November 29, 2022

Volume XII, Number 333

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November 28, 2022

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ABCmouse Pays $10 Million to Settle FTC Enforcement Action

On September 2, 2020, Age of Learning, Inc. (operating as ABCmouse), a children’s online educational company, settled with the Federal Trade Commission (FTC) for $10 million for its alleged misrepresentations and failure to disclose important information to consumers.

The FTC’s complaint alleged that ABCmouse unfairly billed users without their authorization and also made it very difficult to cancel memberships. Andrew Smith, Director of the FTC’s Bureau of Consumer Protection, said, “ABCmouse didn’t clearly tell parents that their subscriptions would renew automatically, and then the company made it very difficult for them to cancel. People are relying more than ever on remote learning and other online services, and companies need to be up-front about automatic renewals and get permission before charging customers.” This is certainly a warning for other online educational companies operating during the pandemic – transparency is key.

ABCmouse records between 2015 and 2018 indicate that hundreds of thousands of consumers who attempted cancellation nevertheless remained subscribed and billed.

In addition to the $10 million penalty, the settlement order requires ABCmouse to:

  • Stop making any misrepresentations related to negative options (i.e., that a good or service is “free,” “trial,” “sample” or “no obligation” when a consumer must act in order to avoid later charges);
  • Disclose important information to consumers when it offers negative option plans (i.e., how to cancel the plan, the total amount they will be charged if they don’t cancel the plan, and the deadlines by which they must cancel the plan);
  • Explain clearly key terms associated with negative option plan offers BEFORE they get a consumer’s billing information;
  • Obtain consumers’ informed consent BEFORE enrolling the consumer in any automatic billing programs; and,
  • Provide cancellation mechanisms for its subscriptions.

To read the full settlement order, click here.

Copyright © 2022 Robinson & Cole LLP. All rights reserved.National Law Review, Volume X, Number 248
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About this Author

Kathryn Rattigan Attorney Cybersecurity Data Privacy
Associate

Kathryn Rattigan is a member of the firm's Business Litigation Group and Data Privacy + Cybersecurity Team. She advises clients on data privacy and security, cybersecurity, and compliance with related state and federal laws. Kathryn also provides legal advice regarding the use of unmanned aerial systems (UAS, or drones) and Federal Aviation Administration (FAA) regulations. She represents clients across all industries, such as insurance, health care, education, energy, and construction.

Data Privacy and Cybersecurity Compliance

Kathryn helps clients comply...

401-709-3357
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