Florida asks for increased protection from negative options
Bill McCollum (R)
TALLAHASSEE, Fla. (Legal Newsline) - Florida's attorney general has weighed in with the Federal Trade Commission on potential amendments to strengthen the FTC's "negative option" rule.
Negative option plans are a sales practice where goods or services are automatically provided to consumers unless the consumer notifies the business in advance of the shipment or billing that the goods or services are not wanted.
Attorney General Bill McCollum, who has pursued aggressively a number of cases involving unfair or deceptive negative option plans, advocated for better consumer protection measures to expand the FTC's existing rule.
"Consumers deserve the best measures of consumer protection we can provide," McCollum said.
Negative options are traditionally used by book clubs, record clubs and mail-order merchandisers but, recently, have expanded to include products and services for sale in almost every medium from retail to internet, direct mail, radio and print advertisements.
McCollum's Economic Crimes Division has pursued negative options cases that involve cell phone content, magazine subscriptions and internet marketing schemes.
Negative option plans most commonly consist of trial conversions, when a product is given to a consumer for a trial period and the consumer is then billed if the product or service is not returned or cancelled. These plans often convert to an automatic renewal or continuity plan with the consumer continuing to receive additional shipments or services unless the consumer cancels.
Only one type of negative option is currently regulated by the FTC's existing rule. That negative option, called a "pre-notification negative option plan," is where consumers receive periodic announcements that consumers will be sent merchandise unless he or she declines it within a set period of time.
Of the approximately 50 companies McCollum has investigated for marketing and billing negative options since 1998, only two have involved the FTC's existing negative option rule.
McCollum, during the public comment period by the FTC seeking information on whether the current negative option rule should be changed or broadened, advocated expanding the rule to cover other forms of negative options, including those that transition from free offers to pain subscriptions and automatic renewals. McCollum also asked the FTC to apply the rule to all business entities offering negative option plans.
McCollum also urged the FTC to make its rule require businesses to obtain express, informed consent from consumers about terms of the offer and to require companies to provide clear, conspicuous disclosures of the material terms at the point of sale and in subsequent confirmation notices. McCollum also seeks to expand the right to cancel and require adherence to cancellation policies, to tighten regulation of third-party billing mechanisms, and to ensure that minors are not marketed to by negative option contracts.