SEATTLE – Two online companies that promised consumers “free” big-ticket items but required them to pay for trial offers and subscriptions must pay $55,000 in civil penalties under a settlement announced today by the Washington Attorney General’s Office. Under the terms of the settlement, SubscriberBASE Holdings, Inc., of Columbia, S.C., and SubscriberBASE, Inc., can no longer offer such promotions to Washington residents. The companies also agreed to refund more than 35,000 Washington consumers who paid for products and services in order to qualify for the so-called “free” items.
“There’s a reason why folks say ‘there’s no such thing as a free lunch,’” said Attorney General Rob McKenna. “SubscriberBASE offered ‘free’ items such as high-definition televisions, digital cameras and laptops, but consumers had to pay more than the items were worth in order to receive them.
“We alleged SubscriberBASE misled consumers into believing that they would be shipped ‘free’ items worth thousands of dollars, but they first had to provide personal information which the defendants then leased to other online marketers. Consumers were then presented with a series of offers that required increasingly more expensive purchases in order to qualify for the ‘free’ item. The vast majority dropped out of the qualification process, but only after they had spent significant money.
“The companies’ main intent was to collect and sell consumers’ personal information to marketers. Under our settlement, the defendants can no longer advertise ‘free’ gift promotions to Washington residents and cannot use, sell or lease the personal information of Washington consumers in its databases,” McKenna said.
The Attorney General’s Office alleged the companies’ practices violated Washington’s Consumer Protection Act. Under the settlement filed today in King County Superior Court, the defendants didn’t admit any wrongdoing but agreed to pay the $55,000 in civil penalties, plus $69,365 in attorneys’ fees and costs. An additional $295,000 in civil penalties were suspended provided they comply with injunctive provisions included in the settlement and issue refunds to eligible consumers. Restitution could amount to more than $2 million, depending on the number of consumers who respond to refund offer.
The state’s complaint, also filed today in court, alleges SubscriberBASE attracted consumers with e-mail messages and online ads for a “New Member Incentive Promotion.” Consumers interested in receiving the free products clicked on a Web link. They were then led through a series of steps in which they were asked to provide information or sign up for a service or product.
First, consumers were instructed to fill out an online form asking for their “shipping details” including name, mailing and e-mail addresses, birth date and phone number.
Next, they were asked to fill out a survey seeking further information about their buying preferences and interests. The survey also included links to advertisements for various products and services.
After completing the survey, consumers were instructed to select from various “Top” offers such as a membership to rent DVDs or receive monthly shipments of coffee. After choosing two “Top” offers, consumers were told they must select, accept and pay for two “Prime” offers and, finally, two “Premium” offers.” Unlike the earlier promotions, the “Premium” offers required consumers to spend thousands of dollars for items such children’s furniture, Rail Europe passes or Web site hosting.
“Businesses that market products or services online must be up front and truthful with their promotional offers,” said Senior Counsel Paula Selis, an assistant attorney general who heads up the Attorney General’s Consumer Protection High-Tech Unit. “The defendants named in our suit advertised products as ‘free,’ but consumers had to spend $2,000-$3,000 dollars. Under the state’s Consumer Protection Act, an item can’t be advertised for free if there’s a significant undisclosed cost.”
SubscriberBASE will send e-mail messages and follow-up letters to Washington consumers who paid for offers as a result of its promotions and offer them refunds. Eligible consumers should check their inbox for a message within the next 30 days and respond immediately. The deadline to submit claims is 60 days from receipt of the e-mail. Washington consumers who have questions about the settlement can contact the Attorney General’s Consumer Resource Center at 1-800-551-4636 between 10 a.m. and 3 p.m. weekdays.
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Media Contacts: Kristin Alexander, Media Relations Manager, (206) 464-6322, (206) 437-2654
Paula Selis, Senior Counsel, (206) 464-7662