If you watch as much TV as we do, you might be tempted to pick up the phone and order the Snuggie, a sleeved blanket for couch potatoes; the answer to the ever-comfortable, hip spring chair; or one of the many sold by New York-based Allstar Marketing Group Other merchandise. If a Magic Mesh, Cat’s Meow, Roto Punch or Perfect Tortilla wasn’t enough, the ads also lured buyers with a “double offer” buy-one-get-one-free promotion that was misleading, the Federal Trade Commission and New York’s attorney general said . The settlement, totaling $8 million, provides guidance on how to ensure your BOGO does not become powerless.
According to the FTC complaint, Allstar deceived consumers about key parts of the transaction. As a result, many people end up with items they didn’t order and charges they didn’t authorize. For example, Magic Mesh—a self-closing door curtain—is advertised as “only $19.95.” But “call now” and the company promises “double the quote. Just pay separate processing and handling fees.” That’s right, the salesman said, “You can get two Magic Mesh curtains for $19.95. That’s less than $10 each.”
Now look at what the defendant didn’t tell people. First, Allstar charges $7.95 for processing and handling of each Magic Mesh. What’s more, BOGO cannot be declined, which means the minimum processing fee is $15.90. That brings the advertised offer of $19.95 to $35.85, with no clear upfront disclosure of what consumers will get or how much they’ll have to pay.
The FTC said Allstar’s labyrinthine phone and online ordering process compounded the problem. For example, the toll-free number uses an interactive voice recognition system, which is one of the “press 1” settings, but doesn’t give people the option to speak to an operator. Consumers must immediately provide their credit or debit card numbers, and they are not prompted to indicate how much of the item they want. For example, the recorded voice simply said, “Great. We’re letting you buy a set of Magic Mesh,” without clearly explaining that people would have to buy two screens and pay separate processing and processing fees for each screen.
But wait, there’s more. Allstar then launched a series of upsells for its own products and those sold by other companies. Adding to the confusion, Allstar is offering consumers “extra packs” of Magic Mesh and asking people for the first time how many items they want. Because of the company’s description of the deal, some consumers pressed 1, intending to only get the originally advertised BOGO offer. However, what they ended up with were four screens – two “sets” – at a significant additional cost. Allstar never tells people how much product they order or the total cost. According to the FTC, Allstar even charged some consumers who hung up on the phone and had no intention of completing the sale.
You’ll have to read the complaint for details, but the FTC says Allstar’s online ordering process isn’t clear.
Faced with multiple products they don’t want and charges they don’t authorize, some consumers are turning to Allstar’s “30-day money back guarantee (minus p&h).” The first hurdle is that processing and handling fees often approach 50% of the total cost. If consumers call to complain that the item they received is not what they ordered, many are denied a full refund and told they must return it at their own expense.
The FTC complaint alleges that Allstar illegally charged consumers without their explicit consent and failed to adequately disclose material terms of the offers. The lawsuit also accuses the company of repeatedly violating telemarketing sales rules regarding upselling.
What does this mean for marketers?
- Pogo stick. The FTC said Allstar deceived unwary consumers by structuring transactions in a confusing way. It is unwise to hide the true nature of a transaction behind a deceptive “free” claim.
- “Not normal? You’re not normal!” Savvy marketers know that a disorganized ordering process can lead to frustrated customers and potentially violate the Federal Trade Commission Act. If you choose to use an automated system, pay special attention to making sure your prompts and options are easy for consumers to understand.
- Keep your upsells growing. Offering upsells through telemarketing can up your compliance ante. Complying with the Telemarketing Sales Rules provides advice on TSR requirements.
- States of the Union. Like other recent settlements, this case demonstrates the unity of the FTC and state law enforcement officials in fighting fraud.
