(CN) - Allstar Marketing Group, the company behind such as-seen-on-TV products as Snuggies, Magic Mesh and Car's Meow, will pay $8 million to settle charges it deceived consumers into paying exorbitant processing and handling fees that double the cost of their products, the Federal Trade Commission announced.
The settlement includes a $7.5 million payment to the FTC, and a $500,000 payment the New York State Attorney General's office.
According to a complaint the agency filed in Chicago Federal Court, Allstar Marketing has been using almost identical television commercials to sell a host of products since 1999.
Consumers can buy the advertised products, which also include Roto Punch and the Perfect Tortilla, in retail stores, by phone or online, but in each case the manner in which the company markets and sells its products is similar across product lines, the FTC says.
"Defendant's televised commercials for all of its products adhere to a nearly identical script," the complaint says. "The commercial, which generally are approximately two minutes in length, begin by touting the products and their features. Nearly all of Defendant's products offered for purchase by telephone or online include a 'buy-one-get-one-free' promotion."
The problem, the agency says, is what comes near the end of the commercials. As an example, it cites the promotion of Magic Mesh, a door-sized screen that is advertised as letting "fresh air in and keeping annoying bugs out."
"During the Magic Mesh commercial, the narrator never discloses that Allstar charges $7.95 for "processing and handling" for each Magic Mesh," the complaint says. "Nor does the Narrator disclose that it is not possible to decline the second 'free' Magic Mesh, meaning that the minimum 'processing and handling' fee that the Defendant charges is actually $15.90.
"In reality," the complaint continues, Defendant's undisclosed processing and handling fees nearly double the advertised cost of the Magic Mesh from $19.95 to $35.85. Defendant offers many of its other products in a similar manner."
The FTC claims that consumers who choose to call the toll-free numbers shown at the end of the commercials are guided through Allstar's interactive voice recognition ordering system, "which is deceptive and misleading."
"At the outset, consumers are instructed to input their name and address, followed by their credit or debit card number," the complaint says. "Defendant collects consumers' billing information -- including the credit card or debit number -- before consumers have indicated how many products they are ordering and before Allstar discloses the total cost of consumers' orders."
"Despite neither disclosing quantity nor price, however, Defendant immediately charges consumers who enter their billing information for at least one 'set,' which includes the buy-one-get-one-free promotion of the main product being advertised," the agency adds.
Once all this takes place, Allstar offers consumers a series of "upsells," additional goods or services offered either by it directly, or by third-parties.
"As with the Defendant's main offer, the ordering process for the various upsell offers is deceptive and misleading, and the total cost associated with the upsells is not disclosed during the telephone calls," the complaint says.
The FTC claims Allstar employs similarly deceptive practices in its online sales efforts.
"Finally, Defendant's refund policy makes it virtually impossible for consumers to receive a full refund for products they never intended to purchase in the first instance," the complaint says. "Defendant's stated refund policy for many of its products is a "30 day money-back guarantee (less P&H)," even though processing and handling can account for nearly half of consumers' purchase cost."
According to the FTC, "Consumers have stated that when they have contacted Defendant to complaint of being charged for too many products, Defendant has refused to issue full refunds and has directed consumers to return the unwanted products at consumers' own expense. In other instances, Defendant offers complaining consumers minor discounts in exchange for consumers keeping the unwanted products."
The settlement prohibits Allstar from failing to obtain consumers' written consent before billing them for any product or service. It also requires the company to clearly and conspicuously disclose - before billing consumers - the total number of products they have ordered, all related fees and costs, and material conditions related to the products purchased.
It also prohibits Allstar from violating the TSR by failing to disclose the true costs of any goods or products it sells; failing to promptly disclose the identity of the seller to consumers and that the purpose of the call is to sell a product or service; and causing billing information to be submitted for payment without consumers' express authorization.
After the settlement was announced, Jennifer De Marco, Allstar's General Counsel, released a statement on behalf of the company.
"Allstar is pleased to have resolved this matter, and we're proud that it resulted in positive change for our company. One of our goals has always been to provide a positive purchasing experience for our customers," said Jennifer De Marco, General Counsel at Allstar. "While we have always believed our processes complied with the law, we are proud to have successfully worked with the FTC and the NY AG to improve them and set new standards for transparency," the statement said.
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