The Massachusetts state legislature is currently considering a bill to severely limit sellers’ ability to enroll consumers through negative option sales. This bill, like the federal Restore Online Shoppers’ Confidence Act signed into law by President Obama in 2010, places restrictions on entities that use negative option sales.

Negative option plans, as defined by the Federal Trade Commission, are commercial transactions in which sellers interpret a customer’s failure to take an affirmative action, either to reject an offer or cancel an ongoing subscription, as an agreement to be charged for goods or services. The most common example of a negative option is the conversion of a limited-time “free trial” into a program where fees are charged to consumers on a reoccurring basis if they do not cancel prior to the expiration of the free trial.

Under the proposed bill, sellers and any other entity that promotes the exchange of goods or services for money must provide notice to consumers that they will incur charges following a free trial period. Prior to any charges, the consumers must provide the seller with their express consent to be charged. The seller must also provide advance notice of any charges by at least 10 days if the goods and or services have already been delivered to the consumer or 15 days for all other transactions. The bill also specifies that the notice must be “clearly written” and include the following items: (1) a description of the underlying agreement governing the transaction; (2) a description of the purchased goods and/or services; (3) the amount that the customer will be billed; (4) the date the customer will be billed if the agreement is not cancelled; and (5) the steps the customer must take to cancel the agreement. Should a dispute arise, the seller bears the burden of proving the customer’s express consent to be charged

If Massachusetts House Bill No. 1014 becomes law, Massachusetts will have added itself to the list of other states, such as California, Connecticut, New York, Florida, Illinois, New Mexico, Louisiana, and North Carolina, that have already enacted legislation that affects how negative option offers are marketed. Arent Fox will continue to monitor this bill, as well as other laws and regulations covering negative options and e-commerce.