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NY Attorney General Tightens the Screws on Direct Marketing Industry

In a move that will no doubt have ripple effects across the direct marketing industry, the New York Attorney General has reached a settlement with two marketers regarding allegations of deceptive advertising practices. If this settlement is any indication, going forward, marketers must be careful to disclose the terms of their offers and let consumers confirm all details and final prices of any order before finalization. Now is the time for direct marketers to closely review advertising, ordering processes and customer service practices to ensure compliance with applicable laws.

The two companies in question (Tristar Products, Inc. and Product Trend, LLC) allegedly ran misleading infomercials that often featured attractively priced “Buy One, Get One” offers, which required consumers to purchase a double order of the advertised product. However, the ads did not adequately disclose that consumers would be charged two separate processing and handling fees or the amount of those fees, which significantly increased the cost of the offer. The AG alleged that when consumers placed orders they were subjected to a confusing, automated ordering process that typically included numerous “upsell” offers for additional products. Consumers were also not given the opportunity to review and edit their orders before they were processed. As a result, in some cases, consumers who responded to the marketers’ advertisements were charged significantly more than they expected and received products that they did not intend to order.

The settlements require the marketers to: a) Clearly and conspicuously disclose all material terms of an advertised offer; b) Clearly and conspicuously disclose the amount of any processing and handling fee for the second item in a “Buy One, Get One” offer; c) Provide consumers with an opportunity to confirm the details and the total price of any order before it is processed. For orders placed online, this includes presenting the consumers with a checkout or shopping cart page that the consumer can edit; d) Disclose the amount of any processing and handling fees during the ordering process before the consumer is asked to confirm the order details; e) Label all hyperlinks to clearly convey the consequence of clicking the link: f) Email consumers who place orders by phone an order summary with any processing, handling or other charges; and g) Ensure that the marketers’ customer service lines are adequately staffed so that consumers are not subjected to long hold times. The agreements also require each marketer to make a monetary payment to the New York Attorney General’s Office for restitution, penalties, costs and fees, with Tristar paying $700,000 and Product Trend paying $175,000.

These settlements serve as an important reminder that direct marketing companies need to carefully review their offers. The New York OAG’s Consumer Frauds Bureau is continuing its sweeping investigation into the marketing and sales practices utilized by the direct marketing industry, and other states have undertaken similar investigations. If your business is faced with a regulatory inquiry or enforcement action, you should contact an experienced advertising attorney.

This blog post is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.