For Immediate Release:

Friday, December 27, 2019

Subscription box company misled subscribers with “free trial” offers.

Christmas came early for former subscribers of UrthBox snack boxes. Earlier this month, the Federal Trade Commission mailed 2,221 checks totaling more than $84,000 in refunds to customers who were misled by an UrthBox “free trial” offer. The customers thought they were signing up for a free snack box after paying a nominal shipping and handling fee but, instead, the San Francisco-based UrthBox signed them up for a six-month subscription if they didn’t opt out in time.

UrthBox offered a "Tasty Snack Box Free" via banner ads, press releases, tweets and on their website. The FTC says the terms of the actual offer appeared in a smaller font on the desktop and mobile versions of the UrthBox website, making it difficult for consumers to see that, unless canceled, they would be enrolled in a six-month UrthBox membership, billed in a lump sum at the end of the trial. A $19.99-a-month snack box would be billed at $119.99.

The FTC believes Urthbox's misleading business practices took place over a 13-month period, starting in October 2016 and ending November 2017. According to the FTC, both on their desktop and mobile websites, UrthBox did not clearly and conspicuously post terms and conditions of the offer which left more than 2,200 customers subscribing and paying for snack boxes they didn't want.

In addition to these allegations, the FTC says that, between January and November 2017, UrthBox misrepresented itself through (paid) positive reviews on third-party websites including the Better Business Bureau, violating the FTC Act. The reviews appeared to come from customers who were independently posting reviews of the subscription boxes, but they were compensated for their reviews with free snack boxes and cash bonuses. This was not disclosed to readers of the reviews. They also charged Behnam Behrouzi, as an officer of UrthBox, as violating the FTC Act.

According to the FTC complaint, before offering the incentive program, the company had nine reviews online, all negative, in 2016. In 2017, the number of reviews grew to 695 with 612 positive, 15 neutral and 68 negative, so there was a swing from 100% negative to 88% positive in just one year.

To settle the claims against them through an FTC administrative order, approved by the FTC in a 5 to 0 vote, UrthBox had to stop compensating reviewers and pay $100,000 to the FTC which was used to issue refunds. Analytics, Inc. issued the refunds on behalf of the FTC. The average check is $37.94, and recipients must cash them within 60 days.

Insider Take:

This is another instance of a government agency taking firm action against a subscription company that has implemented deceptive business practices to defraud customers. This claim is relatively small compared to others we've seen this year, but it shows that this type of business behavior will not be tolerated. Subscription companies need to make clear offers and post them clearly and conspicuously where prospective subscribers or members will see them and can choose to opt in or opt out. Companies also need to be transparent in terms of promotion. They need to disclose paid endorsements and influencer relationships. If they fail to heed that advice, they should know that somebody is watching and they will get caught at some point.

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