Business ProfileforF9 Advertising LLC

As of February 28, 2019, FTC Matter/File Number: 1723164, Civil Action Number: 3:19-CV-1174

The Federal Trade Commission today announced another case in a series of recent actions targeting allegedly deceptive online "free-trial" offers that tricked consumers into enrolling in negative option plans.

The Commission's complaint against a Puerto Rico-based defendant and the companies he controlled alleges violations of the Restore Online Shoppers' Confidence Act (ROSCA) through negative option marketing. Defendants' deceptive scheme cost consumers tens of millions of dollars.

According to the FTC's complaint, Gopalkrishna Pai and eight companies he owns and operates acted as a common enterprise, selling skin care products online from at least February 2016 through August 2017. The products, which the defendants sold in pairs on a series of websites, included Vita Luminance and Regenelift, Derma Vibrance and Nuevoderm, Revived Youth Cream and Revived Youth Serum, and Aura Youth Cream and Aura Youth Serum.

The defendants advertised free trial products for a nominal shipping and handling charge, typically $4.99 or less. The online ads prominently touted "Risk Free" trial offers. Common pitches in the ads included, "RUSH MY FREE TRIAL," "WAIT, You Qualify for a Risk Free Trial," and "CLAIM YOUR FREE TRIAL."

The FTC alleges that the defendants failed to disclose that consumers would be automatically charged full-price for the products, as well as for monthly auto-shipments, unless they cancelled their order within 14-15 days. Only by clicking on the small "Terms and Conditions" hyperlink in the ads and then scrolling through a pop-up window could consumers find this information/disclosure.

The FTC alleges the defendants charged consumers who ordered the "Free Trial" more than $90 and enrolled them in auto-ship programs that cost over $90 a month. The complaint further alleges defendants frequently charged consumers without their consent for additional products, enrolled them in additional auto-ship programs related to the initial free trial, and used a confusing checkout process that led consumers to unintentionally sign up for products they did not want.

Finally, the complaint alleges that many consumers who tried to cancel their enrollment in the auto-ship plan found it very difficult to do so. Many consumers had difficulty reaching defendants' customer service representatives and, when they did so, were often unsuccessful in their efforts to cancel their enrollment. Some consumers who sent back the trial product unopened were still unable to cancel and get a refund.

The FTC further alleges that to hide their illegal scheme, the defendants used more than 100 shell companies with straw owners to obtain merchant processing accounts needed to accept and process consumers' credit and debit card payments. Through such credit card laundering and the use of both fake and real websites, the FTC alleges the defendants avoided detection by credit card companies and law enforcement, allowing defendants to bring in tens of millions of dollars through their deceptive trial offers.

For further assistance please contact
Federal Trade Commission
600 Pennsylvania Avenue, NW
Washington, DC 20580
Telephone: (202) 326-2222

LINK: https://www.ftc.gov/news-events/press-releases/2019/02/ftc-continues-actions-stop-deceptive-free-trial-negative-option

_________________________________________

As of October 11, 2023, Pai and his companies agreed to an FTC proposed order, issuing lifetime ban on negative option marketing and will turn over his funds and assets to the FTC

The proposed settlement order in the FTC case includes a number of requirements:

- Permanent ban on negative option marketing: Pai and his companies are permanently banned from participating in any negative option marketing.
- Prohibition on deceiving consumers: The order would also prohibit Pai and his companies from deceiving consumers about any other good or service they sell or market.
- Turn over funds and assets: The order would require the settling defendants to turn over the contents of numerous bank accounts and a retirement account. It also requires Pai to assign his interest in a promissory note secured by real property to an FTC-appointed liquidator. The order also notes that Pai has already surrendered more than $500,000 to the United States as part of the federal criminal suit against him. The relinquished assets will be used by the FTC to provide refunds to consumers harmed.
The order contains a total monetary judgment of $34,081,6073, which is partially suspended based on the settling defendants’ inability to pay the full amount. If the settling defendants are found to have lied to the FTC about their financial status, the full judgment would be immediately payable.

The Commission vote approving the stipulated final order was 3-0. The FTC filed the proposed order in the U.S. District Court for the District of Puerto Rico.