Web
Crammers Settle FTC Charges
Consumers
Charged For "Free Trials"
April 17, 2001
Web site operators who
billed consumers for "free trials" have agreed
to settle Federal Trade Commission charges that their
practices were deceptive and violated federal law. The
settlement will bar the defendants from making false or
misleading statements - including misrepresenting whether
consumers will be charged for goods or services during a
free-trial period - and will bar billing before providing
clear and conspicuous notice of all terms and conditions.
The settlement also will prohibit the defendants from
changing the terms of their agreements, cancellation or
refund policies without first giving consumers the
opportunity to cancel the membership.
Voice Media Incorporated (VMI)
and its officers, Ron Levi and Paul Lesser, are based in
Carson City, Nevada.
In the complaint detailing
its charges, the FTC alleged that the VMI operates adult
content Internet sites and sells memberships for $19.95 to
$34.95 per month. The sites promote membership by
periodically offering "free" 7-day trial
memberships. VMI asked those signing up for the free
trials to provide credit card numbers for age
verification. The complaint alleged that VMI represented
that it would not charge membership fees to consumers who
affirmatively canceled their trial memberships within the
trial period. Contrary to that representation, VMI
sometimes charged monthly membership fees to consumers who
canceled within the trial period. Additionally, the
complaint alleged that VMI immediately billed the credit
cards of those consumers who signed up for the free trial
at the outset, treating the submissions of credit card
information as authorization to bill the accounts.
However, consumers did understand that they had to take
affirmative steps if they did not want to become members
and be regularly billed.
The settlement will bar
the defendants from making false or misleading statements,
including false statements that they will not charge
consumers during a free-trial period; that their services
are free; and that a request for a credit card number is
for age verification only. The order also prohibits them
from requesting credit card information except for
purposes of age verification, without giving consumers
clear and conspicuous information about membership costs
and the length of any free trial; terms of cancellation;
and how consumers can provide notice of cancellation. The
order prohibits the defendants from billing consumers who
have not agreed to purchase their goods or services and
from automatically billing consumers after a free-trial
expires without first notifying the consumer in a clear
and conspicuous way that the trial period has expired and
billing is about to begin. It also prohibits the
defendants from changing the terms and conditions of their
agreements without giving consumers 15 days advance notice
and an opportunity to cancel. The agreement also contains
certain bookkeeping provisions to allow the Commission to
monitor compliance.
The Commission vote to
accept the proposed consent agreement was 5-0. A summary
of the proposed agreement will be published in the Federal
Register shortly. Comments may be submitted for 30 days,
until May 17 2001, after which the Commission will
determine whether to make the agreement final. Comments
should be sent to: FTC, Office of the Secretary, 600
Pennsylvania Ave., N.W., Washington, D.C. 20580
NOTE: A
consent agreement is for settlement purposes only and does not
constitute an admission of a law violation. When the Commission
issues a consent order on a final basis, it carries the force of
law with respect to future actions. Each violation of such an
order may result in a civil penalty of $11,000.
Related
Documents:
File No. 002 3003
In the Matter of Voice Media, Incorporated
