The defendants generated millions of dollars in revenue selling these skin care products online through negative option marketing.
Defendants enrolled consumers in auto-ship programs without their consent
Pai and his companies told consumers that they will only pay nominal shipping and handling costs, typically $4.99 or less for their risk-free trial offers. However, consumers were not aware that the defendants enrolled them in auto-ship programs.
The defendants charged consumers for the full cost of the product and for monthly automatic shipments, normally more than $90, unless they cancel within 14 or 15 days.
Additionally, the FTC alleged that the defendants used a confusing checkout process that led consumers to unintentionally sign up for products they did not want.
Furthermore, the defendants allegedly made it very difficult for consumers to cancel their enrollment in the auto-ship program. Consumers could not reach the defendants’ consumer representatives. They did not get refund or cancellation of their enrollment in the auto-ship programs even they sent back the unopened trial products.
Defendants used credit card laundering to avoid detection
Moreover, the FTC accused the defendants of using more than 100 shell companies with straw owners to obtain merchant processing accounts needed to accept and process consumers’ credit and debit card payments.
