In 2017, the FTC announced that Adore Me, an online lingerie company, had agreed to return more than $1.3 million to customers who enrolled in a negative-option membership program offering discounts and other benefits. Almost six years later – in another example of states pursuing settlements on their own – 32 state attorneys general announced a $2.3 million settlement with Adore Me over the same program.

Under Adore Me’s VIP program, a member would be charged $39.95 per month, unless the member either purchased apparel or pressed a “skip” button during the first five days of that month. According to the FTC, the company advertised: “If you do not make a purchase or skip the month by the 5th, you’ll be charged a $39.95 store credit that can be used anytime to buy anything on Adore Me.”

Like the FTC, the states generally alleged that Adore Me (a) failed to properly disclose the terms of its VIP program and the amount of the monthly charge, (b) failed to adequately obtain consent to the terms, (c) made it difficult for consumers to cancel their memberships, (d) improperly forfeited consumers’ VIP store credits upon cancellation, and (e) misrepresented that discounted prices are time limited.

The settlement requires Adore Me to do various things, including:

• Clearly and conspicuously disclose all fees, costs, and material terms related to the VIP program and the credits;
• Obtain express informed consent – such as through a checkbox – from consumers before enrollment;
• Provide a simple online mechanism for consumers to cancel their membership, and promptly honor those requests; and
• Limit its attempts to “save” consumers who want to cancel.

In addition, Adore Me is required to notify all consumers with active VIP Memberships that they have an option to obtain a refund of any unused store credits. The $2.35 million will be paid to the 32 states involved in this investigation and will be used to further other consumer protection investigations. (New York, which was not part of this settlement, announced a separate $125,000 settlement with the company in 2018, four months after the FTC settlement.)

These settlements show that federal and state regulators are looking closely at automatic renewal programs. (In fact, some are actively looking for enforcement opportunities.) And although the FTC and state AGs sometimes work together towards a common resolution, resolving a dispute with the FTC doesn’t necessarily mean that states will be satisfied with that resolution, which is why we sometimes see additional settlements, even years later.

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