In the Internet age, negative option marketing abuses aren't as widespead as they once were, but they can still blindside consumers from time to time.
Three states – New York, Washington and Pennsylvania – have announced a $1 million settlement with Internet Order LLC, doing business as Pimsleurapproach.com, to market audio language courses. The states claimed the company misused the negative option to sell consumers things they never intended to buy.
The agreement resolves an investigation concerning the company’s failure to clearly disclose that the purchase of a language course advertised as “only $9.95” included the shipment of additional language courses that, if not returned, could cost the consumer more than $1000.
“Consumers deserve to be treated fairly and not subjected to deceptive marketing practices that unexpectedly cost hundreds of dollars or more,” said New York Attorney General Eric Schneiderman. “This settlement requires Internet Order LLC to obtain express informed consent before billing consumers for products and makes it clear that my office will not tolerate any abuses of consumers’ trust.”
Burden placed on consumer
That's often how negative option marketing works. The company selling the product starts with the assumption that the consumer has agreed to the purchase. It is up to the consumer to speak up and say, “no, I don't want the product.”
In the early 2000s ConsumerAffairs received numerous negative option marketing complaints as a number of marketers repeatedly stepped over the line.
In some of the worst cases, consumers would purchase one product, only to be charged for a completely unrelated product, because of a negative option purchase agreement buried in the fine print of the original transaction.
In the case of Internet Order LLC, it charged retired New York State Justice Stephen Crane for a course he said he did not order. It was Crane who brought the matter to Schneiderman's attention, resulting in the investigation.
“I consider myself a careful lawyer,” Crane said. “I was scammed by fine print buried in a bold-type offer for wanting to learn a foreign language. I thought the program was a great introduction to Italian for $9.95. Imagine my amazement when I was billed for an additional $256, and then started to receive threatening letters from Internet Order demanding payment.”
The company advertises the audio courses for “only $9.95.” However, upon signing up for this offer, the consumer is enrolled in a negative option plan, obligating the consumer to receive up to four additional audio courses at a cost of $256 per course.
So instead of paying just $9.95, consumers who don't see the fine print can be obligated to pay as much as $1,024.
Negative option marketing is not illegal. The issue is the consumer must know what he or she is agreeing to. In recent years the Federal Trade Commission (FTC) declared that all negative option terms must be “clear and conspicuous” in a company's marketing materials.
The states said the investigation found that even consumers who were aware of the terms and called the company to return the unwanted courses were subjected to “save” techniques by company personnel to avoid the cancellation.
The states said the company would not refund the consumer’s money unless the course was returned within a 30-day “free trial” window. Consumers were also requested to pay return shipping, despite the promise of the offer being “Risk Free” and “100% Money Back Guarantee.”
Under the terms of the settlement, before enrolling a consumer in a negative option plan, Internet Order must receive the consumer’s “express consent” to the arrangement, which does not include a pre-checked box.