E-commerce Legal Alert: FTC Turning Attention towards Negative Option Marketing

December 23, 2019

The Federal Trade Commission is turning its attention, once again, towards negative option marketing. If your checkout process automatically enrolls consumers in a subscription or renewal plan, take two minutes to familiarize yourself with the latest happenings.

What is Negative Option Marketing?

Before we dive into the FTC’s efforts, let’s review some basics.

What is Negative Option Marketing?

Negative option marketing is when you don’t obtain affirmative consent to charge for goods or services. That might sound nefarious, but even the Commission concedes it’s a “widely used” tactic that “can provide benefits to both sellers and consumers.”

Example of “Good” Negative Option Checkout

For example, when you buy a domain or digital magazine subscription, the seller may automatically set your account to renew in a year, which is convenient for you and them. Typically, companies will send a renewal alert, giving consumers a chance to cancel.

The FTC, however, wants to curtail sneakier negative option schemes that cheat people.

Current Negative Option Legislative Landscape

To curb corrupt operations, the FTC established the Negative Option Rule. It “requires sellers to clearly disclose the terms of any such negative option plan for the sale of goods before consumers subscribe.”

Additionally, the Telemarketing Sales Rule and portions of the Restore Online Shoppers’ Confidence Act address negative option marketing points.

Despite the three regulations, loopholes still exist.

Why is the FTC Concerned about Negative Option Marketing?

The Federal Trade Commission announced that it wants to review the “existing patchwork” of regulations that govern negative option marketing matters. Authorities want to ensure that the current rules do an adequate job of protecting consumers without unnecessarily hamstringing businesses.

The Federal Trade Commission is seeking public comment on:

  • Whether or not the FTC should modify the Negative Option Rule;
  • The validity of the current Negative Option Rule requirements;
  • How much the current Negative Option Rule is costing businesses;
  • Whether or not the rules need to be rewritten to define “clearly and conspicuously”;
  • Legislative overlaps at the state, local, and federal levels that are interfering or competing with the current laws.

The Commission also wants to consider if marketers have developed new negative option marketing practices that fall into the “unfair and deceptive” category.

Connect with an FTC Defense Lawyer

The Gordon Law Group is home to a leading FTC defense legal practice. We’ve beaten the Federal Trade Commission in court and have the experience you need to secure the best possible outcome in a negative option or truth-in-advertising tussle with the FTC.

It’s just a call. Get in touch today. We’ll listen and go from there. And if we’re not the right fit for your needs, we’ll put you in touch with someone who is.

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