Consumer Alert

Alaska Joins Settlement with Classmates, Inc. and FTD for Misleading Advertising and Billing Practices

The Alaska Office of the Attorney General joined with 21 other states in a settlement with Classmates, Inc. and Florists Transworld Delivery (“FTD”). Classmates, a social media platform aimed at connecting high school classmates, and FTD, one of the world’s largest floral companies, have agreed to pay the states a total of $11 million to settle allegations that the two companies engaged in misleading advertising and billing practices.

The companies allowed third-party marketers to offer travel rewards programs, discount buying clubs, and other membership programs to FTD or Classmates’ online customers. The states alleged that the customers were not given adequate notice that they were conducting online transactions with the marketers, rather than with Classmates or FTD. They also allege the companies failed to inform consumers that if they signed up for “free trials” of the programs, they could be charged on a monthly basis at the end of the trial period. At one point, Classmates and FTD shared customer credit card account information with the third-party marketers but without customers’ knowledge. Because of these practices, consumers paid for services they did not know they had signed up for.

Today’s agreement includes terms to ensure that consumers knowingly agree to purchase any membership program offered by a marketing partner of Classmates or FTD. It prohibits certain practices, including:

• Misrepresenting the reason for requesting a consumer’s account information.
• Failing to tell consumers they are being transferred to a marketing partner or transferring them without the consumer’s consent.
• Stating an offer is “free” or “risk-free” if the offered program will convert to a paid subscription.

The states also investigated Classmates own social network subscriptions and its renewal and cancellation practices. Under the settlement, Classmates agreed to make significant changes to its business practices and will pay up to $3 million for refunds to consumers who were enrolled in Classmates’ subscription service without authorization or who experienced difficulty when trying to cancel their Classmates subscriptions. Consumers seeking a refund can file a complaint with the Alaska Attorney General’s office or by calling 907-269-5200 (or, toll-free, 888-276-2529) to request a complaint form.

Consumer Protection Unit
May 2015