An online marketer offering supposedly free Internet auction kits has settled a complaint filed by the U.S. Federal Trade Commission for charging consumers US$59.95 a month for enrollment in an "online-supplier" program, the FTC said Thursday.
The proposed settlement, filed in U.S. District Court for the Central District of California, requires Commerce Planet and two former executives to disclose to consumers any recurring-fee plans and requires them to pay what could amount to more than $1.1 million in fines and consumer redress.
Commerce Planet operated a Web site offering consumers a free "online auction kit" that included information about how to start a business selling products on online auction sites such as eBay, the FTC said. Commerce Planet said the kit would provide consumers with "an easily managed online business that has the potential to supplement, or even replace" their current source of income.
Commerce Planet allegedly told customers they would be charged as little as $1.95 shipping and handling for this "free" trial offer, but customers had to provide their credit-card information, the FTC said. Many customers were unwittingly signed up for the company's $59.95 per month online supplier program, the agency said.
Over an 18-month period Commerce Planet did not clearly disclose that, by registering for the free offer, customers also were agreeing to be enrolled in the online supplier program and would be charged a membership fee unless they canceled within a few days.
The terms of the program, including the recurring fee, were difficult to find on Commerce Planet's Web site, the FTC said. The terms and conditions appeared on a separate page from the trial offer that could only be accessed by a link, or on the payment page, but below the bottom of the visible screen, the agency said.
Most customers did not even realize they had been enrolled in the online-supplier program until their credit cards were repeatedly charged, the FTC said. Many customers had to call the company multiple times to receive a refund, and some called lawyers or asked their credit-card companies to reverse the charges, the agency said.
Commerce Planet's Web site was not working Thursday afternoon. A spokesman for former Commerce Planet subsidiary Iventa declined to comment for the company.
The proposed court orders settle charges against Commerce Planet, former Commerce Planet CEO Michael Hill, and Aaron Gravitz, the former president of Legacy Media, a subsidiary of Commerce Planet. The FTC's case against a fourth defendant, former Commerce Planet president Charles Gugliuzza, will proceed in federal court.
The settling defendants must make specific disclosures before requesting payment for any product or service and before making any offer with a recurring-payment feature. They must first get consumers' express informed consent before charging them for any goods or services, and must document the consumers' consent for all recurring payment plans.
The proposed orders require the defendants to provide information about their refund policies, honor their refund policies, monitor their sales agents, and track their agents' billing information.
The orders include judgments of $19.7 million against each settling defendant, but those fines have been suspended due to the defendants' inability to pay. Under the orders, Commerce Planet must still pay $100,000, Gravitz must pay $192,000, and Hill must pay $230,000, but future proceeds from financial dealings may bring his total payments to more than $900,000.