FTC Proposes Amendment to "Negative Option Rule"

The FTC proposed amendments to the "Negative Option Rule" concerning programs that allow sellers to "interpret a customer’s silence, or failure to take an affirmative action, as acceptance of an offer." The FTC would require additional disclosures, informed consent by consumers and allow for easy cancellation of subscription services. The amendment was published in the Federal Register.

The amendment would apply to four forms of negative option marketing, including: prenotification plans, continuity plans, automatic renewals and free trials. The FTC stated that the existing Negative Option Rule only applies to prenotification plans.

The proposal would also amend the Negative Option Rule to:

• prohibit misrepresentation of any material facts throughout customer agreements and not just for information included in negative option features;
• require sellers to disclose, prior to receiving a consumer’s billing information: (i) whether the payments will be recurring and the deadline to stop charges, (ii) the cost consumers can expect to incur and on what data and (iii) steps to cancel recurring payments;
• mandate sellers obtain consent from consumers before charging them;
• impose an "easy cancellation" requirement, which the FTC said is an "essential feature of a fair and non-deceptive negative option program";
• require sellers to receive permission from buyers before pitching additional offers if a buyer is trying to cancel a service and, if such permission is denied, the seller must cancel the negative option arrangement immediately; and
• not require sellers with contracts involving the automatic delivery of physical goods to provide confirmatory or periodic reminders since "each delivery serves as a reminder of the contract."

Comments on the proposed amendments must be submitted by June 23, 2023.