Firms marketing products or services online must clearly and conspicuously disclose billing practices and obtain affirmative consent before charging consumers, or potentially face hefty fines for violating consumer protection laws, the Federal Trade Commission cautions.

The warning comes with a Feb. 9 announcement that two dietary supplement marketers will settle FTC allegations that they made "bogus 'free' sample offers" to enroll unknowing consumers in a "negative option" continuity program under which they billed consumers $100 every few months for recurring shipments unless customers cancelled.

FTC says JAB Ventures and Jason Brailow will pay $610,000 and Complete Weight Loss Center, Terry Guthmiller and David Guthmiller will pay $3,000 for allegedly not explaining that customers ordering a "free" sample were automatically enrolled to buy more products and would have to cancel to avoid charges for additional shipments. They also allegedly continued charging customers who cancelled or attempted to cancel their orders.

The settlements resolve allegations the firms made false or unsubstantiated weight-loss and related claims about their products LeanLife PM , Burn Fat 2 , Hoodia 66 , Hoodia Thin , HoodiaGordonii and RxZyte .

FTC places a "high level of attention on weight-loss" products and services, said Michael McGuffin, American Herbal Products Association president.

The commission fined three marketers $50,000 in December 2008 for making misleading weight-loss claims about Hoodia supplements (¹ Also see "Hoodia Marketers Accused Of $10 Million Fraud In FTC Investigation" - Pink Sheet, 8 December, 2008., p. 13).

Negative option marketing is not common among supplement firms, nor is fraud more pervasive in the industry than in any other, said Daniel Fabricant, VP of scientific and regulatory affairs for the Natural Products Association.

McGuffin advised supplement marketers not to use negative option campaigns, even though FTC points out the tactic is allowed with safeguards, including appropriate disclosures before transactions are made and effective processing of cancellation requests.

- Elizabeth Crawford (e.crawford@elsevier.com)

FTC Nails Supplement Marketers For “Bogus” Free Weight-Loss Samples

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