When is free really free? This group of online marketers of "free" and "risk-free" trials of various kitchen and golf products is now in trouble with the Federal Trade Commission (FTC) for allegedly deceiving consumers about the true cost of their offers.
As a result, they have now agreed to pay big fines and revise their billing practices to settle the claims. The FTC announced that the online marketing group will now pay a $2.5 million settlement.
The original FTC complaint filed in March of this year accused Brian Bernheim, Joshua Bernheim, Jared Coates, Robert Koch, AAFE Products Corp., JBE International LLC, BSDC Inc., KADC Inc., Purestrike Inc., and BNRI Corp. (formerly known as Bernheim and Rice Inc.) of deceiving customers by not clearly disclosing that by accepting their "free" and "risk-free" offers, they were actually agreeing to a monthly subscription if they did not cancel.
They are also accused of misrepresenting their return, refund, and cancellation policies.
The companies sold their products under different names, including:
- Kitchen Advance
- Gourmet Cooking Online
- Gourmet Cooking Rewards
- Medicus Golf
- Kick X Tour Z Golf Balls
- Golf Online Academy
- Golf Tour Partners
- Purestrike Swing Clinic
According to the complaint, the group's websites, emails, and TV infomercials misled customers into thinking that the products they're offering are free.
Unknown to the customer, the companies continuously charged the customer's saved credit cards on file monthly if they did not cancel the "free" trials. Customers were also charged if they did not return their "free" products after a certain period of time.
They are also accused of misrepresenting their return, refund and cancellation policies by burying them in pages of fine print that can only be accessed via a tiny hyperlink.
Additionally, during the checkout process, customers were encouraged to sign up for more "free" products and offers by forcing them to click through as much as 14 more upsell pages before landing on the final confirmation page. These extra pages often led to more unauthorized charges.
For example, according to the Consumerist, the website that sells Tour Z Golf Balls had a big "FREE" label next to the "Add to Cart" button.
What was not disclosed clearly was that the customers will be charged for the golf balls if they did not cancel the order and return the golf balls in time.
The group was also accused of "bundling" one product with other "free" trial offers the customer was not aware of, leading to more charges.
Additionally, the FTC stated that the group did not provide adequate disclosures or ask for their customers' consent before enrolling them in the monthly subscription programs after the "free" trial is over. Each program is typically priced at about $10 monthly.
Due to the confusing fine print and tiny hyperlink provided, cancellation of these subscriptions was made difficult on purpose.
The terms of the settlement
With the group agreeing to settle for $2.5 million, Brian Bernheim and Joshua Bernheim must pay the $1.86 million fine in four installments within one year. Robert Koch must pay $632,000 in three installments over one year.
According to the FTC, the companies will be:
- prohibited from misrepresenting the cost of any good or service
- that consumers will not be charged, that consumers can get something for a processing or shipping fee with no further obligation
- and that a product or service is free
They are also required to clearly disclose important details about any online negative option where consumers’ enter billing information, to get consumers’ informed consent before charging them, and to offer a simple way for consumers to cancel recurring charges.
Furthermore, they are barred from billing consumers who were first charged before March 1, 2016, and from selling or otherwise benefitting from consumers’ personal information and failing to dispose of it properly.