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The agreement with international floral service provider Florists’ Transworld Delivery, Inc., its subsidiary FTD.com, Inc. and the online social networking company “resolves allegations the two companies engaged in deceptive advertising and billing practices,” acting New Jersey Attorney General John J. Hoffman said this morning.
It requires that both pay a total of $8 million to 22 participating states.
Classmates is paying another $3 million in restitution to consumers in the participating states who purchased subscription services it offered directly, Hoffman said.
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To be eligible for restitution, consumers must have purchased subscription services from Classmates between January 1, 2008 and the effective date of the settlement (today, May 26). Contact the state Division of Consumer Affairs at (973) 504-6200 or (toll-free) at 1-800-242-5846.
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“The multi-state investigation found that consumers who visited Web sites controlled by FTD and Classmates often were sold ‘trial term’ subscriptions for goods and services by the two companies but were not adequately informed that the subscriptions would renew automatically once the trial period ended, and that their credit cards would be billed for the renewal until the consumer actively cancelled the subscription,” the attorney general said.
FTD and Classmates “also allegedly permitted sales and membership offers by their third-party marketing partners – for such things as discount clubs, travel rewards programs, insurance-type programs, etc. — to ‘pop up’ during on-line consumer transactions with FTD and Classmates,” he added.
“In some cases, these third-party ‘pop up’ offers displayed an FTD or Classmates logo, creating the misimpression that the consumer was still doing business with one of the two companies when they were not,” Hoffman said.
The third-party promotions “typically offered an initial free trial period, but also contained a ‘free-to-pay’ aspect that was not adequately disclosed, and resulted in consumers being billed for paid memberships or subscriptions after the trial period ended — until the consumer actively cancelled the membership or subscription,” he said.
FTD and Classmates also engaged in “data passing” — relaying consumers’ data, including their personal billing information, to the third-party marketing partners without proper disclosure, Hoffman said.
This led to unwitting online customers being charged by the third-party marketing partners for services or subscriptions that they did not want, he said.
Consumers were sometimes unaware that by simply clicking a button on checking a box in the third-party pop ups, they’d agreed to additional services or subscriptions — a practice known as “negative option marketing,” Hoffman said.
“Businesses have a duty to be clear, direct and honest when advertising, and to respect consumer privacy laws by not sharing sensitive credit card and debit card account information without proper disclosure and/or consumer consent,” the attorney general said.
Eligible complaints involve charges purportedly collected:
· Without the consumer’s authorization
· With authorization, but when the authorization was obtained by misrepresentation or material omission made at the time the consumer first purchased subscription services or
· Following the consumer’s cancellation of the Classmates’ subscription services.
Under the settlement, FTD and Classmates, Inc. deny any wrongdoing or liability.
In addition to New Jersey, states participating in the settlement announced today include: Alabama, Alaska, Delaware, Florida, Idaho, Illinois, Kansas, Maryland, Maine, Michigan, Nebraska, New Mexico, North Dakota, Ohio, Oregon, Pennsylvania, South Dakota, Texas, Vermont, Washington and Wisconsin.
Deputy Attorney General Erin M. Greene, assigned to the Division of Law’s Consumer Fraud Prosecution Section, handled the case.
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