Allstar Marketing Group, a direct marketing company that typically sells “as-seen-on-TV” products such as Snuggies and the Magic Mesh door cover, has agreed to pay $7.5 million to the Federal Trade Commission for consumer restitution. The FTC alleges that Allstar deceived consumers with “buy-one-get-one-free” promotions.
The FTC’s settlement was reached alongside actions by the New York State Office of the Attorney General, which announced a separate state case against Allstar. In addition to the $7.5 million paid to the FTC, Allstar will pay $500,000 to the Attorney General’s Office for penalties, costs, and fees to settle that action.
“Marketers must clearly disclose all costs. That includes processing fees, handling fees, and any other fees they think up,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “Working with the New York Attorney General, we’ll return millions of dollars to consumers that Allstar collected in undisclosed fees.”
Since at least 1999, Allstar, based in Hawthorne, New York, has been in the direct marketing business, using television commercials to sell its products, many of which are familiar to consumers such as Magic Mesh, Cat’s Meow, Roto Punch, Perfect Tortilla, Forever Comfy, and Snuggies.
While the products have varied, Allstar’s pitch is often the same — a “buy-one-get-one-free” offer without additional costs disclosed, according to the FTC’s complaint.
“This agreement returns money to thousands of consumers in New York and across the nation who believed they were buying items at the price advertised on television, but ended up with extra merchandise and hidden fees they didn’t bargain for,” Attorney General Eric T. Schneiderman said.
In a recent commercial for Magic Mesh, for example, the company promised that it would “double the offer” for consumers, if they just paid “processing and handling fees.” Consumers were led to believe that they would then be getting two $19.95 products for “less than $10 each,” the FTC alleges. In fact, the total cost with the undisclosed $7.95“processing and handling” fees jumped from the advertised price of $19.95 to $35.85, according to the complaint.
As alleged in the FTC’s complaint, consumers who called Allstar were often immediately instructed to enter their personal and billing information, and were charged for at least one “set” of products, based on the “buy-one-get-one-free” offer, before they had a chance to indicate how many products they wanted to buy. Because the sales pitch was often confusing, some consumers purchased more “sets” than they actually wanted.
Allstar then attempted to up-sell consumers additional products via automated voice prompts that requested the consumer accept the offer. Many times, the only way a consumer could decline the offer was to say nothing. At the end of the calls, Allstar sometimes routed consumers to other third-party sellers who made additional sales pitches, the FTC said.
Based on this alleged conduct, the FTC’s complaint charges Allstar with two violations of the FTC Act and three violations of the agency’s Telemarketing Sales Rule (TSR), including the following:
- Billing consumers without their express informed consent;
- Failing to make adequate disclosures about the total number and cost of products before billing consumers;
- In connection with the up-selling of goods and services, violating the TSR by failing to disclose material information about the total cost of the products and that the purpose of the call is to sell goods or services ; and
- During telemarketing, illegally billing consumers without first getting their consent.