“As-seen-on-TV” product marketing company, Allstar Marketing Group, LLC, who makes such products as the Snuggie and the Magic Mesh door cover, has agreed to settle charges with the FTC for $7.5 million. The FTC’s settlement with Allstar was reached in conjunction with a $500,000 settlement arising out of actions pursued by the New York State Office of the Attorney General.
The FTC’s complaint alleges that, since at least 1999, Allstar has directly marketed its products, which include the Magic Mesh, Cat’s Meow, Roto Punch, Perfect Tortilla, Forever Comfy, and Snuggies, to consumers through television commercials. While the products have varied through the years, Allstar’s promise of “buy-one-get-one-free” without any additional costs has remained the same. According to the FTC, consumers seeking to order the products were immediately directed to enter their personal and billing information, and were then charged for at least one set of products before they even had a chance to indicate how many of the product they wished to buy. Additionally, those consumers seeking to make purchases online faced similar problems, including separate “processing and handling” fees and difficulty in returning the products for a full refund under Allstar’s “30 day money-back guarantee.”
Based upon the above described conduct, the FTC’s complaint charges Allstar with two violations of the FTC Act and three violations of the Telemarketing Sales Rule for: 1) billing consumers without their express informed consent; 2) failing to make adequate disclosures about the total number and cost of products before billing consumers; 3) 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 ; and 4) during telemarketing, illegally billing consumers without first getting their consent.
The settlement order bars Allstar from failing to obtain consumer’s written consent before billing them for a product or service. The order also requires Allstar to clearly and conspicuously disclose the number of products a consumer has ordered, all related fees and costs, and all other conditions related to the product before the consumer is billed for the product. It also prohibits Allstar from violating the TSR by: 1) failing to disclose the true costs of any goods or products it sells; 2) failing to promptly disclose the identity of the seller to consumers and that the purpose of the call is to sell a product or service; and 3) causing billing information to be submitted for payment without consumers’ express authorization.
Even though Allstar has agreed to settle the FTC charges, Allstar’s attorney Jennifer De Marco has said that Allstar’s tactics were legal. “Allstar is pleased to have resolved this matter, and we’re proud that it resulted in positive change for our company. One of our goals has always been to provide a positive purchasing experience for our customers,” and “[w]hile we have always believed our processes complied with the law, we are proud to have successfully worked with the FTC and the NY AG to improve them and set new standards for transparency.” However, it is hard to understand how, if there tactics were legal, Allstar would have agreed to such a substantial settlement with the FTC and NY AG. The FTC and NY AG have said that the money recovered will be used to refund those consumers impacted by Allstar’s practices.