Mediaboss Marketing

March 27, 2023

The US Federal Trade Commission (FTC or Commission) proposes expanding the Negative Option Rule to all subscription agreements.

The FTC, in a 3-1 vote with Commissioner Christine S. Wilson (R) dissenting, published a notice of proposed rulemaking (NPRM) regarding an amendment to the FTCs Negative Option Rule concerning subscription services. The NPRM was released March 23, 2023, and comments will be due within 60 days of its forthcoming publication in the Federal Register.

The proposal would amend the current Negative Option Rule by expanding its scope to apply to all subscription agreements and strengthening consumer protections as follows:

Violations of the proposed rule would be penalized under the Commissions authority to prohibit unfair or deceptive acts and practices (UDAP), 15 USC 45. Because this penalty provision establishes statutory penalties of up to $46,517 per violation and the Commission could be expected to argue that each impression or viewing is a violation, the potential penalties for violations could be significant.

Moreover, all 56 states and territories have similar UDAP statutes that they may independently enforce in state courts. Some states argue, although it is far from clear, that a violation of a federal rule is a violation of state law. In addition, some plaintiffs class action lawyers may incorrectly argue that there could be a private right of action enforceable on a class basis.

The proposal significantly expands the scope and reach of existing law that dates back to 1973 with the last amendments in 1998. The current rule focuses on outdated marketing techniques and products and applies only to prenotification plans wherein the consumer is sent advance notice that the company will send them something (such as a book or album) and the consumer has a limited time to tell the business they do not want to receive it. Those of us of a certain age will recall getting CDs, cassette tapes, or 8-track cartridges that way. While such programs continue to exist, they are largely online, and the proposal sweeps within negative option programs subject to common subscriptions such as internet, cable television, and mobile phones.

See the article here:
FTC Makes It Easier to Say No with Proposed Rule to Limit Negative ... - Morgan Lewis