Direct marketer Allstar Marketing Group, of such "as-seen-on-TV" products as Snuggies and the Magic Mesh door screen, has agreed to pay $7.5 million to settle a Federal Trade Commission charge its "buy-one-get-one-free" offers were deceptive.
But wait, there's more. The company, which also markets Cat’s Meow, Roto Punch and the Perfect Tortilla, has agreed to pay $500,000 to settle a separate case brought by New York State.
The FTC alleged the TV ads did not make clear what the processing and handling fees would be for the "free" item.
“This agreement returns money to thousands of consumers in New York and across the nation who believed they were buying items at the price advertised on television, but ended up with extra merchandise and hidden fees they didn’t bargain for,” said New York Attorney General Eric Schneiderman. “The settlement also brings much needed reforms to a major firm in the direct marketing industry. Those who use small print and hidden fees to inflate charges to unwitting consumers must be held accountable.”
The FTC charged the company with violations of the FTC Act and Telemarketing Sales Rules, including: 1) "billing consumers without their express informed consent; 2) failing to make adequate disclosures about the total number and cost of products before billing consumers; 3) failing to disclose material information about the total cost of the products and that the purpose of the [telemarketing] call is to sell goods or services; and, during telemarketing, 4) illegally billing consumers without first getting their consent."
The settlement requires Allstar to obtain written consent before billing for any product or service and requires it to "clearly and conspicuously disclose" before it bills consumers "the total number of products they have ordered, all related fees and costs, and material conditions related to the products purchased."
Allstar was making the best of the situation, saying it was setting a new standard in transparency in settling a "compliance inquiry." “Allstar is pleased to have resolved this matter, and we’re proud that it resulted in positive change for our company," said Allstar general counsel Jennifer De Marco. "One of our goals has always been to provide a positive purchasing experience for our customers. While we have always believed our processes complied with the law, we are proud to have successfully worked with the FTC and the NY AG to improve them and set new standards for transparency.”
The company said the settlement "will not have an adverse impact on the company’s operations or services in any way."