By Russ Van Arsdale, executive director Northeast CONTACT
Posted May 31, 2015, at 2:26 p.m.
Until a couple of years ago, Florists’ Transworld Delivery Inc. and Classmates.com were affiliated companies. Now they’ve settled charges by the Federal Trade Commission that they engaged in misleading advertising and billing.
Maine is among 22 states that took legal action against the companies. A big part of the investigation focused on accusations that the companies used “negative option marketing” to snag customers who didn’t know what they were buying. Investigators looked at tactics, including subscriptions to Classmates that renewed automatically.
The probe also looked at the companies’ dealings with third-party marketers, including travel rewards programs, insurance plans and discount buying clubs, whose ads would “pop up” during transactions.
The states charged that Classmates and FTD shared consumers’ personal information, including credit card numbers. This practice, known as “data pass,” allowed customers to be charged for third-party offers if they did not opt out.
Congress put an end to data pass in Internet dealings by approving the Restore Online Shoppers’ Confidence Act in 2010.
In reaching the settlement, which will cost the two firms $11 million, FTD and Classmates admit no wrongdoing. FTD officials say they voluntarily stopped a third-party marketing program in early 2010.
Classmates also denied any wrongdoing. Part of the settlement statement deals with the companies’ denial: “The defendants are confident that if any of the alleged misconduct were to be litigated, the defendants would prevail on each and every claim asserted by the plaintiffs. However, to avoid the substantial burden and expense on the defendants that would result from continued investigation into these issues or litigation, the defendants have elected to resolve this matter through a consensual resolution.”
In the future, both companies say they will keep customers’ information from being passed on to third-party marketers without the consent of those customers.
Classmates also said it would work to make it easier for customers to end their subscriptions.
Both firms must be clear whether membership programs they may offer are their own or those of third parties. They also can’t use terms including “free” or “risk free” if a program will switch to a paid subscription.
Part of the settlement includes $3 million set aside by Classmates for refunds to customers who had signed up and later had problems canceling.
FTD will pay $8 million to the 22 states, including Maine, involved in the suit.
Maryland Attorney General Brian Frosh used the announcement of the settlement to caution people. “Consumers should always carefully review service agreements and other add-on offers when making a purchase to ensure there are no strings attached,” Frosh said in a statement.
Consumers are advised that, to be eligible for restitution from Classmates, they must have purchased subscription services from the company between Jan. 1, 2008, and May 26, 2015
The deadline to file claims is Aug. 24. Mainers may file through Classmates or with the Maine Attorney General by writing to 6 State House Station, Augusta, ME, 04333, or by going online at http://email@example.com. If consumers have questions, they may call the Maine attorney general’s office at 1-800-436-2131.
Businesses and consumers can expect more enforcement actions in the future. FTC Guardian is a Georgia-based company — not affiliated with the Federal Trade Commission — which has suggestions for other entities that do online marketing. You can read this company’s advice at ftcguardian.com/articles/tragic-legal-mistake-4-continuity-programs-in-the-ftc-crosshairs/.
Consumer Forum is a collaboration of the Bangor Daily News and Northeast CONTACT, Maine’s all-volunteer, nonprofit consumer organization. For assistance with consumer-related issues, including consumer fraud and identity theft, or for information, write Consumer Forum, P.O. Box 486, Brewer, ME 04412, visit https://necontact.wordpress.com or email firstname.lastname@example.org.