Advertising Law Blog

A website that offered "free trials" of its herbal products, including smoking cessation patches, has agreed to halt its allegedly deceptive practices, pending trial. The FTC sued NextClick Media alleging that the trials weren't free, the patches didn't work as claimed, and the operation was illegally debiting consumers' bank accounts without their authorization. In entering the Stipulated Preliminary Injunction the defendants have agreed to abide by a federal court order that bars them from making deceptive claims, restricts their ability to dissipate assets, requires them to preserve records and other evidence, and account for the money they made from their venture.

The FTC alleges that NextClick Media operates several Web sites that offer "free" 10- day trials for their products, advertised that consumers will only pay for shipping and handling with ads in large type that say "FREE 10-Day Supply plus shipping and handling," and "TRY IT FREE." Consumers who want to try the "free trial" provide a credit or debit card to pay for the shipping charge. But, the FTC alleges, the trials weren't free. Consumers weren't sent a 10-day trial size package. They were sent a 30-day supply and had to pay for all 30 days of product if they chose to keep it. Consumers who chose to return the unused product paid postage and were assessed a $7.95 restocking fee, which according to the FTC was not adequately disclosed.

The Stipulated Preliminary Injunction requires all material terms and conditions of an offer or agreement involving a Continuity Program to be clearly and consciously disclosed before the consumer provides any billing information. Such information includes, but is not limited to: 1. the fact that the customer's account will be charged unless the customer takes an affirmative action to avoid the Charge(s); 2. the date(s) the Charge(s) will be submitted for payment; 3. the specific steps the customer must take to avoid the Charge(s); 4. all material terms and conditions of a guarantee, refund, or return policy, or if Defendants have a policy of not making refunds or accepting returns, a statement that this is Defendants' policy; 5. the fact, if true, that periodic shipments of products or the periodic provisions or the continuation of services will occur without further action by consumers; 6. a description of each good or the type of good to be included in each shipment or a description of the services that will be performed or continued; 7. if the products are shipped or services provided on a periodic basis, the approximate interval between each shipment or service period or the number of shipments or service periods per year; 8. the cost or range of costs for each shipment or service period, including shipping and handling fees and restocking fees; 9. the minimum number of purchases or minimum service period required by Defendants, if any; and 10. any limitations or restrictions concerning free trials that Defendants.

This case serves as an important reminder that all material terms involving billing must be clearly and consciously disclosed especially when offering a product on a continuity program.