throbber
Case 2:20-cv-07996 Document 1 Filed 09/01/20 Page 1 of 25 Page ID #:1
`
`
`
`
`ALDEN F. ABBOTT
`General Counsel
`MATTHEW H. WERNZ
`mwernz@ftc.gov
`JOANNIE T. WEI
`jwei@ftc.gov
`Federal Trade Commission
`230 South Dearborn, Suite 3030
`Chicago, Illinois 60604
`312.960.5596 (Wernz)
`312.960.5607 (Wei)
`ATTORNEYS FOR PLAINTIFF
`
`
`
`
`UNITED STATES DISTRICT COURT
`CENTRAL DISTRICT OF CALIFORNIA
`
`
`
`
`
`
`v.
`
`Plaintiff,
`
`FEDERAL TRADE COMMISSION,
`
`
`
`
`
`AGE OF LEARNING, INC., a
`corporation, also d/b/a ABCmouse and
`ABCmouse.com,
`
`
`
`
`Case No. 2:20-cv-7996
`
`COMPLAINT FOR
`PERMANENT INJUNCTION
`AND OTHER EQUITABLE
`RELIEF
`
`
`
`
`Defendant.
`Plaintiff, the Federal Trade Commission (“FTC”), for its Complaint alleges:
`The FTC brings this action under Sections 13(b) and 19 of the Federal
`1.
`Trade Commission Act (“FTC Act”), 15 U.S.C. §§ 53(b) and 57b, and the Restore
`Online Shoppers’ Confidence Act (“ROSCA”), 15 U.S.C. § 8404, to obtain
`permanent injunctive relief, rescission or reformation of contracts, restitution, the
`refund of monies paid, disgorgement of ill-gotten monies, and other equitable relief
`
`
`
`- 1 -
`
`COMPLAINT
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`

`

`Case 2:20-cv-07996 Document 1 Filed 09/01/20 Page 2 of 25 Page ID #:2
`
`
`
`for Defendant’s acts or practices in violation of Section 5(a) of the FTC Act, 15
`U.S.C. § 45(a), and in violation of Section 4 of ROSCA, 15 U.S.C. § 8403.
`JURISDICTION AND VENUE
`This Court has subject matter jurisdiction pursuant to 28 U.S.C.
`2.
`§§ 1331, 1337(a), and 1345.
`Venue is proper in this District under 28 U.S.C. § 1391(b)(1), (b)(2),
`3.
`(c)(2), (c)(3), and (d), and 15 U.S.C. § 53(b).
`PLAINTIFF
`The FTC is an independent agency of the United States Government
`4.
`created by statute. 15 U.S.C. §§ 41–58. The FTC enforces Section 5(a) of the
`FTC Act, 15 U.S.C. § 45(a), which prohibits unfair or deceptive acts or practices in
`or affecting commerce. The FTC also enforces ROSCA, 15 U.S.C. §§ 8401-8405.
`ROSCA prohibits the sale of goods or services on the Internet through negative
`option marketing without meeting certain requirements for disclosure, consent, and
`cancellation to protect consumers. A negative option is an offer in which the seller
`treats a consumer’s silence—i.e., their failure to reject an offer or cancel an
`agreement—as consent to be charged for good and services. 16 C.F.R. § 310.2(w).
`The FTC is authorized to initiate federal district court proceedings, by
`5.
`its own attorneys, to enjoin violations of the FTC Act and ROSCA and to secure
`such equitable relief as may be appropriate in each case, including rescission or
`reformation of contracts, restitution, the refund of monies paid, and the
`disgorgement of ill-gotten monies. 15 U.S.C. §§ 53(b), 57b, 8404.
`DEFENDANT
`Defendant Age of Learning, Inc. (“Age of Learning”), also doing
`6.
`business as ABCmouse and ABCmouse.com, is a Delaware corporation with its
`principal place of business at 101 North Brand Boulevard, 8th Floor, Glendale,
`California 91203. Age of Learning transacts or has transacted business in this
`
`
`
`- 2 -
`
`COMPLAINT
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`

`

`Case 2:20-cv-07996 Document 1 Filed 09/01/20 Page 3 of 25 Page ID #:3
`
`
`
`District and throughout the United States. At all times material to this Complaint,
`acting alone or in concert with others, Age of Learning has advertised, marketed,
`distributed, or sold online educational programs to consumers throughout the
`United States.
`
`COMMERCE
`At all times material to this Complaint, Defendant has maintained a
`7.
`substantial course of trade in or affecting commerce, as “commerce” is defined in
`Section 4 of the FTC Act, 15 U.S.C. § 44.
`DEFENDANT’S BUSINESS PRACTICES
`From 2015 until at least 2018, Defendant failed to adequately disclose
`8.
`key terms of memberships to access online educational content for children.
`Touting twelve-month memberships for $59.95, Defendant enrolled consumers in
`yearly plans that renewed indefinitely at the same price after the twelve months
`expired. Defendant failed to disclose material information about these and other
`term memberships, including that they automatically renew, that Defendant would
`charge members each year unless they cancel, and what consumers must do to
`cancel. Even though consumers who signed up were prominently promised “Easy
`Cancellation,” Defendant for years made cancellation difficult. Many consumers
`tried without success to cancel by calling, emailing, or contacting Defendant
`through a customer support form. Rather than accepting these cancellation
`methods, Defendant instead required consumers to find and navigate a lengthy and
`confusing cancellation path that repeatedly discouraged consumers from canceling
`and, in many instances, resulted in consumers being billed again without their
`consent. Over the course of at least three years, hundreds of thousands of
`consumers visited Defendant’s cancellation path but remain enrolled. Even
`consumers who completed Defendant’s cancellation path later discovered ongoing
`charges for additional content they believed they had canceled along with their
`
`
`
`- 3 -
`
`COMPLAINT
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`

`

`Case 2:20-cv-07996 Document 1 Filed 09/01/20 Page 4 of 25 Page ID #:4
`
`
`
`base memberships. Defendant has received at least tens of thousands of consumer
`complaints about these practices.
`Defendant’s Misleading Enrollment Practices
`Defendant operates a membership-based online learning tool called
`9.
`ABCmouse Early Learning Academy for children ages 2 to 8 years old.
`ABCmouse includes digital content on reading, language arts, math, and other
`subjects. Consumers can access ABCmouse at Defendant’s website,
`abcmouse.com, and through Defendant’s mobile application (“app”). Defendant
`provides consumers access to ABCmouse through memberships, which typically
`cost from $9.95 for monthly memberships to $59.95 for twelve-month
`memberships.
`10. On ABCmouse.com and in its app, Defendant has advertised
`membership to ABCmouse Early Learning Academy. Above an animated image
`of a teacher gesturing to her classroom, Defendant displayed a bright green gift tag
`with a prominent link offering consumers a “Special Offer 38% OFF Annual
`Membership! Learn More!” The following is a representative image of such an
`offer from Defendant’s website:
`
`
`
`- 4 -
`
`COMPLAINT
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`

`

`Case 2:20-cv-07996 Document 1 Filed 09/01/20 Page 5 of 25 Page ID #:5
`
`
`
`
`
`11. Consumers who clicked on the “Special Offer” link were directed to
`an enrollment page with the same green gift tag. There, next to a prechecked box,
`in large blue and red bold font, Defendant offered consumers a membership
`costing either “$59.95 for 12 Months” or “4 equal monthly installments of
`$19.75.” Defendant promised “Easy Cancellation” in bold, red text, stating: “If
`your family does not absolutely love ABCmouse, you can cancel at any time!”
`Defendant promised the same “Easy Cancellation” to consumers who enroll in
`monthly memberships. To enroll, consumers were required to submit their email
`address, password, and payment information, and they also were required to check
`
`
`
`- 5 -
`
`COMPLAINT
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`

`

`Case 2:20-cv-07996 Document 1 Filed 09/01/20 Page 6 of 25 Page ID #:6
`
`
`
`a box agreeing to Defendant’s terms and conditions. A representative image of the
`enrollment page is below:
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`12. Consumers who used this page to sign up for a twelve-month
`ABCmouse membership were instead enrolled in a negative option plan under
`which Defendant charged them $59.95 immediately and each year thereafter until
`they affirmatively have canceled. For at least three years, Defendant did not
`disclose these facts anywhere on the enrollment page. Nor did Defendant disclose
`how consumers were to accomplish the advertised “easy cancellation.”
`
`
`
`- 6 -
`
`COMPLAINT
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`

`

`Case 2:20-cv-07996 Document 1 Filed 09/01/20 Page 7 of 25 Page ID #:7
`
`
`
`13. Similarly, when consumers enrolled in a 30-day free trial of an
`ABCmouse monthly membership, Defendant often offered them alternative
`payment options following their free month, including twelve months for $39.95 or
`six months for $29.95. Defendant also often offered all consumers who signed up
`for twelve-month memberships access for twelve months at the cost of $39.95 to
`Defendant’s “Assessment Center,” a separate service that includes quizzes and
`lessons to measure children’s skills. Defendant did not disclose that after charging
`consumers who selected these options immediately for the stated membership
`term, Defendant would charge consumers again at the end of that period for the full
`six or twelve months, and on a recurring basis thereafter until they canceled.
`14. Rather, during these three years, Defendant described the ongoing
`nature of these term memberships only in separately hyperlinked terms and
`conditions. Even if consumers were to click on the hyperlinked terms and
`conditions, however, they would be unlikely to see that Defendant’s term
`memberships automatically renew each year. Defendant buried this information in
`dense text, in small font and in single-spaced type.
`15. Not until in or around early 2018, after receiving a Civil Investigative
`Demand from the Federal Trade Commission, did Defendant modify its term
`membership enrollment pages to include information about the membership’s
`automatic renewal. Even then, for its twelve-month membership, Defendant
`buried that information in the smallest font on the page under a bright red heading
`labeled “Easy Cancellation.” This disclosure was not close to or in similar size,
`brightness, or prominence to Defendant’s representation that consumers were
`paying “$59.95 for 12 Months” of membership. Thus, despite this modification,
`consumers were unlikely to see any disclosure of the automatic renewal of their
`twelve-month memberships.
`
`
`
`- 7 -
`
`COMPLAINT
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`

`

`Case 2:20-cv-07996 Document 1 Filed 09/01/20 Page 8 of 25 Page ID #:8
`
`
`
`16. Tens of thousands of consumers have complained to Defendant that
`they did not know that ABCmouse memberships would automatically renew.
`These complaints have continued after the 2018 change discussed in paragraph 13
`above. Many of these consumers also complained that they had not authorized
`Defendant to charge their accounts on an ongoing basis. For example, one
`consumer who was surprised to be charged automatically for a second twelve-
`month period complained, “No one asked me if I wanted to subscribe again. My
`personal account was just accessed without my permission.”
`17. Defendant was well aware of these types of consumer complaints.
`Indeed, in January 2015, after completing an internal review, Defendant concluded
`that common customer support issues include that the “Subscription page is
`misleading,” and “Customers are confused about their billing plan on registration,
`customers do not like that they [are] not notified of their auto-renewal.”
`18. Despite that conclusion, no changes were made, and consumers
`continued to complain. More than a year later, a customer service representative
`described a consumer complaint as “the standard ‘I only subscribed for 1 year and
`now I’m being billed again’ complaint.” By 2018, three years after the internal
`review, Defendant’s Vice President of Customer Support described the same
`problem, that consumers were complaining that automatic renewals of twelve-
`month memberships were:
`catching them off guard as they did not recognize it was an auto-
`renewal . . . . [W]e encounter many customers that are confused as to
`what it is that they are signing up for in terms of length of subscription
`and even more so how much and when they will be charged.
`19. Despite more than three years of similar complaints, Defendant
`continued to enroll consumers in term memberships without clearly and
`
`
`
`- 8 -
`
`COMPLAINT
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`

`

`Case 2:20-cv-07996 Document 1 Filed 09/01/20 Page 9 of 25 Page ID #:9
`
`
`
`conspicuously disclosing to them the ongoing charges associated with those
`memberships or how to cancel them.
`Defendant Made It Difficult for Consumers to Cancel
`20. ABCmouse memberships—including monthly and term
`memberships—automatically renew until consumers cancel. For years, Defendant
`restricted the ways consumers could cancel their memberships, permitting
`cancellation only through an online mechanism within Defendant’s website and
`app that was difficult for consumers to find and complete. Consumers who
`requested cancellation via this mechanism often have believed they canceled, but
`Defendant continued to charge them anyway. Defendant routinely refused to
`honor consumers’ cancellation requests that were not made through the online
`mechanism. As a result, Defendant continued to charge tens of thousands of
`consumers who requested cancellation or believed that their accounts had already
`been canceled.
`
`Defendant Refused to Accept Cancellation Requests
`by Telephone, Email or Web Form
`21. On its website and in its app, Defendant did not post a customer
`service telephone number or email address that consumers could use to contact
`Defendant to cancel their memberships.
`22. Some consumers were able to find a telephone number for Defendant
`by searching online, however. Consumers who called this number often were
`unable to reach a customer service representative because of long wait times that
`resulted in many consumers simply hanging up. For example, in each month from
`October 2016 through April 2018, consumers who called the customer service line
`had to wait an average of at least 10 minutes to talk with a customer service
`representative. In December 2017, according to Defendant’s internal data, the
`average wait time exceeded 30 minutes. By June 2017, the call-abandonment rate
`
`
`
`- 9 -
`
`COMPLAINT
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`

`

`Case 2:20-cv-07996 Document 1 Filed 09/01/20 Page 10 of 25 Page ID #:10
`
`
`
`resulting from these wait times had risen to more than 30 percent, which Defendant
`acknowledged was “out of control.” By the end of 2017, 60 percent of all calls to
`Defendant were abandoned without consumers reaching an ABCmouse
`representative. In many instances, consumers who reached a customer service
`representative were told that they could not cancel their memberships by phone,
`and were instead directed to Defendant’s website or app to cancel.
`23. Some consumers also were able to find an email address for
`Defendant by searching online. Consumers who emailed Defendant to request
`cancellation often were told that they could not cancel their memberships by email,
`and were instead directed to Defendant’s website or app to cancel.
`24. Numerous consumers submitted requests to cancel their memberships
`through a web form found on Defendant’s website in the “Parent Home” page, by
`clicking on “Customer Support” and then on a link labeled “Contact Us.” The
`“Contact Us” form included a box in which consumers could type a message, and
`many consumers used this box to notify Defendant they wanted to cancel their
`memberships. However, instead of honoring these cancellation requests,
`Defendant typically responded that, “A member’s account can only be cancelled
`by that member on the site itself, not via email or any other means.” Defendant
`claimed that requiring consumers to cancel through the site’s cancellation
`mechanism “helps us to ensure that accounts are not cancelled unintentionally or
`maliciously.” Defendant refused cancellation requests from more than 100,000
`consumers in this way, instead redirecting them to Defendant’s website to cancel.
`Defendant Used a Hard-to-Find, Poorly Labeled
`Online Cancellation Mechanism
`25. Consumers often had difficulty locating Defendant’s online
`cancellation mechanism. To do so, consumers first had to go to the “My Account”
`section of Defendant’s website, where there were three boxes labeled “Account
`
`
`
`- 10 -
`
`COMPLAINT
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`

`

`Case 2:20-cv-07996 Document 1 Filed 09/01/20 Page 11 of 25 Page ID #:11
`
`
`
`Information,” “Membership,” and “Billing.” Consumers were required to click on
`the “Membership” box, which took them to a summary of their membership terms
`and included a link to “Customer Support” at the bottom of the page. Clicking on
`“Customer Support” would not take consumers to Defendant’s online cancellation
`mechanism, but would send them to a series of frequently asked questions and the
`“Contact Us” link described above. In the lower left corner of the Membership
`screen, Defendant included a link in small, light colored font, to its “Cancellation
`Policy.” Instead of the cancellation policy, however, this link took consumers to
`Defendant’s online cancellation mechanism.
`26. For years, consumers who wanted to cancel their memberships often
`were unable to find this cancellation mechanism on Defendant’s site. Defendant
`received complaints that consumers were unable to locate this online cancellation
`mechanism, but Defendant did not take any steps to make this mechanism more
`prominent or easier to locate. In September 2016, one of Defendant’s customer
`support representatives noted that when Defendant directed consumers to its site to
`cancel, the membership “never gets canceled by the customer and then we get
`several more emails back or angry calls.”
`Defendant’s Online Cancellation Mechanism Confused, Misdirected, and
`Frustrated Consumers Requesting Cancellation
`27. Even those consumers who were able to locate the cancellation path
`through the “Cancellation Policy” on Defendant’s website still had difficulty
`canceling because the path did not clearly inform consumers how to cancel and
`instead required consumers to navigate several pages of promotions and links that,
`when clicked, directed consumers away from the cancellation path without
`warning.
`
`
`
`- 11 -
`
`COMPLAINT
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`

`

`Case 2:20-cv-07996 Document 1 Filed 09/01/20 Page 12 of 25 Page ID #:12
`
`
`
`28. The first screen in the path often appeared as depicted below.
`
`29. Although this was the first screen of Defendant’s online cancellation
`path, it did not tell consumers that they had arrived at the correct place to cancel
`their memberships. Indeed, nowhere on this screen did the word cancellation, or
`any variation of it, appear. Instead, this screen promoted ABCmouse’s availability
`across several devices. The only way for consumers to continue along Defendant’s
`cancellation path was by clicking the button labeled “No Thanks, Continue” in the
`lower right-hand corner of the screen. Clicking this button would lead consumers
`to a series of other screens promoting additional ABCmouse features.
`30. Defendant often labeled buttons on these screens with vague and
`inconsistent descriptions, leaving many consumers confused about how to
`successfully complete Defendant’s cancellation path. For example, on one screen,
`depicted below, Defendant asked consumers to provide a reason for canceling,
`invited consumers to “contact our Customer Support team” through a link, and
`displayed buttons labeled “Back Home, “No Thanks, I’ll Wait,” and “Continue.”
`
`
`COMPLAINT
`
`
`
`- 12 -
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`

`

`Case 2:20-cv-07996 Document 1 Filed 09/01/20 Page 13 of 25 Page ID #:13
`
`
`
`
`
`
`
`31. Consumers who clicked the “Customer Support” link or the “Back
`Home” or “No Thanks, I’ll Wait” buttons would be removed from the cancellation
`path and would remain enrolled, often without their knowledge or consent.
`32. The only way to continue along the cancellation path was to provide a
`reason for canceling and then click “Continue.” But doing that took consumers to
`another screen, where Defendant attempted to persuade consumers not to cancel.
`For example, as shown below, a consumer who indicated “My Child Is Not
`Interested” as a reason for cancellation would be presented with a screen, labeled
`“Before You Go…,” and relaying a message that “many children love visiting the
`Aquarium, Hamster, Zoo, Farm, and the Shopping areas of our site,” along with
`links to those areas:
`
`
`
`- 13 -
`
`COMPLAINT
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`

`

`Case 2:20-cv-07996 Document 1 Filed 09/01/20 Page 14 of 25 Page ID #:14
`
`
`
`
`
`33. On this “Before You Go…” screen, consumers who clicked any of the
`five links to other areas of Defendant’s site or on the “Back Home” or “No Thanks,
`I’ll Wait” links would be removed from the cancellation path and would remain
`enrolled, often without their knowledge or consent.
`34. Consumers who pressed “Continue” on this screen were not canceled
`but were taken to still another screen, as shown below, prompting consumers to
`“Learn More” about an opportunity to “Upgrade” their memberships.
`
`
`
`
`
`
`
`
`
`
`
`- 14 -
`
`COMPLAINT
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`

`

`Case 2:20-cv-07996 Document 1 Filed 09/01/20 Page 15 of 25 Page ID #:15
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`35. Consumers who clicked on the “Learn More” link would again be
`removed from the cancellation path. Defendant prompted these consumers to enter
`their passwords and click “Submit” on a popup that, in small print, stated that
`consumers would be billed. Defendant charged consumers who entered their
`passwords immediately for an additional twelve-month ABCmouse membership.
`Many consumers reported that they remained enrolled in this way without their
`knowledge or consent.
`36. Consumers who clicked on the “Back Home” or “No Thanks, I’ll
`Wait” link on this screen would again be removed from the cancellation path and
`would remain enrolled in their existing membership at the existing price, often
`without their knowledge or consent.
`In total, Defendant displayed along the cancellation path between six
`37.
`and nine screens that consumers were required to navigate to cancel their
`memberships. None of these screens informed consumers of the total number of
`screens along the cancellation path or how many screens remained before their
`
`
`
`- 15 -
`
`COMPLAINT
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`

`

`Case 2:20-cv-07996 Document 1 Filed 09/01/20 Page 16 of 25 Page ID #:16
`
`
`
`memberships would be canceled. Consumers could not skip ahead or cancel
`without visiting each screen. Each screen included multiple links and buttons that,
`if pressed, would take consumers out of the cancellation path and maintain their
`memberships.
`38. Defendant failed to provide a simple cancellation mechanism by
`which consumers could stop recurring charges. Defendant’s cancellation
`mechanism was not disclosed on its product order or confirmation pages, nor in the
`confirmation emails consumers receive for their online transactions. Additionally,
`it was much more difficult to cancel a membership and Defendant’s recurring
`charges than it is to sign up for the membership and to initiate the recurring
`charges.
`39. Moreover, unbeknownst to many consumers, canceling their
`memberships did not cancel all charges associated with their accounts. Many
`consumers who enrolled in Defendant’s “Assessment Center” found that they
`continued to be charged for the Assessment Center even after canceling their
`ABCmouse memberships. Many of these consumers found that, even once they
`realized they needed to separately cancel their Assessment Center membership,
`they could not do so because Defendant had deactivated their login credentials
`when they canceled their ABCmouse memberships. Thus, for at least seven
`months, consumers complained to Defendant that they did not understand that
`canceling their ABCmouse memberships would not also cancel the Assessment
`Center membership.
`Defendant’s Restrictive Cancellation Practices
`Resulted in Unauthorized Charges
`40. From 2015 to at least 2018, tens of thousands of consumers
`complained to Defendant that they were unable to cancel their ABCmouse
`memberships or that they did cancel their memberships but nevertheless were
`
`
`
`- 16 -
`
`COMPLAINT
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`

`

`Case 2:20-cv-07996 Document 1 Filed 09/01/20 Page 17 of 25 Page ID #:17
`
`
`
`charged after cancellation. For example, one consumer complained that “Your
`website will not allow me to cancel my subscription. … I have gone through all the
`ridiculous questions about a dozen times, and the site does not allow me to finish
`the cancellation.” Another consumer, who had attempted to cancel an ABCmouse
`membership multiple times, complained, “I cancelled this account 3 times . . . . I
`had to request 2 ACH returns to get my money back after twice correctly
`cancelling my account including multiple emails and phone calls to
`abcmouse.com.” In November 2017, Defendant’s Vice President of Customer
`Support wrote to Defendant’s COO, two Vice Presidents of Marketing, President
`of Production, and Senior Director of Operations, noting a “dramatic increase in
`the amount of [customer support] tickets as well as the amount of phone calls”
`received by Defendant, and identifying consumer “confusion and/or inability to
`find and complete the cancellation on-line” as a “constant that has generated the
`large majority of all tickets since my arrival.”
`41. At least thousands of consumers complained about incurring
`unauthorized charges related to the Assessment Center even after canceling their
`base membership. Defendant tracked customer complaints related to this subject
`under the heading, “Customer Suggestion: Assessment Subscription should not
`require separate cancellation.” Instead of fixing the issue, however, Defendant
`developed and used a template customer support response stating, “We
`investigated this matter and discovered that although your ABCmouse subscription
`was cancelled, your subscription to the Assessment Center subscription [sic] had
`not been cancelled. Please note that your subscription and the Assessment Center
`add-on are separate features that require individual cancellation.”
`42. For years, Defendant recognized that its cancellation path was long,
`confusing, and not the “easy” process Defendant promised. For example, as early
`as 2015, in internal communications, Defendant acknowledged that the
`
`
`
`- 17 -
`
`COMPLAINT
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`

`

`Case 2:20-cv-07996 Document 1 Filed 09/01/20 Page 18 of 25 Page ID #:18
`
`
`
`“Cancellation Path is too long,” that the “Cancellation process is confusing,” and
`that an ABCmouse membership was “not easy to cancel like advertised.” That
`same year, Defendant’s Senior Director of Operations wrote:
`To improve customer experience / satisfaction, . . . I’d take a look at
`the impact of reducing the number of clicks in the online cancellation
`flow. I believe there are 8-9 clicks required currently, in order for a
`customer to successfully end their subscription.
`Instead of simplifying the cancellation mechanism, however,
`43.
`Defendant created a customer support response script to respond to complaints
`from consumers who were billed after believing they had canceled. Thus, for
`several years, consumers who complained about billing after cancellation would
`receive an email from Defendant saying, “We show that you attempted to cancel
`the subscription, but did not successfully complete the process.” Defendant did not
`offer to cancel consumers’ memberships, but sent them back to the online
`cancellation path.
`44. Rather than take steps to make it easier for consumers to cancel their
`memberships, Defendant often made it more difficult. In April 2016, Defendant
`added two screens to the cancellation mechanism, which, Defendant found,
`resulted in a “lower cancellation percentage.” In May 2017, after Defendant’s
`Senior Design Director reported that, according to the customer support
`department, “the cancellation path is too hard to get to and get through,” Defendant
`changed its Parent Dashboard, including to make the “Cancellation Policy” link
`less prominent. Defendant later concluded that as a result of this change,
`cancellations “decreased by approximately 10%-15%.” In June 2017, shortly after
`this change was made, the same Senior Design Director reported that “the decrease
`of cancellation % of those entering the Parents Section to completion of the
`cancellation path.”
`
`
`
`- 18 -
`
`COMPLAINT
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`

`

`Case 2:20-cv-07996 Document 1 Filed 09/01/20 Page 19 of 25 Page ID #:19
`
`
`
`45. According to Defendant’s own data and records, from 2015 to 2018,
`hundreds of thousands of consumers who visited Defendant’s online cancellation
`path or otherwise contacted Defendant to cancel nevertheless remained subscribed.
`It was only after the FTC issued a Civil Investigative Demand to
`46.
`Defendant Age of Learning that the company modified its online cancellation
`mechanism. However, despite its modifications, Defendant’s cancellation
`mechanism continued to be located within a link to Defendant’s “Cancellation
`Policy;” continued to contain multiple screens that consumers had to navigate in
`order to cancel; continued to provide consumers with multiple links that if clicked,
`would take them out of the cancellation path without warning; and required as
`many as seven clicks to complete. Thus, consumers continued to complain that
`Defendant did not honor their cancellation requests.
`47. Even though Defendant knew of consumer confusion regarding its
`membership terms and cancellation mechanism, Defendant’s stated policy was that
`it did “not provide full or partial refunds.” Thus, Defendant’s restrictive refund
`policies compounded the consumer injury caused by its misleading memberships
`and its failure to provide a simple cancellation mechanism.
`48. Based on the facts and violations of law alleged in this Complaint, the
`FTC has reason to believe that Defendant is violating or is about to violate laws
`enforced by the Commission because, among other things: Defendant engaged in
`its unlawful acts and practices repeatedly over a period of at least three years;
`Defendant continued its unlawful acts or practices despite knowledge of tens of
`thousands of complaints; Defendant modified its unlawful conduct only after
`receiving a Civil Investigative Demand from the FTC; and Defendant remains in
`the business of selling negative-option online educational services and maintain the
`means, ability, and incentive to resume its unlawful conduct.
`
`
`
`- 19 -
`
`COMPLAINT
`
`1
`2
`3
`4
`5
`6
`7
`8
`9
`10
`11
`12
`13
`14
`15
`16
`17
`18
`19
`20
`21
`22
`23
`24
`25
`26
`27
`28
`
`

`

`Case 2:20-cv-07996 Document 1 Filed 09/01/20 Page 20 of 25 Page ID #:20
`
`
`
`VIOLATIONS OF THE FTC ACT
`49. Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), prohibits “unfair or
`deceptive acts or practices in or affecting commerce.”
`50. Misrepresentations or deceptive omissions of material fact constitute
`deceptive acts or practices prohibited by Section 5(a) of the FTC Act.
`51. Acts or practices are unfair under Section 5 of the FTC Act if they
`cause or are likely to cause substantial injury to consumers tha

This document is available on Docket Alarm but you must sign up to view it.


Or .

Accessing this document will incur an additional charge of $.

After purchase, you can access this document again without charge.

Accept $ Charge
throbber

Still Working On It

This document is taking longer than usual to download. This can happen if we need to contact the court directly to obtain the document and their servers are running slowly.

Give it another minute or two to complete, and then try the refresh button.

throbber

A few More Minutes ... Still Working

It can take up to 5 minutes for us to download a document if the court servers are running slowly.

Thank you for your continued patience.

This document could not be displayed.

We could not find this document within its docket. Please go back to the docket page and check the link. If that does not work, go back to the docket and refresh it to pull the newest information.

Your account does not support viewing this document.

You need a Paid Account to view this document. Click here to change your account type.

Your account does not support viewing this document.

Set your membership status to view this document.

With a Docket Alarm membership, you'll get a whole lot more, including:

  • Up-to-date information for this case.
  • Email alerts whenever there is an update.
  • Full text search for other cases.
  • Get email alerts whenever a new case matches your search.

Become a Member

One Moment Please

The filing “” is large (MB) and is being downloaded.

Please refresh this page in a few minutes to see if the filing has been downloaded. The filing will also be emailed to you when the download completes.

Your document is on its way!

If you do not receive the document in five minutes, contact support at support@docketalarm.com.

Sealed Document

We are unable to display this document, it may be under a court ordered seal.

If you have proper credentials to access the file, you may proceed directly to the court's system using your government issued username and password.


Access Government Site

We are redirecting you
to a mobile optimized page.





Document Unreadable or Corrupt

Refresh this Document
Go to the Docket

We are unable to display this document.

Refresh this Document
Go to the Docket