Federal Trade Commission v. Nutraclick, LLC

Filing 7

ORDER FOR PERMANENT INJUNCTION AND MONETARY JUDGMENT by Judge Dolly M. Gee: Upon Stipulation 5 , Judgment in the amount of $350,000 is entered in favor of Plaintiff, the Federal Trade Commission, against the Defendant, Nutraclick, LLC, formerl y known as Hungry Fish Media, LLC, as equitable monetary relief. Such payment must be made within seven days of entry of this Order. See document for details re permanent injunction against defendant, compliance and recordkeeping, etc. (MD JS-6, Case Terminated). (gk)

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JS-6

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UNITED STATES DISTRICT COURT

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CENTRAL DISTRICT OF CALIFORNIA

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FEDERAL TRADE COMMISSION,

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Case No.: CV 16-6819-DMG (JPRx)

Plaintiff,

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v.

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NUTRACLICK, LLC, a limited liability
company, formerly known as
HUNGRY FISH MEDIA, LLC,

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ORDER FOR PERMANENT
INJUNCTION AND MONETARY
JUDGMENT [5]

Defendant.

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Plaintiff, the Federal Trade Commission (“Commission” or “FTC”), filed

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its Complaint for Permanent Injunction and Other Equitable Relief (“Complaint”)

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in this matter, pursuant to Section 13(b) of the Federal Trade Commission Act

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(“FTC Act”), 15 U.S.C. §§ 53(b), and Section 5 of the Restore Online Shoppers’

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Confidence Act (“ROSCA”), 15 U.S.C. § 8404. The Commission and Defendant

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have stipulated to the entry of this Stipulated Order for Permanent Injunction and

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Monetary Relief (“Order”) to resolve all matters in dispute in this action between

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them.
THEREFORE, IT IS ORDERED as follows:

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FINDINGS

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This Court has jurisdiction over this matter.

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2.

The Complaint charges that Defendant participated in deceptive acts or

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practices in violation of Section 5 of the FTC Act, 15 U.S.C. § 45, and Section 4

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of ROSCA, 15 U.S.C. § 8403, in the marketing of its negative option

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memberships for nutritional supplements and beauty products.

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3.

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Complaint, except as specifically stated in this Order. Only for purposes of this

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action, Defendant admits the facts necessary to establish jurisdiction.

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4.

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Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this action through

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the date of this Order, and agrees to bear its own costs and attorney fees.

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5.

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validity of this Order.

Defendant neither admits nor denies any of the allegations in the

Defendant waives any claim that it may have under the Equal Access to

Defendant waives all rights to appeal or otherwise challenge or contest the
DEFINITIONS

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For the purpose of this Order, the following definitions apply:

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A.

“Billing Information” means any data that enables any person to access a

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customer’s account, such as a credit card, checking, savings, share or similar

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account, utility bill, mortgage loan account, or debit card.

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B.

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submitted for payment, including against a consumer’s credit card, debit card,

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bank account, phone bill, or other account, or otherwise attempting to collect

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money or other consideration.

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C.

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difficult to miss (i.e., easily noticeable) and easily understandable by ordinary

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consumers, including in all of the following ways:

“Charge” or “charging” means causing billing information to be

“Clear(ly) and conspicuous(ly)” means that a required disclosure is

1.

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In any communication that is solely visual or solely audible, the

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disclosure must be made through the same means through which the

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communication is presented. In any communication made through

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both visual and audible means, such as a television advertisement,

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the disclosure must be presented simultaneously in both the visual

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and audible portions of the communication even if the representation

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requiring the disclosure is made in only one means.
2.

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A visual disclosure, by its size, contrast, location, the length of time

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it appears, and other characteristics, must stand out from any

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accompanying text or other visual elements so that it is easily

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noticed, read, and understood.
3.

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An audible disclosure, including by telephone or streaming video,

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must be delivered in a volume, speed, and cadence sufficient for

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ordinary consumers to easily hear and understand it.
4.

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In any communication using an interactive electronic medium, such

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as the Internet or software, the disclosure must be unavoidable. A

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disclosure is not Clear and Conspicuous if a consumer must take any

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action, such as clicking on a hyperlink or hovering over an icon, to

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see it.
5.

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The disclosure must use diction and syntax understandable to

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ordinary consumers and must appear in each language in which the

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representation that requires the disclosure appears.
6.

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The disclosure must comply with these requirements in each medium

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through which it is received, including all electronic devices and

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face-to face communications.
7.

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The disclosure must not be contradicted or mitigated by, or
inconsistent with, anything else in the communication.

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8.

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When the representation or sales practice targets a specific audience,

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such as children, the elderly, or the terminally ill, “ordinary

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consumers” includes reasonable members of that group.

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D.

“Close Proximity” means immediately adjacent to the triggering

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representation. In the case of advertisements disseminated verbally or through

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audible means, the disclosure shall be made as soon as practicable after the

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triggering representation.

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E.

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Media, LLC, and its successors and assigns.

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F.

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provide any good or service, a provision under which the consumer’s silence or

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failure to take affirmative action to reject a good or service or to cancel the

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agreement is interpreted by the seller or provider as acceptance or continuing

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acceptance of the offer.

“Defendant” means NutraClick, LLC, formerly known as Hungry Fish
“Negative Option Feature” means, in an offer or agreement to sell or

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ORDER

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I. PROHIBITION AGAINST MISREPRESENTATIONS
IT IS ORDERED that Defendant, Defendant’s officers, agents, employees,

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and attorneys, and all other persons in active concert or participation with any of

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them, who receive actual notice of this Order, whether acting directly or

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indirectly, in connection with promoting or offering for sale any good or service

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with a Negative Option Feature, are permanently restrained and enjoined from

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misrepresenting, expressly or by implication:

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A.

The cost or price of any good or service;

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B.

That a good or service is offered on a “free,” “trial,” “sample,”

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“bonus,” “gift,” “no obligation,” or “discounted” basis, or words of

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similar import, denoting or implying the absence of an obligation on

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the part of the recipient of the offer to affirmatively act in order to
avoid a charge, including where a charge will be assessed pursuant to

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the offer unless the consumer takes affirmative action to cancel;

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C.

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processing, service, or administrative fee with no further obligation;
D.

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E.

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F.

checking account debit);
G.
H.

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That a transaction has been authorized by a consumer; or

I.

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The length of any trial period before the consumer is Charged or

Any other fact material to consumers concerning any good or

billed;

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The timing or manner of any Charge or bill (including but not

limited to the date of the Charge and whether it will be a credit card Charge or

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The purpose for which a consumer’s payment information will be

used;

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service, such as qualifications to participate in a program, limited supply of a
good or service, the total costs, any material restrictions, limitations, or
conditions, or any other material aspect of a good or service’s performance,
efficacy, nature, or central characteristics.
II. REQUIRED DISCLOSURES RELATING TO

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NEGATIVE OPTION FEATURES

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IT IS FURTHER ORDERED that Defendant, Defendant’s officers, agents,

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employees, and attorneys, and all other persons in active concert or participation
with any of them, who receive actual notice of this Order, whether acting directly
or indirectly, in connection with promoting or offering for sale any good or
service with a Negative Option Feature, are permanently restrained and enjoined
from:
A.

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That consumers can obtain a good or service for a minimal shipping

or handling fee with no further obligation;

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That consumers can obtain a good or service for a minimal

Obtaining Billing Information from a consumer for any transaction

involving a good or service that includes a Negative Option Feature, without first
disclosing Clearly and Conspicuously and in Close Proximity to the consumers’
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provision of Billing Information:
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That the consumer will be Charged for the good or service, or

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that those Charges will increase after the trial period ends,

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and, if applicable, that the Charges will be on a recurring

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basis, unless the consumer timely takes steps to prevent or

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stop such Charges;
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The amount (or range of costs) the consumer will be Charged

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or billed and, if applicable, the frequency of such Charges

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unless the consumer timely takes steps to prevent or stop

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them;
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The deadline (by date or frequency) by which the consumer
must act in order to stop all recurring Charges;

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The name of the seller or provider of the good or service;

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A description of the good or service; and

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The mechanism to stop any recurring Charges.

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B.

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For any transaction involving a sale of a good or service to a

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consumer through a Negative Option Feature, within ten (10) days after the date

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of the sale, failing to send the consumer written confirmation of the transaction,

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either by email or first class mail, Clearly and Conspicuously identified as such in

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the email subject line or on the outside of the envelope. Such written

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confirmation shall include Clear and Conspicuous disclosure of all the

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information required by Section III.A.
III. OBTAINING EXPRESS INFORMED CONSENT

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IT IS FURTHER ORDERED that Defendant, Defendant’s officers, agents,

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employees, and attorneys, and all other persons in active concert or participation

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with any of them, who receive actual notice of this Order, whether acting directly

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or indirectly, in connection with promoting or offering for sale any good or

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service with a Negative Option Feature, are permanently restrained and enjoined
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from using Billing Information to obtain payment from a consumer, unless, prior

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to using such Billing Information to obtain payment, Defendant obtains the

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express informed consent of the consumer relating to the Negative Option

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Feature. Express informed consent shall consist of:
A.

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For all written offers with a Negative Option Feature (including over

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the Internet or other web-based applications or services), a consumer’s express

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informed consent shall be obtained, prior to Defendant charging the consumer,

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through a check box, signature, or other substantially similar method, that the

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consumer must affirmatively select or sign to accept the Negative Option Feature,

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and no other portion of the offer. Defendant shall disclose Clearly and

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Conspicuously and in Close Proximity to such check box, signature, or

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substantially similar method of affirmative consent, only the following (with no

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additional information):
1.

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That the consumer will be Charged for the good or service, or

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that those Charges will increase, after the trial period ends,

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and, if applicable, that the Charges will be on a recurring

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basis, unless the consumer timely takes steps to prevent or

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stop such Charges;
2.

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The amount (or range of costs) the consumer will be

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Charged or billed and, if applicable, the frequency of such

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Charges unless the consumer timely takes steps to prevent or

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stop them; and
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The deadline (by date or frequency) by which the consumer
must act in order to stop all recurring Charges.

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B.

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For all oral offers including a Negative Option Feature, Defendant

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shall, in addition to disclosing the information identified in Section III.A., and

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prior to obtaining any Billing Information from a consumer, obtain affirmative

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and unambiguous oral confirmation that the consumer:
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Consents to authorizing payment for any goods or services;

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Understands that the transaction includes a Negative Option
Feature; and

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3.

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Understands the specific affirmative steps the consumer must
take to prevent further Charges.

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Defendant shall maintain for two (2) years from the date of each transaction a

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voice recording of the entire transaction, including the prescribed statements set

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out in Section III.A. Each recording must be retrievable by date and by the

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consumer’s name, telephone number, or Billing Information, and must be

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provided upon request to the consumer, the consumer’s bank, or any law

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enforcement entity.

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IV. SIMPLE MECHANISM TO CANCEL

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NEGATIVE OPTION FEATURE

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IT IS FURTHER ORDERED Defendant, Defendant’s officers, agents, and

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employees, and all other persons in active concert or participation with any of

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them, who receive actual notice of this Order, whether acting directly or

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indirectly, in connection with promoting or offering for sale any good or service

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with a Negative Option Feature, are permanently restrained and enjoined from

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failing to provide a simple mechanism for a consumer to: (1) avoid being

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Charged, or Charged an increased amount, for the good or service; and (2)

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immediately stop any recurring Charges. Such mechanism must not be difficult,

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costly, confusing, or time consuming, and it must be at least as simple as the

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mechanism the consumer used to initiate the recurring Charge.

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V. PROHIBITIONS ON VIOLATING THE RESTORE ONLINE

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SHOPPERS’ CONFIDENCE ACT
IT IS FURTHER ORDERED Defendant, Defendant’s officers, agents, and

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employees, and all other persons in active concert or participation with any of

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them, who receive actual notice of this Order, whether acting directly or
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indirectly, in connection with promoting or offering for sale any good or service,

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are permanently restrained and enjoined from violating the Restore Online

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Shoppers’ Confidence Act, 15 U.S.C. §§ 8401-05, a copy of which is attached.
VI. MONETARY JUDGMENT

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IT IS FURTHER ORDERED that:

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A.

Judgment in the amount of three hundred and fifty thousand dollars

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($350,000) is entered in favor of the Commission against the Defendant as

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equitable monetary relief.
B.

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Defendant is ordered to pay to the Commission three hundred and

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fifty thousand dollars ($350,000), which, as Defendant stipulates, its undersigned

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counsel holds in escrow for no purpose other than payment to the Commission.

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Such payment must be made within 7 days of entry of this Order by electronic

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fund transfer in accordance with instructions previously provided by a

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representative of the Commission.
VII. ADDITIONAL MONETARY PROVISIONS

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IT IS FURTHER ORDERED that:

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A.

Defendant relinquishes dominion and all legal and equitable right,

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title, and interest in all assets transferred pursuant to this Order and may not seek

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the return of any assets.
B.

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The facts alleged in the Complaint will be taken as true, without

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further proof, in any subsequent civil litigation by or on behalf of the

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Commission, including in a proceeding to enforce its rights to any payment or

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monetary judgment pursuant to this Order, such as a nondischargeability

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complaint in any bankruptcy case.
C.

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The facts alleged in the Complaint establish all elements necessary to

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sustain an action by the Commission pursuant to Section 523(a)(2)(A) of the

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Bankruptcy Code, 11 U.S.C. § 523(a)(2)(A), and this Order will have collateral

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estoppel effect for such purposes.
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D.

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Defendant acknowledges that its Taxpayer Identification Number,

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which Defendant previously submitted to the Commission, may be used for

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collecting and reporting on any delinquent amount arising out of this Order, in

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accordance with 31 U.S.C. §7701.
E.

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All money paid to the Commission pursuant to this Order may be

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deposited into a fund administered by the Commission or its designee to be used

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for equitable relief, including consumer redress and any attendant expenses for

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the administration of any redress fund. If a representative of the Commission

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decides that direct redress to consumers is wholly or partially impracticable or

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money remains after redress is completed, the Commission may apply any

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remaining money for such other equitable relief (including consumer information

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remedies) as it determines to be reasonably related to Defendant’s practices

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alleged in the Complaint. Any money not used for such equitable relief is to be

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deposited to the U.S. Treasury as disgorgement. Defendant has no right to

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challenge any actions the Commission or its representatives may take pursuant to

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this Subsection.
VIII. CUSTOMER INFORMATION

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IT IS FURTHER ORDERED that Defendant, Defendant’s officers, agents,

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and employees, and all other persons in active concert or participation with any of

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them, who receive actual notice of this Order, whether acting directly or

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indirectly, in connection with advertising, marketing, promotion, offering for sale,

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or sale of any good or service with a Negative Option Feature must provide

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sufficient customer information to enable the Commission to efficiently

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administer consumer redress. If a representative of the Commission requests in

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writing any information related to redress, Defendant must provide it, in the form

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prescribed by the Commission, within 14 days.

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IX. ORDER ACKNOWLEDGMENTS

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IT IS FURTHER ORDERED that Defendant obtains acknowledgments of

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receipt of this Order:
A.

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Defendant, within seven (7) days of entry of this Order, must submit

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to the Commission an acknowledgment of receipt of this Order sworn under

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penalty of perjury.
B.

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For five (5) years after entry of this Order, Defendant must deliver a

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copy of this Order to: (1) all principals, officers, directors, and LLC managers

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and members; (2) all employees, agents, and representatives who participate in

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conduct related to the subject matter of the Order; and (3) any business entity

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resulting from any change in structure as set forth in the Section titled

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Compliance Reporting. Delivery must occur within seven (7) days of entry of

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this Order for current personnel. For all others, delivery must occur before they

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assume their responsibilities.
C.

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From each individual or entity to which Defendant delivered a copy

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of this Order, Defendant must obtain, within 30 days, a signed and dated

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acknowledgment of receipt of this Order.
X. COMPLIANCE REPORTING

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IT IS FURTHER ORDERED that Defendant make timely submissions to

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the Commission:
A.

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One year after entry of this Order, Defendant must submit a

compliance report, sworn under penalty of perjury:

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Defendant must: (a) identify the primary physical, postal, and

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email address and telephone number, as designated points of

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contact, which representatives of the Commission may use to

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communicate with Defendant; (b) identify all Defendant’s

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businesses by all of their names, telephone numbers, and

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physical, postal, email, and Internet addresses; (c) describe the
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activities of each business, including the goods and services

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offered, and the means of advertising, marketing, and sales;

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(d) describe in detail whether and how that Defendant is in

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compliance with each Section of this Order; and (e) provide a

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copy of each Order Acknowledgment obtained pursuant to this

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Order, unless previously submitted to the Commission.

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B.

For 15 years after entry of this Order, Defendant must submit a

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compliance notice, sworn under penalty of perjury, within 14 days of any change

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in the following:

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1.

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point of contact; or (b) the structure of Defendant or any entity that

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Defendant has any ownership interest in or controls directly or

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indirectly that may affect compliance obligations arising under this

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Order, including: creation, merger, sale, or dissolution of the entity

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or any subsidiary, parent, or affiliate that engages in any acts or

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practices subject to this Order.

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C.

Defendant must report any change in: (a) any designated

Defendant must submit to the Commission notice of the filing of any

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bankruptcy petition, insolvency proceeding, or similar proceeding by or against

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such Defendant within 14 days of its filing.

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D.

Any submission to the Commission required by this Order to be

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sworn under penalty of perjury must be true and accurate and comply with 28

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U.S.C. § 1746, such as by concluding: “I declare under penalty of perjury under

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the laws of the United States of America that the foregoing is true and correct.

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Executed on: _____” and supplying the date, signatory’s full name, title (if

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applicable), and signature.

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E.

Unless otherwise directed by a Commission representative in

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writing, all submissions to the Commission pursuant to this Order must be

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emailed to [e-mail] or sent by overnight courier (not the U.S. Postal
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Service) to: Associate Director for Enforcement, Bureau of Consumer Protection,

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Federal Trade Commission, 600 Pennsylvania Avenue NW, Washington, DC

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20580. The subject line must begin: FTC v. NutraClick, LLC.
XI. RECORDKEEPING

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IT IS FURTHER ORDERED that Defendant must create certain records

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for 15 years after entry of the Order, and retain each such record for 5 years.

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Specifically, Defendant must create and retain the following records:
A.

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accounting records showing the revenues from all goods or services

B.

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personnel records showing, for each person providing services,

sold;

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whether as an employee or otherwise, that person’s: name; addresses; telephone

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numbers; job title or position; dates of service; and (if applicable) the reason for

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termination;
C.

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received directly or indirectly, such as through a third party, and any response;
D.

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records of all consumer complaints and refund requests, whether
all records necessary to demonstrate full compliance with each

provision of this Order, including all submissions to the Commission; and
E.

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a copy of each unique advertisement or other marketing material.
XII. COMPLIANCE MONITORING

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IT IS FURTHER ORDERED that, for the purpose of monitoring

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Defendant’s compliance with this Order, including failure to transfer any assets as

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required by this Order:
A.

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Within 14 days of receipt of a written request from a representative

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of the Commission Defendant must: submit additional compliance reports or

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other requested information, which must be sworn under penalty of perjury;

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appear for depositions; and produce documents for inspection and copying. The

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Commission is also authorized to obtain discovery, without further leave of court,

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using any of the procedures prescribed by Federal Rules of Civil Procedure 29, 30

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(including telephonic depositions), 31, 33, 34, 36, 45, and 69.
B.

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For matters concerning this Order, the Commission is authorized to

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communicate directly with each Defendant. Defendant must permit

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representatives of the Commission to interview any employee or other person

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affiliated with any Defendant who has agreed to such an interview. The person

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interviewed may have counsel present.
C.

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The Commission may use all other lawful means, including posing,

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through its representatives as consumers, suppliers, or other individuals or

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entities, to Defendant or any individual or entity affiliated with Defendant,

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without the necessity of identification or prior notice. Nothing in this Order

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limits the Commission’s lawful use of compulsory process, pursuant to Sections 9

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and 20 of the FTC Act, 15 U.S.C. §§ 49, 57b-1.
XIII. RETENTION OF JURISDICTION

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IT IS FURTHER ORDERED that this Court retains jurisdiction of this

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matter for purposes of construction, modification, and enforcement of this Order.

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IT IS SO ORDERED.

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DATED: September 20, 2016

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_______________________________
DOLLY M. GEE
UNITED STATES DISTRICT JUDGE

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