Allstar to Pay $8 Million in Restitution in FTC/New York AG Case11 Mar, 2015 By: Doug McPherson
WASHINGTON – Allstar Marketing Group, the consumer products company behind Magic Mesh, Cat’s Meow and the Snuggie (among others), has agreed to pay $7.5 million to the Federal Trade Commission (FTC) for consumer restitution to settle FTC charges related to its “buy-one-get-one-free” promotions. Allstar will also pay $500,000 to the Attorney General’s Office of New York for penalties, costs and fees.
Allstar resolved the inquiries by agreement and without any finding that it had violated any laws. “Allstar is pleased to have resolved this matter, and we’re proud that it resulted in positive change for our company,” said Jennifer De Marco, general counsel at Allstar. “While we have always believed our processes complied with the law, we are proud to have successfully worked with the FTC and the New York attorney general to improve them and set new standards for transparency.”
According to the FTC’s complaint, in TV ads the company promised it would “double the offer” for consumers, if they just paid “processing and handling fees.” While consumers were led to believe that they would then be getting two $19.95 products for “less than $10 each,” in fact, the total cost with the $7.95 “processing and handling” fees jumped from the advertised price of $19.95 to $35.85.
As alleged in the FTC’s complaint, consumers who called Allstar were often instructed to enter their personal and billing information, and were charged for at least one “set” of products – based on the “buy-one-get-one-free” offer – before they had a chance to indicate how many products they wanted to buy. Because the sales pitch was often confusing, some consumers purchased more “sets” than they actually wanted.
Allstar then attempted to upsell consumers additional products via automated voice prompts that requested the consumer to accept the offer. Many times, the only way a consumer could decline the offer was to say nothing. At the end of the calls, Allstar sometimes routed consumers to other third-party sellers who made additional sales pitches. Once all of the offers ended, consumers were not told the total number of items they’d “agreed” to buy, or the total amount they would be billed, according to the complaint.
According to the FTC’s complaint, consumers who opted to buy Allstar’s products online faced similar problems, including separate “processing and handling” fees – which were only disclosed in very fine print at the bottom of the page – and a barrage of upsell offers. Consumers were not provided with the total price of their purchases, and despite a “30-day money-back guarantee” (less processing and handling fees) full refunds were difficult for consumers to obtain.
Jessica Rich, director of the FTC’s Bureau of Consumer Protection, said marketers must clearly disclose all costs including processing fees, handling fees and any other fees. The FTC will return millions of dollars to consumers that Allstar had collected in these undisclosed fees.
Based on the alleged conduct, the FTC’s complaint charges Allstar with two violations of the FTC Act and three violations of the agency’s Telemarketing Sales Rule (TSR), including the following:
- Billing consumers without their express informed consent
- Failing to make adequate disclosures about the total number and cost of products before billing consumers
- In connection with the up-selling of goods and services, violating the TSR by failing to disclose material information about the total cost of the products and that the purpose of the call is to sell goods or services
- During telemarketing, illegally billing consumers without first getting their consent
Allstar has agreed to provide multiple opportunities for customers to confirm their orders before placing them and to clarify ordering and return procedures. While Allstar contends its online and phone sales processes have always been clearly disclosed to consumers, the company believes its forthcoming changes will set a new benchmark for enhanced consumer experiences.