interactive Voice Recognition system – one of those “Press 1” set-ups that doesn’t offer people the option to speak to an operator. Consumers immediately had to give their credit or debit card numbers and the system didn’t prompt them to indicate how many of an item they wanted. A recorded voice just said, for example, “Great. We have you down for one Magic Mesh set” without clearly explaining that people had to get two screens and pay separate processing and handling for each of them.
But wait, there’s more. Allstar then pitched a series of upsells for its own products and for items sold by others. Where it got even more confusing is that Allstar offered consumers “additional sets” of Magic Mesh and asked for the first time how many items people wanted. Because of how the company described the deal, some consumers pressed 1, intending to get just the originally advertised BOGO offer. What they ended up with, however, was four screens – two "sets" – at a hefty additional cost. At no time did Allstar tell people how many products they ordered or the total cost. According to the FTC, Allstar even charged some consumers who hung up mid-call and didn’t intend to complete a sale.
You’ll want to read the complaint for the details, but the FTC says Allstar’s online ordering process was no clearer.
Faced with multiples of products they didn't want and charges they didn't authorize, some consumers turned to Allstar's “30 day money-back guarantee (less p&h)." The first deterrent was that the processing and handling fees often were close to 50% of the total cost. If consumers called to complain about receiving merchandise they didn’t order, many were refused full refunds and were told they had to return the items at their own expense.
The FTC’s complaint alleges that Allstar illegally billed consumers without their express consent and failed to adequately disclose material terms of the offer. The lawsuit also charges the company with multiple violations of the Telemarketing Sales Rule’s provisions regarding upsells.
What’s the message for marketers?
- BOGO stick. The FTC says Allstar stuck it to unwary consumers by structuring the deal in a confusing fashion. It’s unwise to hide the true nature of the transaction behind deceptive “free” claims.
- "Out of order? You're out of order!" Savvy marketers know that an out-of-order ordering process can result in frustrated customers and possible violations of the FTC Act. If you choose to use an automated system, take particular care to make sure your prompts and options are easy for consumers to understand.
- Keep your upsells on the up-and-up. Offering upsells via telemarketing ups your compliance ante. Complying with the Telemarketing Sales Rule offers advice on what the TSR requires.
- State of the union. Like other recent settlements, this case demonstrates that the FTC and state law enforcers are united in the fight against deception.
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