FTC Halts Online Subscription Scheme that Deceived People with “Free

The operators of an online subscription scheme agreed to settle a Federal Trade Commission complaint alleging that the defendants duped consumers out of more than $74.5 million by luring them with supposedly “free trial” offers for cosmetics and dietary supplements, then enrolling them in subscriptions and billing them without their consent.

The court orders settling the FTC’s complaint ban the defendants from negative option marketing, in which the absence of affirmative consumer action constitutes consent to be charged for goods or services. The orders require the defendants to get consumers’ consent before billing them. The orders also impose financial judgments, which the FTC may use to send refunds to affected consumers.

“These companies promised free products for only the cost of shipping, but then charged consumers for expensive subscriptions,” said Andrew Smith, Director of the FTC’s Bureau of Consumer Protection. “The FTC will continue to go after companies that offer supposedly ‘free’ trial offers, but hide the real terms and conditions in the fine print.”

According to the FTC’s July 2019 complaint[1], since at least April 2016, AH Media Group, LLC (AH Media) and the company’s owners, Henry Block and Alan Schill, pitched at least eight different product lines to consumers. The defendants primarily sold cosmetics and dietary supplements with claims that they promote younger-looking skin or weight loss.

The FTC alleged that the defendants used deceptive websites to charge consumers for both the “trial” product and ongoing monthly subscription plans. The defendants claimed consumers would have to pay only a small shipping and handling fee for the trial, while hiding the actual cost. After two weeks, the defendants charged consumers $90 for the trial product and enrolled them in unwanted and costly negative option subscription plans.

The defendants allegedly used a network of shell companies and straw owners to process consumer payments. By using dozens of nominally distinct companies, the FTC alleges the defendants circumvented underwriting requirements and monitoring programs and made it more difficult to be detected by consumers and law enforcement. In October 2019, the FTC filed an amended complaint[2] adding Zanelo, LLC as a defendant, alleging it also was active in the AH Media scheme.

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