Federal Trade Commission v. Commerce Planet, Inc.
878 F. Supp. 2d 1048
C.D. Cal.2012Background
- FTC sued Commerce Planet and officers for deceptive/unfair marketing of OnlineSupplier (2005–2008); program used a negative option with auto charges after a free trial; alleged misrepresentation of a free kit to enroll consumers and collect monthly fees totaling over $45 million from 500k+ customers.
- FTC settled with other defendants; Gugliuzza faced two counts for deceptive/unfair practices under the FTC Act; bench trial in early 2012 led to liability finding and substantial monetary remedy.
- OnlineSupplier marketed as free “Online Auction Starter Kit” with a free trial and then automatic $29.95–$59.95 monthly charges; sign-up pages (Version I–III) created a misleading net impression that a free kit was being offered.
- Gugliuzza held substantial control over Commerce Planet’s marketing decisions and sign-up pages; he acted as consultant, president, and de facto executive, overseeing marketing and legal reviews.
- Expert testimony (Jennifer King) supported the net-impression finding; substantial consumer complaints and high chargeback rates corroborated deception/unfairness; court awarded permanent injunction and $18.2 million restitution.
- Bench trial involved extensive exhibits and witnesses; ruling under Rule 52(a) focused on net impression standard and likelihood of future violations.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Was OnlineSupplier’s sign-up flow deceptive under the FTC Act? | FTC contends landing/billing pages created net impression of a free kit. | Gugliuzza argues pages disclosed terms and that deception was due to third-party marketing. | Yes; pages misled a reasonable consumer. |
| Was OnlineSupplier’s marketing also “unfair”? | Misleading actions caused substantial consumer injury not offset by benefits. | No meaningful or avoidable harm tied to the product’s value. | Yes; the practice was unfair under §5(a). |
| Did Gugliuzza have individual liability for deceptive/unfair acts? | Gugliuzza participated in and controlled deceptive marketing; had knowledge. | Advise-of-counsel/good-faith defenses negate knowledge. | Yes; individual liability established for deceptive/unfair acts. |
| Do the remedies (injunction and restitution) proper here? | 13(b) authority allows permanent injunction and consumer redress. | Challenge to calculation of injury and reliance on data. | Permanent injunction and $18.2 million restitution approved. |
| Was the defense of advice of counsel/good faith valid? | No; reliance on counsel does not absolve knowledge. | Advise of counsel/G’s good faith negates liability. | No; these defenses fail. |
Key Cases Cited
- FTC v. Pantron I Corp., 33 F.3d 1088 (9th Cir. 1994) (net-impression/deception framework for §5(a))
- Cyberspace.com, LLC v. FTC, 453 F.3d 1196 (9th Cir. 2006) (deception may be found by net impression even with truthful disclosures)
- FTC v. Stefanchik, 559 F.3d 924 (9th Cir. 2009) (use of net impression; consumer injury need not be proven for all)