The Federal Trade Commission (“FTC”) recently sent out settlement checks to consumers who were allegedly deceived by UrthBox, Inc. (See https://www.ftc.gov/news-events/press-releases/2019/12/ftc-sending-refund-checks-consumers-allegedly-misled-free-trial.) While the settlement, $100,000, and the amount refunded, around $84,000, were not very high, the case is interesting as it reinforces the need for companies who offer online subscription services or that rely on online reviews to ensure they are adequately disclosing what the law requires.
UrthBox sells a subscription service in which consumers pay for it to send a monthly snack box to their door. In its initial complaint against UrthBox, the FTC alleged that UrthBox deceived consumers in two ways.
First, that UrthBox offered a free box of snacks, but when consumers signed up for that free box, they were automatically enrolled in 6-month subscription service without adequate disclosures. The FTC alleged that many consumers were unaware they were enrolled in the subscription plan until they discovered a charge on their credit cards. The FTC claimed this constituted a “negative option feature,” which is defined as “an offer or agreement to sell or provide any goods or services, a provision under which the customer’s silence or failure to take an affirmative action to reject goods or services or to cancel the agreement is interpreted by the seller as acceptance of the offer.” 15 C.F.R. § 310.2 (w). The FTC further claimed this violated the Restore Online Shoppers’ Confidence Act (“ROSCA”), 15 U.S.C. §§ 8401 et seq., which prohibits sale of goods or services in internet transactions through a negative option feature unless the seller clearly and conspicuously discloses all material terms of the transaction before obtaining the consumer’s billing information, obtains the consumer’s express informed consent before making the charge, and provides an easy mechanism to stop recurring charges. 15 U.S.C. § 8403.
Second, the FTC alleged UrthBox provided free snack boxes for consumers who would post positive reviews / comments on the Better Business Bureau website, TrustPilot.com, and social media websites such as Twitter, Facebook, etc. The FTC alleged that UrthBox failed to disclose that the resulting reviews were not “independent opinions or experiences of ordinary impartial customers.”
The case serves as a good reminder for the numerous companies that now rely on online reviews and/or offer online subscription services that they should ensure they are acting in compliance with the various laws and regulations applicable to those areas, including ROSCA. The FTC has shown that it is willing to bring an enforcement action when companies fail to do so, even when the dollar amount involved is small.
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