Markets Wired

Note: Steve Baker, Director of the FTC’s Midwest Region Office, will take reporters’ questions by phone:

Date: October 29, 2014
Time: 2 p.m. ET
Call-in: (800) 230-1951, confirmation number 341247
Call-in lines, for news media only, will open at 1:45 p.m.

In its first law enforcement action against an online dating service, the Federal Trade Commission has reached a settlement that prohibits JDI Dating Ltd., an England-based company,  from using fake, computer-generated profiles  to trick users into upgrading to paid memberships and charging these members a recurring monthly fee without their consent. The settlement also requires the defendants to pay $616,165 in redress.

“JDI Dating used fake profiles to make people think they were hearing from real love interests and to trick them into upgrading to paid memberships,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “Adding insult to injury, users were charged automatically to renew their subscriptions – often without their consent.”

According to a complaint filed by the FTC, JDI Dating and William Mark Thomas operate a worldwide dating service via 18 websites, including cupidswand.com, flirtcrowd.com and findmelove.com. The defendants offered a free plan that allowed users to set up a profile with personal information and photos. As soon as a new user set up a free profile, he or she began to receive messages that appeared to be from other members living nearby, expressing romantic interest or a desire to meet. However, users were unable to respond to these messages without upgrading to a paid membership. Membership plans cost from $10 to $30 per month, with subscriptions generally ranging from one to 12 months.

The messages were almost always from fake, computer-generated profiles – “Virtual Cupids” – created by the defendants, with photos and information designed to closely mimic the profiles of real people. A small “v” encircled by a “C” on the profile page was the only indication that the profiles were fake. Users were not likely to see – much less understand – this icon. The fake profiles and messages caused many users to upgrade to paid subscriptions.

In addition, the defendants failed to tell subscribers that their subscriptions would be renewed automatically and that they would continue to be charged until they canceled. To avoid additional charges, members had to cancel at least 48 hours before their subscriptions ended. Information about the automatic renewal feature was buried in multiple pages of densely worded text that consumers could see only by clicking a “Terms and Conditions” hyperlink. Consumers were not required to access this hyperlink as part of the enrollment process.

The Commission’s complaint charges JDI Dating and Thomas with violating the FTC Act by misrepresenting the source of the communications from fake profiles and by failing to disclose the automatic renewal terms. The complaint also charges the defendants with violating the Restore Online Shoppers’ Confidence Act (ROSCA) by failing to: disclose clearly the terms of the negative-option plan, obtain express informed consent before charging consumers, and provide a simple way to stop recurring charges.

The settlement order prohibits the defendants from misrepresenting material facts about any product or service and, from failing to disclose clearly to potential members that they will receive communications from virtual profiles who are not real people. The order requires that, before obtaining consumers’ billing information for a product with a negative-option feature, the defendants must clearly disclose the name of the seller or provider, a product description and its cost, the length of any trial period, the fact that charges will continue unless the consumer cancels, the deadline for canceling, and the mechanism to stop recurring charges. The order also bars the defendants from using consumers’ billing information to obtain payment without their informed consent.

The injunction also bars the defendants from misrepresenting refund and cancellation policies, and failing to disclose clearly the terms of a negative option plan – before a consumer consents to pay. In addition, the defendants are prohibited from failing to honor a refund or cancellation request that complies with their policies, and failing to provide a simple mechanism for consumers to stop recurring charges – at least as simple as the mechanism consumers used to initiate them.

The order also prohibits JDI Dating and Thomas from violating the ROSCA and selling or otherwise benefitting from customers’ personal information, and requires them to pay $616,165 in redress.

The Commission vote authorizing the staff to file the complaint and proposed stipulated order for permanent injunction was 5-0. The complaint and stipulated final order were filed in U.S. District Court for the Northern District of Illinois, Eastern Division, on October 27, 2014.

NOTE: The Commission authorizes the filing of a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. Stipulated orders have the force of law when signed by the District Court judge.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.