On November 8, Shahin Rothermel, Ari Rothman, and Claudia Lewis published "The Massive Change in FTC's 'Click to Cancel' Rule and California's Updated Law That Nobody Is Discussing: A Fast VAST Update" in the Daily Journal. The following is an excerpt:
Many alerts and articles discussing the Federal Trade Commission's (FTC) updated Negative Option Rule and the Amendments to California's Automatic Renewal law have focused on the stricter consent and cancellation requirements. But very few have addressed the elephant in the room: the FTC's Rule and California law both provide new rights of action where companies could face multi-millions of dollars in liability for making allegedly false, unsubstantiated, or misleading claims about the underlying products or services.
In other words, the updated rule and law afford the FTC and private plaintiffs a new avenue for challenging any advertising claims, with potentially business-ending implications, for any company selling products on an autorenewal, continuous service, or negative option basis.
Specifically, the FTC Rule would prohibit companies selling on a negative option basis to misrepresent, expressly or by implication, any material fact of the transaction, including: the fact or any terms of the negative option feature, including consumer consent, any deadline to prevent or stop a charge, or the cancellation policy; cost; purpose or efficacy of the underlying good or service; health or safety; or any other material fact. It imposes a penalty of $51,744 per violation, and the FTC takes the position that multiple violations can occur in one transaction.
Click here to access the article.