The Federal Trade Commission put a stop to an online operation that allegedly lured consumers with a supposedly “free” book falsely promising that it would show them how to power their cars and homes at no cost, and then billed them for an online magazine they never ordered. The defendants behind the alleged scam have agreed to a settlement that requires them to pay almost $2 million for consumer refunds, and permanently bars them from making misleading product claims.
The settlement order against Green Millionaire LLC is part of the FTC’s ongoing efforts to stamp out online marketing fraud. The order prohibits the operators of Green Millionaire from misleading consumers about any offer that uses “negative-option” marketing, in which the seller interprets consumers’ silence or inaction as permission to charge them. In particular, regarding Internet-based negative-option offers, the order requires the defendants to provide a check box disclosing the most critical terms of the negative-option program: all costs associated with it, that consumers are agreeing to pay the costs, the length of any trial period, and that consumers must cancel to avoid the charges. Consumers must then affirmatively select the check box for the defendants to process any billing information.
According to the FTC’s complaint against Green Millionaire, Syndero Inc., Scott Waltz, and Nigel Williams, the defendants marketed a “Green Millionaire Book” in TV and Internet ads. The ads falsely claimed the book would describe “how to get free gas for life,” “how to put solar panels on your roof for free,” and “how to make your electricity meter go backwards paying you,” with phony testimonial statements such as “I don’t pay for electricity” and “I don’t have car payments, and I don’t pay for fuel.”
The Green Millionaire websites allegedly asked consumers to provide their credit card or bank account number to pay a small shipping and handling fee, without clearly disclosing that they would be charged $29.95 for a two-month subscription to an e-magazine, or $89.95 for a one-year subscription. The defendants allegedly violated the FTC Act by failing to disclose the subscription program, that customers would have to cancel it to avoid additional charges, the program’s cost and how to cancel it, and when they must cancel to avoid charges. They also allegedly debited or charged consumers’ bank or credit card accounts without their consent, misrepresented the book’s contents, and used unsubstantiated endorsements.
What is interesting is that Defendant Nigel Williams was essentially a service provider to Waltz and provided “consulting services to Green Millionaire and was paid a royalty for sales of the Green Millionaire book.” – Source
That service provider liability is one that the Consumer Financial Protection Bureau recently identified as a point of focus. here.
The proposed settlement order includes provisions that bar the defendants from misrepresenting specific aspects of any negative-option transactions. Among other things it prohibits them from misrepresenting:
- that any product, program, or service is offered on a “free,” “trial,” “no obligation,” or “discounted” basis;
- the amount a consumer will be charged or billed; and
- the timing of any charge or the length of any trial period.
The settlement order also prohibits the defendants from using consumers’ billing information to obtain payment without first getting their consent, as well as failing to clearly disclose the terms of any refund or cancellation policy and failing to promptly honor a consumer’s request for a refund or cancellation.
In addition, the order bars the defendants from making any material misrepresentation in the sale of any good or service, including falsely claiming that consumers can get free gas for life, put solar panels on their roofs for free, and make their electricity meter go backward; and from using endorsements and testimonials unless they are true and substantiated. The order also prohibits the defendants from selling or otherwise benefitting from customers’ personal information, and requires them to properly dispose of customers’ personal information within 30 days.
The order imposes a judgment of more than $5.7 million, which will be suspended when Syndero has paid at least $1.35 million; Waltz has paid $600,000; Green Millionaire has paid $20,000; and Williams has surrendered the proceeds from the sale of his assets, including two parcels of land and a mobile home, and a 2005 BMW. The full judgment for each defendant will become due immediately if the defendant is found to have misrepresented his financial condition. – Source