A direct marketing company in Hawthorne whose television-infomercial products include the popular Snuggie blanket will pay $8 million in consumer refunds and state penalties to settle charges that the company engaged in deceptive advertising and ordering practices.
The settlement with Allstar Marketing Group LLC was announced on Thursday by New York Attorney General Eric T. Schneiderman, who said it is part of a wider investigation into the direct marketing industry by his office”™s consumer frauds bureau. The attorney general”™s office worked to reach the agreement with Allstar in concert with the U.S. Federal Trade Commission, which has entered into a separate consent order with the 16-year-old Westchester company.
The consumer frauds bureau began its probe into the direct marketing industry after receiving numerous complaints from consumers, including hundreds forwarded to the attorney general”™s office by the Better Business Bureau.
The attorney general”™s investigators alleged that Allstar Marketing ran misleading infomercials on television that featured attractively priced offers for products to lure consumers to place orders either online or over the phone and then used deceptive and confusing ordering processes that left consumers with excessive and unauthorized fees and charges.
The attorney general”™s office cited the direct marketer”™s “buy one, get one” offers as an example of its deceptive practices. Consumers who ordered two of an advertised product were not adequately informed they would be charged two separate processing and handling fees, which in some cases nearly doubled the cost of the offer, according to investigators.
Investigators claimed Allstar subjected online buyers to a confusing ordering process that typically included numerous up-sell offers for products that in many cases were inadvertently added by consumers to their orders, resulting in significantly higher charges and products they did not intend to order.
One consumer who responded to Allstar”™s “buy one, get one” offer for the Perfect Brownie Pan, advertised at $19.95, was charged a total of $105 and received six of the pans, having unwittingly tripled his telephone order, according to investigators.
The consumer frauds bureau also found that Allstar also typically offered priority processing to buyers for a fee of about $6 or $7 but used the same shipping methods for consumers who paid no extra fee.
The agreement requires Allstar to stop using allegedly deceptive and misleading advertising and ordering processes for its various products, which also include the Perfect Brownie Pan, Eggies and the Magic Mesh screen.
Allstar agreed to pay to pay $7.5 million for restitution to consumers, which will be distributed by the Federal Trade Commission. The direct marketer also must also pay $500,000 in penalties, costs and fees to the state attorney general”™s office.
Schneiderman when announcing the settlement said it “brings much needed reforms to a major firm in the direct marketing industry. Those who use small print and hidden fees to inflate charges to unwitting consumers must be held accountable.”
