Beachbody to Pay $3.6 Million in Consumer Protection Case
Santa Monica City Attorney's Case Among First to Require Separate Checkbox for Consumers’ Consent to Recurring Payments
August 29, 2017 9:01 AM
SANTA MONICA, Calif. – Beachbody, one of the world’s largest sellers of exercise videos, supplements, and weight-loss programs, has agreed to change its website and sales practices to better protect consumers. The Santa Monica-based company, which claims over 23 million customers, also will pay $3.6 million in penalties and restitution as part of a final court judgment. The judgment was negotiated with the Santa Monica City Attorney’s Office after lengthy discussions, which followed the prosecutors’ investigation of consumer complaints.
The City Attorney’s Office learned that Beachbody was charging its customers’ credit cards on an automatic, recurring basis for renewals of products and services, without their express prior consent as required by law.
The judgment includes a permanent injunction requiring full transparency with consumers. Before automatically renewing charges, Beachbody now must:
- Clearly and conspicuously disclose the renewal terms
- Get consumers’ consent, through a separate check-box (or similar mechanism) 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
- Send reminders of upcoming renewals for all subscriptions 6 months or longer
"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."
This is believed to be the first injunction in California (and one of the first in the United States) to require a separate check-box to ensure that consumers knowingly consent before they’re enrolled in auto-renewals.
The final court judgment was approved by Judge Mitchell L. Beckloff of the Santa Monica Superior Court, and entered by the court on August 28, 2017.
Under the judgment, Beachbody will pay a total of $3,579,000. This includes $2,579,000 in penalties and $1,000,000 in restitution to non-profit groups that work for laws and policies to help communities with health and nutrition.
Explosion of Recurring Charges
Online “subscriptions” and other recurring charges have proliferated in the U.S. in recent years. More and more services and products are sold this way – everything from streaming video, to software, to food and household items.
Some automatic renewals come after “free trials,” where consumers need to cancel in time to avoid the charges.
Businesses reap far more profits with automatic renewals. Consumers often don't know they have agreed to the recurring charges; they forget about them, or delay in stopping them due to cumbersome and time-consuming requirements. The recurring charges then continue, indefinitely, at significant expense to the consumer.
Lawmakers have responded to these problems. The law now requires businesses to make auto-renewals clear to consumers, and to get their “express, affirmative consent” – before they collect any money.
However, most businesses still don’t obtain consumers’ knowing consent before enrolling them in automatic renewals.
“A separate check-box is the key,” said Chief Deputy City Attorney Adam 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.”
Unsupported Product Claims
Prosecutors also alleged Beachbody made health-related and other claims about its products that were false, misleading, and not backed by scientific evidence. These included claims in the areas of:
- Reducing inflammation
- Balancing hormones
- Preventing mental decline
The injunction requires that before Beachbody makes any claims about its products, it must have “competent and reliable” scientific studies to support the claims. These studies must be based on similar amounts and formulations as the advertised products.
(For example, if Beachbody claims one of its supplements helps to remove toxins, the supporting studies need to test a similar combination of ingredients to back the claim.)
Santa Monica Investigation
The Santa Monica City Attorney’s Office conducted an undercover investigation, consulted with scientific experts about Beachbody’s health claims, and engaged in lengthy negotiations with the company’s attorneys over a period of more than two years.
“We appreciate the company’s cooperation and its willingness to change its practices,” said Radinsky. "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. They will now have one of the best online disclosure and consent pages anywhere.”
“Automatic renewal is one of the critical areas in consumer protection today,” said Radinsky. “Consumers always have the right to know where their money is going.”
The Santa Monica City Attorney’s Consumer Protection Division promotes fairness through awareness and enforcement of the law. To report a consumer issue, go to smconsumer.org or call 310-458-8336.