The FTC is no stranger to cracking down on businesses offering so-called “free” products, only to charge the consumer for them later on. It wasn’t long ago that we wrote about that exact issue. But a recent FTC complaint shows that the FTC is not only cleaning up businesses selling directly to consumers, but also businesses selling to other businesses.
On October 30th, the FTC filed suit in Illinois against a number of cleaning product suppliers for violating the FTC Act, the FTC’s Telemarketing Sales Rule, and the Unordered Merchandise Statute. The complaint alleged that defendants, who sell office and cleaning supplies, called small businesses, hotels, municipalities, and charitable organizations, purporting to offer a free sample of their products. However, the samples were not free. Regardless of whether the consumer wanted the sample or not, the defendants would send one, and following not too far behind would be an invoice for that free sample.
According to the complaint, in order to increase the chances of getting paid, the defendants would list an employee’s name on the invoice, and, unfortunately, many businesses erroneously paid the invoices, assuming the order was legitimate. The defendants proceeded to send more supplies, and even larger invoices. When a consumer contested the shipments, they were told the repeat shipments were agreed to in the initial order. Failure to pay would result in additional invoices with “overdue” on the coversheet, and collection calls where defendants insisted the order was placed—even claiming they had a recording.
Once businesses caught on to the fact they were paying for free samples, many would contact defendants to seek a refund. In many cases, those refunds would be rejected, claiming that chemical merchandise could not be returned.
The FTC alleges that defendants have billed some consumers in excess of one thousand dollars for supplies they did not order. The FTC is seeking an injunction, an order freezing assets and granting immediate access to business premises, and appointment of a receiver.
As readers know, the FTC takes a dim view of allegedly deceptive “free” claims in the consumer realm. This case makes clear that the view applies to claims directed at small businesses too. Stay clean on your “free” claims.