The Federal Trade Commission's Final Negative Option Rule ("Click to Cancel Rule") contains stringent new requirements for negative option programs, making it even more difficult to run compliant negative option offers. But the Final Rule contains some silver linings as well. One is the FTC's indication that hyperlinked disclosures might meet the "clear and conspicuous" standard in some circumstances.
Specifically, the final Rule removed the statement that hyperlinks per se fail the "clear and conspicuous" standard. Previously, the proposed Rule stated that a disclosure is not "clear and conspicuous" if a consumer "must take any action, such as clicking on a hyperlink or hovering over an icon, to see it."
In the Background and Discussion of the final Rule, however, the FTC acknowledged comments that it would be difficult or impossible to implement this requirement on small screens such as mobile phones, and it may reduce rather than improve clarity. As a result, in the Final Rule the FTC deleted the sentence "A disclosure is not Clear and Conspicuous if a consumer must take any action, such as clicking on a hyperlink or hovering over an icon, to see it."
This reflects a 180-degree shift from its previous positions on hyperlinks. Indeed, the FTC acknowledged that prohibiting hyperlinked disclosures "would have made effective space-constrained disclosures of the terms required by the final Rule difficult if not impossible." But the FTC maintained that a clear and conspicuous disclosure still must be "unavoidable. . . even if the consumer must take some action to see it."
In its Background and Discussion, the FTC suggested that this means that sellers could make it impossible for the consumer to consent unless and until the consumer has seen the disclosure by requiring consumers to scroll down to a clear disclosure and then click a button indicating they have seen the disclosure. This clarification suggests that sellers must undertake a "scroll through" or similar disclosure. However, the final Rule does not contain this requirement and suggests that the FTC has finally acknowledged courts' position that hyperlinks can in some instances meet the clear and conspicuous standard. Moreover, given the final Rule's broad requirement that companies must "clearly and conspicuously" disclose all material terms and facts surrounding the product and service, the update provides some solace to companies regarding their concerns about over-disclosure.
It remains to be seen how the FTC will attempt to enforce the Rule. However, companies using hyperlinks should evaluate the overall consumer experience to confirm that linked disclosures give consumers sufficient notice about the truly material terms of the transaction and underlying product or service.
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