Indiana firms violated law in online scheme, FTC says

INDIANAPOLIS — Six companies based in Indianapolis are among more than 50 nationwide charged by the Federal Trade Commission with deceiving online customers into buying personal care products.

The firms use negative option marketing in which a seller uses a consumer’s silence, essentially the failure to reject an offer or cancel an agreement, as consent to be charged for services, the FTC alleges.

The home base is in Nevada, although affiliates are in Wyoming, Colorado, Arizona and Indiana.

The Indiana firms are Brookville Lane LLC; Greenville Creek LLC; Night Watch Group LLC; Newport Crossing LLC; Indigo Systems LLC; and Salamonie River LLC, all of Indianapolis.

The Indiana corporations have filings from Danielle Foss and Jennifer Johnson, who are named as two of three defendants in the case. The third is Blair McNea, the Nevada-based founder of some of the firms.

The defendants have not filed a response to the lawsuit, which was filed by the FTC and the U.S. Attorney’s office in Las Vegas. Copies were also filed in the U.S. District of Southern Indiana court.

The FTC alleges that since 2013, the three used 78 companies and 87 websites to sell personal care products. The FTC said the companies use negative option marketing in which a consumer is charged monthly for automatic shipments unless the consumer personally cancels the transaction.

Among goods sold are tooth-whitening products under such names as Smile Vitalize, Smile Pro Direct and First Class Whitening. Affiliated networks were created to attract online customers.

As one example, the FTC said one of the networks drove traffic to trial-offer sites through emails, inviting consumers to fill out a satisfaction survey that it said was for trusted merchants that included Kohl’s and Amazon. However, the surveys were not affiliated with those retailers, the FTC said.

Instead, survey takers were given a choice of “rewards” for participating such as offering trial products for $1.03 plus shipping. As consumers checked out of the survey there was a 10-line block of small print that included a stipulation in which the consumer agreed to pay for future offers of $100 every month unless they canceled the plan.

Many consumers clicked on the “complete checkout” button to obtain a trial product without realizing they would incur monthly charges, the FTC claims.

The set-up misrepresented the price of trial offers and violated the federal Restore Online Shoppers Confidence Act of 2010, according to the allegations. Congress passed the act with the intention that the internet provide consumers with accurate information and give sellers a chance to fairly compete for business.

A section of the act prohibits charging consumers for transactions through negative option features. The FTC is seeking a permanent injunction against the companies and the awarding of restitution to consumers.

The Federal Trade Commission monitors use of the federal has completed its review of the Negative Option Rule. The “Trade Regulation Rule Concerning Use of Prenotification Negative Option Plans” requires sellers to clearly disclose the terms of any such negative option plan for the sale of goods before consumers subscribe. In such plans, consumers are notified of upcoming merchandise shipments and have a set period to decline the shipment. Sellers interpret a customer’s silence, or failure to take an affirmative action, as acceptance of an offer.

Source: Federal Trade Commission

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