FTC Releases Final Negative Option Marketing and “Click-To-Cancel” Rule

The FTC released the final version of its amended rule governing marketing and charging consumers for negative option programs, which includes new provisions intended to simplify cancellation processes.

Negative option programs refer to products and services which contain a term or condition that allows a seller to interpret a customer’s silence, or failure to take an affirmative action, as acceptance of an offer.  Common types of negative option programs include:

• Pre-notification plans, where sellers provide periodic notices offering goods or services to participating consumers and then provide—and charge the customer for—those goods and services only if the consumers take no action to decline the offer;
• Continuity plans, where consumers agree in advance to receive provision of goods or services, which they will continue to receive until they cancel the agreement;
• Automatic renewals, where sellers automatically renew consumers’ subscriptions when they expire, unless consumers affirmatively cancel the subscriptions; and
• Free-to-pay plans, where consumers receive goods or services for free (or at a nominal fee) for a trial period, after which sellers automatically begin charging a higher fee unless consumers affirmatively cancel or return the goods or services.

Under the final rule, it is an unfair or deceptive act or practice under Section 5 of the FTC Act for sellers to: misrepresent any material fact made while marketing using a negative option feature; fail to clearly and conspicuously disclose material terms prior to obtaining a consumer’s billing information in connection with a negative option feature; and, fail to obtain a consumer’s express informed consent to the negative option feature before charging the consumer.

Additionally, the rule contains the “click-to-cancel” provision, which requires sellers to provide a simple mechanism for a consumer to cancel a negative option feature, avoid being charged (or being charged an increased amount) for the good or service, and immediately stop any recurring charges.  The simple mechanism must be at least as easy to use as the mechanism the consumer used to consent to the negative option feature in the first place and must be available through the same medium that the consumer used to provide the initial consent.  For cancellation by an interactive electronic medium (such as the internet and apps), the simple cancellation mechanism must be easy to find and use when the consumer seeks to cancel.

The rule will become effective 60 days after publication in the Federal Register.