By: Linda L. Goodman
The Federal Trade Commission (“FTC”) recently announced it is seeking public comment on ways to improve its existing regulations for negative option marketing. Negative option marketing is a common form of marketing whereby the consumer accepts the product or service now and consents to be charged later. Such marketing is widely used and can provide benefits to both sellers and consumers. However, it is also the most disliked and distrusted marketing from a consumer’s perspective. The primary complaint is that any benefit to the consumer is lost when marketers fail to make adequate disclosures, bill consumers without their consent, or make cancellation difficult or impossible.
Such deceptive practices saddle consumers with recurring payments for products and services they did not intend to purchase or did not want or did not receive. Such practices have generated thousands of consumer complaints to the Federal Trade Commission and various State Attorney Generals each year.
Over the years, the FTC sought to address these problems first with a regulation (FTC Negative Option Rule) and then by statute (Restore Online Shoppers’ Confidence Act) and finally through individual law enforcement cases.
Despite the FTC enforcement actions on both the statute and the regulations, harmful negative option practices persist. The industries response has been that these various requirements do not provide industry and consumers with a consistent legal framework across different media and types of plans. In addition, the current regulations may lack the specificity necessary to deter deceptive practices.
As detailed in an Advance Notice of Proposed Rulemaking (ANPR), the FTC seeks public comment on ways to improve existing regulatory requirements, including whether the agency should use its rulemaking authority under the FTC Act to expand the scope and coverage of the existing Negative Option Rule. The Commission seeks any suggestions or alternative methods for improving current requirements, in an effort to more effectively protect consumers from negative option violations.
The Commission vote approving publication of the ANPR in the Federal Register was 4-0-1, with Commissioner Rohit Chopra abstaining. It will be published in the Register shortly. Written comments must be received within 60 days of the date the notice is published. Comments can be filed electronically at https://www.regulations.gov by following the instructions on the web-based form.
Expect further regulations to be the fall out.
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This article is a publication of The Goodman Law Firm and is intended to provide information on recent legal developments. This article does not create an attorney-client relationship, nor should it be construed as legal advice or an opinion on specific situations. This may constitute “Attorney Advertising” under the Rules of Professional Conduct and under the law of other jurisdictions.
Linda L. Goodman is the founder of The Goodman Law Firm, concentrating its practice in internet business and law. Her firm’s clients include Advertisers, Affiliates, Affiliate Networks, and ISP’s.
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