By D. John Hendrickson
In a reminder to all marketers that the use of scare tactics and similar high-pressure strategies in advertising are fair game for investigation, the Federal Trade Commission and the State of Florida have settled claims against Boost Software, Success Capital, LLC and a group of individual defendants for judgments totaling more than $37 million based on their alleged violations of the Telemarketing Sales Rule, the FTC Act and the Florida Deceptive and Unfair Trade Practices Act.
According to the Commission, “These defendants deceived consumers and used high-pressure sales tactics to convince them that their computers required tech support products.” More specifically, the Commission contended in its filings that:
- PC HealthBoost software was advertised with such claims as “in just a couple of clicks [it] dramatically increases PC speed performance and stability,” and that it could “repair and prevent windows errors, PC crashes and freezes, blue screen errors and much more.”
- The product’s website offered a free computer scan for consumers who were willing to download a free version of the product. However, the free computer scan was actually a highly deceptive marketing tool designed to scare consumers into purchasing the paid version of the product, flagging innocuous and beneficial files found on nearly every computer.
- Following purchase of the paid version, the software then directed customers to call a toll-free number to activate the software. When consumers reached the call center, the telemarketers lead them down a carefully scripted path that inevitably reached the conclusion that the consumer’s computer was in need of repair and required more help than the already-purchased software could provide.
- Throughout the diagnostic portion of the call, the telemarketers used other high pressure sales tactics. By way of example, car analogies were included in the script to convince consumers that their computer was in immediate danger and needed repairs (e.g., “Your computer is like an engine. Now what happens if you over rev an engine too high or overwork it? (Pause) Exactly – it could break!”).
- The misleading diagnostics and other scare tactics in the telemarketing scripts inevitably lead to the conclusion that every computer was damaged and in need of repair.
- Having convinced consumers that their computers were in danger, the telemarketers then closed the sale by telling consumers that they could either have their computer repaired by a well-known retailer that would be very costly and cause them to be without a computer for several days, or they could purchase technical support directly from the technician and have their computer repaired the same day while they sit in the comfort of their own home. Consumers were charged as much as $500 for the repairs.
The $37 million judgment will be suspended upon payment of $236,000 (due to the defendants’ inability to pay) and surrender of the corporate assets. The defendants did not admit or deny liability as part of the settlement. This matter was one of a group of actions filed in 2014 by the Commission against tech support companies allegedly engaged in similar conduct.
It is critical for marketers to understand that, as illustrated in this case, regulators will look at the totality of an advertising campaign in assessing whether any violations of law have occurred – from the first placement of an ad, to the submission of an order online, to the last upsell in a telemarketing script, and everything in-between. Further, it is important to keep in mind that the Commission takes special exception to campaigns directed toward particularly vulnerable segments of the population (here, senior citizens). Finally, claims of false urgency and other scare tactics are “red flags” to regulators that should be avoided at all costs.
Legal disclaimer: This article is not intended to constitute legal advice or to create an attorney-client relationship. We trust you knew this anyway.