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Santa Monica Multinational Fitness Business to Pay Nearly $3.6 Million in Settlement

 
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By Niki Cervantes
Staff Writer

August 30, 2017 -- A Santa Monica-based operation selling everything from workout videos to supplements worldwide is paying nearly $3.6 million in penalties and restitution after prosecutors found customers were being charged automatic renewals for which they hadn’t knowingly signed up.

Prosecutors from the Santa Monica City Attorney’s Office announced the settlement Tuesday with Beachbody, one of world’s largest sellers of exercise videos, livestreaming workouts, supplements and weight-loss programs.

Beachbody says it has 23 million customers, the City Attorney’s Office said.

Investigators found Beachbody was charging its customers’ credit cards on an automatic, recurring basis for renewals of various products and services, although the clients had not given their “express prior consent,” as required by both federal and state law.

Among other protections, Beachbody agreed to provide a separate check-box, or a similar mechanism, for customers, and to make it clear to what they are agreeing, said Chief Deputy City Attorney Adam Radinsky.

“A separate check-box is the key,” said Radinsky, who heads Santa Monica’s Consumer Protection Division.

“Otherwise, it’s too confusing. Companies have too many ways to hide the auto-renewal terms.”

He said the injunction is believed to be the first in California -- and one of only a few in the United States -- to require the separate check-box.

It is a particularly important protection in light of an explosion of online “subscriptions” and other recurring charges to U.S. customers in recent years, he said.

Some automatic renewals come after “free trials,” where consumers need to cancel in time to avoid the charges.

Businesses plump up profits with automatic renewals, yet customers don’t necessarily realize they signed on, Radinsky said.

Sometimes they forget about renewals, or delay stopping them “due to cumbersome and time-consuming requirements,” he said.

It can end up taking a lot out of a consumer’s wallet.

"The Santa Monica City Attorney’s Office is committed to protecting consumers from unfair and unlawful business practices,” said City Attorney Lane Dilg. “This is an important victory to ensure that consumers will not be subject to recurring charges imposed without their clear approval and consent."

It is legally required of businesses to make auto-renewals clear to consumers, and to get their “express, affirmative consent,” before collecting any money, the City Attorney’s Office said.

But “most businesses” don’t do so, Radinsky said.

The $3.6 million settlement is part of a final court judgment approved by Judge Mitchell Beckloff of the Santa Monica Superior Court and entered by the court on Monday.

Radinsky said the City Attorney’s Office launched an investigation -- including some undercover work -- into Beachbody after receiving complaints from consumers.

He said the company worked with prosecutors in concluding the terms of the settlement. In all, the process took about four years.

Now, before automatically renewing charges, Beachbody now must:

* Clearly and conspicuously disclose the renewal terms,

* Get consumers’ consent, that does not include other terms and conditions,

* Send a clear summary of the renewal terms after consumers pay,

* Allow consumers to cancel easily, both online and by phone, and

*Send reminders of upcoming renewals for all subscriptions six months or longer

"Beachbody is one of the first major sellers to be up-front with its customers about consent for recurring charges, including the new, separate checkbox,” Radinsky said.

“They will now have one of the best online disclosure and consent pages anywhere.”

Under the judgment, Beachbody will pay a total of $3,579,000.

The City Attorney’s Office and Los Angeles County District Attorney’s Office each receive $1,289,500 for civil penalties and investigative costs.

Another $500,000 is going to Action for Healthy Kids and $250,000 to the United States Healthful Food Council as “cy pres. restitution -- or a distribution of monies “as near as possible” to individual restitution.

Radinsky said the many victims in the Beachbody case had such wide-ranging products for which they had been mischarged that arriving at individual restitution would have been “extremely difficult.”

Prosecutors also alleged Beachbody made health-related and other claims about its products that were false, misleading, and “not backed by scientific evidence,” the City Attorney’s Office said.

Included were claims that certain products detoxified, were anti-aging, balanced hormones, reduced inflammation and prevented mental decline.

The injunction now requires Beachbody to have “competent and reliable” scientific studies to support such claims before making them to consumers.

 


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