FTC Considers Changes to Automatic Renewal Rules
Currently, the FTC relies on a variety of laws and regulations to discourage potentially deceptive negative option practices. The FTC’s Negative Option Rule addresses only a small subset of negative option plans called “prenotification plans,” in which consumers are given advance notice of the contents of their next shipment and have a limited period of time to decline the delivery. Monthly subscription boxes and book-of-the-month clubs are typical prenotification negative option plans. A different law, the Restore Online Shoppers' Confidence Act (ROSCA) applies more generally to automatic renewal offers, while the Telemarketing Sales Rule governs negative option offers by telemarketers. While all the laws and regulations emphasize proper disclosure of material terms, the FTC is concerned that they do not provide industry with a consistent legal framework and that they lack specificity.
The FTC is seeking comments from interested parties on ways to improve its current legal framework for negative options, including whether the FTC should use its rulemaking authority under the FTC Act to expand the scope and coverage of the existing Negative Option Rule. Comments must be received on or before December 2, 2019.
Please contact Arent Fox for additional information on the negative option rulemaking or if you are interested in submitting comments.