Guthy-Renker LLC, one of the world’s largest direct marketing companies, has agreed to change its websites and sales practices to protect California consumers. The El Segundo-headquartered company also will pay $1.2 million in penalties and up to $7.3 million in restitution to customers who got automatically-renewed charges without their consent.
The terms are part of a final court judgment negotiated with a task force of local prosecutors that included the Santa Monica City Attorney’s Office and the district attorneys of four California counties: Santa Clara, Los Angeles, San Diego, and Santa Cruz. The task force learned that Guthy-Renker was allegedly charging its customers for repeated shipments of Proactiv and Wen products, without their prior consent as required by law.
“Automatic renewal is one of the critical areas in consumer protection today,” said Santa Monica Chief Deputy City Attorney Adam Radinsky, head of the Consumer Protection Division. “Consumers always have the right to know where their money is going.”
The judgment requires Guthy-Renker to have full transparency with consumers about automatically renewing payments. The company now must:
Conspicuously disclose automatic-renewal terms;
Get consumers’ explicit consent for renewals, through a separate check-box;
Send consumers a clear summary of the auto-renewal terms after they pay; and
Allow consumers to easily cancel the subscriptions.
Guthy-Renker paid nearly $8 million to settle another recent lawsuit over its automatic renewals, for buyers of Proactiv products prior to July 2014. In that class action case, Habelito v. Guthy-Renker LLC, the company paid out $2.5 million in restitution and over $5 million in attorneys’ fees to the plaintiffs. In this case, Guthy-Renker will pay restitution to customers who were re-charged at least once without their consent: Wen customers charged after May 2012, and Proactiv customers charged between July 2014 and August 2016.
“The separate check-box is the key,” said Radinsky. “Otherwise, it’s too confusing. Companies have too many ways to hide the auto-renewal terms.”
The judgment was filed in Santa Clara County Superior Court on February 1, 2019. Online “subscriptions” and other automatically recurring charges have proliferated in the U.S. in recent years. Some renewals come after “free trials,” where consumers need to cancel in time to avoid the charges. Federal and state law requires businesses to make these automatic renewals clear to consumers, and to get their “express, affirmative consent” – before collecting any money. However, many businesses still don’t follow this law.
Guthy-Renker is the latest in a series of judgments against leading online companies brought by California prosecutors, resulting in penalties, restitution, and injunctions:
In October 2018, the same task force, led by Santa Monica, obtained a $1.5 million settlement against Spark Networks, the parent company of dating websites JDate and Christian Mingle, for similar automatic-renewal violations in California.
In January 2018, the Santa Monica City Attorney helped a similar task force of California prosecutors obtain a $2.2 million judgment against eHarmony, one of the nation’s most popular dating websites, for violating the automatic-renewal laws.
In August 2017, the Santa Monica City Attorney obtained a $3.6 million settlement with Beachbody, one of the largest sellers of exercise videos, supplements, and weight-loss programs. That settlement included the first injunction in California to require the separate check-box to ensure that consumers knowingly consent before they are enrolled in auto-renewals.
“The Santa Monica City Attorney’s Office is committed to protecting consumers from unfair and unlawful business practices,” said City Attorney Lane Dilg. “This joint effort is an important victory to ensure that consumers will not be subject to recurring charges without their clear approval.”
Santa Monica Deputy City Attorney Gary Rhoades also worked on the case. The settlement applies only to Guthy-Renker, and not to other entities selling Proactiv or Wen products. The case addressed the company’s sales practices but not the products themselves. The Santa Monica City Attorney’s Consumer Protection Division promotes fairness through awareness and enforcement of the law. To report a consumer issue, go to smconsumer.org or call 310-458-8336.
Submitted by Miranda Iglesias, Public Information Coordinator