SAN DIEGO–District Attorney Summer Stephan said Monday that California-based Guthy-Renker L.L.C, which markets acne treatment care and hair products, will pay up to $8.5 million to settle a consumer protection lawsuit that it misled customers as a result of its auto-renew practices.
The San Diego County District Attorney’s Office, as part of the California Automatic Renewal Task Force, alleged that Guthy-Renker L.L.C. did not properly disclose automatic charges resulting from Wen hair care products and ProActiv acne prevention purchases made on their websites.
As part of its settlement, the El Segundo-based marketing company will pay $1.2 million in penalties and up to $7.3 million in restitution to customers whose payments were automatically renewed without their consent. The terms are part of a final court judgment negotiated with the California Automatic Renewal Task Force, consisting of the District Attorneys of San Diego, Santa Clara, Los Angeles, and Santa Cruz counties, as well as the Santa Monica City Attorney’s Office.
“Companies should know that automatically renewing customer payments, without the consumer’s express prior consent, violates the law,” District Attorney Summer Stephan said. “These laws are in place so consumers know what they’re getting when they make purchases. Companies must adequately disclose when a transaction will renew automatically and they should not hide that information where a consumer is not likely to notice it.
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. Under California law, online businesses must clearly and conspicuously disclose all automatic renewal charges and terms and get affirmative consent to those recurring charges from the consumer.
The settlement applies only to Guthy-Renker, and not to other entities selling Wen or ProActiv products.
Guthy-Renker cooperated with the investigation. The company has promised to more clearly display its automatic payment renewal policy on its website and will send out restitution notices to affected customers.