Opinion ID: 181032
Heading Depth: 4
Heading Rank: 2

Heading: The Auto-Ship Program

Text: The life blood of the business was its auto-ship program, which was instituted in 2001, shortly before Enzyte hit the market. [4] The auto-ship program was a continuity or negative-option program, in which a customer would order a free trial of a product and then continue to receive additional shipments of that product until he opted out. Before each new continuity shipment arrived on the customer's doorstep, a corresponding charge would appear on his credit-card statement. The shipments and charges would continue until the customer decided to withdraw from the program, which required the customer to notify the company. In the early days of the auto-ship program, customers who ordered products over the phone were not told that they were being enrolled. [5] From August 2001 to at least the end of December 2002, [6] customers were simply added to the program at the time of the initial sale without any indication that they would be on the hook for additional charges. Apparently, products were shipped with literature explaining the program, but no authorization was sought in advance of the shipment. According to Teegarden, Warshak explained that the auto-ship program was never mentioned because nobody would sign up. If nobody signed up, you couldn't make revenue. This policy resulted in a substantial volume of complaints, both to Berkeley and to outside organizations. In October 2002, the Better Business Bureau (BBB) contacted Berkeley and indicated that more than 1,500 customers had called to voice their consternation. Because of the complaints, Berkeley's sales scripts and website began to include some language disclosing the auto-ship program. [7] A number of internal emails indicate that sales representatives were required to read the disclosure language and faced punishment if they failed to do so. To monitor the interactions between representatives and customers, Berkeley installed a recording system for all incoming calls. However, as a number of Berkeley insiders testified, the compulsory disclosure language was not always read, and it was designed not to work. Shelley Kinmon testified that the disclosure of the continuity shipments was only made after the customer had placed his order. In other words, the sales representative had already taken the customer's credit-card information when auto-ship was mentioned. Also, the disclosures were deliberately made with haste, and they were placed after unrelated language that was intended to divert or deaden the customer's attention. In the case of Enzyte, sales reps were instructed to lead into the disclosure language by stating that the product is not a contraceptive nor will it prevent or treat any sexually transmitted disease. [8] According to Teegarden, the thinking was that, if we started off with a statement about a contraceptive, something other than what it was, that people wouldn't really listen to what we were disclosing to them. Moreover, disclosure of the auto-ship program was sometimes irrelevant. For example, in November 2003, Berkeley hired a company called West to handle sales calls that were from ... Avlimil or Enzyte advertisements. During the calls, West's representatives asked customers if they wanted to be enrolled in the auto-ship program, and over 80% of customers declined. When Warshak learned what was happening, he issued instructions to take those customers, even if they decline[d], even if they said no to the Auto-Ship program, go ahead and put them on the Auto-Ship program. A subsequent email between Berkeley employees indicated that all [West] customers, whether they know it or not, are going on [auto-ship]. As a result, numerous telephone orders resulted in unauthorized continuity shipments. However, not all of Berkeley's auto-ship issues related to the telephone. Many Berkeley sales were the result of orders placed on the Internet, where disclosure of the auto-ship program was inconsistent. In 2001, when Berkeley was in its infancy, the company's websites contained no indication that customers would be enrolled in the program. Thereafter, disclosures were placed on the websites, but the disclosures would appear[], disappear[], and chang[e]. In 2003, for instance, disclosure language that had been added to Berkeley's Avlimil website was removed because sales had been drastically affected. Additionally, the language that did appear was often confusing and contained non sequiturs. By July 2004, the complaints arising from Berkeley's auto-ship program had not slowed, so the President of the BBB reached out to Berkeley, sending a letter directly to Warshak. The purpose of the letter was to express serious concerns about the number of complaints that [the BBB] had received. The complaints related to a single issue, which was the [auto-ship] program. According to the President of the BBB, the organization had asked on numerous occasions that [Berkeley] consider dropping [the program], and got no positive response.