December 21, 2016

deceptive-tradeThis week, the Second Circuit Court of Appeals reversed a district court ruling that had dismissed GameStop Corp. (“GameStop”) and Webloyalty.com, Inc. (“Webloyalty”), an online discount savings website, from a class action lawsuit arising from allegations of deceptive trade practices.

What were the business practices that landed GameStop and Webloyalty in hot water?

According to the facts at issue, the Plaintiff has alleged that he was deceived into enrolling in a fee-based monthly discount club operated by Webloyalty at the time that he purchased a video game from GameStop’s ecommerce website.  The underlying complaint maintains that Plaintiff unwittingly registered for Webloyalty’s “Shopper Discounts” program by entering personal information on a webpage integrated into the GameStop check-out process.   This webpage advertised a $20 GameStop coupon and included references to GameStop throughout the description of the membership program.  The webpage further required the plaintiff to enter the last four digits of his debit card and to enter, and verify, his email address.  Thereafter, GameStop allegedly transferred plaintiff’s billing information to Webloyalty.  Webloyalty is alleged to have advertised that the discount program included a free one-month trial without further advising consumers that their accounts would be debited on a monthly basis upon the lapse of the trial period.   The plaintiff claims that he did not know that he had enrolled and that he never received the promised $20 coupon.

Protect Yourself From A Deceptive Trade Practices Lawsuit

When done correctly, automatic recurring billing provides a convenience for both businesses and their consumers by doing away with the need to revisit the purchase/payment process each month for a product or service that the consumer plans to use for an extended period of time.  However, when offering this method of payment, it is important that the consumer be made aware of the subject price prior to purchase, and that all details concerning recurring charges are adequately communicated to the consumer.  As the GameStop case illustrates, companies which engage in negative option billing practices can routinely come under scrutiny from class action plaintiffs, as well as federal and state authorities.  Accordingly, it is critically important that businesses that offer various recurring billing options work closely with knowledgeable counsel to ensure that they steer clear of regulatory pitfalls.

If you are interested in learning more about this topic or need to review your marketing and billing practices, please e-mail us at info@kleinmoynihan.com or call us at (212) 246-0900.

The material contained herein is provided for informational purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney.  Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.

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