Although many New Year’s resolutions lose momentum by February (guilty!), the FTC’s commitment to Restore Online Shoppers’ Confidence Act (ROSCA) enforcement shows no signs of slowing. Last week, the FTC filed a complaint in the Northern District of California against JustAnswer LLC (JA) and its CEO, alleging violations of ROSCA. Specifically, the FTC alleged that JA, an online expert Q&A service, violated ROSCA by failing to clearly and conspicuously disclose material subscription terms and failing to obtain consumers’ express informed consent prior to obtaining billing information. Notably, unlike many of the FTC’s recent ROSCA enforcement actions, the complaint focuses solely on the sign-up flow and does not challenge the company’s cancellation practices. In addition to providing more insight into how the FTC views the first two prongs of ROSCA, this complaint also offers a sense of the types of facts the FTC points to when making its case on the knowledge requirement for civil penalties.
According to the FTC, JA advertised that consumers could “join” and connect with an expert for $1 or $5, but consumers were immediately charged both the nominal fee ($1 or $5) and a significantly higher monthly subscription fee (~$65/month). The complaint alleged that these subscription terms appeared in “substantially smaller text than almost any other text on the page ... including the join for $5 claim.” In addition, the complaint argues that even if consumers did notice the disclosure, they would be unlikely to understand it because it “flatly contradicts” the “join for $5 messaging.”
The FTC further alleged that the inclusion of the full subscription terms in the terms of service (TOS) was insufficient to comply with ROSCA’s clear and conspicuous disclosure and express informed consent requirements because (1) consumers were not required to open or affirmatively agree to the TOS and (2) the subscription terms appeared midway through the “dense and lengthy” TOS, where consumers would have difficulty locating them.
Finally, the complaint spotlights facts the FTC believes show sufficient knowledge to obtain civil penalties. Specifically, the complaint notes that JA and its CEO were allegedly aware of hundreds of thousands of consumer complaints and disputes about the subscription charges. In addition, the complaint alleges the CEO “directly participated” in market research and testing efforts that further affirmed that consumers were being misled. Interestingly, the complaint makes note of the fact that the CEO has been “engaged in in negative option marketing for twenty-one years” and therefore was keenly “aware of the laws that apply to this form of marketing.” While several paragraphs in the complaint have been redacted, the remaining paragraphs clearly highlight the FTC’s focus on establishing knowledge.
Ultimately, the case serves as a reminder that teaser fees, inconspicuous disclosures and negative options remain squarely on the FTC’s radar.
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