FTC’s Negative Option Rule Needs Improvement

Last week, regulators announced a $2.35 million multistate settlement with Adore Me — the subject of an in-depth TINA.org investigation, as well as complaints to state and federal regulators — resolving claims that the online lingerie retailer deceptively marketed its VIP Membership Program and made it difficult for members to cancel.

The settlement comes as the FTC, which itself reached a $1.4 million settlement with Adore Me in 2017 (following TINA.org’s complaint to the agency), is proposing to amend its Negative Option Rule and requesting public comment on its proposed amendments in order to combat unfair or deceptive practices related to subscriptions that include recurring charges for products or services consumers don’t want and can’t cancel.

Back in 2019, when the FTC was soliciting input about whether to amend the rule at all, TINA.org submitted a comment regarding the need to modernize the rule and suggested a number of amendments, several of which have been included in the FTC’s current proposal. Those are:

• Applying the rule to all forms of negative option marketing in all media instead of just to one type of negative option marketing — prenotification plans (e.g., book or music clubs where sellers send periodic notices offering goods and if consumers take no action, sellers send the goods and charge consumers) — as the rule is currently drafted.
• Requiring negative option sellers to provide a simple way to cancel the negative option feature that is “at least as easy to use as the method the consumer used to initiate the negative option feature.”
• Requiring negative option sellers to provide periodic reminders for certain negative option offers.

While TINA.org supports the FTC’s proposed amendments to the rule to better inform marketers and further protect consumers, TINA.org also believes that certain additional revisions are necessary to increase the rule’s utility and impact.

Specifically, as explained in a comment filed Tuesday, TINA.org is urging the FTC to require periodic reminders for a broader array of negative option offers. The proposed amendments only require such reminders for plans that do not include the automatic delivery of physical goods, the FTC’s reasoning being that the delivery of goods serves as a reminder. However, in situations where there’s a trial period that precedes the continuation of the automatic delivery of goods, the delivery of physical goods after the trial period has ended would not serve as a reminder of contract terms, but rather the misimpression that the “trial” period is still in effect and that the consumer does not need to take any affirmative action to avoid recurring charges. As such, TINA.org is urging the commission to require marketers using negative option offers — whether for the delivery of physical goods or not — to provide clear and conspicuous reminders to consumers of when a trial period is ending, as well as obtain consumers’ reaffirmance of consent to be charged, before charging them.

TINA.org is also urging the FTC — for the second time — to require sellers to provide notice to consumers when sellers make material changes to a negative option contract. This would be consistent with the FTC’s longstanding position that material terms of an offer must always be clearly and conspicuously disclosed, as well as with the laws in numerous states across the country.

Read TINA.org’s full comment here.