BBB: Deceptive 'free trial' offers and fake celebrity endorsements are a billion dollar problem
Millions of people in the U.S. have been victimized by scams involving “free trial” offers or subscription plans in disguise, both of which are often promoted with deceptive ads, some with fake celebrity endorsements, according to a new Better Business Bureau report.
The report, released exclusively to “Good Morning America” on Wednesday, outlines how these operations have created a global, multi-billion-dollar industry that reaches outside of the U.S. into countries including Canada and Australia. The Federal Trade Commission has resolved at least 14 cases over the last 10 years, with losses to consumers totaling more than $1.3 billion, according to the report.
Between 2015 and 2017 complaints to the FBI about “free trial” offers have more than doubled, the BBB said in an interview with “Good Morning America.”
“These sorts of scams, frauds often claim that they're endorsed by celebrities or that celebrities are actually investing in them, for example that people have left their TV jobs to instead set up a skincare line,” said Steve Baker, an international investigations specialist for the BBB. “For people that become victims of this, a lot of the time the fact that somebody that's famous… endorsed this… gives them a real strong feeling that this must be a legitimate.”
In fact, Baker told ABC News that celebrities’ names and pictures are being printed without their permission. Representatives for Beyonce and Jennifer Lopez told GMA the celebrities knew nothing about online ads ABC discovered for their purported skin cream products. “The fact that these things claim a celebrity endorsement does not mean that they're really endorsed by the celebrity,” said Baker.
In November 2017, a federal court ordered three men the FTC alleged were behind ads making false claims that Joy Behar and Whoopi Goldberg of ABC’s “The View” were launching their own skincare lines, to pay $179 million dollars -- the amount the FTC claimed consumers had paid for the products over more than five years. The judgment was ultimately suspended after the defendants paid nearly $6.4 million to the FTC.
In another case last month, a federal court temporarily halted an alleged international internet marketing scam operating since 2014. The FTC claims the operation, headed by Apex Capital Group, LLC, and others, deceived consumers through false claims of free trial offers for more than 50 different products. They allegedly told customers they only had to pay $4.95 for shipping and handling for items such as personal care products or dietary supplements, but then charged full product prices – at an average of $90 -- and enrolled them in various kinds of subscription plans without their consent.
The FTC alleges Apex Capital Group, LLC, and others also engaged in “credit card laundering,” by setting up dozens of shell companies in the U.S. and the U.K. to open merchant accounts needed to accept customers’ credit card payments, and avoid potential fraud detection by card companies and law enforcement. Alex Capital Group did not immediately respond to ABC News' request for comment.
Although the FTC continues to crack down on what the BBB says is a massive problem, operations can be challenging to identify and locate. Baker says the scam often involves several players working together. “There are people that put up the ads on the internet or social media. Those are called ‘affiliates’ and those are the ones that get paid commissions if people go to the website where they see the claims,” Baker said.
He also says those websites, run by a third-party hired by the affiliate, are often designed to replicate legitimate websites and feature fake news articles with fabricated user testimonials and celebrity quotes endorsing the product.
When someone purchases an item, “there are separate people that ship the products called fulfillment companies,” Baker said. There is also a customer service department for “people that talk to unhappy ripped-off people on the phone all day. And there are people at hand at the credit card processing. So this industry is very large, very organized and often very international with lots of players. It makes it difficult to pin down who exactly is responsible for this,” Baker said.
The FTC broke it down in an infographic here.
Brenda Devlin of Palm Desert, California, says she was duped by a false ad and purchased two items in June that she thought were created by Lara Spencer.
“I saw the ad…stating that she was going to be leaving ‘Good Morning America’ and working on her skin care line,” Devlin told ABC. “I was out of face cream… And I like Lara. And I thought, “Oh, I’ll give her a try for her product.”
Devlin says she signed up for what she thought was a trial offer for just $4.95 per product. But she says the shipments kept coming, costing her nearly $90 per product.
“I didn't realize it was a subscription,” Devlin said. “Never anywhere on the packaging did it say or in anything you received that that you were gonna automatically be shipped the product.”
The company claimed the subscription was outlined in the terms and conditions, but Devlin told ABC she doesn’t remember seeing them. According to the BBB, the terms of “free trial” offers are often in small, fine print on the site, if at all, or on a separate web page accessible only by a hyperlink.
“They have to actually receive this product and ship it back, all within 14 days, or their credit card is going to be charged a hundred dollars or so for a month's supply,” Baker said. “And these people are going to keep sending additional products every month and continue to charge people's credit cards until they can find a way to stop it.”
Devlin said she realized she had been duped after she saw a tweet by a different TV personality, ABC’s Amy Robach: “I need to put this to rest: I AM NOT LEAVING GMA FOR A SKIN CARE LINE - I’ve had many people tell me they bought a face cream because someone is falsely using my name + image to sell it! I have NOTHING to do with this company - Please beware of this scam. #lovemyjob #notleaving.”
“I saw that and I went, ‘Oh my gosh. I did that,’” Devlin said. Devlin called the skincare company to request a refund. “When someone came on the line they said, ‘There’s absolutely no refunds.’ And pretty much hung up on you,” she said.
Devlin was able to cancel the subscription during the call, but said it was only after she sent a complaint to the BBB that the company agreed to refund her money. But now, more than 2 months later, she said she still has not received the money.
And the skin cream line she thought was Lara Spencer’s was news to Spencer. “All of it is completely false,” Spencer told ABC. She said she only learned of the false ads when fans began asking her why she was leaving “Good Morning America.” Perplexed, she eventually went online to look into it, and discovered the disturbing ads featuring her name.
“It makes me very upset,” Spencer said. “Literally, it makes me want to cry because this is my career, and it's a fan base that trusts me and has known me on TV for a very long time, and to have people think that I'm leaving a job that I love to do something that I have no idea about, I feel so violated.”
Spencer has been fighting against the fraudulent use of her name for months with a team of attorneys led by Art Middlemiss; together Spencer and her attorneys found more than a dozen skincare products using her name and likeness in ads.
GMA Investigates tracked down one skincare company promoted in false ads featuring Spencer. A spokesperson for the company denied it even knew about the false ads until Spencer’s lawyers told them. The company told us it hires a company -- or affiliate network -- who then hires independent contractors to promote their products. The company provided GMA with the name of the independent contractor they said was behind the ads. He told GMA he had nothing to do with them.
The skincare company also told ABC their contract with the affiliate forbids false celebrity endorsements, and that upon learning about the ads, they demanded the affiliate take action against whoever may be responsible. The ad has since been deleted.
According to the BBB, some companies offer the same product under several names and change the websites regularly. “It's a lot like whack-a-mole,” Middlemiss said. “You can get shut down in one place and open up the next day.”
Middlemiss, Spencer’s lawyer, who specializes in financial crimes compliance, said that cases like these are fraud.
“If I tell you that I'm selling you one thing, but I really sell you another thing, that's fraud,” Middlemiss told GMA. “I'm telling you that I'm selling you a product that's endorsed by a celebrity, when it hasn't been endorsed by a celebrity. That's a fraud.”
Both Middlemiss and the BBB agree that more needs to be done to protect consumers.
According to Baker, the BBB believes criminal charges brought by a law enforcement agency are necessary. “Some of these people need to go to prison. The FTC cannot do that. It's going to take the Justice Department bringing criminal charges,” he said.
The Florida Attorney General is currently investigating a fulfillment company which has been tied to 447 products sold through deceptive free trials, according to the BBB.
In addition, the BBB would like to see credit card companies do more.
“Since all these frauds can't exist without credit card processing, if the credit card companies would crack down on them or try to get them out of their system that would make a huge difference as well,” Baker said.
Meanwhile consumer advocates urge shoppers to take precautions to prevent falling for the scam.“Nothing is really free. There’s always a catch,” said Susan Grant, director of consumer protection and privacy at Consumer Federation of America, a nonprofit. “So it’s really important to look at the fine print and not believe you’re going to get something for nothing.”
The BBB also suggests tips on what consumers can look for to spot a deceptive online ad:
- a surprising celebrity endorsement
- extravagant claims about the product
- credit card needed for shipping and handling
- website with no contact information
- subscription information hidden in the fine print.
If a consumer believes they have seen a deceptive “free trial” offer ad, they are urged to report it and send a screenshot to the BBB at: www.bbb.org/adtruth. The BBB continues to build a database of crowdsourced information and work with the FTC and state attorneys general offices in an effort to identify those behind the ads and shut down companies.
In addition, the BBB instructs consumers to call their credit card company if they’ve been a victim. “Call the customer service number on the back of the card and tell them you want your money back. That's a process called a ‘chargeback,’” Baker said.
Consumers should also file complaints with the FTC or their state’s attorney general. Most importantly, Baker said, “People who've been victims should not take it lying down.”
