Scholastic, Inc. and two subsidiaries, Scholastic-at-Home and Grolier, Inc., have agreed this week to settle Federal Trade Commission allegations they violated laws when marketing negative option book clubs.
The FTC alleged that the companies’ direct mail and telemarketing campaigns offered consumers two related book clubs, but each operated on different terms, which were not fully disclosed. Consumers who didn’t understand the book club operation complained the companies sent them books they didn’t order, and that the companies wouldn’t cancel their club memberships.
To settle the allegations, Scholastic, Inc., Scholastic-at-Home and Grolier agreed to pay a $710,000 civil penalty and fully disclose their respective club membership terms. The U.S. District Court for the District of Columbia settled the FTC’s charges Tuesday.
In the FTC’s five-count complaint, it said the companies’ advertising and telemarketing efforts did not properly distinguish the two book clubs or notify consumers that they were two separate clubs. In addition, the companies’ didn’t tell consumers they would have to cancel merchandise from the second book club by returning a notice, and that buying a book from the second club didn’t count toward the first book club’s obligation, the FTC claimed. Consumers weren’t told that canceling one book club didn’t automatically cancel their enrollment in the second, the FTC said.
“There’s a message in this order for any business that runs a negative-option club,” said Lydia Parnes, Director of the FTC’s Bureau of Consumer Protection in a statement. “Your company is responsible for letting potential customers know the rules that come with their membership before they enroll.”
