September 23, 2016
Nutritional supplement marketer, NutraClick, has entered into a settlement with the Federal Trade Commission (“FTC”), ending a lawsuit that the agency initiated for alleged violations of the Federal Trade Commission Act and the Restore Online Shoppers’ Confidence Act. The FTC had brought the lawsuit in connection with allegations that NutraClick charged customers recurring monthly fees without their consent after consumers had ordered free sample products, an illegal negative option billing practice according to the FTC’s complaint.
What has NutraClick agreed to as part of the settlement?
In addition to a restitution payment of $350,000, NutraClick has agreed to the following prohibitions concerning its future billing and advertising practices:
- Using consumer billing information to obtain payment without first obtaining the express authorization of the customer;
- Obtaining consumer billing information without first disclosing to the customer that there will be a charge, or that a charge is set to increase after a certain time period; and
- Failing to disclose to consumers that charges will continue on a recurring basis unless the customer cancels, the method to effectuate such cancelation, and the deadline by which the costumer must cancel the recurring charge.
Protect Yourself From Negative Option Billing-Related Scrutiny
When done correctly, recurring billing methods provide 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, it is important that the consumer be made aware of the price prior to purchase, and that all details concerning the recurring charges are adequately communicated to the consumer. The NutraClick case illustrates the reality that companies which engage in negative option automatic billing practices can routinely come under scrutiny from federal and state authorities. Accordingly, it is critically important that businesses work closely with knowledgeable counsel to ensure that they provide clear and conspicuous disclosures to customers concerning subscriptions and/or renewals in connection with their product and service offerings.
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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