June 30, 2015

negative-optionOn June 16, the United States District Court for the Central District of California issued an ex parte temporary restraining order prohibiting certain marketing companies from continuing to offer “risk free trials.” The injunction follows the filing of a complaint by the Federal Trade Commission (“FTC”) against negative option marketers who promoted certain cosmetic skincare products over the Internet. According to the FTC, these marketers offered “risk free trials” to lure consumers into paying charges, as much as $97.88, under terms that were allegedly hidden in the fine print of the defendants’ websites. The defendant marketers have yet to appear in the action.

Why are clear and conspicuous disclosures important?

Court Enjoins Offer of Negative Option “Risk Free Trials”

In its findings, the Court noted that there is good cause to believe that the defendants violated Section 5(a) of the Federal Trade Commission Act and Section 5 of the Restore Online Shopper’s Confidence Act “by failing to clearly and conspicuously disclose all material terms of the negative option feature of their sales offer before obtaining consumers’ credit card or financial accounting information.” Negative option marketing is a practice in which a seller treats a consumer’s failure to take an affirmative action, either rejecting an offer or canceling an agreement, as assent to be charged for future goods or services. The Court also found that there was good cause to believe that the defendants “fail[ed] to obtain consumers’ informed consent to a negative option feature before charging consumers’ credit cards or financial accounts.” A hearing on the issuance of a preliminary injunction will take place on August 6, 2015.

If you are interested in learning more about this topic or if you have been served with process concerning your marketing 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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