MoviePass: Rediscovering the Magic of ROSCA

The subscription-based billing model is enjoying a renaissance — from razors to meal kits to clothing to movies, it seems there’s a subscription for everything. And with this proliferation, there has also been a marked uptick in the incidence of deceptively marketed negative-option offers. In fact, deceptive online subscription offers have become a multibillion-dollar disaster for consumers.

The FTC’s recent case against MoviePass, which offered subscribers “unlimited” movie viewing at theaters across the country for just $9.95 a month, exemplifies the problem. Before MoviePass filed for bankruptcy protection in 2020, it attempted to save its failing subscription-based business by implementing a series of deceptive tactics to deny customers the ability to view movies, including using “password disruption” and deceptive “ticket verification” programs. In its complaint, the FTC alleges that defendants went to great lengths to ensure that a substantial minority of its 3 million subscribers were precluded from receiving the primary benefit of the bargain that was, no doubt, the motivation for entering into the negative subscription offer with MoviePass in the first place — “unlimited movies.” Indeed, who would enter into a recurring fee agreement to view unlimited movies knowing that their usage would be severely and arbitrarily throttled? According to the FTC, failing to disclose such actions on MoviePass’ part violated the Restore Online Shoppers’ Confidence Act, aka ROSCA.

ROSCA was enacted in 2010 in an attempt to protect consumers from deceptive online negative-option offers. The law states, in part, that it shall be unlawful to initiate an internet charge through a negative option unless:

1. (1) all material terms of the transaction are clearly and conspicuously disclosed before obtaining the consumer’s billing information;
2. (2) the consumer’s express informed consent is obtained before charging the consumer; and
3. (3) there are simple mechanisms to stop recurring charges.

Because MoviePass deceptively altered the material terms of the transaction — i.e., it prevented consumers from receiving the primary benefit of their bargain — the FTC claims that the company violated ROSCA by failing to disclose “all material terms of the transaction,” and failing to secure consumers’ express informed consent before charging their financial accounts.

The proposed settlement with MoviePass is a first of sorts for the FTC because the commission has never before pursued ROSCA violations that focus on the benefits of the bargain that motivated consumers to enter into a negative-option subscription in the first place. (ROSCA cases have generally focused on automatic renewal and cancellation terms.) And the lack of precedent worries some. But it is the FTC’s responsibility and duty to hold wrongdoers accountable using all the available arrows in its quiver. As such, TINA.org filed a comment with the FTC supporting its proposed settlement with MoviePass, and urging the commission to continue to utilize ROSCA to the fullest extent authorized by Congress.