Companies that market products and services to New York State consumers must be sure that their advertising efforts are lawful and above board. Any significant terms and conditions relating to a consumer purchase should be presented in a clear and conspicuous manner such that the average consumer can recognize and understand them. Businesses that engage in deceptive marketing practices will likely face regulatory scrutiny and exposure to significant liability. Consider, for example, a recent action by the Attorney General of the State of New York (“NYAG”). NYAG Letitia James initiated an investigation into the marketing and delivery of retail natural gas and electricity services provided by Major Energy Services, LLC and Major Energy Electric Services, LLC (“Major Energy”). According to the NYAG press release, Major Energy deceived and misled New York consumers throughout the State through use of dishonest business practices. As a result of these practices, the NYAG maintains that New Yorkers paid “millions more for their gas and electric services than they would have paid to their utilities.”
Clear and Conspicuous Notice in Marketing Campaigns
For some background on this matter, the New York State Public Service Commission (“PSC”) has permitted private energy service companies, called ESCOs, to sell natural gas and electricity directly to New York residential and business customers dating back to 1996. To standardize practices among ESCOs and protect consumers, the PSC adopted the Uniform Business Practice (“UBP”) standards, which provide enhanced protections for energy consumers. According to the press release, Major Energy is an ESCO that offers electric and gas products throughout the State. The Assurance of Discontinuance (“AOD”) entered into by the NYAG and Major Energy described the ESCO’s methods of reaching new potential customers, including via telemarketing and in-person solicitations, online advertising, and social media. The AOD states that from approximately 2011 through 2016, Major Energy’s marketing contractors repeatedly engaged in deceptive business practices in an effort to sign up new customers for the ESCO.
Assurance of Discontinuance Mandates Clear and Conspicuous Disclosures
The AOD contains certain findings and relief agreed to by the parties. As for the findings, the AOD explains that Major Energy’s salespeople and telemarketers “lured consumers with false promises of savings, and then charged them significant, sometimes illegal early termination fees when they tried to get out of their contracts.” Further, many consumers were not even aware that they had become Major Energy customers, arguing that they had been enrolled without providing their consent. In terms of relief, among other things, the AOD provides that any future statement, representation, or term disclosed to consumers must be “clear and conspicuous.” This means that the language must be “of such size, color, contrast and/or audibility and is so presented as to be readily noticed and understood by the person to whom it is being disclosed.“ Further, the AOD indicates that “[i]f such statement is necessary as a modification, explanation or clarification to other information with which it is presented, it must be presented in close proximity to the information it modifies, in a manner so as to be readily noticed and understood.” Significantly, with respect to interactive media, the AOD requires that the disclosures be unavoidable, without requiring a “click through” for access, and presented prior to incurring any financial obligation.
Why Your Marketing Campaigns Must Offer Clear and Conspicuous Terms
The NYAG secured $1.5 million from Major Energy for their alleged deceptive marketing practices. No company wants that kind of press or to incur such significant liability. To avoid a similar outcome, it is necessary to prepare marketing materials with the focus on what the average consumer will definitely see and comprehend. One of the most obvious ways to be sure that your advertising campaign is compliant is to make sure that all material terms and conditions are presented in a clear and conspicuous manner. Where material terms are not disclosed both adequately and in advance of obtaining consumer payment information, businesses will have failed to secure the consumer’s express informed consent. Where this occurs, sign-ups will be deemed invalid, resulting in the potential for regulatory liability.
The attorneys at Klein Moynihan Turco have years of experience helping businesses effectively prepare compliant marketing materials. If you need assistance with crafting a marketing campaign or are being investigated for your advertising practices, please email us at firstname.lastname@example.org or call us at (212) 246-0900.
The material contained herein is provided for informational purposes only and is not legal advice nor is it a substitute for seeking legal advice from an attorney. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.
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