Online marketers scammed consumers out of more than $450 million dollars with 'free' trial offers, FTC charges
May 19, 2011
By Rita R. Robison, Consumer Specialist
Jesse Willms and 10 companies he controls allegedly raked in more than $450 million from consumers in the United States, Canada, the United Kingdom, Australia, and New Zealand by luring them into "free" or "risk-free" offers, and then charging them for products and services they didn’t want or agree to purchase, according to a complaint filed by the Federal Trade Commission.
The pitch
Willms and his companies used deceptive tactics in offering "free trials" for online products, including acai berry weight-loss pills, teeth whiteners, and health supplements containing resveratrol, as well as for a work-at-home scheme, access to government grants, free credit reports, and penny auctions, the FTC charges.
Consumers were often charged for the "free" trial plus a monthly recurring fee, typically $79.95. Consumers were also charged monthly recurring fees for the so-called bonus offers.
The defendants allegedly contracted with affiliate marketers whose banner ads, pop-ups, sponsored search terms, and unsolicited e-mail led consumers to the defendants’ websites, and the defendants paid the affiliates for each consumer whose credit or debit card was charged. The defendants allegedly made false claims about the total cost of products, recurring charges, and the availability of refunds. They also buried important terms and conditions in fine print, the FTC alleges.
No refunds
Although the defendants offered a money-back guarantee, consumers were often unsuccessful in canceling the charges or obtaining refunds, and the process involved time-consuming phone calls and other steps that made the deals far from risk-free, the FTC complaint alleges.
Penny auctions
The complaint charges that the defendants’ penny auction offers falsely indicated consumers would receive free "bonus" bids, but those who provided credit or debit card numbers to facilitate future auction buying were hit with charges they didn’t know about, including $150 for introductory "bonus" bids and $11.95 per month for ongoing "bonus" bids. The FTC also charges that Willms and his companies made false weight loss and cancer cure claims for their products and touted bogus endorsements by Oprah Winfrey and Rachael Ray.
The defendants
Among the defendants named in the FTC complaint are Jesse Willms, Peter Graver, Adam Sechrist, Brett Callister, Carey L. Milne; 1021018 Alberta Ltd., also doing business as Just Think Media, Credit Report America, eDirect Software, WuLongsource, and Wuyi Source; 1016363 Alberta Ltd., also doing business as eDirect Software; and 1524948 Alberta Ltd., also doing business as Terra Marketing Group, SwipeBids.com, and SwipeAuctions.com.
Most of the defendants are located in Alberta, Canada.
Beware of free trial offers
To help consumers avoid the hidden costs in some "free trial" programs, the FTC video, Free Trial Offers tells how to check out a free trial before you sign up and what to do if you find yourself enrolled in a free trial offer without your permission. For more information on free trials, see "’Free Trials' Aren’t Always Free."
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