FTC Announces Final Negative Option Rule

The Federal Trade Commission (FTC) announced their final Ruleon October 16 regarding Negative Option programs. The Alliance advocated for numerous changes to the proposal in comments, letters, and three follow-up meetings with the FTC. The Commission specifically cited the Alliance's comments 20 times in the Final Rule. To address two of our main concerns, the FTC stated to the Alliance that: cancel/saves will not be prohibited, and separate consent will not be required (it can be on the same page). Based on the text of the Final Rule, the Commission removed the proposed requirement that sellers obtain separate consent to "the rest of the transaction" under § 425.5(a)(3); however, § 425.5(a)(1) states that sellers require separate consent for the "negative option feature".

Following an evaluation of more than 16,000 public comments, the Commission voted to adopt the final rule with certain changes, including dropping a requirement that sellers provide annual reminders to consumers of the negative option feature of their subscription, and dropping a prohibition on sellers telling consumers seeking to cancel their subscription about plan modifications or reasons to keep their existing agreement without first asking if they want to hear about them.

The final rule:

• Prohibits sellers from misrepresenting any material fact made while marketing goods or services with a negative option feature;
• requires sellers to clearly and conspicuously disclose material terms prior to obtaining a consumer's billing information in connection with a negative option feature;
• requires sellers to obtain a consumer's express informed consent to the negative option feature before charging the consumer; and
• requires sellers to provide a simple mechanism to cancel the negative option feature and immediately halt charges.

The Commission voted 3-2, with Commissioners Melissa Holyoak and Andrew N. Ferguson voting no. Commissioner Rebecca Kelly Slaughter issued a separate statement and Commissioner Holyoak issued a separate dissenting statement. The FTC developed a fact sheet summarizing the changes to the rule.

Most of the final rule's provisions will go into effect 180 days after it is published in the Federal Register. We will continue to review the Rule, and the Alliance will provide a detailed summary. The FTC gave the Alliance a courtesy call prior to issuance and noted that they will be accessible and connected to us for any questions or clarifications.