FTC Settles Over Undisclosed Reviews, Auto Renewal Programs

Advertising Law

“Free” trial offers that did not adequately state the terms of auto renewal programs and failed to disclose compensated reviews resulted in a deal with the Federal Trade Commission (FTC) for UrthBox, Inc., and its principal, Behnam Behrouzi.

The San Francisco-based company delivers monthly snack packages to consumers, who can sign up for a subscription at a cost of $20 to $200, depending on the size of the box. Beginning in 2017, UrthBox offered to send consumers a free snack box if they posted a positive review on the Better Business Bureau’s (BBB) website, via a link it provided to the correct page.

After consumers posted their review, took a screenshot and sent it to UrthBox, the company sent them a free box of snacks. The company’s reviews went from nine negative posts in 2016 to 695 reviews in 2017, of which 612 were positive, resulting in a much higher “Customer Review Rating,” the FTC said.

The vast majority of those reviews were generated through the incentive program, the agency alleged, but many of the reviewers who took advantage of UrthBox’s offer failed to disclose that they had received an incentive for their glowing reviews, despite the fact the BBB requires consumers who post reviews to certify they have not received any incentives.

UrthBox made similar proposals to consumers for other sites, including TrustPilot.com, and traded credit or free snack boxes in exchange for positive reviews on Facebook, Instagram, Twitter and Tumblr, the FTC alleged. The company lacked procedures or policies to monitor the posts of reviewers, the agency added.

The agency also took issue with UrthBox’s “free trial” automatic renewal program, alleging that the company failed to disclose key terms to consumers. Between October 2016 and November 2017, the company offered a “free” trial of its snack boxes for a nominal shipping and handling fee, the FTC said.

However, the company did not inform consumers that they would be enrolled in a six-month negative-option subscription plan once the free trial period ended and that they would be charged the total amount owed for six months of shipments if they did not cancel in time (a charge of $77 to $269 per month), according to the administrative complaint.

To settle the charges of violating Section 5 of the FTC Act as well as the Restore Online Shoppers Confidence Act (ROSCA), the defendants will pay $100,000. Pursuant to the proposed consent order, they are also prohibited from misrepresenting that an endorser of any good or service is an independent user or ordinary consumer of that good or service, and are required to clearly and conspicuously disclose any material connection with a consumer, reviewer or endorser in close proximity to that representation.

Further, Behrouzi and UrthBox must make certain disclosures relating to the negative-option feature of an auto renewal program and are banned from making misrepresentations in connection with the marketing or sale of any good or service with a negative-option feature.

The proposed consent order is open for public comment.

To read the complaint and proposed consent order in In re UrthBox, Inc., click here.

Why it matters: “People should be able to trust that good customer reviews aren’t the result of companies secretly paying the reviewers,” Andrew Smith, director of the FTC’s Bureau of Consumer Protection, said in a statement. “As this case shows, we hold companies accountable for this kind of deceptive marketing.” The agency called the action a “compliance reminder to industry members,” not just about consumer reviews, but the requirements of ROSCA as well.