Full opinion text
MEMORANDUM OF DECISION CORMAC J. CARNEY, District Judge. I. INTRODUCTION The Federal Trade Commission (“FTC”) brought this action for injunctive and monetary equitable relief against Commerce Planet, Inc. (“Commerce Planet”) and several of its directors and officers, including Michael Hill, Aaron Gravitz, and Charles Gugliuzza (collectively, “Defendants”), for deceptive and unfair business practices arising from Defendants’ website marketing of a web creation and hosting service called OnlineSupplier. OnlineSupplier was marketed as a free “Online Auction Starter Kit” that purported to help consumers sell products on eBay. Consumers were permitted a free trial period to use OnlineSupplier with payment of a small shipping and handling fee. If consumers did not cancel the service within the trial period, they were automatically charged a recurring monthly fee ranging from $29.95 to $59.95. The FTC alleges that during the relevant time period (July 2005 to March 2008), Defendants deceptively marketed OnlineSupplier as a free auction kit on its website without adequately disclosing the program’s negative option plan, which required consumers to affirmatively cancel their membership or otherwise incur a monthly charge to their credit card. The FTC alleges that consumers unwittingly signed up for OnlineSupplier, believing they had ordered a free kit, only to discover later that they had been enrolled in OnlineSupplier’s continuity program when they saw monthly charges on their credit card bill. The FTC alleges that between July 2005 and March 2008, Commerce Planet obtained over $45 million from over 500,000 consumers. The FTC settled with all Defendants except for Mr. Gugliuzza, Commerce Planet’s former president and consultant from July 2005 to November 2007. In the operative First Amended Complaint (“FAC”), the FTC asserts two counts against Mr. Gugliuzza for (i) deceptive practices and (ii) unfair practices in violation of section 5(a) of the Federal Trade Commission Act (the “FTC Act” or “Act”), 15 U.S.C. § 45(a). The FTC requests injunctive and monetary equitable relief against Mr. Gugliuzza under section 18(b) of the FTC Act, 15 U.S.C. § 53(b). Between January 31, 2012 and February 28, 2012, the Court conducted a sixteen-day bench trial that involved over 300 exhibits and 22 witnesses. The. parties thereafter submitted extended closing briefs. The Court, by this Memorandum of Decision, issues its findings of fact and conclusions of law pursuant to Federal Rule of Civil Procedure 52(a). After carefully reviewing all the evidence, testimony, and arguments presented by the parties’ counsel, the Court concludes that the FTC has proven by a preponderance of the evidence that Mr. Gugliuzza is individually liable for the deceptive and unfair marketing of OnlineSupplier in violation of section 5(a) of the FTC Act. The Court finds that a permanent injunction against Mr. Gugliuzza is appropriate because there is a cognizable danger that he will repeat the deceptive and unfair marketing tactics he authorized and implemented with OnlineSupplier. The Court also finds that monetary equitable relief against Mr. Gugliuzza is proper in the amount of $18.2 million as restitution for his wrongful and knowing participation in the deceptive marketing of OnlineSupplier. II. BACKGROUND Commerce Planet marketed and sold OnlineSupplier, a webhosting service that purported to provide consumers an inexpensive platform to sell products online. Commerce Planet hired Mr. Gugliuzza to provide an assessment of the company and recommend ways to improve its profitability. From July 2005 to November 2007, Mr. Gugliuzza served in various capacities as the company’s consultant, president, de facto executive and in-house counsel, and director. Mr. Gugliuzza helped transition the company from telemarketing to internet marketing of OnlineSupplier, whereby consumers could sign up for the program from its website. Internet sign-ups of OnlineSupplier dramatically improved the company’s revenue. At the same time, numerous consumers complained to the Better Business ■ Bureau (“BBB”), the Attorney General, and to Commerce Planet regarding confusion as to the nature and cost of OnlineSupplier and demanded refunds. OnlineSupplier was also subject to excessive credit card chargebacks. In March 2008, the FTC served a civil investigative demand (“CID”) on Commerce Planet, after which Commerce Planet changed its webpages for OnlineSupplier under the guidance of outside counsel knowledgeable in FTC Act compliance. Sales of OnlineSupplier thereafter plummeted. In November 2009, the FTC filed suit against Commerce Planet and three of its key officers and employees, Messrs. Hill, Gravitz, and Gugliuzza, for their alleged involvement in the deceptive and unfair marketing of OnlineSupplier during the relevant time period. A. The Parties The FTC is an independent agency of the United States Government created by statute. 15 U.S.C. §§ 41-58. The FTC enforces section 5(a) of the Act, 15 U.S.C. § 45(a), which prohibits unfair or deceptive acts or practices affecting commerce. The FTC is authorized to bring suit in federal court to enjoin violations of the Act and to secure an array of suitable equitable relief, including consumer redress. 15 U.S.C. § 53(b). Commerce Planet is á Utah corporation with its headquarters in Goleta, California. (Exhs. 1175, 2043-2051.) Commerce Planet began operations as NeWave, Inc. (“Ne-Wave”), which was founded by Messrs. Gravitz and Hill at the end of 2003 and taken public in January 2004. (Gravitz, 2/1/12,' 140:1-3; Hill, 2/7/12, 111:1-18; Hill 2/17/12, 72:23-25.) Through NeWave’s subsidiary at the time, Online Supplier, Inc., the company began marketing and selling an online web creation and hosting service called OnlineSupplier. (Exh. 31.) Effective June 2006, NeWave changed its name to Commerce Planet, Inc. (Exhs. 31, 2043-2051.) Commerce Planet began operations as a holding company and conducted its business through three wholly-owned subsidiaries: Consumer Loyalty Group, Inc. (“CLG”), Legacy Media, LLC (“Legacy Media”), and Ivenia, LLC (“Ivenia”). (Id.) Mr. Hill served as the company’s Chief Executive Officer from 2004 to September 2007, after which he remained as the company’s Chief Strategic Officer until December 2008 when he left the company. . (Hill, 2/7/12, 111:19-112:1, 112:17-18.) Mr. Gravitz, who served as the head of media at NeWave, was president of Legacy Media from 2006 until December 2008 when he left the company. (Gravitz, 2/1, 6:14-19; 2/22, 12:25-13:2.) Mr. Gugliuzza served as the company’s titular consultant from July 1, 2005 to September 2006. (Gugliuzza, 2/21/12, 110:25-111:5; Exh. 1035.) From September 11, 2006 to November 5, 2007, Gugliuzza served as president of Commerce Planet. (Gugliuzza, 2/21/12,110:21-24,116:3-13; Exhs. 228, 259-60.) Commerce Planet was only licensed to do business in California but received customer orders nationwide and from international locations. (Exh. 31.) During the relevant time period, Legacy Media functioned as the marketing and advertising arm of Commerce Planet and shared the same office as the parent company. (Gravitz, 2/1/12, 82:19-83:1, 163:3-6, Exh. 31.) CLG handled the customer service component of the company and also shared the same office as Commerce Planet. (Exh. 31.) Christopher Seidel, who joined NeWave in 2004 and served as the company’s vice president of operations, was the president of CLG from 2006 until his departure in 2009. (Seidel, 2/14/12, 52:7-11, 67:9-16; Exhs. 318, 1292a-24.) José Guardiola served as CLG’s customer service manager from August 2006 to August 2007. (Guardiola, 2/21/12, 4:19-15, 7:3-4, 35:23-24.) Paul Daniel was Commerce Planet’s Chief Financial Officer from July 2005 to May 2006. (Daniel, 2/14/12, 15:23-16:2.) David Foucar replaced Mr. Daniel as CFO from June 2006 to October 2007. (Foucar, 2/16/12, 130:19— 23, 161:16-18.) Jaime Rovelo served as the company’s final CFO from the end of 2007 to February 2009. (Rovelo, 2/10/12, 4:20-22, 5:20-25, 33:1-2.) The company’s in-house counsel was Jeffrey Conrad from mid-2004 to the end of 2006. (Conrad, 2/8/12, 40:20-25, 86:19-24.) Paul Huff replaced Mr. Conrad as Commerce Planet’s in-house counsel from 2007 until August 2008. (Huff, 2/15/12, 115:9-11; Exh. 117.) In January 2009, Commerce Planet’s assets were acquired by Superfly and later purchased by Lenco Mobile, Inc. (Cruttenden, 2/28/12, 29:17-30:9, 33:13-21; Exh. 132.) Commerce Planet is currently no longer in business. (Cruttenden, 2/28/12, 24:16-17.) B. OnlineSupplier Commerce Planet primarily marketed and sold OnlineSupplier. (Exh. 31.) The bulk of company’s revenue was generated from OnlineSupplier and associated upsell products. (Gravitz, 2/1/12, 7:16-20, 133:16-134:9; Hill 2/7/12, 159:10-18.) Messrs. Gravitz and Hill developed the concept for OnlineSupplier. (Hill, 2/7/12, 112:25-113:5.) OnlineSupplier was a website hosting service designed to enable consumers to create and manage a website to sell products on that site and on other internet sites. (Gravitz, 2/1/12, 6:20-7:3.) The service included a hosted website created by the customer; access to an inventory of products; access to the customer service department; and an information kit consisting of a 23-page manual on how to use the service and program. (Gravitz, 2/1/12, 140:12-146:11;' Exhs. 31, 2003.) Consumers signed up for OnlineSupplier initially by telephone and then later online on its webpages by entering their shipping address and credit card information. (Exh. 31.) Consumers paid for the initial handling and shipping fee of $1.95 (or $7.95 for expedited delivery) for the membership kit. (Exhs. 1270-2,1271-2.) Consumers were permitted a free trial period ranging from 7 to 14 days to use the product and services. (Exhs. 1270-1, 1271-1.) If consumers did not cancel within the free trial period, they were automatically enrolled in the continuity program and charged a monthly membership fee ranging from $29.95 to ■ $59.95 on their credit card. (Gravitz, 2/1, 66:25-67:5, 111:13-20; Gravitz, 2/2/12, 25:5-9, Hill, 2/17/12, 123:16-22.) Commerce Planet initially maintained its own warehouse from which goods were sold to customers. (Exh. 31.) The warehouse was discontinued in 2006, and products were subsequently offered to customers through Ingram ■ Micro. (Seidel, 2/14/12, 100:8-101:12; Hill, 2/17/12, 115:23-117:20.) To cancel the service, customers could either call or email customer service at CLG. (Seidel, 2/14/12,108:17-24.) 1. Marketing When Commerce Planet began operations in 2003, it initially marketed OnlineSupplier through classified advertising, newspapers, and emails, and the program was primarily sold through inbound telemarketing whereby consumers would call a toll-free number to sign up for the service. (Gravitz, 2/1/12, 7:4-6, 8:1-7; Hill, 2/7/12, 11:16-24.) At first, Commerce Planet charged consumers a flat fee of $58 or $98.90 for OnlineSupplier, depending on the particular package consumers purchased, and there was no free trial period or a negative option plan. (Gravitz, 2/1/12, 10:12-18.) However, the sale of OnlineSupplier was poor, and the company lost money. (Id. at 155:12-17; Hill, 2/17/12, 131:17-24.) The company later transitioned from telemarketing to online marketing between June and July 2005. (Gravitz, 2/1/12, 11:5-10; Seidel, 2/14/12, 56:6-16.) 2. Sign-Up Pages Between July 2005 and March 2008, there were two versions of OnlineSupplier’s sign-up pages. (Exhs. 1270, 1271.) The first working version was complete around July 2005. (Gravitz, 2/1/12, 17:15-24.) After several revisions, the final sign-up pages of the first version (“Version I”) went live in October 2005. (Gravitz, 2/1/12, 21:11-19, 27: H; . Gravitz, 2/2/12, 107:21-108:5;' Hill, 2/17/12, 117:21-118:4; Exh. 1270.)- Mr. Gravitz developed Version I • in 2005 and 2006 with the legal advice of Jeff Conrad and Mr. Gugliuzza. (Gravitz, 2/1/12, 27:11-22; Gravitz, 2/2/12, 114:2-5.) Another version of the sign-up pages (“Version II”) was used after some modifications were made to Version I in February 2007. (Gravitz, 2/1/12, 109:22-111:24; Exhs. 1271, 1198.) A third version of the sign-up pages (“Version III”) was used after the FTC’s CID on Commerce Planet in March 2008. (Exh. 1272.) Version III incorporated changes under the recommendations of outside counsel, Linda Goldstein, who had expertise in FTC Act compliance. (Gravitz, 2/1/12, 127:9-132:10; Huff, 2/15/12, 93:13-95:22; Roth, 2/8/12, 17:19-18:13; Exhs. 232, 1204, 1272.) Version III did not mention a free auction starter kit and significantly clarified the terms of membership on the landing and billing pages. (Exh. 1272.) After implementing the changes in Version III, the company experienced a severe downward spike in sales of OnlineSupplier. (Roth, 2/8/12, 21:1-14.) The internet sign-up process of OnlineSupplier involved four steps. First, through affiliate marketing, such as emails and ads, consumers were directed to OnlineSupplier’s website. (Gravitz, 2/1/12, 11:5-10, 12:11-13:20, 35:9-36:3; Exhs. 1274, 1277.) The landing page of the website represented OnlineSupplier as a free “Online Auction Starter Kit” that provided information to consumers on how to sell products on eBay. (Exhs. 1270-1, 1271-1.) Consumers could obtain a free kit if they filled out their shipping address and clicked the “Ship My Kit!” button. (Id.) Second, upon clicking the “Ship My Kit!” button, consumers were directed to the billing’ page where they could select their shipping method and submit their credit card information. (Exhs. 1270-2, 1271-2.) On the bottom of the landing and billing pages, below the “Ship My Kit!” button, there was a hyperlink to the “terms and conditions,” which popped up on a separate page. (Exhs. 1270, 1271.) The terms and conditions page included information about OnlineSupplier’s services, fees, and legal conditions, including the automatic charge of the monthly membership fee if consumers did not cancel within the trial period. (Id.) At the bottom of the billing pages, in fine print, there was also a disclosure about the negative option plan and membership fee. (Exhs. 1270-2, 1271-2.) The first draft of this disclosure was prepared by Mr. Gravitz using a competitor’s site and circulated to management, including Mr. Gugliuzza, for review. (Gravitz, 2/1/12, 71:3-10.) Clicking on the “Ship My Kit!” button on the billing page completed the order for OnlineSupplier. (Exhs. 1270-2, 1271-2.) Third, after submitting their credit card information and clicking the “Ship My Kit!” button, consumers were directed to the upsell page, where they could chose additional products and services for a monthly or annual fee. (Exhs. 1270-3, 1271-3.) The products and services were pre-clicked to “Yes,” but the consumer could change it to “No.” (Id.) Fourth, upon clicking the “Submit” button on the upsell page, consumers were directed to the final confirmation page with the order information. (Exhs. 1270-4, 1271-4.) Commerce Planet experimented with sending post-transaction confirmation emails to consumers before charges to credit cards were posted, but these were inconsistently used and discontinued after a brief period of time. (Guardiola, 2/21/12, 11:20-25, 16:14-23; King, 2/3/12, 157:10-19.) 3. Consumer Complaints and Chargebacks More than 500,000 consumers completed OnlineSupplier’s sign-up process during the relevant time period. (Exh. 2061.) The transition to online sign-ups was followed by dramatic increases in company profits. From 2005 to 2006, when the company transitioned to online sign-ups, the company swung from over a 6.2 million-dollar net loss to over an 8.7 million-dollar net profit. (Foucar 2/16/12, 152:18-153:14; Exh. 2044.) At the same time, the company started to receive high volumes of telephone and written complaints from consumers who were confused over the nature of the service and terms of membership and demanded refunds. (Guardiola, 2/21/12, 31:20-32:13; Exhs. 163, 193, 1180, 1177-79, 1292a, 1293, 1295.) In numerous instances, consumers first became aware that they had been enrolled in a negative option plan when they received a credit card bill with a charge for membership to OnlineSupplier. (Gravitz, 2/1/12, 165:17-24.) OnlineSupplier also was subject to excessive credit card chargebacks in 2006 and 2007, leading to fines of more than one million dollars during this time. (Chen, 2/3/12, 5:9-23; Exhs. 1312, 1058-62, 1317-19,1321-22.) C. Role of Charles Gugliuzza Mr. Gugliuzza was employed with Commerce Planet as a consultant and president from July 2005 to November 2007 and retained a seat on the company’s Board as an outside director until May 2008. (Gugliuzza, 2/21/12, 118:10-17, 122:18-20; Exh. 235.) Before joining Commerce Planet, Mr. Gugliuzza graduated from Loyola Law School and cofounded a company called eBatts with a law school friend. (Gugliuzza, 2/21/12, 102:1-20.) EBatts operated a consumer direct website that sold batteries, adapters, and chargers for laptops, cell phones, and digital cameras manufactured by Battery-Biz, the family business of his law school classmate. (Id.) Mr. Gugliuzza held the position of Chief Operating Officer at eBatts. (Id. at 103:16-17.) EBatts was financially successful and became the exclusive supplier for Duraeell’s camcorder and digital camera batteries. (Id. at 103:19-104:9.) Mr. Gugliuzza left eBatts to start his own business, American Power Supplies, a web-store that locally purchased products similar to those at eBatts and sold them directly to consumers via the internet. (Id. at 104:17-105:17.) Again, Mr. Gugliuzza had financial success with American Power Supplies. (Id. at 105:18-20.) Mr. Gugliuzza sold his interest in American Power Supplies to his business partner after selling back his interest in Battery-Biz and signing a noncompete clause with Battery-Biz. (Id. at 105:21-106:7.) 1. Consultant (July 2005 to September 2006) After he sold his interest in American Power Supplies, Mr. Gugliuzza sent a letter to NeWave’s Board of Directors in April 2005, seeking the position of CEO. (Exh. 3.) In May 2005, NeWave’s Board of Directors retained Mr. Gugliuzza as a consultant to conduct an assessment of the company and identify ways to increase profits and decrease costs. (Gugliuzza, 2/21/12, 108:7-21; Hill, 2/7/12, 115:24-116:24, 117:5-11). Mr. Gugliuzza performed consulting work through his business called Olive Tree Holdings. (Id. at 108:7-21; Exh. 6.) Mr. Gugliuzza conducted a one-month assessment of NeWave and submitted a 78-page report of his evaluation and recommendations to the company’s Board in June 2005. (Gugliuzza, 2/21/12, 108:7-21; Exh. 6.) The report provided a detailed, comprehensive assessment of Commerce Planet and its subsidiaries, including the company’s management, infrastructure, operations, finances, products and services, and marketing and advertising. Some of the core deficiencies Mr. Gugliuzza identified in the report in-eluded the discrepancy between perceived value and actual value; management’s lack of experience and skill to effectively operate the company and implement change; lack of well-established channels of communication and coordination between managers; and “[a] lack of value added products and services that produce high profit margins and customer retention,” among others. (Exh. 6.) Mr. Gugliuzza recommendations included a “complete overhaul” with respect to the company’s existing decision making process; improvements in the channel of communication between management to clarify expectations and responsibilities for projects; and enhancements to coordination efforts between departments. (Id.) Specifically, with respect to marketing, Mr. Gugliuzza noted the lack of coordination between marketing and sales. (Id.) Mr. Gugliuzza also emphasized that because “existing management lack[ed] experience,” management was “in dire need of a leader” who possessed basic management skills. (Id.) Mr. Gugliuzza also observed that customer retention was extremely low with an average of less than 35% after the first 45 days of billing activity. (Id.) He identified marketing expenditures as comprising the largest portion of NeWave’s expense budget and the company’s media budget to be the largest contributor to its negative net profits, aside from payroll. (Id.) Mr. Gugliuzza provided more specific recommendations with respect to the company’s human resources, infrastructure, operations, products and services, and budgets. For example, Mr. Gugliuzza recommended that Messrs. Hill and Gravitz be replaced as the CEO and head of Media, respectively, so they could focus their attention on developing revenue generating opportunities. (Id.) Mr. Gugliuzza recommended that Mr. Hill remain as president and Mr. Gravitz be in charge of business development. (Id.) From July 1, 2005 to September 2006, Mr. Gugliuzza held the titular position of consultant to Commerce Planet. (Gugliuzza, 2/21/12, 110:25-111:5; Exh. 1035.) Mr. Gugliuzza was also a director of the company beginning in August 2006. (Exhs. 31, 1247.) After Mr. Gugliuzza conducted an assessment of the company, the Board of Directors hired him to implement the recommendations in his report. (Hill 2/7/12, 125:20-126:21; Gugliuzza, 2/21/12, 109:10-18; Exh. 1246.) Mr. Gugliuzza executed a “Corporate Consulting Agreement” with NeWave, dated June 28, 2005. (Exh. 1035.) The consulting agreement provided that, as a consultant, Mr. Gugliuzza, “shall assist in implementing operating strategies and procedures as prescribed by the Company’s Board of Directors, and pursuant to the Consultant’s Company Performance Assessment Report dated June 14, 2005” and “shall also use [ ] best efforts to introduce the Company to potential vendors, customers or business partners which would be beneficial to the Company’s business.” (Id.) Under the consulting agreement, Mr. Gugliuzza was paid $5000 in cash per week, with a signing and performance bonus. (Id.) Although the consulting agreement lasted three months, it had a renewable option under the same terms, and Mr. Gugliuzza renewed his contract until he became president in 2007. (Hill, 2/7/12,131:5-20.) The Board of Directors tasked Mr. Gugliuzza with the goal of reducing cost and increasing revenue. (Hill, 2/17/12, 120:6-121:7.) Although Mr. Gugliuzza held the title of consultant, the Board conferred broad, management authority upon Mr. Gugliuzza over the company’s departments arid daily operations, including over Mr. Gravitz, marketing, and customer service. (Hill, 2/7/12, 128:3-130:9, 137:20-138:7; Daniel, 2/14/12, 28:1-14; Gravitz, 2/2/12, 122:3-11.) Messrs. Gugliuzza and Hill comprised the company’s executive staff, and by around March 2006, they were being compensated under the same terms. (Hill, 2/7/12, 142:4-7, 150:10-20; Hill 2/17/12, 130:4-9; Exhs. 16, 1331.) Mr. Gugliuzza regularly met with and communicated with all the department heads, who were required to submit weekly reports to him. (Gugliuzza, 2/23/12 Vol. I, 57:8-11; Seidel, 2/14/12, 58:6-59:22, 61:19-24; Exhs. 1124, 1129,1130, 1132,1354, 1356,1368-71, 1292a, 1293, 1295.) Mr. Gugliuzza, along with Hill, oversaw the company’s migration of OnlineSupplier from telemarketing to internet sales in 2005. (Hill, 2/17/12, 122:1-4; Daniel, 2/14/12, 28:15-23.) Mr. Gugliuzza also acted as de facto legal counsel of NeWave and took over Mr. Conrad’s role as the primary legal reviewer for the company. (Gravitz, 2/2/12, 120:6-12; Gugliuzza, 2/22/12, 119:5-14.) After Mr. Gugliuzza implemented many of the recommendations in his assessment report, the company became profitable. (Hill, 2/7/12, 143:10-24.) 2. President (September 2006 to November 2007) Pursuant to an executive agreement, Mr. Gugliuzza became the president of the company, effective September 11, 2006. (Hill, 2/7/12, 152:21-153:10; Exhs. 259.) He signed another executive employment agreement on April 10, 2007. (Exh. 261.) Gugliuzza served as president until he stepped down on November 5, 2007. (Gugliuzza, 2/21/12, 110:21-24, 116:3-13; Exhs. 228, 259-61.) Mr. Hill remained the CEO, and David Foucar became the CFO. (Hill, 2/7/12, 151:19-152:1.) Although Mr. Gugliuzza assumed the title of president, as a practical matter, his duties and responsibilities did not materially change. (Id. at 153:18-25.) .Mr. Gugliuzza continued to assert operational control over the company and its subsidiaries and had oversight authority over the department heads. (Foucar, 2/16/12, 137:19-138:6.) Mr. Gravitz reported to Mr. Gugliuzza, and Mr. Gugliuzza directed the marketing of OnlineSupplier, such as by reviewing and approving marketing agreements, approving landing and billing pages of OnlineSupplier, and reviewing weekly performance reports. (Hill, 2/7/12, 155:11— 20.) Mr. Seidel also continued to report to Mr. Gugliuzza. (Seidel, 2/14/12, 67:9-16, 68:16-18.) After Mr. Huff was hired in 2007, Mr. Gugliuzza delegated some of his legal responsibilities to Mr. Huff, but remained the final authority on legal matters. (Gravitz, 2/1/12, 35:1-8; Gravitz, 2/2/12, 120:14-19; Hill, 2/7/12, 141:16-142:13.) On November 5, 2007, Mr. Gugliuzza stepped down as president, and Anthony Roth took over as the company’s CEO and president. (Roth, 2/8/12, 9:1-9; Exhs. 228, 234.) Mr. Gugliuzza continued working for the company as a consultant until December 31, 2007. (Gugliuzza, 2/21/12, 116:14-17, 117:4-19; Exh. 235.) At the end of 2007, Commerce Planet repurchased from Mr. Gugliuzza his 1.8 million shares of company stock in exchange for $185,000 cash down, $90,400 in additional payment terms, and a $427,000 promissory note, pursuant to a Share Repurchase Agreement on December 26, 2007. (Roth, 2/8/12, 10:10-12:1; Exhs. 264, 265.) Mr. Gugliuzza did not receive payment on the promissory note and received a total of $275,400 for the purchase of his company stock. (Rovelo, 2/10/12, 9:24-11:2; Exhs. 138, 264.) Mr. Gugliuzza remained on the company’s Board as an outside director until May 2008. (Gugliuzza, 2/21/12, 118:10-17, 122:18-20; Exh. 1175.) From 2006.to 2007, Mr. Gugliuzza received over $3 million in compensation, bonuses, stock awards, and option awards for his services at Commerce Planet. (Rovelo, 2/10/12, 6:8-15:10, 36:18-36:7; Exhs. 138, 264, 1042.) After leaving Commerce Planet, Mr. Gugliuzza founded a company called Grow Commerce with one partner, Jaime Stafford, the original founder of Iventa. (Gugliuzza, 2/21/12, 124:20-125:17.) Grow Commerce was founded on the assets of Iventa. Grow Commerce built, operated, and managed websites for other companies to sell products; managed fulfillment; and provided warehouse and customer service. (Id. at 125:18-126:5.) Grow Commerce did not engage in direct consumer sales but serviced other companies and did not include a monthly membership, or negative option plan. (Id. at 127:25-127:13.) Mr. Gugliuzza was a principal of Grow Commerce and owned 49% of that company. (Id. at 126:6-10.) Grow Commerce was financially successful, and the company was sold within several months. (Id. at 127:14-19.) Mr. Gugliuzza then obtained an MBA degree from the University of Southern California, after which he worked for Oakley,'a sunglass company, as an e-Commerce strategy manager. (Id. at 124:7-11, 128:20-129:3.) Mr. Gugliuzza supported Oakley’s large e-commerce account that consisted of business-to-business sales of sunglasses to such companies as Amazon and Zappos. (Id. at 129:4-20.) Oakley does not utilize a monthly membership or negative option plan. (Id.) Mr. Gugliuzza left Oakley three days before trial. (Id. at 129:21-130:1.) D. Procedural History In March 2008, the FTC served a CID on Commerce Planet. (Gravitz, 2/1/12, 48:3-6; Roth, 2/8/12, 17:19-18:13.) The FTC filed suit against Defendants on November 10, 2009. (Dkt. No. 1.) Shortly thereafter, the FTC settled with Commerce Planet, Mr. Hill, and Mr. Gravitz, and final judgments for permanent injunction and equitable monetary relief in the amount of $19,730,000 were entered against them on November 18, 2009. (Dkt. Nos. 3-5, 7-9.) The parties agreed to suspend the judgment for monetary relief under certain conditions, including the payment of $100,000 by Commerce Planet, $330,000 in cash plus interest on a $100,000 loan by Mr. Hill, and $192,000 by Mr. Gravitz. (Dkt. Nos. 7-9; Hill, 2/7/12, 183:7-11; Hill, 2/17/12,114:14-16.) The FTC engaged in settlement discussions with Mr. Gugliuzza, but the parties were unable to reach a resolution. (Dkt. No. 142.) After the FTC and Mr. Gugliuzza engaged in' substantial discovery, the FTC filed a motion for leave to amend the Complaint, which the Court granted. (Ct. Order, Dkt. No. 145, June 27, 2011.) The FTC filed the operative FAC on June 29, 2011. (Dkt. No. 147.) On July 18, 2011, Mr'. Gugliuzza answered the FAC, asserting several affirmative defenses, including advice of counsel, reliance on professionals, good faith, and mootness. (Dkt. No. 149.) On July 27, 2011, Mr. Gugliuzza filed two motions for partial summary judgment, which the Court denied. (Ct. Order, Dkt. No. 164, Sept. 8, 2011.) The Court thereafter conducted its bench trial, and the parties submitted closing briefs. (Dkt. Nos. 242-43, 248-49.) III. INDIVIDUAL LIABILITY The FTC alleges that Defendants engaged in deceptive and unfair website marketing of OnlineSupplier as a free “Online Auction Starter Kit” from July 2005 to March 2008 without adequately disclosing the program’s negative option plan. (FAC ¶¶ 17-24, 48-53.) The FTC also alleges that Mr. Gugliuzza participated in, controlled, or had authority to control as well as knew about or should have known about Commerce Planet’s deceptive and unfair practices related to the marketing of OnlineSupplier via his various roles as the company’s consultant, president, de facto executive, and in-house counsel from July 2005 to November 2007. (Id. ¶¶ 38 — 43.) Based on these allegations, the FTC asserts two counts against Mr. Gugliuzza for deceptive and unfair practices under section 5(a) of the FTC Act. A. Deceptive Acts (Count I) Section 5(a) of the FTC Act prohibits “unfair or deceptive acts or practices in or affecting commerce” and empowers the FTC to prevent such acts or practices. 15 U.S.C. § 45(a)(1), (2). An act or practice is deceptive if (1) there is a representation, omission, or practice, (2) that is likely to mislead consumers acting reasonably under the circumstances, and (3) the representation, omission, or practice is material. FTC v. Pantron I Corp., 33 F.3d 1088, 1095 (9th Cir.1994), cert. denied, 514 U.S. 1083, 115 S.Ct. 1794, 131 L.Ed.2d 722 (1995). District courts consider the overall, common sense “net impression” of the representation or act as a whole to determine whether it is misleading. See FTC v. Gill, 265 F.3d 944, 956 (9th Cir.2001) (holding that defendant failed to counter the FTC’s substantial showing that he made statements and created an overall “net impression” of a misleading representation regarding the ability to remove negative information from consumers’ credit report, “even if the information was accurate, complete, and not obsolete”); FTC v. Stefanchik, 559 F.3d 924, 928 (9th Cir.2009) (“Deception may be found based on the ‘net impression’ created by a representation.”). A misleading impression is material if it “involves information that is important to consumers and, hence, likely to affect their choice of, or conduct regarding, a product.” FTC v. Cyberspace.com, LLC, 453 F.3d 1196, 1201 (9th Cir.2006) (citation and quotes omitted). The FTC’s theory of the case is that Defendants offered a free internet auction kit as a ruse to enroll consumers in OnlineSupplier. Defendants thereby grossed over $45 million in two years by tricking over 470,000 consumers into unwittingly submitting their credit card information, which was used to charge them a monthly subscription, fee without their informed consent. (Opening Statements, Trial Tr., 1/31/12, 5:25-6:15, 10:8-10.) At trial, the FTC attempted to show that OnlineSupplier’s landing and billing pages, (Exhs. 1270, 1271), created the net impression that OnlineSupplier was a free offer, except for a small shipping and handling fee, and that although there was a disclosure of the negative option plan, consumers were unlikely to see or understand it because of the way it was placed on the sign-up pages. (Trial Tr., 1/31/12,11:7-13.) Mr. Gugliuzza denied liability and any wrongdoing- on his part. He contended that OnlineSupplier was not a devious internet scheme, but a legitimate -product that people wanted to use. (Id. at 20:24-21:7.) . Mr. Gugliuzza argued that there was no empirical evidence of deception or unfairness arising from the negative option disclosures on OnlineSupplier’s website. (Dkt. No. 187 [Def.’s Trial Brief], at 2.) Mr. Gugliuzza also argued that there was no evidence that consumers were deceived by the webpages, and any consumer confusion about OnlineSupplier resulted from third-party marketing fraud. (Id.; see also Trial Tr., 1/31/12, 22:18-23:8.) The Court finds that the' landing and billing pages of OnlineSupplier were materially misleading because those web-pages created the net impression that consumers could obtain a free auction kit, when in fact, consumers were subscribing to a continuity program with monthly subscription fees. The clear weight of the evidence simply does not support Mr. Gugliuzza’s position that affiliate fraud was the primary cause of consumer confusion. That confusion was clearly caused by OnlineSupplier’s misleading sign-up pages. 1. Version I Is Facially Misleading The most compelling evidence that the website marketing of OnlineSupplier was misleading are the sign-up pages themselves. The landing and billing pages of the webpages created the net impression that OnlineSupplier was a free kit containing information on how to sell products online, rather than a continuity plan with a monthly membership fee. The central message on the landing page of Version I is that consumers will get a free kit that gives them information about how to sell products on eBay. (Exh. 1270.) When looking at the landing page, the most prominent graphic is the red boxed message on the upper left corner that states, “AS SEEN ON TV,” which then leads the eye to the main message in caps “OVER $3.2 BILLION WAS MADE ON ebay LAST YEAR!” The phrase “$3.2 Billion” and “On ebay” are also in red, except that the eBay logo is in primary colors. Above this in smaller, dark blue font is the phrase “Work From Anywhere Using Your Computer!” Underneath the main headline about eBay is the message in a green banner that states “JOIN OVER 724,000 AMERICANS MAKING A LIVING ON EBAY.” (Exhs. 1270-1, 1271-1.) Below the banner, the webpage is divided into two sections. The left section contains information about an “Online Auction Starter Kit” that “provides detailed instructions to maximize profits, using little known but proven strategies.” Just below this statement in Version I is the directive “GET YOUR KIT NOW FOR FREE.” The word “FREE” is in red, as is the phrase “STARTER KIT.” The kit is advertised to include the following benefits: (1) a step-by-step quick start guide, (2) no experience required, (3) advanced training for experienced auctioneers, (4) and up to 50% discounts on thousands of name brand products. The right section of the web-page contains a light blue box where the user may submit her shipping address. There is a countdown clock on top that ticks off the number of minutes left until the offer expires. Just below is the question “Where do we ship your FREE KIT?” The phrase “FREE KIT” is in red. The button “Ship My Kit!” appears below the spaces for filling in one’s name and contact information. Below that is the message inserted in light gray that states “GET YOUR ONLINE AUCTION STARTER KIT TODAY FREE!” The price 19.95 is crossed out and next to it is the offer “NOW FREE! (limited time offer)!” Again, “FREE” is in red. Below the fold, in smaller text, is the following disclaimer: “By submitting this form you are accepting and agreeing to the Privacy Policy and Terms of membership of this Web Site.” The phrase “Privacy Policy” and “Terms of Membership” are hyperlinked in slightly darker blue. Further below is the message: “BONUS, your kit includes a FREE 14-DAY TRIAL TO YOUR VERY OWN WEBSTORE.” On the bottom left are “Success Stories,” which consist of testimonials from two satisfied customers who purchased the kit. Overall, the predominant message is that consumers can order a free kit on how to make money by selling products on eBay. This is underscored by the repetition and placement of the phrase “Free Kit,” which is bolded in red, and by the use of name eBay at the center top of the webpage. Notably, there is no mention of the product’s name “OnlineSupplier,” on the webpage in a manner that enables viewers to associate the kit with OnlineSupplier. Nor is there any information about Commerce Planet, its subsidiaries, or any information about cost or the continuity program. Rather, the net impression created by the landing page is that the kit is affiliated with eBay, and that consumers can learn how to sell products on eBay from the kit. While the terms of the continuity program are disclosed in a separate, hyperlinked “Terms of Membership” page, this is an insufficient cue. Disclaimers do not automatically exonerate deceptive activities. See FTC v. Gill, 71 F.Supp.2d 1030, 1044 (C.D.Cal.1999), aff’d, 265 F.3d 944 (9th Cir.2001). “A solicitation may be likely to mislead by virtue of the net impression it creates even though the solicitation contains truthful disclosures.” Cyberspace.com, 453 F.3d at 1200. There are multiple reasons why the hyperlinked “Terms of Membership” page is inadequate to overcome the net impression that OnlineSupplier was a free auction kit. First, the hyperlink is buried at the bottom and is not placed in close proximity to the “Ship My Kit!” button, making it unlikely that consumers would notice or click on the link. There is also no indication that the “Terms of Membership” are specifically in regard to a negative option plan. Second, when the viewer clicks on the hyperlink, the actual terms of membership appear on a separate pop-up page rather than being directly inserted on the landing page. Such separation suggests that the disclosure is inadequate because it appears in a different context than the claims they purport to repudiate. See Gill, 71 F.Supp.2d at 1044 (holding that a disclaimer in contract consumers eventually signed was inadequate to overcome deceptive representations in defendants’ advertisements). Third, the information about the continuity plan, contained under numeral 4 (“Payment of Fees”), is buried with other densely packed information and legalese, which makes it unlikely that the average consumer will wade through the material and understand that she is signing up for a negative option plan. Once the consumer clicks the “Ship My Kit!” button, she is taken to the billing page. (Exhs. 1270-2.) The eBay logo, along with the message “AS SEEN ON TV,” is repeated on top, reinforcing the message that the kit is affiliated with eBay. The space for filling in one’s payment information is inserted in a light blue vertical box to the right. At the top are two shipping options, regular shipping for $1.95 and expedited shipping for $7.95. Below the space for the credit card information is the “Ship My Kit!” button. At the very- bottom, below the fold, in slightly darker blue font and in fine print is the disclosure regarding- the negative option plan and payment terms. Although information about OnlineSupplier’s negative option plan is disclosed on the webpage, fine-print disclosures may not overcome the net impression of a deceptive representation. Cyberspace.com, 453 F.3d at 1200-1201 (finding that disclosures in small-print on the back of a check regarding the monthly fee for internet access was insufficient to defeat the net impression that the check was a refund or rebate); see also FTC v. Brown & Williamson Tobacco Corp., 778 F.2d 35, 42-43 (D.C.Cir.1985) (holding that a cigarette advertisement of tar content was deceptive despite a truthful, fine-print explanation in corner of advertisement of how tar was measured). As placed, the disclosure regarding OnlineSupplier’s negative option plan is difficult to read because it is printed in the smallest text size on the page and in blue font against a slightly lighter blue background at the very end of the disclosure. The disclosure is also not placed in close proximity to the “Ship My Kit!” button and placed below the fold. It is highly probable that a reasonable consumer using this billing page would not scroll to the bottom and would simply consummate the transaction by clicking the “Ship My Kit!” button, as the consumer is urged to do by the message at the top left: ‘You are ONE CLICK AWAY from receiving the most up-to-date information for making money on ebay!” Furthermore, the term “negative option” is not clearly defined in the disclosure. The disclosure also states that the consumer “may” be liable for payment of future goods and services if she fails to cancel the service, which casts ambiguity as to whether the consumer will in fact be charged a monthly fee. See Removatron Int’l Corp. v. FTC, 884 F.2d 1489, 1497 (1st Cir.1989) (“Disclaimers or qualifications in any particular ad are not adequate to avoid liability unless they are sufficiently prominent and unambiguous to change the apparent meaning of the claims and to leave an accurate impression. Anything less is only likely to cause confusion by creating contradictory double meanings.”) After the consumer clicks on the “Ship My Kit!” button on the payment page, she is next taken to the upsell page where various products and services are advertised. (Exh. 1270-3.) The product offers are pre-clicked to “Yes,” and the consumer must change it to “No” to decline the offer. Each of the products and services involves a free trial offer and a monthly or annual membership fee. Again, there is no clarification that the kit is a negative option plan. Instead, the top banner states “Come Work Online Using Ebay!” and “Join Over 724,000 Americans ... Making a Living on Ebay!,” which reinforces the central message of using the kit to make money on eBay. If the consumer clicks on the submit button, she is taken to the final confirmation page. (Exh. 1270-4.) That page contains the same message and graphics as the previous upsell page and states that the order has been completed. Even assuming that the upsell and confirmation pages included clarifying information about OnlineSupplier’s negative option plan, it is not enough because the transaction would have been completed upon submitting the “Ship My Kit!” button on the billing page. See Resort Car Rental Sys., Inc. v. FTC, 518 F.2d 962, 964 (9th Cir.) (“The Federal Trade Act is violated if [an advertisement] induces the first contact through deception, even if the buyer later becomes fully informed before entering the contract.”), cert. denied, 423 U.S. 827, 96 S.Ct. 41, 46 L.Ed.2d 42 (1975). 2. Version II Is Facially Misleading The sign-up pages of Version II are similarly misleading because they create the net impression that consumers are getting a free kit to sell products on eBay. The landing and billing pages of Version II are largely similar to those of Version I. (Exh. 1271.) On the landing page, the phrase “AS SEEN ON TV” and the eBay logo have been removed, although the word eBay (in red) is still included in the header, and there is a reference to a CBS news story regarding people making a living on eBay. (Exh. 1271-1.) The figure $3.2 billion is now increased to $52 billion. The phrase “GET YOUR KIT NOW FOR FREE” in Version I has been changed to “GET YOUR KIT NOW.” (Exh. 1271-1.) The phrase “Just Pay S/H” has also been added next to the phrase “Free,” and the trial period has been shortened from 14 to 7 days. These modifications, however, do not substantively change the net impression that consumers can order a free kit on how to sell products on eBay with payment of shipping. Again, there is no information about OnlineSupplier, Commerce Planet, or the negative option plan. As in Version I, the landing page on-Version II includes a hyperlink to “Terms of Membership,” which pop up on a separate page. The terms and conditions page' now includes information regarding the negative option plan - at the very top instead of further down in the text. However, the disclosure is still inadequate for the same the reasons discussed above: the hyperlink is not placed in. close proximity to the “Ship My Kit!” button; it is placed below the fold; there are no cues that the terms of membership are specifically in regard to the negative option plan; and the terms and conditions appear on a separate pop-up page. The most significant change appears on the billing page of Version II. (Exh. 1271-2.) The name eBay has been removed altogether from the top, and “onlinesupplier.com” has been added on the right. Second, the disclosure text has been taken out of the right blue box, centered at the bottom, and written in black font. As the defense team pointed out during trial, the shipping and handling fee, along with the monthly fee, is now in red while the remaining text is in black. Although these modifications do somewhat improve readability, the Court finds that they are inadequate to change the net impression of the landing and billing pages. As in Version I, the disclosure is not placed in close prox- imity to the “Ship My Kit!” button, but placed at the very bottom of the page, below the fold, so that a reasonable consumer is not likely to scroll to the bottom and see or read it. Furthermore, the main information about the negative option plan is in the smallest text size on the page and densely packed with the other text, rendering it difficult to read. The remaining pages in Version II follow the same flow as the pages in Version I. When the consumer clicks the “Ship My Kit!” button, she is taken to the upsell page. (Exh. 1271-3.) Here, the eBay logo has been removed, and “onlinesupplier.com” has been added to the header. Version II contains an increased number of upsell offers, which, again, have been pre-clicked to “Yes.” Clicking the submit button takes the consumer to the final confirmation page. (Exh. 1271-4.) This page also has “onlinesupplier.com” in the header. The final confirmation page includes some additional information regarding a 7-day trial membership for $1.95, when the consumer will receive the product, customer service information, and OnlineSupplier’s website address. It also contains a link to the terms and conditions. But the added information does not change the net impression of OnlineSupplier, as the transaction would already have been completed upon clicking the “Ship My Kit!” button on the billing page. See Resort Car Rental Sys., Inc., 518 F.2d at 964. In short, the sign-up pages of Version I and II are misleading because the overall, net impression from the content, layout, axid design of the webpages is that consumers are ordering a free kit on how to sell goods on eBay with payment of a small shipping and handling fee, not that they are subscribing to a negative option plan. It is also apparent that the disclosure — by its placement, wording, colorization, spacing, and size of the text — was designed not be clear and conspicuous, but rather to mask information about OnlineSupplier’s continuity program without entirely omitting the information. Such a method of disclosure is inadequate because it simultaneously conceals, obscures, and suppresses the very information it purports to convey. This misrepresentation is undoubtedly material because the information about a free kit goes to the cost of the product, an important factor in a consumer’s decision on whether or not to purchase a product. See Cyberspace.com, 453 F.3d at 1200. The notion that consumers will get a free kit makes it more likely that they will unwittingly provide their credit card information, thinking they are only paying for shipping and handling, when in fact, they are obligating themselves to pay a subscription fee for the continuity program. 3. Expert Testimony Although a facial examination of the sign-up pages sufficiently demonstrates that the website marketing of OnlineSupplier was misleading to a reasonable consumer, the Court may consider extrinsic evidence as corroborating evidence. See Kraft, Inc. v. FTC, 970 F.2d 311, 318-19 (7th Cir.1992). The FTC presented additional evidence that corroborates the Court’s conclusion that OnlineSupplier is facially misleading. In particular, the Court finds the expert testimony of Jennifer King to be on-point and persuasive. Ms. King is a researcher and a third-year Ph.D. candidate at the U.C. Berkeley School of Information, with a master’s degree in information management and systems, a program that focuses on graduating professionals in Human Computer Interaction (“HCI”). (King, 2/3/12, 101:7-8, 107:2-9, 109:22-110:3.) At Berkeley, Ms. King studies privacy using HCI-based methods, which is the study of how humans interact with computers. (Id. at 101:9-18.) HCI research is an interdisciplinary study that encompasses both qualitative and quantitative methods and draws upon such fields as computer science, cognitive psychology, and social psychology, among others. (Id. at 103:14-17, 104:22-105:9.) Ms. King was retained by the FTC to review OnlineSupplier’s webpages and determine whether (1) customers would understand that a negative option was present when they reviewed the sign-up pages, and (2) after they finished the check-out process, whether they would understand that they were enrolled in a continuity program. (Id. at 113:2-10.) Here, Ms. King applied a usability inspection method, a type of HCI qualitative-based approach that is “user-centered” — meaning that it focuses on what the user can perceive and what the user should do. (Id. at 103:23-104:1, 115:23-116:10.) Ms. King likened the method to a preflight checklist whereby she analyzes the webpages to see if they are consistent with certain HCI heuristics or principles of usability. (Id. at 114:22-115:15; 116:16-117:4.) Thus, like an airline pilot who goes through a preflight checklist trying to determine if the plane should fly, an expert conducting a usability inspection looks for major flaws in a website to determine whether it should be launched. (Id.) After inspecting Version I and Version II, Ms. King concluded that she did not believe that “most people” would know, after visiting the webpages, that a negative option existed or that “most people” would know they were enrolled in a continuity program upon completing the check-out process. (Id. at 114:9-18.) (i) Version I With respect to Version I, Ms. King focused on what consumers are drawn to based on principles of usability. These principles include the fact that users typically do not scroll, tend to scan very quickly and read only 20% of what is on the page, and seek'cues for what to do next on a webpage. (Id. at 123:19-125:6, 125:20-23.) Ms. King testified that on the landing page of Version I, the things that draw the most attention are the “AS SEEN ON TV” logo, the eBay logo, and the word “kit” used multiple times.. (Id. at 124:7-11.) The primary call to action on the landing page is the “Ship My Kit!” button. (Id. at 124:13-18, 124:23.) On the billing page, the primary call to action is filling out the payment information and the “Ship My Kit!” button. (Id. at 127:6-18.) Ms. King testified that there is nothing on the screen to cause a typical consumer to believe that they would be signing up for a free trial and would incur monthly charges on their credit card. (Id. at 127:21-25.) As to the hyperlinked “Terms of Membership,” Ms. King testified that she had grave concerns with the pop-up window, as a lot of factors could potentially interfere with viewing that window, such as a pop-up blocking software installed on the computer or other windows on the screen. (Id. at 135:12-136:4.) Ms. King also pointed out that the terms and conditions contain at least 6,000 words in giant blocks of text; the disclosure about the membership fee is buried in section 4; and the terms and conditions are written in legal language, which most people do not understand and immediately ignore. (Id. at 137:2-17, 138:4-9.) Ms. King testified that the “Terms of Membership” hyperlink and the adjacent “Privacy Policy” hyperlink are also terms that most people are trained to immediately tune out. (Id. at 136:5-19,136:20-137:1.) Ms. King further identified several key flaws with regard to the disclosure. First, Ms. Bang provided screenshots of the landing and billing pages, which showed that the disclosure appeared below the fold, as seen on a computer screen with the resolution size of 1024 by 768 pixels (the most common resolution for computers during the time the webpages were live from 2005 and 2006) and allowing for the maximum amount of screen space. (Id. ■ at 131:3-132:25, 133:1-4, 133:20-134:25; Exhs. 1324, 1325.) Ms. King explained that the placement of the disclosure below the fold violates the cardinal heuristic of usability because people do not read the entire webpage and do not tend to scroll down to look for information below the fold. (King, 2/3/12, 128:1-7,130:5-16, 133:5-9.) Generally, what one wants people to read the least is placed at the bottom while the thing one cares about the most is placed at the top of the webpage and above the fold. (Id. at 128:8-12.) • In rebuttal, Gugliuzza provided evidence of a screenshot from his computer showing the disclosure on the billing page of Version I to be above the fold. (Exh. 19; see also Exh.2002.) But the net impression test under section 5(a) is from the perspective of a reasonable consumer, not that of the seller or the seller’s employee. While Gugliuzza’s computer may, indeed, have shown a part of the billing page disclosure to be above the fold, it is not representative of the resolution size of the typical consumer. Ms. King, testified that the most common resolution size at the time Version I was live was 1024 by 768 pixels. (King; 2/3/12, 126:16-21.) Ethan Brooks, the company’s Chief Technology Officer from 2006 to .2007, also confirmed that during the time that OnlineSupplier’s sign-up pages were live, the screen resolution was 1024 by 768 for approximately 50% of users, which would place the disclosure below the fold. (Brooks, 2/9/12, 100:16— 101:2, 102:7-12, 118:23-114:9, 115:20-22, 116:14-21.) The defense team also pointed to hints of something more below the fold — ie., the light blue box continues downward and the graphic on the left is cut off. However, Ms. King testified that these were ineffective visual cues considering the totality of the page and the prominence of the “Ship My Kit!” button. (King, 2/7/12, 29:12-31:5; Exh. 1323.) Even assuming the disclosure were entirely above the fold for most consumers, the Court finds that its visibility is only slightly improved given its overall placement and presentation on the page. A second flaw Ms. King observed was that the disclosure is located far away from the “Ship My Kit!” button, at the very bottom of the page, and after the hyperlinked terms of membership and “Privacy Policy.” (King, 2/3/12, 128:18-22.) Ms. King testified that her research in user cognition and privacy policies demonstrates that “as soon as you put the word ‘privacy policy’ in front of a consumer, they completely tune out. They’re one of the most unread components of a web page.” (Id. at 128:23-129:6.) Thus, “the location of the disclosure after that privacy policy link basically signals to somebody that here is something you don’t need to read; this is not relevant to your shopping experience. If it were crucial, it would have been placed up near the ‘ship my kit’ button.” (Id. at 129:7-13.) Third, Ms. King testified that the visibility of the disclosure was poor given the blue-on-blue lettering, the small and blocky text, the all-cap font (rendering it more difficult, not easier to read), and the legalese language (most people are not familiar with the term “negative option”). (Id. at 128:13-17, 129:21-130:2.) Ms. King concluded that Version I did not appear to be offering for sale a membership program because (i) that messaging was absent from the entire user flow and the focus of the pages was instead on obtaining a free kit, and (ii) there was no mention of the continuity program in the area of the webpage where she believed most people would spend their viewing time. (Id. at 139:11-21.) Ms. King stated that she would not recommend launching Version I until the core flaws she identified were fixed. (Id. at 139:22-140:4.) (ii) Version II With regard to Version II, Ms. King similarly opined that the landing and billing pages did not contain anything that would cause a typical consumer to believe she would be signing up for a free trial in OnlineSupplier and would incur monthly charges until she affirmatively cancelled. (Id. at 141:5-9, 142:2-6.) The primary message of Version II’s landing page is consistent with that of Version I — the focus is on the words eBay, starter kit, and free online auction. (Id. at 140:5-24.) The billing page does include the word OnlineSupplier for the first time, but the call to action remains “Ship My Kit!” (Id. at 141:15-142:1.) As to the disclosure on the billing page, Ms. King acknowledged that some changes were made to improve visibility, but that they were inadequate because “key flaws” were not addressed— ie., the disclosure is still ensconced in a very large block of small text, printed in caps, dressed in legal language, placed at the bottom of the page away from the primary call to action (“Ship My Kit!”), and appears below the fold. (Id. at 142:7-25, 152:23-154:2.) Ms. King testified that because most major webpages tend to always put their legal disclosures in the footer, “people have been trained to know if you see ‘terms and conditions,’ privacy policy,’ ... they are things that they do not need to read to complete the task at hand.” (Id. at 143:7-18.) As with Version I, Ms. King provided a screenshot of the landing and billing pages of Version II, using the same resolution (1024 by 768 pixels) and maximizing the display windows. (Exhs. 1323, 1326.) Neither of the screenshots shows the terms and conditions hyperlink or the disclosure to be above the fold, and Ms. King testified that most consumers would not have seen the disclosures on the billing page. (King, 2/3/12, 144:3-25, 147:9-148:7.) As in Version. I, Ms. King testified that the terms and conditions are unhelpful in disclosing the materials terms of OnlineSupplier because they are only available by clicking the hyperlinked “Privacy Policy” and “Terms and Condition” — two terms that people do not tend to view. (Id, at 149:12-18.) The terms of membership for OnlineSupplier are also ineffective because— although the terms of the negative option plan appear at the very beginning of the 6,000-word text — the disclosure is contained in a separate pop-up window rather than directly on the billing page. (Id. at 148:13-149:1, 149:24-150:12.) Ms. King concluded that Version II does not appear to be offering for a sale a membership program and that she would not have recommended launching Version II because of “severe violations of usability rules that need to be addressed.” (Id. at 152:14-22.) (iii) Rebuttal Testimony Mr. Gugliuzza did not produce any expert rebutting Ms. King’s usability inspection of OnlineSupplier’s webpages. Rather, Mr. Gugliuzza attempted to minimize Ms. King’s testimony by pointing out that she did not incorporate any analysis of empirical data in reaching her conclusions. (Def.’s Closing