FTC targets 'free' trial offers from Canadian entrepreneur

The businessman's companies promised free trials but charged customers, the agency says

The U.S. Federal Trade Commission has filed a lawsuit against a Canadian entrepreneur and a group of Web-based businesses that promised customers free offers, but allegedly raked in more than US$450 million by then charging for products and services they did not purchase.

The 10 Web businesses, controlled by 24-year-old entrepreneur Jesse Willms, touted free trials or risk-free offers on several products, including acai berry weight-loss pills, teeth whiteners, health supplements, work-at-home opportunities, access to government grants, free credit reports and penny auctions, the FTC said in a press release.

Customers in the U.S., U.K., Canada, Australia and New Zealand were lured in by the free trial offers, the FTC said.

Willms and his companies obtained consumers' credit or debit card account numbers through the promise of free or risk-free trial offers, the FTC said. Customers had "no reason to believe" they would be charged for the trial product or extra bonus products, but they were often charged for the supposedly free trial, plus a monthly recurring fee, typically $79.95, the FTC said.

"The defendants used the lure of a 'free' offer to open an illegal pipeline to consumers' credit card and bank accounts," David Vladeck, director of the FTC's Bureau of Consumer Protection, said in a statement. "'Free' must really mean 'free' no matter where the offer is made."

Willms and other defendants in the case allegedly contracted with affiliate marketers that used banner ads, pop-ups, sponsored search terms and unsolicited e-mail to lead consumers to the defendants' websites. The defendants "buried" important terms and conditions in fine print, the FTC alleged.

The defendants' penny auction offers promised free bonus bids, but customers were hit with unexpected charges, including $150 for introductory bonus bids and $11.95 a month for ongoing bonus bids, the FTC alleged. Willms and his companies also made false weight loss and cancer cure claims for their products, the agency alleged in its complaint, filed Monday in U.S. District Court for the Western District of Washington.

Willms, who writes about his charitable contributions and online ethics on various blogs, did not immediately respond to a message seeking comment on the FTC charges. In one September blog post, Willms talks about companies that make false claims online.

"I know it's tempting to make false or borderline claims," the blog said. "We get excited about products and services and want to yell from the rooftops about how great they are. But, you need to keep it realistic."

Repeat business is the "bread and butter" of the Internet marketing industry, the blog added. "So, be an Internet good guy and don't make any false claims," the blog said. "Just tell it like is -- and you'll profit from the experience."

In another blog post, Willms wrote that he never uses the word "free" to promote products because customers will assume the free products are worthless.

The FTC alleged that the defendants provided banks with false or misleading information, in order to acquire and maintain credit and debit card processing services from the banks in the face of mounting charge-back rates and consumer complaints. Willms and his companies also allegedly violated the Electronic Fund Transfer Act and other U.S. regulations by debiting consumers' bank accounts without their signed, written consent and without providing consumers with a copy of the written authorization.

The FTC worked with Canadian law enforcement agencies to bring the complaint, the agency said.

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is grant_gross@idg.com.

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.

Tags governmentregulationinternetlegale-commerceU.S. Federal Trade CommissionCivil lawsuitsDavid VladeckU.S. District Court for the Western District of WashingtonJesse Willms

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Grant Gross

IDG News Service
Show Comments

Brand Post

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Luke Hill

MSI GT75 TITAN

I need power and lots of it. As a Front End Web developer anything less just won’t cut it which is why the MSI GT75 is an outstanding laptop for me. It’s a sleek and futuristic looking, high quality, beast that has a touch of sci-fi flare about it.

Emily Tyson

MSI GE63 Raider

If you’re looking to invest in your next work horse laptop for work or home use, you can’t go wrong with the MSI GE63.

Laura Johnston

MSI GS65 Stealth Thin

If you can afford the price tag, it is well worth the money. It out performs any other laptop I have tried for gaming, and the transportable design and incredible display also make it ideal for work.

Andrew Teoh

Brother MFC-L9570CDW Multifunction Printer

Touch screen visibility and operation was great and easy to navigate. Each menu and sub-menu was in an understandable order and category

Louise Coady

Brother MFC-L9570CDW Multifunction Printer

The printer was convenient, produced clear and vibrant images and was very easy to use

Edwina Hargreaves

WD My Cloud Home

I would recommend this device for families and small businesses who want one safe place to store all their important digital content and a way to easily share it with friends, family, business partners, or customers.

Featured Content

Product Launch Showcase

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?