Earlier this month, we posted that the Washington AG announced a settlement with a company that misrepresented that consumers’ computers were at risk. As part of the settlement, the company agreed to pay refunds to consumers. This week, the FTC announced a settlement involving similar issues and remedies. According to the FTC, the company used deceptive ads to trick consumers into thinking their computers were infected with malicious software, and then sold them software to “fix” the non-existent problems. As part of the settlement, the company agreed to pay over $8 million that will be used to reimburse consumers.
We’ve also made several posts regarding free trials. This week, the FTC also announced that a federal court has frozen the assets of corporations and an individual behind an enterprise that allegedly made more than $275 million by luring consumers into deceptive “trial” memberships. According to the FTC complaint, the companies offered “free” information at no risk and asked consumers to provide billing information to pay a shipping and handling fee. But when consumers provided their billing information, the companies charged a hefty one-time fee, as well as recurring monthly fees. The FTC is seeking to return money to consumers.
Although these cases involve allegations of egregious marketing practices, the basic principles underlying the cases apply to all companies. Advertisers need to make sure they accurately describe their offers and clearly disclose the terms of any free trials. The cases also demonstrate that the costs of failing to comply with advertising laws can be significant.