United States: Snack Box Company Settles Commission's FTC Act And ROSCA Claims

FTC says UrthBox engaged in false endorsements, shady subscription offers

Special Delivery

California-based UrthBox is part of the boxing trend that’s swept the country of late. To be clear, we’re not talking pugilism. The trend involves gourmet or to-order products delivered by box to the consumer’s doorstep; the products range from food and clothing to beauty supplies. Many of the boxes ship with a “surprise” assortment of products that the consumer only discovers when the box arrives.

What does the boxing trend signify? Is it merely a consequence of highly efficient delivery systems that can ship almost anything anywhere on the cheap? Or is it a sign that American consumers are completely bored and need to send themselves surprises to fend off the ennui? Both?

Who knows?

In any case, UrthBox has staked its claim in the healthy-snack corner of the boxing landscape, selling subscription boxes with a variety of vegan, gluten-free or diet crackers, nuts, seeds, crisps, juices and so forth. Shoppers choose a box size, pay a monthly rate and wait for their boxes to drop.

ENOUGH WITH THE CAPS

Unfortunately for those consumers, UrthBox was running a negative option/auto payment scam – or so says the Federal Trade Commission (FTC) in its recent complaint against the company and its chief executive.

The FTC claims that UrthBox drew in consumers with a “free box” claim, including web advertising tags like this:

“Enjoy a FREE Trial of Tasty Snacks From UrthBox! ENJOY A FREE FIRST BOX OF TASTY SNACKS! Just Pay $2.99 for Shipping & Handling. . . . GET YOUR FREE BOXDISCOVER TASTY SNACKS EVERY MONTH. . . . CLICK HERE TO GET YOUR FIRST BOX FREE!”

But once consumers provided payment details for the shipping costs of the trial box, the complaint maintains, UrthBox automatically enrolled them in a six-month subscription, which could range in cost from $77 to $269, depending on the size of the subscription. Consumers were required to cancel prior to the first of the month following receipt of the box to avoid the charges.

The FTC claims that UrthBox initially failed to disclose the length of the subscription or the amount of the charges, and when it eventually included information on its site, buried the terms on pages that the consumer was not required to visit prior to purchase.

Chutzpah

But the meatiest allegation – sorry vegans – involved a compensated endorsement scheme that made use of the Better Business Bureau’s (BBB’s) website. The BBB requires that reviewers certify that they “have not been offered any incentive or payments originating from the business” to write reviews; otherwise, the BBB will not post the customer review.

In the complaint, the FTC claims that UrthBox’s customer service department engaged in a brazen conversion scheme: “In numerous instances … representatives offered to send [customers] a free snack box if they posted positive reviews on the BBB’s website.” UrthBox’s representatives “offered participation in the incentive program to hundreds of its customers, including some who called to cancel their snack box subscriptions.”

As a result, the FTC claims, “Customer reviews on the BBB website grew exponentially from 9 reviews in 2016, all negative, to 695 reviews in 2017. . . . Consequently, the ratio of positive to negative reviews jumped from 100% negative to 88% positive after implementation of the incentive program.” Additionally, one can assume that, in order to post, the customers misleadingly reported that their reviews were not incentivized in contravention of the BBB’s requirements. UrthBox was accused of similar efforts on Trustpilot.com and various social media platforms.

The Takeaway

The FTC charged the company with three violations of the FTC Act – failure to disclose negative option terms, false claim of independent reviews and failure to disclose material connections – and an illegal negative option marketing charge under the Restore Online Shoppers’ Confidence Act for good measure.

As is so often the case, the complaint was settled the day it was filed. While UrthBox did not admit or deny any of the allegations, it promised to scour websites to remove compensated reviews, fully disclose future endorsements, and refrain from the allegedly unlawful auto payment and negative option practices in the future.

A $100,000 monetary judgment, “which may be used to provide refunds to affected consumers,” served as a final penalty.

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