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Legal Review: 'But I'm Not the Only One ...' Isn't a Legal Defense

1 Jul, 2008 By: Jeffrey D. Knowles, Venable LLP’s Advertising, Response Contributor Response


How many of you have been pulled over for speeding just moments after a fast, expensive sports car (driven by a good-looking guy who still has all his hair) has passed you like you were standing still? Did you tell the officer who stopped you about the guy in the sports car, and complain about how unfair it was that you got pulled over and he didn't? Did it do you any good? I didn't think so.

Gary D. Hailey
Gary D. Hailey

If "Family Feud" had a category titled "Excuses that direct response advertisers give to their lawyers when they don't play by the rules," the No. 1 answer would be, "But all my competitors do that!" Talk to the hand, folks, because the judge isn't listening.

One popular marketing technique that is often misused is the "free" offer. Economists are fond of saying that there is no such thing as a free lunch, and most of them would probably say there's no such thing as a truly free DR offer.

Jeffrey D. Knowles
Jeffrey D. Knowles

A federal judge recently approved a consent order settling the Federal Trade Commission's (FTC) allegations that Think All Publishing was guilty of a deceptive "free" offer. According to the FTC, the defendants' Web site offered consumers a free CD containing computer software if they agreed to pay a shipping-and-handling fee of $1.99 to $2.99. Literal-minded people may believe that "free" should mean "free" — but the government usually lets you get away with attaching strings (like a shipping-and-handling fee) to "free" offers as long as you disclose them.

Here, the small shipping-and-handling fee wasn't the only string attached to this offer. Consumers who ordered the free CD were then offered three more "free" software CDs with no additional shipping or handling. Before they accepted the offer, they had to check a box saying they had read and agreed to the "Terms of Use" statement.



But many consumers checked the box without clicking on the hyperlink that took them to those terms of use (let those of you who have never checked a box agreeing to be bound by the terms of use without reading them cast the first stone).

Those consumers who did click on the "Terms of Use" link found what appeared to be legal boilerplate relating to software licensing arrangements and usage rules. Only if you read as far as the seventh paragraph of the lengthy document (which was single-spaced and printed in nine-point font) would you learn that the seller's definition of "free" was a little funky.

In fact, customers who didn't send back two of the four "free" CDs within 10 days were charged $39 to $49, according to the complaint. They also were enrolled in a software continuity program, and were charged $39 to $49 for additional CDs unless they returned them within 10 days. Not surprisingly, a lot of customers complained when they got their credit card statements and discovered they had been charged.

The settlement contains nothing that comes as a real surprise. It bars the defendants from misrepresenting that items are "free" when they aren't. It requires that the defendants disclose all the material terms and conditions of any negative-option offer. It bars the defendants from charging consumers for products or services without their consent. Finally, the defendants were ordered to pay more than $2 million in consumer redress.

If you want to call something "free," you need to disclose all the hidden strings attached to that offer. You'd better put that disclosure in close proximity to the "free" claim and make it unavoidable — not bury it in the seventh paragraph of a lengthy single-spaced document that has a misleading title and requires consumers to click on a link to get to it.

But if you choose to ignore that advice and take your chances with the FTC, we ask only one thing of you: please ... please ... don't call us and complain that everyone else is doing the same thing and getting away with it.

Gary D. Hailey and Jeffrey D. Knowles are partners at Washington, D.C.-based Venable. They practice advertising and marketing law and can be reached at (202) 344-4000.


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