Apex Capital Group, LLC – including its two principals Philip Peikos and David Barnett – and the twelve (12) entities it controlled (collectively, “Apex Capital”) have agreed to two separate court orders settling the Federal Trade Commission’s (“FTC”) allegations related to Apex Capital’s operation of a multi-national scheme to defraud consumers through free trial and negative option plans.

The FTC alleged that Apex Capital marketed supposed “free trial” offers to consumers for personal care products and dietary supplements online, but instead charged consumers the full price for these products and enrolled them in negative option plans without their consent. To further this scheme, the FTC alleges Apex Capital used dozens of shell companies and straw owners in the US and UK to engage in “credit card laundering” – an illegal process by which credit card payments are processed through other companies’ merchant accounts – including manipulating chargeback levels, artificially spreading sales transactions across multiple merchant accounts (load balancing), and running low dollar value sales through merchant accounts that did not reflect actual sales to consumers (microtransactions).

Under both court orders, Apex Capital is permanently barred from using negative option plans, including using negative option features on a trial basis or as an add-on to a sale, to sell dietary supplements, cosmetics, foods, or drugs. If Apex Capital use a negative option plan to sell any other products, they are required to provide enhanced disclosures, secure consumer’s express informed consent prior to purchase, and provide a simple mechanism to stop recurring charges, using the same mechanism that the consumer used to purchase the products. Further, the court orders bar Apex Capital from credit card laundering and engaging in tactics to avoid fraud/risk monitoring programs, including load balancing and microtransactions.

Takeaway: As we have previously blogged, free trial and negative option plans continue to be an enforcement priority for the FTC, with strict guidelines for how they may be operated fairly and transparently for consumers. With both federal and state regulators continuing to pay attention to these hot areas, marketers considering free trial programs and negative option sales strategies should continue to be careful to follow all applicable rules.