Darden Restaurants, Inc ., "the world's largest casual dining restaurant company" operates all those "Red Lobster," "Olive Garden," "Bahama Breeze," "Smokey Bones Barbeque & Grill," and "Seasons 52" restaurants you'll find throughout the country. (According to the company's website, each year some 300 million meals are served at these 1400 establishments.)
The restaurateur got into a bit of a pickle when the Federal Trade Commission (FTC) charged Darden with "deceptive trade practices" under federal law. It was uncovered that Darden was charging its customers a "dormancy fee," when gift cards purchased from the chain were not used after a certain period of time. Apparently, appropriate disclosures were not made to customers at the time of purchase or the fine print on those cards was obscured or rendered illegible by the point type or graphic utilized.
In a three page complaint , the FTC alleged that customers were unaware of the monthly fee until such time as they attempted to use the gift cards and "discovered that the cards held little or no remaining value."
According to the FTC, Darden:
failed to disclose, or ... failed to disclose adequately, that, after a specified number of consecutive months of non-use (i.e., 15 or 24 consecutive months), ... a $1.50 fee per month [was deducted] from the value of their gift cards until they are used again. This fact would be material to consumers in their purchase or use of [the chain's] gift cards. The failure to disclose this fact, in light of the representation made, was, and is, a deceptive practice.
In a press release dated April 3, 2007 , the FTC announced that Darden has agreed to sign a " consent order " modifying its gift-card practices. The proposed order provides, in part, as follows:
IT IS ORDERED that respondents, directly or through any corporation, subsidiary, division, or other device, in connection with the labeling, advertising, promotion, offering for sale, sale, or distribution, in or affecting commerce, of any Darden Gift Card, shall not fail to disclose clearly and prominently:
A. the existence of any expiration date or Covered Fee associated with the Darden Gift Card; provided, however, that, at the point of sale, prior to purchase, respondents shall not fail to disclose clearly and prominently all of the material terms and conditions of any expiration date or Covered Fee associated with the Darden Gift Card; and
B. on the front of each Darden Gift Card, the existence of any expiration date or Covered Fee associated with the Darden Gift Card.
Darden has furthered agreed to make restitution and will restore the fees which were wrongfully collected from its customers' gift cards and will post notice of that refund on its various websites.
We believe the proposed resolution is flawed and should not be given final approval by the FTC. The agreement assumes that those Darden customers who were harmed by the company's "deceptive trade practice," kept their valueless gift cards. Quite unlikely, don't you think?
Since we fail to see how consumers will truly be made whole by this outcome, we're of the opinion that the settlement lacks claws legs.
For a copy of the FTC's complaint, please use this link: Darden Complaint
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The FTC is currently accepting comments from the public with regard to this proposed settlement. Comments should be forwarded to the FTC, Office of the Secretary, Room H-135, 600 Pennsylvania Avenue, N.W., Washington, DC 20580, on or before May 2, 2007.