ALBANY, N.Y. (Legal Newsline) – Direct marketing companies are facing legal challenges over allegedly deceptive marketing practices in New York.
New York Attorney General Eric Schneiderman recently settled cases against Tristar Products and Product Trends in relation to allegedly misleading consumers about processing, shipping and handling costs associated with “buy one, get one” (BOGO) offers. The attorney general alleged that both companies failed to disclose that the "free" product would be assessed additional shipping and processing fees and failed to disclose the amount of those fees.
According to prosecutors, one customer responding to a “Buy Three, Get Three” offer for Tristar’s Genie Bras marketed at $19.99 wound up paying $101. Further, prosecutors alleged that this was indicative of a system in which customers were subjected to confusing ordering processes that focused on "upsells" and adding additional purchases and refused to allow customers to review or edit orders prior to processing.
“Material terms of advertised offers must be clearly and conspicuously disclosed,” Adam Solomon, promotions and marketing compliance attorney at Michelman & Robinson, told Legal Newsline. “Specifically [marketers] must disclose the amount of any processing and handling fee for the second item in a BOGO offer.”
The settlement compels Tristar and Product Trends to reform their marketing and customer service practices, similar to the settlement that New York and the Federal Trade Commission reached with Allstar Marketing Group last spring. Customers must also be able to review and edit their orders before processing according to the terms of the settlement.
Solomon said that the settlements would surely have ripple effects through the direct marketing industry. He encouraged direct marketers to take this opportunity to review their advertising, ordering process and customer service practices in light of these settlements.
“These cases were part of a wider investigation into the advertising and sales practices used by the direct marketing industry,” said Solomon.
New York authorities launched an investigation into the two companies after receiving hundreds of complaints, many forwarded to the Attorney General’s Office by the Better Business Bureau. Schneiderman is continuing a sweeping investigation into the practices of the direct marketing industry, according to Solomon.
“Regulators have been focusing on the direct marketing industry for a long time and the industry will continue to receive scrutiny,” Solomon said. “These settlements should serve as a reminder to all companies that material terms must be clearly disclosed.”
Additionally, monetary penalties of $700,000 and $175,000 were assessed to Tristar and Product Trends respectively.