Trade Commission has brought a law enforcement action against an
online operation that allegedly raked in more than $450 million
from consumers in the United States, Canada, the United Kingdom,
Australia, and New Zealand by luring them into “free”
or “risk-free” offers, and then charging them for
products and services they did not want or agree to purchase.
The FTC seeks to stop the operation’s illegal practices
and make the defendants repay injured consumers.
“The defendants used the lure of a ‘free’
offer to open an illegal pipeline to consumers’ credit card
and bank accounts,” said David C. Vladeck, Director of the
FTC’s Bureau of Consumer Protection.
“‘Free’ must really mean ‘free’ no
matter where the offer is made.”
The FTC worked closely with Canadian law enforcement to track
down the defendants, most of whom are located in Alberta.
According to the FTC’s complaint,
Jesse Willms and 10 companies he controls used deceptive tactics in
offering “free trials” for various products online,
including acai berry weight-loss pills, teeth whiteners, and health
supplements containing resveratrol (the supposedly healthful
ingredient in red wine), as well as for a work-at-home scheme,
access to government grants, free credit reports, and penny
auctions. (Penny auctions are online auctions in which consumers
must purchase bids, usually for $0.50 to $1 each.
Regardless of whether a consumer actually wins a penny auction,
the consumer has paid for each bid he or she placed during the
auction. However, each bid that is placed raises the price of the
auctioned item by a penny.)
According to the FTC, Willms and his companies obtained
consumers’ credit or debit card account numbers, by enticing
them with bogus “free” or “risk-free” trial
offers that supposedly required only small shipping and handling
fees, and also promised phony “bonus” offers just for
Consumers had no reason to believe they would be charged for the
trial product or the extra bonus products, but they were often
charged for the “free” trial plus a monthly recurring
fee, typically $79.95. Consumers were also charged monthly
recurring fees for the so-called bonus offers.
Although the defendants offered a money-back guarantee,
consumers were often unsuccessful in canceling the charges or
obtaining refunds, and the process involved time-consuming phone
calls and other steps that made the deals far from risk-free, the
FTC complaint alleged.
The defendants allegedly contracted with affiliate marketers
whose banner ads, pop-ups, sponsored search terms, and unsolicited
e-mail led consumers to the defendants’ websites, and the
defendants paid the affiliates for each consumer whose credit or
debit card was charged. The defendants allegedly made false claims
about the total cost of products, recurring charges, and the
availability of refunds. They also buried important terms and
conditions in fine print, the FTC alleged.
The complaint charges that the defendants’ penny auction
offers falsely indicated consumers would receive free
“bonus” bids, but those who provided credit or debit
card numbers to facilitate future auction buying were hit with
charges they did not know about, including $150 for introductory
“bonus” bids and $11.95 per month for ongoing
The FTC also charged that Willms and his companies made false
weight loss and cancer cure claims for their products, and touted
bogus endorsements by Oprah Winfrey and Rachael Ray.
The FTC further alleged that the defendants provided merchant
banks with false or misleading information, in order to acquire and
maintain credit and debit card processing services from the banks
in the face of mounting chargeback rates and consumer complaints.
Willms and his companies also allegedly violated the Electronic
Fund Transfer Act and Regulation E (issued by the Federal Reserve
System’s Board of Governors) by debiting consumers’
bank accounts without their signed written consent and without
providing consumers with a copy of the written authorization.
Businesses named in the FTC complaint include Just Think Media,
Credit Report America, eDirect Software, eDirect Software; 1524948
Alberta Ltd., Terra Marketing Group, SwipeBids.com, and
SwipeAuctions.com; Circle Media Bids Limited, Selloffauctions.com;
Coastwest Holdings Ltd.; Farend Services Ltd.; JDW Media LLC; Net
Soft Media LLC, Sphere Media LLC, and True Net LLC.
Feds Charge Canadian Scam Artists Raked in $450 Million. Consumers were lured into "free" and "risk-free" offers that were anything but...