FTC: Consumers Duped By Health Offers
The Federal Trade Commission has accused a Canadian entrepreneur of netting more than $467 million from Web users who were duped into providing credit and debit card numbers.
In a complaint filed this week in U.S. District Court in Seattle, the FTC says that Jesse Willms of Alberta and 10 Web companies he allegedly controls lured consumers into revealing their billing information by promising them "free" trial offers of material such as tooth whiteners and weight-loss products.
In actuality, however, many consumers who signed up for the free products were enrolled in subscription plans that charged recurring fees if they didn't quickly cancel their memberships, the FTC alleges.
"Using deceptive marketing tactics for a variety of products, programs and services offered via the Internet, the Willms defendants have made charges to consumers' credit and debit cards that the consumers neither knew about or agreed to," the complaint alleges.
Willms, a 24-year-old entrepreneur, denied wrongdoing. "We believe our business practices are compliant with the law and are working to resolve this disagreement with the appropriate government agencies," he stated.
The FTC says in its court papers that Willms and the other companies tapped affiliate marketers to run pop-ups, paid search, unsolicited email and banner ads to drive traffic to his sites. Those sites didn't adequately inform consumers that signing up for a free trial could result in enrollment in one-year paid membership programs, according to the FTC.
Monthly fees typically ran around $80, and the membership programs often included nonrefundable $126 fees, the FTC alleges.
In addition, Willms and the other companies allegedly charged users who didn't quickly cancel their "free" trial memberships with the cost of the trial products, which ranged from $40 to $90.
The FTC says that information about these charges was disclosed "in small fonts, using pale colors that are difficult to view." Plus, the information "appears before or after long paragraphs and graphics in places widely separated from the box where consumers are asked to enter billing information."
Willms counters in a statement that a "large percentage" of customers continued to use the companies' products after 12 months. "This loyalty, in part, is earned through compliant business practices and disclosures that are both clear and conspicuous."
The FTC alleges that marketing efforts by Willms' companies also were problematic because the ads included "false and unsubstantiated" claims about products' effectiveness. The Web sites allegedly made it appear that Oprah Winfrey, Rachael Ray and other celebrities endorsed the products.
In 2009, Winfrey's production company, Harpo, filed suit in federal district court in New York against 40 companies -- including JDW Media, run by Willms -- for allegedly using her image in ads for weight-loss products. Court records show that case was settled.
One of the Willms-controlled companies named by the FTC in its complaint this week, Farend Services, was previously sued by Dazzle Smile for trademark infringement. Court records indicate that lawsuit was settled last year.