On October 28, the Federal Trade Commission (FTC) issued a new policy statement on autorenewal and negative option marketing.
As its press release title indicates, the FTC intends to “ramp up enforcement” against companies offering subscription services via an autorenewal or negative option offer. Signaling its primary concerns, the FTC’s policy statement focuses on three points:
- Clear and Conspicuous Disclosures. Any autorenewal or negative option offer should clearly and conspicuously disclose all material terms, including the price, whether the price will increase after a trial period, any recurring charges, the deadline for the consumer to stop the charges, payment submission date(s) for each charge, and all information necessary to cancel the contract.
- Express and Informed Consumer Consent. A company offering an autorenewal or negative option should obtain the consumer’s express and informed consent, which should be obtained separately from any other consents and not obtained via any detracting or contradictory language that muddles the consumer’s ability to give informed consent.
- Ease of Cancellation. A company offering an autorenewal or negative option should provide the consumer with a simple and efficient mechanism to cancel the subscription and offer that mechanism via the same media (e.g., mobile application or website) that the consumer used to enroll in the subscription plan.
FTC Bureau of Consumer Protection Director Samuel Levine said: “Today’s enforcement policy statement makes clear that tricking consumers into signing up for subscription programs or trapping them when they try to cancel is against the law.”
The press release further notes that the FTC has brought cases challenging a variety of illegal subscription practices. The FTC has sued companies that hid important payment information, that made consumers wait on hold or listen to lengthy ads before they could cancel, that converted free trials to paid subscriptions before the free trial ended, and that failed to disclose that widely advertised material benefits of the subscription were no longer available.
Our Take. The FTC’s press release and policy statement signal again that U.S. consumer protection agencies intend to ramp up enforcement of the laws and regulations that govern autorenewal and negative option marketing.
