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The FTC has acknowledged that food delivery services can be a convenience for people with busy lives and that a free trial offer can help people decide which service they want to use. But subscription service providers also need to comply with the law.
The FTC recently settled with subscription provider, UrthBox, who advertised its snack box services using the ubiquitous “free” trial offer. The FTC charged that the company failed to adequately disclose the terms of the auto-renewal features of its subscription plans. The complaint and settlement also addressed the company’s failure to disclose that it compensated consumers with free snacks for posting positive reviews.
Urthbox provides monthly snack boxes to consumers for different monthly prices, depending on the size of the box. The FTC’s complaint arose from the company’s failure to disclose key terms in its advertising of a “free trial,” where only the nominal shipping and handling fee was disclosed, and the order path, where consumers were not adequately informed that they would be enrolled in a monthly negative option plan unless they canceled. The offers did not adequately disclose terms which are explicitly required under the Federal Restore Online Shoppers’ Confidence Act (“ROSCA”).
Keep in mind that there was a disclosure on the payment page stating that consumers would be charged monthly after the free trial – but it was too little and too late.
Attached are the offending ads that were attached to the FTC complaint and which are also available here https://www.ftc.gov/system/files/documents/cases/complaint_exhibits.pdf These examples can be illustrative.
Under the terms of the settlement, Urthbox will pay $100,000 and, among other things, the company and its principal are prohibited from taking payment from a consumer without obtaining express informed consent. This consent will now require an affirmative checkbox accepting the negative option terms of the offer, which must be a separate affirmative consent from the other terms of the offer.
The company is also prohibited from misrepresenting that an endorser of its goods and services is an independent user or ordinary consumer and must clearly and conspicuously disclose any material connection, in close proximity to any such endorsement.
Takeaway: Make sure your offer copy, including initial ads, comply with ROSCA and other state and federal laws.
