The policy covers three areas that are commonly pursued in the enforcement of negative option cases: disclosure, consent and deletion.
The Federal Trade Commission (“FTC”) recently issued an Enforcement Policy warning companies involved in “negative option marketing” of potential legal action if the subscription service enrollment process fails to provide clear advance notice and consumers fail to provide informed information Consent, and the termination is unreasonably onerous. The FTC defines “negative option marketing” in its broadest sense and refers to commercial transactions in which an underlying condition or condition continues or is automatically renewed unless the consumer takes positive action to terminate the contract or the good or service to refuse. While negative options are commonplace in the marketplace and can be beneficial to consumers, the FTC claims that unfair or misleading negative options practices are a widespread source of consumer harm. With increased awareness of negative options marketing, companies should expect increased enforcement by government agencies as well as individual consumer lawsuits.
The Enforcement Policy covers three areas that the FTC typically pursues in enforcing cases with negative options: disclosure, consent, and deletion. The FTC provides the following guidelines on these areas to aid organizations in their compliance efforts.
Disclosure: Essential terms of negative options “must be clear and noticeable”. Businesses must at least state “that consumers will be billed for the goods or services”. [and the amount]”whether” these charges will increase after an applicable trial period “,” whether “the charges will be collected regularly”, “deadline (by date or frequency) by which the consumer must act to stop the charges,” and “[a]All information necessary to withdraw from the contract “This information should be provided in a way that is” inevitable and easily understandable for ordinary consumers “.
Approval: In order to obtain explicit informed consent, companies should “obtain” [and verify] the unambiguous consent of the consumer “to the negative option as well as to the entire transaction.
Cancellation: Businesses should provide termination mechanisms that are “simple”, “reasonable” and “through the same medium (such as a website or mobile application) that the consumer used to consent to the negative option”. “Businesses should not hinder the effective operation of promised cancellation procedures and comply with cancellation requests that comply with these procedures.”
Effects: According to reports, the FTC receives thousands of complaints each year related to negative options marketing. While the FTC has attempted to address the ongoing problems with online marketing for negative options under the Restoration of the Confidence of Online Shoppers Act, which gives the FTC extensive powers, the latest enforcement policy will undoubtedly lead to increased enforcement action by the FTC, investigation by public prosecutors and others carry out regulatory activities at the federal and state levels. As government enforcement increases, businesses are likely to see repercussions for consumer lawsuits that make similar claims under state consumer protection laws. If a company is currently using negative option marketing, or is planning to acquire a company that does use such marketing, given recent FTC guidelines, it is wise to reconsider negative option practices.