Adore Me, a subscription membership service, has gotten some negative press lately due to some purportedly aggressive billing practices and lax disclosure – not the kind of publicity any growing business needs. (Reference: Business Insider, BoingBoing, New York Business Journal, Bloomberg, and TINA Press Release.)
Customers apparently complained that unbeknownst to them when they placed an order for a set of lingerie, the set also came with an automatically renewing membership. When customers place an order in their shopping cart and push “continue” to check-out and then “place order,” the fact that the order comes with a membership unless you opt out of that membership is referenced at the opposite side of the shopping cart from where a consumer inputs billing information.
The site’s Terms and Conditions contain details about membership from a hyperlink and those details do disclose that consumers will automatically receive orders each month for $39.95 unless they actively choose to skip an order or cancel. In addition, the terms disclose that credits issued on purchases are retained by Adore Me. Those same terms are conveyed in two hyperlinks on the shopping cart page but those hyperlinks are avoidable and presumably, at least from the consumers who complained, often went unnoticed.
According to press reports, Adore Me counted over 1 million purchases in 2015 and 560 BBB complaints and quote its CEO as defending the number of complaints as “an extremely low level of dissatisfaction”, or approximately 0.0005% of all transactions on the Adore Me website.
The nonprofit advertising-watchdog Truth In Advertising filed complaints with the Federal Trade Commission, the New York Attorney General’s office, and the District Attorney’s office in Santa Clara, California, claiming the company utilizes misleading marketing practices to entrap consumers into automatic purchases.
The Federal Trade Commission’s disclosure guidelines described in “.com Disclosures: How to Make Effective Disclosures in Digital Advertising” requires that material conditions of an offer be “clearly and conspicuously” disclosed.
Insider Take:
The lesson here is that high subscription sales may indicate a strong product offering but can also be a signal that regulatory compliance needs double checking. Make sure your subscription service is using best-practices: transparent terms and conditions, easy to understand offers and a simple way for your subscribers and members to cancel. While it may sound counter-intuitive, many subscription companies know that an easy cancellation leaves a good impression with subscribers that may lead to higher re-subscription rates with past subscribers.
Lisa B. Dubrow, our Subscription Insider Guide to Subscription Regulation and Compliance, is a legal expert in the areas of bringing goods and services to market as well as state and federal compliance with all methods of sales, including subscriptions, e-commerce, direct mail and telemarketing and negative option sales. Lisa is also a Certified Information Privacy Professional/United States (CIPP/US) certified by the International Association of Privacy Professionals. (Read full bio)
