Markets Wired

Today the Federal Trade Commission 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 absence of affirmative consumer action constitutes consent to be charged for goods or services. Such marketing is widely used, and can provide benefits to both sellers and consumers. However, consumer benefits may be lost when marketers fail to make adequate disclosures, bill consumers without their consent, or make cancellation difficult or impossible.

Deceptive negative option practices can saddle consumers with recurring payments for products and services they did not intend to purchase or did not want. Such practices generate thousands of consumer complaints to the FTC each year.

Over the years, the Commission has sought to address these problems through individual law enforcement cases and various regulatory requirements, including the FTC’s current Negative Option Rule, which addresses only prenotification plans (e.g., book-of-the-month clubs) and does not reach other common forms of modern negative option marketing (e.g., automatic renewals).

The FTC also relies on other statutes (e.g., the Restore Online Shoppers’ Confidence Act) and regulations (e.g., the Telemarketing Sales Rule) to address harmful negative option practices. However, these various requirements do not provide industry and consumers with a consistent legal framework across different media and types of plans. Moreover, 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.

The Federal Trade Commission works to promote competition, and protect and educate consumers. You can learn more about consumer topics and file a consumer complaint online or by calling 1-877-FTC-HELP (382-4357). Like the FTC on Facebook, follow us on Twitter, read our blogs, and subscribe to press releases for the latest FTC news and resources.