NutraClick just entered into a settlement with the FTC for the sale of its nutritional supplements and beauty products including Force Factor, Peak Life, ProBioSlim, SomnaPure, VolcaNO, and Stages of Beauty through the advertising of “free” product samples that were tied to a membership continuity plan for nutritional supplements, costing $29.99 to $79.99 per month. The FTC’s complaint alleges that NutraClick violated Section 5 of the FTC Act by failing to adequately disclose all material terms of its negative option continuity plan. The complaint also alleges that NutraClick violated the Restore Online Shoppers Confidence Act (ROSCA) – a newer law governing Internet negative option sales – by failing to: clearly and conspicuously disclose all material terms of its offer and obtain consumers’ express informed consent before charging their credit cards. As part of the settlement the company paid $350,000 in fines and entered into a consent order.
According to the FTC, NutriClick’s websites did contain disclosures about recurring charges associated with its membership programs but argued that the disclosures were not clear and conspicuous. It is illustrative to review how the FTC described those disclosures which apparently included:
- A small gray bar at the bottom of certain web pages that contained hyperlinks titled “Terms,” “Refund and Return Policy,” “Privacy Policy,” “Copyright Info,” and “Contact Us.”
- A pop-up box which appeared describing the membership program and recurring monthly fees which appeared only when a consumer affirmatively clicked on the “Terms” hyperlink which was not required in order to place an order
- The payment page contained disclosures on the lower left-hand portion of the page in a long paragraph in small type that were identified by “Terms & Conditions.” However, the FTC said that it was not until approximately half-way through the terms and conditions paragraph that the recurring charge and cancellation process was described. Those terms and conditions were also allegedly in small print and away from the credit card field. According to the FTC the consumers’ eyes are not drawn to the dense type, but instead to the credit card field and large button below the credit card field that stated, “RUSH MY SAMPLE.”
- According to the FTC, NutriClick apparently added two additional disclosures at some point to the payments page. First, it included language near the top of the page that described the recurring monthly charge and cancellation methods. However, the FTC felt this disclosure was not clearly and conspicuously disclosed because it was next to a large seal that stated “Money-Back Guarantee” and the first two sentences of that disclosure related to shipping and product satisfaction, not the recurring charge. The second disclosure which was added was a checkbox below the payment information that stated: “I understand and agree to the terms and conditions to the left.” However, the checkbox did not contain any information about the recurring charge and presumably that is why the FTC was not convinced that this affirmative check box was sufficient to communicate the recurring charges.
Insider Take
This case is a classic example of how lots of words and disclosures can be meaningless if they are not disclosed in the right places in a clear and conspicuous manner.
