Last week, the FTC charged an online marketer with scamming consumers out of $467 million through the deceptive use of “free” and “risk-free” trial offers.
According to the complaint, defendant Jesse Willms and the ten companies he controls allegedly lured consumers into providing their debit and credit card numbers by offering deceptive “free” and “risk-free” trial offers for a variety of products including acai berry weight-loss pills, teeth whiteners, and health supplements. Although the offers supposedly only required payment of nominal shipping and handling fees, consumers were often charged for these “free” trials, as well as recurring monthly fees running as high as $79.95 per month. The alleged scheme affected consumers in the United States, Canada, the UK, Australia, and New Zealand. This case highlights the importance of understanding when it is lawful to use the word “free” in an offer or advertisement.
As David C. Vladeck, Director of the FTC’s Bureau of Consumer Protection said, “Free must really mean free no matter where the offer is made.” While this seems self-evident, there are some subtleties that can trip up even well meaning marketers. The FTC has published a guide that provides additional details on using the word “free” in an offer or advertisement. Some of the key points advertisers should be aware of include:
- When making a “free” offer, all the terms, conditions and obligations upon which receipt and retention of the “free” item are contingent should be set forth clearly and conspicuously at the outset of the offer.
- Product offers that deceptively use the word “free” may not be corrected by replacing the word “free” with such similar terms as “gift,” “given without charge,” “bonus,” or other words that convey to the consuming public that the product is “free.”
- A single size of a product or a single kind of service should not be advertised with a “free” offer in a trade area for more than 6 months in any 12-month period. A minimum of 30 days should elapse before another such offer is made in the same trade area.
This case also illustrates the increasing role of cross-border cooperation in combating consumer fraud, as the Willms companies are based in Alberta, Canada. As Lisa Campbell, Deputy Commissioner of the Competition Bureau Canada said, “Internet fraud is a global problem that requires an international enforcement response.” The FTC worked closely with Competition Bureau Canada, the Royal Canadian Mounted Police, and the Alberta Partnership Against Cross Border Fraud to investigate the alleged scheme.
- Amy Mudge and Sean Hennessy