First FTC ROSCA case challenges bogus BOGO and "free" claims

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It’s called ROSCA – the Restore Online Shoppers’ Confidence Act – and it prohibits marketers from charging consumers for an online transaction unless the marketer has clearly disclosed all material terms of the deal and received the consumer’s express informed consent. Your e-commerce clients will want to know about the FTC’s first ROSCA case, filed recently in Nevada.

According to the lawsuit, Health Formulas, LLC and a tangle of related California- and Nevada-based companies and individuals – consumers may know them as Simple Pure Nutrition – pitched a variety of products for weight loss, muscle building, virility, and skin care. The defendants advertised diet supplements like Pure Green Coffee Bean Plus and RKG Extreme as a shortcut to drop the pounds: “Burn fat without diet or exercise,” “Extreme weight loss!” “Shed pounds fast!” “Super concentrated double fat burning,” etc. Among the defendants’ more colorful business names: Weight Loss Dojo, Longhorn Marketing (sorry, Texas fans), Black Bull, and Unleash the Thunder.

But unsubstantiated weight loss claims were just the start. The FTC says the defendants lured people in with bogus promises of a “free” trial or deceptive buy-one-get-one (BOGO) offers. Then they tricked consumers into giving their credit or debit card information with the false implication that consumers had to “just pay shipping.”  

Digits in hand, the defendants really went to town, allegedly signing consumers up without their authorization for a negative option program that billed their accounts over and over again, to the monthly tune of between $60 and $210. The FTC says the defendants violated ROSCA by using a negative option feature without providing clear and conspicuous disclosures, getting the consumer’s express informed consent, and offering a simple mechanism for stopping the recurring charges.

The FTC’s complaint also cites the defendants’ hard-to-find and hard-to-understand fine-print “terms and conditions,” which consumers could reach only by scrolling through the equivalent of two printed pages and clicking on an obscure hyperlink. Assuming they found it – and that’s a big if – the typical “terms and conditions” document was 10 pages long. On some websites, consumers had to scroll down the payment page to see further fine-print disclosures about the cost of the products. The first sentence reiterated what consumers generally understood (“You must pay a shipping and handling fee of $4.95 for us to send you a full 30 day supply of Garcinia Cambogia Extract”) but it wasn’t until the middle of the paragraph that the defendants mentioned that the trial period lasts only 14 days, that it began when the items were shipped (not delivered), and that consumers would be charged after that. Other websites didn’t even include that information. According to the lawsuit, consumers who attempted to take the defendants up on their money-back guarantee were met with a series of undisclosed roadblocks.

In addition to the ROSCA counts, the FTC says the defendants’ practices violated the Electronic Fund Transfer Act by debiting consumers’ accounts on a recurring basis without their prior written authorization. What’s more, the complaint charges that the defendants continued to call people after being told to cut it out, in violation of the Telemarketing Sales Rule’s entity-specific Do Not Call provisions. The FTC says they also violated the TSR through a series of deceptive upsells.

A federal judge has entered a temporary restraining order and the FTC is seeking to put a permanent stop to the defendants’ illegal practices.

If your clients have ROSCA questions, the complaint offers the first example of how the FTC has used the statute. If your clients haven’t had ROSCA questions, maybe now is the time to remind them of what the law requires.

 

Comments

Kind thanks for this information. Blessings
We need more rules like this to encourage consumers that the "Net" is safe and can be trusted. Thank you for your support FTC. But some of your rules go against what is right and mostly support the companies that pay you off!

I have had money debited from my account, and continue to receive calls even after telling 3 different "companies" to stop calling me. Some companies call me 3-4 times/day.

This is an email I sent to the address a Femora Skin Cream representative gave me on September 11th, 2017.

My name is Delores Bailey. I responded to your internet advertisement for Femora Skin Cream not knowing that we would be out of town when the shipment arrived (and before the 14-day trial period was over). I found out later that there was a trial period.

We were called out of state due to a death in the family on August 2nd, before the trial jar of your face cream arrived. We didn’t return home until September 8th, only to find that another jar of this face cream had arrived. When I realized that I had been charged $94.66 I called the number on the packing slip only to find out that I had to call another number to talk to someone who said they understood the problem but was only able to offer me 25% of the $94.66 purchase price. Apparently your company will not take back the unopened product and refund my cost. After talking to the representative at 877-565-3013 I checked my credit card and found out you had charged me yet another $89.71 on August 7th. What are you guys up to?

Now here’s the problem. Your sample was supposedly a 30-day supply and on July 25th I was charged $4.99 + $1.99 for the sample jar. Then I was charged another $89.71 on August 7th (not 30 days yet) and yet another $94.66 on September 5th for this stuff. You need to know that I am a 75 year old woman living on a fixed income. While I was willing to try the product, not just for the $4.95 as advertised but another $1.99 (where did that come from?), I cannot and will not spend that kind of money on face cream. I just can’t afford it. You have depleted my checking account to the point where I will be out of spending money before September is over. I currently use a Hyaluronic Acid and Vitamin C serum which does a great job.

Bottom line I have, in total, been billed $191.31 for something I will never use. After this fiasco I wouldn’t use the stuff if it was free. I have no idea why I was billed on August 7th after being charged for the sample on July 25th. I thought at first that this was just an overpriced product but apparently once you have a credit card number you just charge it whenever it suits your purpose. I realize that I was out of the “14-day trial period” when I discovered that I had received a second jar of the cream but why was I charged in August and September? And why can’t I send the product back for you to sell to some other unwitting person who is concerned about her skin?? Even our local stores who sell this type of product refund if it isn’t opened. I will be cancelling this credit card so you can no longer charge it whenever you feel like it and will file a BBB report against your company if I do not receive a valid answer and refund. Your company has taught me that sellers on the internet are not reputable companies.

Had I know that this would happen I never would have ordered the cream in the first place but then relatives sometimes die when you don’t expect them to. Really $191.31? That sounds like you charged me full price for both jars AND another $6.94 on top of that. What do you have to say for yourself Femora???? I am not a happy camper at this point. I will be telling everyone I know about this rip off. I hope you sell lots of jars before the word gets around but I feel sorry for the women who pay this price for your cream.

Delores Bailey

This is the reply I received, no such address. It does no good to call these people. They just don't care.

Your message did not reach some or all of the intended recipients.

Subject: Shipment of Femora Skin Cream - 2 jars
Sent: 9/11/2017 3:15 PM

The following recipient(s) cannot be reached:

'care@femorasupport.com' on 9/11/2017 3:15 PM
Server error: '550 5.1.1 <care@femorasupport.com> recipient invalid domain'

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