On every score, the court held these claims were false – that, in fact, only a few people made money and the vast majority lost, including on expensive coaching programs. Further, the court said that disclaimers, such as ones stating that results would vary, and that time, effort and “common sense” would be necessary to be successful, were ineffective to dispel the misleading “net overall impression” that handsome profits could be made, quickly and easily, from the programs.
In perhaps its most legally significant finding, the court also ruled that defendants violated the TSR by failing to disclose the terms of their continuity programs not just before the customer agreed to the sale, but even before the customer divulged credit card information. The text of the TSR states only that terms must be disclosed before a consumer “consents to pay,” but the court, citing FTC compliance guidance on the TSR, construed the text to require that disclosure be made even earlier, before the seller or telemarketer requests account information.
Since the start of 2011, Internet sellers of negative options have been required by the Restore Online Shoppers’ Confidence Act (“Rockefeller Law”) to disclose terms before billing information is provided. Now, with the decision in John Beck Amazing Profits, there is case law to back up the FTC view that this requirement should extend to telemarketing sales as well. DR marketers of continuity programs should take heed and review their scripts (and websites) to make sure all material disclosures are made not just before the consumer says, “OK,” but even before he pulls out his card.
As for the case itself, it’s not quite over. The parties have been asked to tell the court how much it should order in consumer redress and whether it should ban Hewitt and Gravink from infomercials – for life. The FTC is seeking more than $450 million, and it goes without saying that it is pushing for a ban.