Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: As Seen on TV marketer settles deceptive marketing claims, (Mar 5, 2015)

By Jody Coultas, J.D.

Allstar Marketing Group, LLC, which sold “as-seen-on-TV” type products such as Snuggies and the Magic Mesh door cover agreed to pay $7.5 million to settle FTC charges that its “buy-one-get-one-free” promotions violated the FTC Act and Telemarketing Sales Rule. New York’s Attorney General announced a separate agreement by Allstar to pay $500,000 to the Attorney General’s Office for penalties, costs, and fees to settle that action.

According to the complaint, Allstar’s television commercials, which featured many products familiar to consumers such as Magic Mesh, Cat’s Meow, Roto Punch, Perfect Tortilla, Forever Comfy, and Snuggies, offered a “buy-one-get-one-free” deal without disclosing additional costs.

For example, Allstar promised that it would “double the offer” for consumers, if they just paid “processing and handling fees.” While consumers were led to believe that they would then be getting two $19.95 products for “less than $10 each,” in fact, the total cost with the undisclosed $7.95 “processing and handling” fees jumped from the advertised price of $19.95 to $35.85, according to the complaint.

Consumers who called Allstar were allegedly instructed to enter their personal and billing information, and were charged for at least one “set” of products, based on the “buy-one-get-one-free” offer, before they had a chance to indicate how many products they wanted to buy. The confusing nature of the sales pitch resulted in consumers purchasing more “sets” than they wanted.

Allstar also allegedly tried to sell consumers additional products via automated voice prompts that requested the consumer to accept the offer. Many times, the only way a consumer could decline the offer was to say nothing. At the end of the calls, Allstar sometimes routed consumers to other third-party sellers who made additional sales pitches. Once all of the offers ended, consumers were not told the total number of items they had “agreed” to buy, or the total amount they would be billed, according to the complaint. The Commission has alleged that Allstar even charged those consumers who hung up mid-call, not intending to complete a sale.

According to the FTC’s complaint, consumers who purchased products online faced similar problems, including separate “processing and handling” fees which were only disclosed in very fine print at the bottom of the page, and a barrage of upsell offers. Consumers were not provided with the total price of their purchases, and despite a “30 day money-back guarantee” (less processing and handling fees) full refunds were difficult for consumers to obtain.

The settlement order prohibits Allstar from failing to obtain consumers’ written consent before billing them for any product or service. Allstar must clearly and conspicuously disclose the total number of products ordered, all related fees and costs, and material conditions related to the products purchased before the purchase is made.

Finally, the order imposes a monetary judgment of $7.5 million, which, in consultation with the New York Attorney General’s Office, may be used to provide refunds to defrauded consumers.

News: ConsumerProtection FederalTradeCommissionNews