The New York State Attorney General has settled charges with two separate companies for deceptive sales practices that resulted in hidden charges to consumers that order products marketed on television. The agreements require Tristar Products, Inc. and Product Trend, LLC to make significant reforms to their advertising, ordering processes and customer service practices.
According to the OAG, Tristar and Product Trend sell their products directly to consumers, typically through television and online advertising. The OAG’s investigation found that both marketers ran deceptive and misleading infomercials on television that often featured favorably priced “Buy One, Get One” offers, which required consumers to purchase a double order of the advertised product. However, the ads failed to clearly and conspicuously disclose material terms that significantly increased the cost of the offer, including that consumers would be charged two separate processing and handling fees or the amount of those fees.
When consumers placed orders by phone or online, according to the OAG, they were subjected to a confusing, automated ordering process that typically included numerous “upsell” offers for additional products. Consumers were also purportedly not provided with an opportunity to review and edit their orders before they were processed. Consequently, consumers who responded to the marketers’ advertisements were charged significantly more than they expected and received products that they did not intend to order.
For example, one Product Trend customer responded to a “Buy One, Get One” ad for Total Pillow, advertised for $19.99, plus shipping and handling, but was charged $91.73 after placing an order online. A Tristar customer who responded to a $19.99 “Buy 3, get 3” Genie Bra advertisement ended up being charged $101.83. Although she subsequently returned the bras, Tristar refused to refund the $27.00 charged for shipping and handling.
The Attorney General’s investigation also revealed that consumers who sought warranty service from Tristar for products that malfunctioned or to obtain authorization to return products often faced long telephone hold times and otherwise had difficulty obtaining relief or assistance.
The settlements require the marketers to: (i) clearly and conspicuously disclose all material terms of an advertised offer; (ii) clearly and conspicuously disclose the amount of any processing and handling fee for the second item in a “Buy One, Get One” offer; (iii) provide consumers with an opportunity to confirm the details and the total price of any order before it is processed. For orders placed online, this includes presenting the consumers with a checkout or shopping cart page that the consumer can edit; (iv) disclose the amount of any processing and handling fees during the ordering process before the consumer is asked to confirm the order details; (v) label all hyperlinks to clearly convey the importance and consequence of clicking the link; (vi) email consumers who place orders by phone an order summary with any processing, handling or other charges; and (vii) ensure that the marketers’ customer service lines are adequately staffed so that consumers are not subjected to long hold times.
The agreements require each marketer to make a monetary payment to the New York Attorney General’s Office for restitution, penalties, costs and fees, with Tristar paying $700,000 and Product Trend paying $175,000.
“These agreements insure that consumers will not be hit with charges they did not authorize and will not be frustrated with long hold times or unresponsive customer service when they seek assistance,” Attorney General Schneiderman said. “The settlements also … insure that consumers will have a clear understanding of the charges before they place an order.”
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Clearly, the New York OAG’s Consumer Frauds Bureau is continuing its wide-ranging investigation into the marketing and sales practices utilized by the direct marketing industry.
If your business is the subject of a regulatory inquiry or enforcement action, please contact Richard B. Newman at [email protected]
This article is provided for informational purposes only and does not constitute, nor should it be relied upon, as legal advice. No person should act or rely on any information in this article without seeking the advice of an attorney.