By now, you have probably heard about the Federal Trade Commission’s new “click to cancel” rule, which requires sellers to provide a simple mechanism to cancel a negative-option feature (essentially any recurring or automatically renewing subscription). If you haven’t, you can check out our previous post here. But “click to cancel” is just one facet of the FTC’s broader “Rule Concerning Subscriptions and Other Negative Options.” There are three other aspects to the new negative-option rule. 

The new negative-option rule declares the following three practices to be unfair and deceptive: 

It is unfair and deceptive “to misrepresent any material fact made while marketing using a negative option feature.” § 425.3 This section does not apply only to the marketing related to the negative option, but to any material fact. This may seem like something that would be covered by other regulations, but the FTC felt it necessary to include it in the new negative-option rule. This provision prohibits a misrepresentation related to the terms of the negative option, such as consumer consent, any deadline to prevent or stop a charge, or the cancellation of the negative option. It also prohibits misrepresentations regarding the cost, the purpose or efficacy of the underlying good or service, health or safety, or anything else that would be likely to affect a customer’s decision regarding the product.

It is unfair and deceptive “to fail to clearly and conspicuously disclose material terms prior to obtaining a customer’s billing information in connection with a negative option feature.” § 425.4. Like the previous section, this provision does not apply to only the negative option, but rather to all material terms “regardless of whether those terms directly relate to the Negative Option Feature.” It expressly applies to the following four items:

• That customers will be charged, or that the charges will increase after the expiration of a trial period, or, if applicable, that the charges will be recurring;
• The deadline by which a customer must act to avoid charges;
• The amount of the charges and, if applicable, the frequency of those charges; and
• The information necessary to find the simple cancelation mechanism required by the “click to cancel” provision.

This information must appear before and immediately adjacent to the means of recording the customer’s consent to the negative option.

It is unfair and deceptive “to fail to obtain a consumer’s express informed consent to the negative option feature before charging the consumer.” § 425.5. This section requires sellers to obtain the customer’s unambiguous affirmative consent to the negative option.  Sellers must also maintain verification of the customer’s consent for at least three years, but the seller does not need to keep these records if it can show that no consumer can technologically complete the transaction without consent. Notably, the seller will be deemed in compliance with the consent requirement if the seller uses a check box, signature, or similar device that the customer must affirmatively select or sign to accept the negative option and no other portion of the transaction.

TAKEAWAY: As we discussed in last week’s post, the new rule expands what is considered a negative option to include prenotification plans, continuity plans, automatic renewals, and free-to-pay plans. The rules’ new requirements go beyond simply “click to cancel” and require any sellers who offer such plans to review their practices to ensure they are in compliance.