FTC Issued an Enforcement Policy Statement Regarding Negative Option Marketing (October 28, 2021)

FTC Enforcement Policy Statement Regarding Negative Option Marketing

October 28, 2021

The Federal Trade Commission (“FTC”) issued an Enforcement Policy Statement regarding negative option marketing to clarify its enforcement of relevant statutes and regulations. Negative option marketing refers to practices where a seller interprets a consumer's silence or inaction as acceptance of an offer, often seen in automatic renewals, continuity plans, free trial conversions, and prenotification plans. While these marketing strategies can benefit both consumers and sellers, they also pose risks of consumer harm, especially when marketers fail to provide adequate disclosures, bill consumers without consent, or complicate cancellation processes.

The FTC highlights the prevalence of deceptive negative option practices, which have resulted in numerous consumer complaints and ongoing enforcement actions. The Commission primarily enforces these practices through Section 5 of the FTC Act, the Restore Online Shoppers’ Confidence Act (ROSCA), and the Telemarketing Sales Rule (TSR). Section 5 prohibits unfair or deceptive acts and outlines requirements for clear disclosures, obtaining express consent from consumers, and ensuring easy cancellation.

ROSCA, enacted in 2010, specifically addresses online negative options, mandating that marketers disclose all material terms before obtaining billing information, secure express consent from consumers, and provide simple cancellation mechanisms. The TSR similarly prohibits deceptive telemarketing practices and requires transparency about charges related to negative options.

The FTC's guidance emphasizes three key areas: disclosures, consent, and cancellation. Disclosures must be clear and conspicuous, covering material terms such as the existence of charges, deadlines for action to avoid charges, and how to cancel. Consent should be obtained separately and clearly, ensuring consumers understand what they are agreeing to. Finally, cancellation processes must be straightforward and accessible, matching the ease of the initial consent method, and marketers should not create barriers that hinder consumers' ability to cancel.

Overall, this enforcement policy aims to protect consumers from deceptive negative option marketing practices and ensure compliance with established legal standards.

For more information, see here:  https://www.ftc.gov/public-statements/2021/10/enforcement-policy-statement-regarding-negative-option-marketing

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