A.G. Schneiderman Announces $8 Million Agreement With Direct Marketer For Deceptive Practices That Resulted In Hidden Charges To Consumers Ordering Products Marketed On TV
Allstar Marketing Group, LLC, Lured Consumers With Infomercials And Used Deceptive Web And Phone Ordering Processes To Hit Consumers With Excessive Fees And Charges; Allstar Must Make Major Reforms To Its Advertising And Marketing Practices
A.G. Schneiderman: It’s Illegal For Businesses In New York To Dupe Consumers
NEW YORK— As part of a wider investigation into deceptive practices allegedly used by the direct marketing industry, Attorney General Eric T. Schneiderman today announced an $8 million settlement with Allstar Marketing Group, LLC, (“Allstar”), a firm headquartered in Hawthorne, N.Y. The agreement, reached along with the U.S. Federal Trade Commission, requires the direct marketing firm to stop using allegedly deceptive and misleading advertising and ordering processes when selling a variety of products, such as the Snuggie, the Perfect Brownie Pan and the Magic Mesh screen.
“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,” Attorney General Schneiderman said. “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.”
“Marketers must clearly disclose all costs. That includes processing fees, handling fees, and any other fees they think up,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “Working with the New York Attorney General, we’ll return millions of dollars to consumers that Allstar collected in undisclosed fees.”
The Attorney General’s Consumer Frauds Bureau launched a probe into the industry after receiving complaints from consumers, including hundreds forwarded to the Attorney General’s Consumer Frauds bureau by the Better Business Bureau.
According to the Attorney General’s investigation, Allstar ran misleading infomercials on television that featured attractively priced offers for products to lure consumers to place orders either online or over the phone. The company then allegedly used deceptive and confusing ordering processes, which resulted in consumers being charged excessive and unauthorized fees and charges.
For example, the investigation found that Allstar lured consumers into buying goods often by using a “Buy One, Get One” offer, in which consumers must receive two of the advertised product, but did not adequately disclose that consumers would be charged two separate processing and handling fees, which in some cases, nearly doubled the cost of the offer. According to the findings, when consumers attempted to place orders, Allstar subjected them to a confusing ordering process that typically included numerous up-sell offers. Many consumers inadvertently ordered the upsells by clicking links that appeared to simply move the consumer through the ordering process, but that also added products to their order. Allstar also did not provide consumers with an opportunity to amend or review their order before it was processed. As a result, in many cases, consumers who responded to Allstar’s advertisements were charged significantly more than they expected and received products that they did not intend to order or received excessive quantities of a product.
One consumer who responded to Allstar’s “Buy One, Get One” offer for the Perfect Brownie Pan, advertised at $19.95, was charged a total of $105 and received six of the pans. The consumer, who expected two pans, unwittingly tripled his order. That person complained that he was subjected to an intentionally misleading automated telephone script and said he was unable to get a full refund. Allstar also typically offered consumers “priority processing” for a fee of approximately $6.00 or $7.00, but, according to the Attorney General's findings, used the same shipping methods for consumers who paid no extra fee.
The settlement requires Allstar to:
- Clearly and conspicuously disclose all material terms of an advertised offer.
- Clearly and conspicuously disclose the amount of any processing and handling fee for the second item in a Buy One, Get One offer.
- Provide consumers with an opportunity to confirm the details and the total price of any order before it is processed.
- Disclose the amount of any processing and handling fees during the ordering process before the consumer is asked to confirm the order details.
- Label all hyperlinks to clearly convey the consequence of clicking the link.
The agreement requires Allstar to pay $7.5 million for restitution to consumers who were harmed by Allstar’s practices. The Federal Trade Commission, which has entered into a separate consent order with Allstar, will distribute the $7.5 million to consumers in consultation with the Attorney General’s office. Allstar must also pay $500,000 to the New York Attorney General’s Office for penalties, costs and fees.
Consumers who believe they may be entitled to a refund should notify the Attorney General’s office. Consumers can file a complaint online or obtain a complaint form at www.ag.ny.gov. Consumers can also call the Attorney General’s consumer helpline at 1-800-771-7755.
The Attorney General thanks the Federal Trade Commission for its cooperation in achieving this settlement.
This investigation is being handled by Assistant Attorney General Amy Schallop, Deputy Bureau Chief Laura J. Levine and Bureau Chief Jane M. Azia, all of the Consumer Frauds and Protection Bureau, and Executive Deputy Attorney General Karla G. Sanchez.