$2.8 Million in Refunds to Consumers Scammed by “Free Trial” Offers
The Federal Trade Commission (“FTC”) is issuing over $2.8 million in refunds to individuals who fell victim to deceptive “free trial” offers for personal care products and dietary supplements. The refunds come as part of the FTC’s ongoing efforts to hold companies accountable for misleading marketing practices that trick consumers into signing up for unwanted subscriptions.
The refund process stems from an investigation into Apex Capital Group, its principals Phillip Peikos and David Barnett, and their related entities. These companies engaged in a multi-year scam that began in 2014, marketing seemingly risk-free “free trial” offers for a variety of products. Consumers were promised that they would only need to pay shipping fees for these trial products, but hidden in fine print were costly recurring charges for the full price of the products. Worse still, many consumers were unknowingly enrolled in negative option continuity plans, which meant they were automatically billed for monthly shipments unless they actively canceled.
The deceptive scheme was further facilitated by the use of shell companies and straw owners, both in the United States and internationally, to process payments and evade detection. This practice, known as “credit card laundering,” allowed the defendants to circumvent fraud detection systems and continue their illicit activities for several years.
In November 2018, the court stepped in and ordered a halt to Apex Capital Group’s operations at the request of the FTC, effectively shutting down the scheme. However, the impact on consumers who were charged for these deceptive “free trial” offers remained, prompting the agency to take action by issuing refunds to those affected.
A total of 153,940 consumers are set to receive checks in amounts that add up to more than $2.8 million. The refunds represent an attempt to provide restitution to individuals who were misled into paying for products they did not want or authorize.
The FTC emphasized this refund distribution is part of a broader effort by the FTC to combat deceptive marketing practices that exploit consumers. It sends a clear message that fraudulent companies will face consequences for attempting to deceive consumers through misleading offers. As part of the settlement, Apex Capital Group and its principals were required to surrender millions of dollars in assets, which are being used to fund the refunds.
From a business perspective, the FTC’s ongoing efforts to monitor and investigate deceptive marketing tactics underscore the need for companies to ensure transparency in their promotional practices. This case emphasizes the critical importance of clearly communicating the terms and conditions of online offers, particularly “free trial” promotions, to prevent any hidden fees or unwanted subscription enrollments that could lead to consumer dissatisfaction and regulatory scrutiny.
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This article is for information purposes only. It is not intended to be and should not be relied on as legal advice for any particular matter.