FTC Pulls Plug On Sites That Made $359 Million On Bogus "Free" Offers

If you’re a Consumerist reader, you’re probably the type of online shopper that would be wary of a website promising a “free trial” period. But every year, millions of Americans think they’re getting something for nothing — only to end up much poorer because they didn’t read the fine print.

The Federal Trade Commission has announced a settlement agreement with the operators of an Internet scheme that used bogus “free” product offers in order to deceive consumers by charging them for products and services they did not want or agree to purchase.

The 10 companies — all owned by the same person — targeted by the FTC complaint had been offering “free trials” for various products online, including acai berry weight-loss pills, teeth whiteners, and health supplements containing resveratrol, work-at-home schemes, access to government grants, free credit reports, and penny auctions.

Customers were required to give their credit card numbers to pay for small fees for shipping and handling, and also promised phony “bonus” offers just for signing up.

As a result, many of them ended up with recurring $79.95 fees. The sites claimed to offer money-back guarantees but the FTC found that customers had to jump through several hoops just to get any sort of refund, if they received one at all.

The settlement not only puts a stop to these businesses using “negative-option” marketing, wherein the seller interprets consumers’ silence or inaction as permission to charge them, but the owner of these companies is ordered to repay $359 million.

To fulfill that penalty, the defendant is surrendering assets in his bank account, proceeds from the sale of his house, personal property, and corporate assets, including a Cadillac Escalade, fur coat, and artwork.

“The fact that almost four million consumers fell prey to the lure of these ‘free trial’ offers is a stark reminder that ‘free’ offers can come at a huge price,” said David Vladeck, Director of the FTC’s Bureau of Consumer Protection. “The FTC has stopped about $1 billion in online marketing fraud during the past two years by shutting down operations like this. But consumers still need to beware, because scam artists are constantly coming up with new ways to deceive people online.”

To that end, the FTC has the following tips for anyone who is tempted by a free trial offer.

1. Do your research. Before signing up, do a search for the company online to see if there are complaints from other customers.

2. Uncheck any pre-checked boxes. If you see any pre-checked boxes during the ordering process, there’s a good chance the site is trying to get you to opt into something that will cost you more in the long run.

3. Mark your calendar. If you do go through with the trial offer, be sure to mark your calendar so you know exactly when the trial period ends. It’s best to end your trial several days before the end of that period, as some companies will claim it can take a few days to process your cancellation.

4. Read your credit card statements carefully. Even after you’ve cancelled, be sure to keep an eye on your credit card statements to make sure you’re not seeing any new or phantom charges.

If you’re having trouble cancelling or if phantom charges continue to show up on your card, you need to contact your credit card issuer to dispute the charges before they start adding up.