The Santa Monica City Attorney’s Office has secured a $3.6 million settlement with a local company accused deceptive sales practices.
City Hall sent out a press release this week announcing the agreement with Beachbody.
“Beachbody, one of the world’s largest sellers of exercise videos, supplements, and weight-loss programs, has agreed to change its website and sales practices to better protect consumers,” said the release. “The Santa Monica-based company, which claims over 23 million customers, also will pay $3.6 million in penalties and restitution as part of a final court judgment. The judgment was negotiated with the Santa Monica City Attorney’s Office after lengthy discussions, which followed the prosecutors’ investigation of consumer complaints.”
The total amount due is $3,579,000. According to the settlement, $1,289,500 will be paid to the Los Angeles County District Attorney’s Office and another $1,289,500 will go the Santa Monica District Attorney’s Office for penalties and investigative costs.
According to the judgement, it would have been impractical if not impossible to identify and provide reimbursement to every consumer who may have believed the company’s marketing efforts so the remainder of the money will be paid to three charities whose work is related to the industry ($500,000 to Action for Healthy Kids, $250,000 to United States Healthful Food Council and $250,000 to ChangeLab Solutions).
The City Attorney’s complaint alleged the company unethically enrolled customers in auto renewal systems and made unsubstantiated health claims about the company’s products.
As part of the judgement, the company will be required to clearly and conspicuously disclose the renewal terms, get consumers’ consent, through a separate check-box (or similar mechanism) that does not include other terms and conditions, send a clear summary of the renewal terms after consumers pay, allow consumers to cancel easily, both online and by phone and send reminders of upcoming renewals for all subscriptions 6 months or longer.
“The Santa Monica City Attorney’s Office is committed to protecting consumers from unfair and unlawful business practices,” said City Attorney Lane Dilg in the statement. “This is an important victory to ensure that consumers will not be subject to recurring charges imposed without their clear approval and consent.”
The complaint alleged Beachbody made unsubstantiated claims that its products would detoxify, fight aging, reduce inflammation, balancing hormones and prevent mental decline. The company is now required to secure “competent and reliable” scientific studies backing the claim.
“For the purposes of this Judgment, the term ‘Competent and reliable scientific evidence’ means tests, analyses, research, studies, or other evidence based on the expertise of professionals in the relevant area, that have been conducted and evaluated in an objective manner by qualified persons using procedures generally accepted in the profession to yield accurate and reliable results,” said the court documents.
Chief Deputy City Attorney Adam Radinsky runs the city’s Consumer Protection Division and said the judgment will provide consumers with greater protections.
“We appreciate the company’s cooperation and its willingness to change its practices,” said Radinsky. “Beachbody is one of the first major sellers to be up-front with its customers about consent for recurring charges, including the new, separate checkbox. They will now have one of the best online disclosure and consent pages anywhere.”
The ruling is one of the first in the state to specify consumers must have a check-box to opt-in to an automatic renewal process.
“Automatic renewal is one of the critical areas in consumer protection today,” said Radinsky. “Consumers always have the right to know where their money is going.”
The company said their case has improved customer service.
“As a leader in health and fitness, Beachbody is more vulnerable to scrutiny – so working with the City of Santa Monica was another step in our drive to be worthy of that scrutiny and to constantly improve. The process actually helped us raise the bar even further to ensure that everyone we interact with comes away with the best experience,” said Jon Congdon, Co-Founder, President Beachbody.
“Over the last four years we’ve invested significant resources to enhance our customer interactions across all Beachbody commerce platforms. Customers can and should expect a transparent purchase process with us, one that clearly lets them know exactly what they are buying and when. At the same time, operating directly with the consumer, we have always provided an industry-leading money back guarantee on all our products and services so our customers feel secure purchasing from Beachbody.”