Federal Trade Commission (FTC) Publishes Final Negative Option Rule in the Federal Register

The Federal Trade Commission (FTC) published the final Negative Option Rule in the Federal Register on November 15. The prohibition on misrepresenting information with respect to a negative option/automatic renewal offer will become effective in 60 days. The requirements regarding clear and conspicuous disclosures, obtaining specific affirmative consent to an automatic renewal feature and providing a simple cancellation method will become effective in 180 days. Senator Ted Cruz (R-TX) sent a letter to the FTC on November 7 requesting the FTC to immediately stop all work on outstanding rules, regulations, and guidance. (Note, however, that given Federal Register processing time, this rule may have already been on its way.)

Lina Khan is likely to be replaced and either a new Chair will need to be nominated and confirmed; or a current Republican Commissioner will be elevated as "Acting," and a new Republican Commissioner will be nominated. Both the Chair and Commissioner will require Senate confirmation. Since Republicans will control the Senate, that confirmation process could be quicker than years in recent past but it's hard to tell how high a priority this will be for the new Administration.

The Alliance continue to monitor litigation. As previously discussed, three lawsuits have been filed by various industry groups and associations (all in concert with the Interactive Advertising Bureau (IAB) and the U.S. Chamber of Commerce) in the Fifth, Sixth, and Eleventh Circuits. We expect those cases to eventually be consolidated.

The FTC discussed the Negative Option rule at an open meeting on November 14. Chair Lina Kahn stated that companies have engaged in deceptive practices that trap consumers into subscriptions, often requiring them to navigate numerous obstacles to cancel. She noted that the FTC was flooded with calls regarding Click-to-Cancel, receiving as many as 70 calls per day. Commissioner Andrew Ferguson noted that the final rule is facing legal challenges, but it provides significant benefits for consumers. Commissioner Melissa Holyoak noted her general support of enforcement to address deceptive practices, but did not support this rule. Holyoak said that the rule eliminates the Negative Option, which could result in companies abandoning it altogether. Commissioner Rebecca Slaughter stated her support for the FTC's work on Click-to-Cancel in raising consumer awareness. Slaughter said that requiring companies to notify consumers of upcoming subscription payments may encourage cancellations, which punishes businesses that are acting responsibly.