If you are a subscription marketer, you have likely heard the buzz about the Federal Trade Commission's Notice of Proposed Rulemaking (NPRM) concerning the Negative Option Rule. If implemented, the proposed rule would impact sellers of negative option offers, subscription programs, automatic renewals, continuity plans, and free-to-pay or nominal-fee-to-pay conversion offers. Many industry commentators have referred to this as the "Click-to-Cancel" rule because it would severely restrict sellers' ability to attempt "saves" when a customer requests to cancel.
Significantly fewer have addressed what could be a bigger change: the FTC's proposed requirements for obtaining consent to the negative option offer. The proposed rule would require companies to obtain customers' "express informed consent" to the negative option offer. This mirrors the consent requirement in the Restore Online Shoppers’ Confidence Act. However, the proposed rule goes further, requiring sellers to:
- Obtain the consumer's unambiguously affirmative consent to the negative option separately from any other portion of the transaction
- Not include any information that interferes with, detracts from, contradicts, or otherwise undermines the ability of consumers to provide their express informed consent to the negative option
- Obtain the consumer's unambiguously affirmative consent to the rest of the transaction
In addition, the negative option disclosures must appear "immediately adjacent to the means for recording the consumer's consent for the negative option feature."
But will a checkbox now be required? The proposed rule states that a negative option seller "will be deemed in compliance" with the consent requirement if that seller obtains the required consent through a checkbox, signature, or other substantially similar method, which the consumer must affirmatively select or sign to accept the negative option feature and no other portion of the transaction. The proposed rule therefore states that a checkbox is not required, but rather that providing checkboxes to obtain consent would be presumed compliant. Further, the FTC states in the notice that "marketers are free to innovate as long as they meet the express informed consent standard."
In settlements, the FTC, the California Automatic Renewal Task Force (CART) and class action plaintiffs' attorneys have taken the position that a checkbox, signature, express consent button, or substantially similar mechanism is necessary to obtain consent. The proposed rule suggests that the FTC is finally acknowledging that current law does not require these mechanisms, and indeed that it will not be required even if the rule is finalized in its current form (since these mechanisms "will be deemed in compliance" but marketers are also "free to innovate").
This leads us to ask: How else can sellers receive consent if they do not use one of these methods? Cases from California and the Ninth Circuit might give some guidance (click here for a webinar describing these cases).
But the NPRM raises another critical question about whether checkboxes are currently required under state law. The FTC's notice states that Vermont's law is "more restrictive" than California's automatic law because under Vermont law, "consent requires consumers to check a box." From this, we can infer that the FTC does not believe California law imposes the same requirement. Whether a deciding court will agree is always a separate question, but this could provide a strong defense to pending cases and demands.
If the proposed rule is adopted in its current form, the biggest questions will be how the FTC analyzes consent mechanisms other than checkboxes and express consent buttons, and whether (and the degree to which) marketers must introduce new "friction" into their enrollment processes.
To learn more, join Shahin Rothermel and Ari Rothman for a webinar on the NPRM on April 18, 2023 at 2:00-2:30 p.m. ET. Click here to register.