FTC Nails Internet Supp Marketers for “Online Negative Option Marketing”

Posted By elissa on Feb 22, 2009 | 2 comments

Last year, Paul made this great video on a deceptive practice some internet supplement marketers engage in…”The 5-7 Day Fat Burner & Diet Pill Free Trial Scam!”

[youtube:http://www.youtube.com/watch?v=aP8GcmU9f-M]

The Federal Trade Commission refers to this as “Online Negative Option Marketing” (personally, I think “Free Trial Scam” is far more descriptive, but that’s government bureaucrats for you).

At any rate, it’s a horrible practice, so it’s nice to see the FTC is cracking down on some of these creeps.

Two dietary supplement marketers that lured consumers on the Internet with allegedly deceptive weight-loss claims and bogus “free” sample offers, and then debited their bank accounts or charged their credit cards for continuing shipments without their consent, have agreed to settle Federal Trade Commission charges that they violated federal law…

In one FTC law enforcement action, the defendants claimed their products – LeanLife PM, Burn Fat 2, Hoodia 66, Hoodia Thin, HoodiaGordonii, and RxZyte – would help consumers lose weight or improve male sexual function. To obtain a “free” sample, consumers provided their account number to pay a shipping and handling fee, unaware that they would be enrolled in a “negative option” continuity program and billed about $100 every few months for recurring shipments of the products unless they cancelled. In the other case, consumers who ordered a “free” sample of Woman’s UltraSlim were asked to provide their credit or debit card account number to pay a shipping and handling fee, unaware that they would be enrolled in a continuity program and charged a monthly fee of almost $30 until they cancelled their enrollment.

As noted in the “UltraSlim” complaint:

The “Terms and Conditions” on Defendants’ websites are inconspicuous and fail to provide consumers with adequate notice that Defendants will: (1) automatically enroll consumers who order the “free” sample in the online support coaching program and will charge those consumers $29.95 per month unless they cancel; or (2) automatically enroll consumers who order the “free” sample in the Product Savings Program and will charge those consumers $29.99 per month unless they cancel, especially in light of the more prominent representations that consumers will receive a “free” sample. Because the “Terms and Conditions” are below the “Order Now!” button, additional product testimonials, and copyright language typically found at the end of a webpage, and are in smaller text than the offer, many consumers do not notice or review these disclosures.

This is exactly the sort of stuff Paul discusses in the vid (as well as in his newest booklet, “Dirty Rotten Tricks” – which is available for free here on the site).  A lot of people get burned by this tactic, so hopefully there’ll be more actions like this in the future!