Antitrust Law Daily Wrap Up, CONSUMER PROTECTIONS NEWS: FTC Negative Option Rule to remain in current form, (Jul 25, 2014)

The FTC has completed its review of the Negative Option Rule and determined that the Rule will remain in its current form, the agency announced today. The action is effective on August 1, 2014.

A “negative option” is any type of sales term or condition that allows a seller to interpret the customer’s silence, or failure to take an affirmative action, as acceptance of an offer. The Commission first promulgated the Rule after finding that prenotification negative option marketers had committed unfair and deceptive marketing practices that violated Section 5 of the FTC Act. The Rule became effective on June 4, 1974.

The “Trade Regulation Rule Concerning Use of Prenotification Negative Option Plans” requires sellers to clearly disclose the terms of any such negative option plan for the sale of goods before consumers subscribe. In such plans, consumers are notified of upcoming merchandise shipments and have a set period to decline the shipment. Sellers interpret a customer’s silence, or failure to take an affirmative action, as acceptance of an offer.

In May 2009, the FTC sought public comments on the Negative Option Rule as part of the agency’s systematic regulatory review of all current FTC rules and guides. Although the comments received by the Commission presented some evidence of concerns with negative option marketing beyond the prenotification offers currently covered by the Rule, the Restore Online Shoppers’ Confidence Act and the Commission’s proposed amendments to the Telemarketing Sales Rule likely address many of those concerns and the Commission determined it would retain the Rule without any changes at this time.

The Commission vote approving the Notice closing review of the Negative Option Rule was 5-0.

News: ConsumerProtection FederalTradeCommissionNews