Santa Monica Prosecutors Help Win Settlement Against Direct Marketer

By Jorge Casuso

February 4, 2019 -- A task force of local prosecutors that included the Santa Monica City Attorneys office has reached a settlement potentially totaling $8.4 million with one of the world’s largest direct marketing companies, City officials announced Monday.

Under the final judgment filed Friday, Guthy-Renker LLC, which sold Proactiv acne medicine and Wen hair products on-line, has also agreed to change its websites and sales practices, City officials said.

The El Segundo-based company will pay $1.2 million in penalties and up to $7.3 million in restitution to customers who got automatically-renewed charges without their consent.

The lawsuit accused Guthy-Renker of "charging its customers for repeated shipments of Proactiv and Wen products, without their prior consent as required by law," City officials said.

“Automatic renewal is one of the critical areas in consumer protection today,” said Santa Monica Chief Deputy City Attorney Adam Radinsky, who heads of the Consumer Protection Division.

“Consumers always have the right to know where their money is going,” he said.

Under the terms of the settlement, the company must "conspicuously" disclose automatic-renewal terms and get consumers’ "explicit consent" for renewals through a separate check-box.

“The separate check-box is the key,” said Radinsky. “Otherwise, it’s too confusing. Companies have too many ways to hide the auto-renewal terms.”

Guthy-Renker also must send "a clear summary of the auto-renewal terms" and "allow consumers to easily cancel the subscriptions," the City Attorneys office said.

The company also will pay restitution to customers who were re-charged at least once without their consent for Wen products charged after May 2012 and Proactiv products charged between July 2014 and August 2016, officials said.

In a statement issued Monday, Guthy-Renker officials said they "are pleased to have reached a settlement."

The company plans to work cooperatively with the District Attorney’s Task Force "to set a new standard of best practices for all sellers to aspire to when providing California customers with an auto-renewal option," the statement said.

It is the second such settlement against the company. In a separate settlement, the company paid $2.5 million in restitution to customers who bought of Proactiv products before July 2014.

Guthy-Renker also paid more than $5 million in attorneys’ fees to the plaintiffs in that class action case.

Guthy-Renker -- which was founded in 1988 -- reportedly earned an estimated $1.8 billion in sales in 2017, according to HAPPI Magazine, a leading media outlet in the global personal care and household product market.

Friday's court order is the third such judgment against leading online companies brought by California prosecutors that included the Santa Monica City Attorney's office for similar automatic-renewal violations.

In October 2018, the same task force that won last week's judgment, led by Santa Monica, obtained a $1.5 million settlement against Spark Networks, the parent company of dating websites JDate and Christian Mingle.

In January 2018, the dating website giant eHarmony agreed to pay $1.2 million in penalties and up to $1 million in restitution in a settlement with prosecutors that included Santa Monica ("Santa Monica Announce Settlement with eHarmony Website," January 10, 2018).

And in August 2017, City prosecutors won nearly $3.6 million in penalties and restitution from Beachbody, a Santa Monica-based company specializing in fitness products ("Santa Monica Multinational Fitness Business to Pay Nearly $3.6 Million in Settlement ," August 30, 2017).

To report a consumer issue, visit smconsumer.org or call 310-458-8336.