FTC Issues Final Rule on the Negative Option Rule

The Federal Trade Commission (“FTC” or “Commission”) issues final amendments to the Commission’s trade regulation “Rule Concerning Use of Prenotification Negative Option Plans,” retitled the “Rule Concerning Recurring Subscriptions and Other Negative Option Programs” (“Rule,” “final Rule” or “Negative Option Rule”). The final Rule now applies to all negative option programs in any media, and, among other things, (1) prohibits misrepresentations of any material fact made while marketing using negative option features; (2) requires sellers to provide important information prior to obtaining consumers’ billing information and charging consumers; (3) requires sellers to obtain consumers’ unambiguously affirmative consent to the negative option feature prior to charging them; and (4) requires sellers to provide consumers with simple cancellation mechanisms to immediately halt all recurring charges.

"The Commission commenced this proceeding because it had reason to believe unfair and deceptive negative option practices are widespread in the marketplace. Negative option programs can provide substantial benefits for sellers and consumers. However, consumers cannot realize these benefits when sellers make material misrepresentations to induce consumers to enroll in such programs, fail to provide important information, bill consumers without their consent, or make cancellation difficult or impossible. Unfair and deceptive negative option practices have been a persistent source of consumer harm for decades, saddling shoppers with recurring payments for products and services they never intended to purchase nor wanted to continue buying. In the past, the Commission sought to address these practices through individual law enforcement actions and a patchwork of laws and regulations. Nevertheless, problems persist, as demonstrated by both a steady stream of state and federal law enforcement actions and thousands of consumer complaints each year. To address these practices, the Commission proposed amending the current Negative Option Rule to establish clear, enforceable performance-based requirements for all negative option features in all media. The Commission solicited comments first in an advance notice of proposed rulemaking (“ANPR”) and then on proposed amendments in a notice of proposed rulemaking (“NPRM”). The Commission designed these amendments to ensure consumers understand what they are purchasing and allow them to cancel their participation without undue burden."