FTC Cracks Down on Deceptive Online Marketing Tactic

Douglas Quenqua | December 21, 2009

The Federal Trade Commission has partnered with Visa and the Better Business Bureau to issue an alert warning consumers about misleading offers for "free" trial subscriptions online that can quickly -- and quietly -- turn into expensive commitments.

The FTC's Bureau of Consumer Protection Director, David Vladeck, held a press conference last week with officials from the BBB and Visa executives to call attention to offers that contain a so-called "negative option." Such offers require the consumer to opt out of a hidden agreement in order to avoid getting charged.

"Free trial marketing can be convenient for consumers -- if the terms are clearly spelled out beforehand," Vladeck said. "Legitimate marketers don't hide critical information about costs or cancellation policies to get their customers to agree to future charges."

The FTC reached a settlement in November with a company called Commerce Planet that offered consumers a "free online auction kit" that would teach them to make money selling items on sites like eBay. The FTC charged that Commerce Planet did not make it clear that by signing up to receive the auction kit, customers were also signing up for the company's $59.95 per month "Online Supplier" program if they didn't cancel within a few days of the order.

In August, the commission shut down a number of sites that were offering free help getting consumers grant money from the government. Consumers found themselves on the hook for up to $70 a month for services from health insurance plans to identity theft protection if they didn't opt out quickly.

The alert issued by the FTC included tips for protecting against such scams, including being aware of pre-checked boxes when signing up for free offers and reading the fine print of every offer closely. Visa also set up a Web site, where consumers can go for more option.

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ABOUT THE AUTHOR

Douglas Quenqua is a journalist based in Brooklyn, NY who writes about culture and technology. His work has appeared in The New York Times, Wired, The New York Observer, and Fortune.