Markets Wired

San Francisco-based UrthBox, Inc. and its principal, Behnam Behrouzi, have agreed to settle a Federal Trade Commission complaint alleging that the company misrepresented that customer reviews were independent when, in fact, it had provided those customers with free products and other incentives to post positive reviews online.

The administrative order settling the FTC’s complaint, which also alleges that UrthBox failed to adequately disclose key terms of its “free trial” automatic renewal programs, bars the respondents from engaging in similar conduct and requires them to pay $100,000 to the Commission to compensate consumers deceived by the trial offers.

“People should be able to trust that good customer reviews aren’t the result of companies secretly paying the reviewers,” said Andrew Smith, Director of the FTC’s Bureau of Consumer Protection. “As this case shows, we hold companies accountable for this kind of deceptive marketing.”

From January through November 2017, UrthBox conducted an incentive program to induce customers to post positive reviews of its snack products on the Better Business Bureau’s (BBB) website. In many cases, the FTC contends, UrthBox offered to send its customers a free snack box if they posted a positive review on the BBB’s website.

While the BBB requires consumers who post reviews about a company to certify that they have not been offered any incentive from the company to write the review, many of UrthBox’s reviewers failed to disclose to the BBB that they in fact had been offered such an incentive for submitting their positive review.

UrthBox similarly encouraged consumers to post positive reviews on other sites, including TrustPilot.com, and between 2014 and 2017, offered store credit and/or free snack boxes in exchange for positive consumer reviews on Twitter, Instagram, Tumblr, and Facebook. At the time, UrthBox had no procedures or policies in place to monitor these reviewers’ posts.

From October 2016 to November 2017, UrthBox offered on its websites a “free” trial of its snack boxes for a nominal shipping and handling fee. During that time, however, UrthBox used both desktop and mobile websites that did not adequately disclose key terms of the offer, including that UrthBox would charge them the total amount owed for six months of shipments if they did not cancel in time.

What the FTC Did to Protect Consumers

According to the complaint, UrthBox violated the FTC Act by misrepresenting that positive consumer reviews on the BBB’s and other third-party websites reflected the independent experiences or opinions of impartial consumers, while the reviewers actually had a material connection to the company. The FTC alleges that UrthBox failed to adequately disclose that some consumers received compensation, including free snack boxes, to post those positive reviews.

The complaint also alleges the respondents violated the FTC Act by failing to adequately disclose key terms of its “free” snack box offer. Specifically, UrthBox allegedly failed to adequately disclose that when the free trial plan expired, the company would automatically enroll consumers in a six-month negative option subscription plan and charge them the total amount owed for six months of shipments, which typically cost $77 to $269 per month depending on the box size.

In addition, the complaint alleges that the respondents violated the Restore Online Shoppers Confidence Act (ROSCA) by failing to adequately disclose the material terms of the free trial offer before obtaining the consumer’s billing information, and by failing to get consumers’ informed consent before charging them for the ongoing negative option subscription.

Finally, the Commission names Behrouzi as a respondent to the complaint because he controlled or had the ability to control UrthBox’s conduct that the Commission alleges violated the FTC Act and ROSCA.

What the Settlement Order Means

The proposed order settling the FTC’s charges contains both conduct and monetary relief. First, it prohibits the respondents from misrepresenting that an endorser of any good or service is an independent user or ordinary consumer of that good or service and requires them to clearly and conspicuously disclose any material connection with a consumer, reviewer, or endorser in close proximity to that representation.

The order also requires the respondents to take all reasonable steps to remove any review or endorsement by any endorser with which it has a material connection from online review websites, including the BBB’s site, unless the disclosure requirements above are met, and to monitor any endorsers they engage.

The order prohibits the respondents from making misrepresentations in connection with the marketing or sale of any good or service with a negative option feature, and requires them to make certain disclosures relating to the negative option feature. The order also prohibits the respondents from using billing information to obtain payment for a good or service with a negative option feature without first getting a consumer’s express informed consent.

The respondents also must provide consumers with a simple mechanism they can use to avoid charges for products with a negative option feature. Finally, the order requires UrthBox to pay $100,000 to the Commission, which may be used to provide refunds to affected consumers.

The Commission vote to issue the administrative complaint and to accept the consent agreement was 5-0. The Analysis to Aid Public Comment will be published in the Federal Register soon. Instructions for filing comments appear in the published notice. Comments must be received 30 days after publication in the Federal Register. Once processed, comments will be posted on Regulations.gov.

The FTC thanks the Golden Gate BBB Serving the San Francisco Bay Area and Northern Coastal California for its assistance in this matter.

NOTE: The Commission issues an administrative 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. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $42,530.

The Federal Trade Commission works to promote competition, and protect and educate consumers. You can learn more about consumer topics and file a consumer complaint online or by calling 1-877-FTC-HELP (382-4357). Like the FTC on Facebook, follow us on Twitter, read our blogs, and subscribe to press releases for the latest FTC news and resources.