November 2012 Archives

The Federal Trade Commission has warned 22 hotel operators that their online reservation sites may violate the law by providing a deceptively low estimate of what consumers can expect to pay for their hotel rooms.

The warning letters cited consumer complaints that surfaced at a recent conference the FTC held on "drip pricing," a pricing technique in which firms advertise only part of a product's price and reveal other charges as the customer goes through the buying process.

According to the FTC letters, "One common complaint consumers raised involved mandatory fees hotels charge for amenities such as newspapers, use of onsite exercise or pool facilities, or internet access, sometimes referred to as 'resort fees.'

These mandatory fees can be as high as $30 per night, a sum that could certainly affect consumer purchasing decisions."

The warning letters also state that consumers often did not know they would be required to pay resort fees in addition to the quoted hotel rate.

"Consumers are entitled to know in advance the total cost of their hotel stays," said Federal Trade Commission Chairman Jon Leibowitz.

"So-called 'drip pricing' charges, sometimes portrayed as 'convenience' or 'service' fees, are anything but convenient, and businesses that hide them are doing a huge disservice to American consumers."

The letters strongly encourage the companies to review their websites and ensure that their ads do not misrepresent the total price consumers can expect to pay.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them.

To file a complaint in English or Spanish, visit the FTC's online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357).

The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad.

The FTC's website provides free information on a variety of consumer topics.

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Plaintiffs filed a class action lawsuit against Papa John's, arguing that a text message campaign conducted by the company's franchises violated the Telephone Consumer Protection Act.

According to the complaint, the franchisees sent text messages to customers without their consent, in violation of the TCPA. Under the law, a plaintiff can recover between $500 to $1,500 for each message sent without consent, depending on whether the violation is willful.

As we've noted in previous posts, the number of lawsuits involving text message campaigns has increased dramatically in recent years.

Part of the increase is because many companies aren't paying attention to legal requirements.

But the increase is also largely because class action attorneys have come to see these cases as an easy way to make money.

For example, a recent case involving text messages sent by Jiffy Lube settled for $47 million.

These attorneys will seize on any violation -- no matter how minor -- as an opportunity to force a settlement.

Most of the recent lawsuits could have been avoided if the text message campaigns if the campaigns had been carefully reviewed prior to launch.

Sometimes, there's a tendency to try to skip that step in order to cut costs and launch quickly, but the recent string of multi-million dollar settlements demonstrates that's a very short-sighted approach.

It will cost exponentially less time and money to do things right from the start.

If you're planning a new campaign, get your legal team involved early in the process.